Shepherd v. Dougan , 58 Idaho 543 ( 1937 )

It has been repeatedly held and is the established law in this state, that a contract such as that entered into between Shepherd and the Dougans, without the signature of the vendor's wife, was absolutely void. Under the laws of this state, the husband cannot alienate or encumber "community real estate unless the wife join with him in executing and acknowledging the deed or other instrument of conveyance, by which the real estate is sold, conveyed or encumbered." (Sec. 31-913, I. C. A.; Childs v. Reed, 34 Idaho 450, 202 P. 685; McKinney v.Merritt, 35 Idaho 600, 208 P. 244; Hart v. Turner, 39 Idaho 50,226 P. 282; Elliott v. Craig, 45 Idaho 15, 260 P. 433;Weiser Loan etc. Co. v. Comerford, 41 Idaho 172, 238 P. 515;Civils v. First Nat. Bank, 41 Idaho 690, 241 P. 1023; BlaineCounty Nat. Bank v. Timmerman, 42 Idaho 338, 245 P. 389; Fargov. Bennett, 35 Idaho 359, 206 P. 692; Williamson v. Wilson,56 Idaho 198, 203, 52 P.2d 138; Burnham v. Henderson, 47 Idaho 687, 691, 278 P. 221.) It is agreed by all concerned that the contract of sale here involved was void.

I concurred in the original opinion herein, on the theory that the husband (Shepherd), having, subsequent to the execution of the contract, become the absolute owner of the community property, by inheriting all his wife's interest in the estate, was estopped to thereafter question the validity of his own contract. He no longer represented the community, that having been dissolved by the death of the wife. To allow him to plead the invalidity of the contract, which he himself made, would no longer be in the interest of the community, nor would it be on behalf of the community; and to do so, in his individual interest, would be to stultify his own contract and accomplish a constructive fraud in his favor and against his intended grantee (the Dougans). Respondents here (Shepherd's grantees) had actual knowledge of all the facts and circumstances of the case and are chargeable with notice thereof. For these reasons, I think the appellant is entitled to a personal judgment for the amount of money expended under this originally void contract. (Elliott v. Craig, supra; Childsv. Reed, supra.) As to whether such judgment should be wholly or partly against F.T. Shepherd or wholly or partly against respondents, I express no opinion. The facts in that respect are not adequately disclosed by the record, and for that reason, I think F.T. Shepherd should have been brought in as a party defendant to the cross-complaint. Now, when it comes to awarding Mrs. Dougan a lien on the property, to secure the payment of this, I doubt if there is any sound, legal or equitable principle upon which it can be predicated.

The question that gives me trouble and engenders serious doubt in my mind is this: If the contract was void from thebeginning, and the vendee, after making various payments in reliance on this void contract, subsequently ceased to make payment or pay taxes, or comply with the terms of the pretended contract; under what principle or theory of law or equity can such vendee have a lien on the land for the payments made in pursuance of such void contract? To award him a lien is to give him something by decree in equity which the law says he cannot acquire "unless the wife join with him in executing and acknowledging the . . . . instrument . . . . by which the real estate is . . . . encumbered." (Sec. 31-913, supra.) Nor can I believe that section 44-704 was ever intended to authorize a vendee's lien in such a case where there was never "an agreement for the sale thereof." That section says:

"One who pays to the owner any part of the price of real property, under an agreement for the sale thereof, has a special lien upon the property, independent of possession, for such part of the amount paid as he may be entitled to recover back, in case of a failure of consideration."

Now, in the case before us, we are confronted with this state of facts: The pretended or attempted contract was made in writing on the 5th day of April, 1927, "by and between F.T. Shepherd and Mary Elizabeth Shepherd, his wife, hereinafter designated as the seller, and John Dougan, hereinafter designated as the buyer." The property is then described and the terms and conditions of the sale are recited in detail. The contract, however, is signed, "F.T. Shepherd, The Seller. John Dougan, The Buyer." Although Mrs. Shepherd's name is recited in the body of the agreement as one of the sellers, she did not sign the agreement; neither she nor her husband acknowledged the contract. The contract contains the following clause:

"In the event of a failure to comply with the terms hereof by the buyer, or upon failure to make any payments when the same shall become due, or within 90 days thereafter, the seller shall, at his option, be released from all obligations in law and equity to convey said property and the said buyer shall forfeit as liquidated damages all payments which have been made theretofore on this contract."

It is also further provided in the contract as follows: "It is agreed that time is of the essence of this agreement." At the time this contract was entered into, Mrs. Shepherd was living and Mr. Dougan was living. Since its execution and prior to the commencement of this action, both Mrs. Shepherd and Mr. Dougan had passed away.

It cannot be contended, and indeed no one has contended, in this case, that any fraud or deception was practiced or perpetrated in the making of the alleged contract or in any of the dealings between the parties. We here simply have a case where the parties negotiated for a contract, which was neverconsummated, in that one of the contracting parties (Mary Elizabeth Shepherd) never signed or executed the contract. This was known to all the parties, and no fraud or deception is charged or intimated as having prevented consummation of the contract. Notwithstanding the failure to consummate the contract, and with the knowledge of all parties that it had not been consummated, the vendee went into possession of the property and made a number of payments in accordance with the terms of the incompleted contract. However, the husband (F.T. Shepherd) had authority, under the statute (sec. 31-913, supra), to deliver possession to the Dougans, for the reason that the statute provides that "The husband has the management and control of the community property." He likewise had authority to demand and receive payments, either as rental or as part of the purchase price, independently of whether or not the tenant was in possession under a legal lease or contract of purchase. The Shepherds and the Dougans, as vendors and purchasers, were chargeable alike with knowledge of the law. Furthermore, we must not lose sight of the fact that neither F.T. Shepherd nor respondents ever refused to comply with and carry out the terms of this pretended or inchoate agreement; nor did any one of them ever assert or place reliance on its invalidity, until the issue was raised in this case. Payments were not discontinued for any such reason.

Our statute, sec. 44-704, supra, was evidently taken from the California Code and is a literal copy of sec. 3050, Cal. Code Civ. Proc. As I read and understand this statute, it is intended to apply to cases of contract for the purchase of real property and is meant to protect the vendee, where he makes a payment on an agreed purchase price; and for some reason or other the vendor either is unable to give a title or refuses to comply with his agreement to do so, and the consideration for the contract fails. But I am unable to find any case where the lien provided for in this statute has been extended to a vendeein default or who neglected or refused to make payments in accordance with the terms of the contract; or to an incomplete contract or a so-called vendee who attempted to purchase under a void contract, and by this, I do not mean a voidable contract but one absolutely void ab initio. (Cases citedsupra.) This statute only declared what had long been recognized as a rule in courts of equity. (Montgomery v. Meyerstein, 186 Cal. 459, 199 P. 800.)

It neither answers the question of fact nor of law, which confronts us here, to say: "that appellant could not possibly either abandon or refuse to perform an absolutely void contract." Void as the contract was, nevertheless, the money was paid by the Dougans and received by the Shepherds on thetheory and with the understanding that they had a validcontract. That fact is just as clear and as fully established as is the fact that the contract was in law absolutely void. The Dougans were not making gifts of these payments to the Shepherds, nor were the Shepherds accepting their payments as gifts or fraudulently or with any intent of cheating or defrauding the Dougans.

It seems clear that the payments did not cease because of the invalidity of the contract but rather because of the financial conditions which confronted the Dougans and rendered payment by them impossible. So now, when a court of equity takes up these transactions with a view to equitably adjusting their differences and fairly adjudicating their resultant rights, the court must face and deal with the facts as they actuallyoccurred rather than as the theoretical legalistic formula brands them; and doing so, we cannot escape the fact that the Dougans neglected to make further payments and abandoned the contract or refused to proceed further with it, although noquestion had been mooted or suggested up to that time as to itsinvalidity.

In Merrill v. Merrill, 103 Cal. 287, 35 P. 768, 37 P. 392, the supreme court of California had under consideration a case where a vendee had sued the vendor for money paid under a contract for the purchase of land, in a case where the contract of sale had been made and the deed placed in escrow. The vendee failed to make payment at the time the same was due and in accordance with the escrow agreement; and the vendor demanded and received his deed. The court awarded plaintiff a money judgment but declined to award her a lien, under the provisions of sec. 3050, California Code Civ. Proc. The case was taken to the supreme court and the judgment of the trial court was affirmed. It was claimed on appeal that there had been a failure of consideration for the contract, which entitled the vendee to a lien on the realty for the money paid. In passing on this question, the court said:

"This cannot be the failure of consideration contemplated in Civ. Code, sec. 3050. That was intended to secure a party from injury through the wrong or inability to perform of the other party. If the vendee did do himself the injury, he is not injured in the eye of the law. He cannot acquire an equity based upon his own wrong. The Civil Code, in general, was intended to announce rules of law already declared by the courts. This presumption is not of such force as to control the language of the statute, but in all cases of doubt that construction should be preferred which accords with known rules. In equity a vendee had a lien when in possession under a contract if the consideration failed. It was the counterpart of the lien given to the vendor, and the rule in equity is that no such lien exists in favor of one who is in default. One whohas himself abandoned the contract, or has refused to performit according to its terms, is not afforded a lien to secure himfrom loss because of his own breach of the contract. 3 Pom. Eq. Jur., sec. 1260, and note. I think the judgment should be affirmed." (Italics supplied.)

In Wilson v. Smith, 69 Cal. App. 211, 230 P. 963, the court had under consideration a kindred question and after citing the Merrill case and quoting sec. 3050, California Code of Civil Procedure, said:

"But the court held that said section should be construed in accordance with the well-known rules of equity, under whichno such lien exists in favor of one who is in default. 'One who has himself abandoned the contract, or has refused to perform it according to its terms, is not afforded a lien to secure him from loss because of his own breach of the contract.' "

The court then concluded that the vendee was in default and, "This being so, he is not entitled to a lien upon the land as security for the repayment of any expenditures which he may have made thereon."

In Rhodes v. Bush, 121 Cal. App. 137, 8 P.2d 542, 545, the California court, in discussing a similar question, quoted from the Merrill case, supra, as follows:

" 'One who has himself abandoned the contract, or has refused to perform it according to its terms, is not afforded a lien to secure him from loss because of his own breach of the contract. 3 Pom. Eq. Jur., sec. 1260, and note.' [and the court then continued;] In the case in which the above-quoted language appears, the action was by a vendee who claimed a purchaser's lien on land as security for the repayment of money paid on the purchase price; the consideration having failed. It appeared, however, that the vendee had defaulted in the payment of an installment of the purchase price, whereupon the vendor demanded and obtained the deed which had been placed in escrow and denied the right of the vendee to complete the purchase. The court held that the consideration of the contract had not failed, but that the contract had ceased to exist, and that a purchaser in default was not entitled to the lien claimed which was described as the counterpart of the lien given to a vendor, which it is said is not enforceable in equity by one who is in default." See also, 25 Cal. Jur., sec. 263, p. 812.

In O'Neill v. Bennett, 49 S.D. 524, 207 N.W. 543, the supreme court of South Dakota had under consideration an action which involved a conveyance by plaintiff's husband of the homestead, in which the wife had refused to join. The trial court awarded the purchaser a judgment for the purchase price paid and a lien on the homestead as security for the payment of the amount found due. The statutes of South Dakota involved appear to be substantially the same as ours, and the court, after discussing the matter at some length, said:

"A contract for sale or a deed, which are absolutely voidfrom the beginning because of the fact that the vendor isentirely lacking in power and authority to transfer thepremises, cannot be the foundation for a vendee's lien any morethan they could be the foundation for any other legal orequitable interest in the premises. (Italics supplied.)

"The judgment appealed from should be modified by reducing the money judgment in favor of defendant respondent Johnson and against defendant appellant Robert O'Neill from $10,000 to $9,805.70. The title to the premises in question should be quieted in plaintiff appellant Annie O'Neill against all claims and liens of every sort made or to be made by respondents, or any of them, or persons claiming under them, and she should have her costs and all that portion of the judgment which purports to make the money judgment against Robert O'Neill in any manner a claim or lien against the homestead premises or any part thereof, or any part of the value thereof, should be stricken out." (See annotation to Larson v. Metcalf, 45 A.L.R. 352.)

If such a procedure be sanctioned by this court, it appears to me that we will thereby open a way for a successful circumvention of the statute, requiring the wife to join in all conveyances selling or encumbering community real estate. The husband can then execute a contract for sale without the wife's consent and receive payments thereon; and when it turns out that he cannot give title, or the wife refuses to sign the deed, the vendee, under such a void contract, may have a lien on such community property for the principal sum paid with interest, and thereby take title through a decree in equity to property, in direct violation of the declarations of the law. In other words, the husband by this method may accomplish by indirection what the statute specifically prohibits, and a purchaser may acquire by the same indirection that which the statute forbids.

For the foregoing reasons, I am persuaded that the original opinion herein is erroneous in so far as it awards a lien against the property, and I think the case should be reconsidered and our judgment in that respect should be revised.