Simon v. Williams , 140 Miss. 854 ( 1925 )

^* Headnotes 1. Vendor and Purchaser, 39 Cyc. p. 1427; 2. Covenants, 15 C.J. Section 109 (Anno). Appellant, Simon, filed his bill in the chancery court of Tunica county against appellees Williams brothers (Burch and J.D. Williams) and J.R. Whisenant to cancel and have surrendered up his purchase-money obligations for certain lands conveyed to him by appellees Williams brothers, known as the Mitchell place, in Tunica county, and to recover back from appellees the sum of twenty-two thousand four hundred fifty dollars, being the purchase money paid by appellant to appellees Williams brothers on said land before the filing of the bill in this cause. The cause was heard on bill, answer, and proofs, and final decree was rendered dismissing appellant's bill, from which appellant prosecutes this appeal.

The gravamen of appellant's bill is that he is entitled to cancel and have set aside his contract for the purchase of the land and recover back the purchase money paid by him because appellees Williams brothers breached the warranty against incumbrances contained in their conveyance of the land to appellant; and that if appellant is not entitled to such cancellation, still he is entitled to recover back the purchase money so paid because of such breach of warranty against incumbrance. The controlling facts in the case are either undisputed or were settled by the finding of facts by the trial court. They are substantially as follows: Mrs. Julia Kyle and her two children owned two plantations in Tunica county consisting of about five hundred acres each; one was known as the Mitchell place and the other as the Ker place. On July 19, 1919, Mrs. Kyle and her children conveyed both places to C.V. Moore and S.G. Salter for a consideration of eighty thousand dollars, five thousand dollars of which was paid cash, the purchasers executing their notes for the balance of seventy-five thousand dollars payable annually through a series of years, and gave a deed of trust on the land to secure the same. On the same day that Moore and Salter bought both places they sold one of them, the Mitchell place, to appellee Whisenant for a consideration of fifty thousand dollars, seven thousand five hundred dollars of which was paid cash and notes executed for the unpaid balance secured by deed of trust on the land. On the 4th day of October, 1919, appellee Whisenant sold the Mitchell place to appellees Williams brothers for a consideration of seventy-five thousand dollars, of which ten thousand dollars was paid cash, and notes were executed for the balance, sixty-five thousand dollars, secured by a deed of trust on the land. On the same day that appellees Williams brothers purchased the Mitchell place from appellee Whisenant, they sold and conveyed it to appellant, Simon, in consideration of eighty-seven thousand five hundred dollars of which sum ten thousand dollars was paid cash, and later, but some time before the bill was filed in this cause, twelve thousand four hundred fifty dollars more of the purchase money was paid by appellant. The balance of sixty-five thousand dollars he agreed to pay by assuming the balance due by appellees Williams brothers on the land to appellee Whisenant, which was exactly that amount, and was evidenced by ten notes for six thousand five hundred dollars each due through a series of years. In the deed of trust executed by Moore and Salter in favor of Mrs. Kyle and her children to secure the unpaid purchase money of seventy-five thousand dollars for both places, it was provided that when fifty thousand dollars of that amount should be paid, Mrs. Kyle and the children would release either the Mitchell place or the Ker place from the deed of trust, the one to be released to be designated by Moore and Salter or their assignees. When appellant purchased the Mitchell place it was under a lease to one Roach for two years at a rental of one thousand five hundred dollars a year. Appellant was to have constructive possession on the 1st of January, 1920, and actual possession on the 1st of January, 1922.

The court below found, and the finding was supported by ample evidence, that when appellant bought the Mitchell place he was informed of the existence of the Kyle deed of trust thereon to secure the seventy-five thousand dollars unpaid purchase money notes executed by Moore and Salter to the Kyles. He also knew of the lease of the place for a term of two years to Roach. The deed from appellees Williams brothers to appellant contained the statutory warranty provided for by section 2817, Code of 1906 (section 2318, Hemingway's Code). The statute embraces the five common-law covenants "seizin, power to sell, freedom from incumbrance, quiet enjoyment and warranty of title."

On May 12, 1920, appellant made a contract with Robinson and Yerger to sell them the Mitchell place for the sum of ninety thousand dollars, two thousand dollars of which was to be paid cash, eight thousand dollars on January 1, 1921, and the balance in nine equal installments beginning January 1, 1922. This contract was upon condition that the title was approved by Robinson and Yerger. The examination of the title revealed the seventy-five thousand dollars unsatisfied deed of trust from Moore and Salter to the Kyles. Robinson and Yerger thereupon refused to carry out their contract of purchase. Appellant made efforts to sell the land to others and failed. In December, 1920, appellant entered into an agreement with Roach, who had the place leased for two years, whereby appellant leased the place from Roach for 1921 for two thousand four hundred dollars, agreeing that the amount of Roach's rent note for that year of one thousand five hundred dollars should be credited thereon. The notes and deed of trust executed by appellee Whisenant were, on March 1, 1920, canceled and surrendered to him in consideration of which he transferred to C.V. Moore and H.L. Moore the notes and deed of trust for sixty-five thousand dollars which had been executed by appellees Williams brothers and assumed by appellant. Appellant made default in the payment of the first of the Williams brothers' notes to the appellee Whisenant so held by the Moores, being for six thousand five hundred dollars, due January 1, 1921, and on February 7, 1921, the deed of trust securing the same was foreclosed for the payment of that note subject to the lien of the deed of trust for the remainder of this series of notes. The property was bought in at foreclosure sale by appellee Whisenant. On October 29, 1921, about two years after appellant purchased the land, and more than a year after he had contracted to sell the place to Robinson and Yerger, and about nine months after the foreclosure sale under the deed of trust to secure an indebtedness which he had assumed the payment of, of which he had made default, appellant filed the bill in this cause. The financial crash of the summer of 1920 had taken place, resulting in the land involved being worth probably less than half of the price at which appellant bought it. Appellant testified and it was not denied, that when he bought the property he stated, and the grantors so understood at the time, that he was buying not as a permanent investment but for resale as soon as he could get a purchaser at a profit.

A vendee of land claiming the right of rescission against his vendor must move promptly after the accrual of such right. If he continues to treat the property as his own awaiting developments before determining whether he will claim rescission, he will not be permitted to rescind. He will not be permitted to experiment with a view of seeing how his purchase will turn out, whether a market goes up or goes down. He must act promptly and within a reasonable time after the accrual of his right to rescind. 5 Pomeroy Equity Jurisprudence (2d Ed.), section 2109, p. 4758; Fletcher v. Wilson, Smedes M. c. 376; Alig v. Lackey, 114 Miss. 392, 75 So. 139;Gannaway v. Toler, 122 Miss. 111, 84 So. 129. Applying these principles to the undisputed facts of this case it seems plain that appellant waited too long before asking for rescission. Too many changes had taken place between the time his alleged right of rescission accrued and the time he took action. And those changes were most radical and important to the parties in interest. As stated, one of them was the great financial crash of the summer of 1920, striking down the values of lands in the Delta section of this state one-half or more.

Appellant contends, however, that even though his right of rescission was gone when he filed his bill, still there was a breach of the warranty in his deed against incumbrances in that the land was incumbered with the Kyle deed of trust for seventy-five thousand dollars which appellant's vendors failed and refused to remove. Appellant's position is that except for this incumbrance he would have sold the land to Robinson and Yerger at a profit of five dollars an acre. And the evidence shows that to be true. Robinson and Yerger were ready, able, and willing to carry out their contract of purchase, and would have done so except for the existence of the Kyle deed of trust. The evidence shows without conflict that appellant demanded of his vendors, appellees Williams brothers, that the Kyle incumbrance be removed so that he could make the sale. They proposed after conference with the Kyles and the other parties in interest that if appellant would pay thirty-two thousand five hundred dollars on the Kyle deed of trust, he receiving credit therefor on the unpaid purchase money due by him, the Kyle deed of trust should be released from this land. Appellant was unable to do that. As the result of the existence of the Kyle deed of trust and the failure of appellant's vendors, appellees Williams brothers, to have the same canceled, the contract of sale between appellant and Robinson and Yerger was abandoned. It should be borne in mind, however, that the foreclosure sale which resulted in appellant losing this land was not under the Kyle deed of trust, but was under the Whisenant deed of trust executed by appellees Williams brothers to appellee Whisenant to secure an indebtedness of sixty-five thousand dollars, the payment of which appellant had assumed as a part of the consideration for the conveyance of the land to him. That indebtedness consisted of ten notes of six thousand five hundred dollars each. Appellant defaulted in the payment of the first one due, and thereupon the foreclosure took place. Appellant's contention is that there was a breach of the covenant of warranty against incumbrances by appellees Williams brothers on account of their failure to remove the lien of the Kyle deed of trust upon his land, resulting in his loss of the sale to Robinson and Yerger at a profit of five dollars per acre. Appellant, however, does not seek to recover the profit he would have made, but seeks to recover the purchase money he had paid on the land, twenty-two thousand four hundred fifty dollars.

In a very large sense the rights and obligations under the law as between covenantor and covenantee under a covenant against incumbrances are the same as those of the covenantor and covenantee under a covenant of title. Numerous cases have been before this court arising out of the latter relation. Under a covenant of warranty of title the established rule in this state is that in order to recover thereon there must have been an eviction, or there must at the time of the purchase of the covenantee have been adverse possession under paramount title holding the covenantee out. Kirkpatrick v. Miller, 50 Miss. 521. A purchaser of land in possession under a deed containing a covenant of warranty of title cannot avoid the payment of the purchase-money notes for the land by setting up an outstanding title in a stranger. And the representation of the vendor that his title is good is no more than is stated in more solemn form in the covenant of warranty in his deed; and such a representation, when there is an outstanding title will not enable the vendee in possession to avoid the payment of purchase-money notes.Winstead v. Davis, 40 Miss. 785. In cases where there is no fraud the purchaser of land in possession cannot have relief in equity from his contract to pay on the ground of a defective title, without previous eviction. Such a purchaser under a deed of warranty has no right to call his vendor into a court of equity to litigate an adverse title. He must rely on his covenant if he should be evicted. Vick v. Percy, 7 Smedes M. 256, 45 Am. Dec. 303. In a case free from fraud in which the insolvency of the vendor is not shown it is no defense to a purchase-money note for the conveyance of land with covenants of general warranty that the vendor had no title or a defective title to the land. In such a case the vendees' remedy is upon the covenants of warranty contained in the deed. Guice v. Sellers, 43 Miss. 52, 5 Am. Rep. 476; Wofford v. Ashcraft, 47 Miss. 641. Where a purchaser of real estate has protected himself by covenants of warranty he is not entitled to be relieved from his contract if it be unmixed with fraud until after eviction. Walker v.Gilbert, 7 Smedes M. 456.

The Kyle deed of trust was not a permanent incumbrance; it was removable. The governing principles where an incumbrance is not removable, such as an easement or other permanent servitude, are different in some material respects from the principles governing removable incumbrances. The principles controlling each class are thus stated in Hale on Damages (Hornbook Series) page 369:

"The measure of damages for breach of a covenant against incumbrances is:

"(a) For a permanent incumbrance, the diminution in the value of the premises due to the incumbrance — not exceeding, in most states, the consideration paid; in others, not exceeding the value of the land.

"(b) For incumbrance which causes a total eviction, the consideration with interest and costs in most states, or the value of the land with interest in others; for a partial eviction, a proportionate amount.

"(c) For a removable incumbrance, the reasonable expense of removing it, not exceeding the consideration or the value of the land."

A vendee suing on a covenant against incumbrances, who has extinguished the incumbrance, is entitled to recover the outlay for such extinction. But if he has not extinguished it but the incumbrance is outstanding, there is a mere technical breach of the covenant, and his damages are but nominal, for he ought not to be permitted to recover the value of an incumbrance on a contingency. He may never be disturbed by it. If he should be permitted to recover the value of the incumbrance, say in the form of a mortgage, the mortgagee might still resort to the mortgagor on his personal obligation and compel him to pay it. If the purchaser feels that the existing incumbrance is inconvenient to him and he does not want to hazard an eviction, he may satisfy the incumbrance and then resort to his covenant. Delavergne v.Norris, 7 Johns. (N.Y.) 358, 5 Am. Dec. 281; Prescott v.Trueman, 4 Mass. 627, 3 Am. Dec. 246. Sutherland on Damages at page 2152 states that to be the settled American rule, and that "it appears to be assumed very generally in this country that the mere existence of a money incumbrance upon land is no injury to the purchaser" (page 2178). The rule that nominal damages only are recoverable for a mere technical breach of a covenant against incumbrances is supported "by the entire weight of authority." Rawle on Covenants of Title, p. 270.

Appellant, when he purchased the land as stated, knew of the existence of the Kyle deed of trust. He did not demand of his vendors that it be released from the land before the conveyance to him was made. Instead, he relied on his covenants of warranty. He was willing, giving his conduct the ordinary and reasonable significance it bears, to run the risk of the Kyle deed of trust being taken care of so that no injury would result to him. Furthermore, he was never disturbed by the Kyle deed of trust. So far as the record discloses, the notes secured thereby were promptly paid as they fell due. The foreclosure was under a deed of trust securing sixty-five thousand dollars with interest, the payment of which appellant has assumed, and foreclosure was not to satisfy the entire indebtedness secured but only the first note of six thousand five hundred dollars. Appellant had defaulted in the payment of that note. That was the cause of the foreclosure. We conclude, therefore, that if there was a breach of the covenant against incumbrances because of the existence of the Kyle deed of trust, it was a mere technical breach; that appellant suffered no injury or damage therefrom, and has no right of recovery for the purchase money paid by him on the land.

Affirmed.