Winslow v. Crowell , 32 Wis. 639 ( 1873 )

Lyon, J.

I. The first question which demands consideration is, What interest had Mr. Hadley in the ninety sections of land which had been earned under the contract at the time of his decease?

This question will be considered without any reference to the interest of the plaintiffs therein, and upon the hypothesis that Mr. Hadley was then the owner of the entire interest therein under the contract.

The answer of the appellant admits that at the time of his decease these lands had been fully earned, and that Mr. Had-ley was -then entitled to a conveyance thereof from the state.

. It seems to us very clear in that event, that he was in the position of a purchaser of the lands under an executory contract therefor, after full payment of the purchase money which lie covenanted to pay for the same. After such payment, and before conveyance, the vendee becomes in equity the owner of the land, or, as he is sometimes denominated, the equitable owner, or the owner of the equitable title, and the vendor the holder of the legal title in trust for him. Until the purchase money is paid, the relation of equitable mortgagor and mortgagee in respect to such land exists between the parties to the contract, and the vendor has an interest in the land to the extent of the unpaid purchase money. But after such payment is made, the vendor holds the naked, legal title in trust for the vendee.

These principles are elementary, and it is quite unnecessary to cite authorities to support them.

We conclude, therefore, that at the time of Mr. Hadley’s death the state held only the naked legal title to the ninety sections of land, and that it held the same in trust for the parties beneficially interested in the contract under which they were earned, who held the equitable title; and if Mr. Hadley • was the only party interested therein, then, as a matter of course, it so held the lands in trust for him.

II. The next question is, Did the assignment by the admin-' istratrix of the estate of Mr. Hadley to the appellant of the executed portion of the contract, under which assignment he obtained from the state a conveyance of the ninety sections of land, entitle him to such conveyance ? Or, stated in another’ form, could the administratrix, without authority from the proper court, make a valid assignment of the contract, which would divest the heirs-at-law of Mr. Hadley of any interest in such lands ?

■ That Mr. Hadley’s interest in these lands descended to his heirs, and that the administratrix of his estate had no power to convey such interest to the appellant, is so clear that argument is unnecessary. The assignment of the executed portion of the contract under which the lands were earned, to the appellant, was an attempted conveyance to him, by the administra-trix, of the equitable title to such lands which her intestate owned at the time of his death, and which descended to, and was vested in, his-legal heirs when the assignment was made.

The heirs, being minors, were incapable of consenting to such conveyance, and the administratrix had no power, either at the common law or by statute, to make it, without license from the proper court. The authorities in support of these propositions are very numerous and entirely uniform. Many of them were referred to by the counsel for the plaintiffs on the argument .of the case, but it is deemed quite unnecessary to cite them here.^*

••Rub it is claimed that the contract assigned by the adminis-tratrix to the appellant is a mere chose in action, and such being its character, that she might lawfully sell and assign it. We do not think that the contract can he so regarded. It is a muniment of Mr. Hadley’s equitable title to the lands, the same as the conveyance from the state to the appellant is the muniment or evidence of.his legal title thereto. And as no one will assert that such conveyance is a mere chose in action, so we think it cannot he successfully maintained that such is the character of the executed part of the contract.

It is further argued by the learned counsel for the appellant, that the contract is not divisible; that the unexecuted portion of it was properly assigned by the administratrix; and that if she had legal authority to assign such portion, she might legally assign the whole contract.

Conceding that the assignment to the defendants Eletcher, Babcock and Crowell was legally made by the administratrix (and the circuit court so held),- we do not think it follows that she had authority to assign the balance of the contract. The argument rests upon the proposition that the contract is indivisible. We are of the opinion that this proposition cannot.be maintained. Whenever ten miles of road were completed, the contract gave to the .parties interested the right to thirty sections of land, without- any reference to future proceedings under it. The contractors might have built but ten - miles or thirty miles of -the road, and have failed entirely to perform their 'convenants- further: still their right to the lands earned was absolute, and entirely unaffected by such future breach of their contract The covenants as to each ten miles of road are entirely independent of the covenants as to the balance thereof; The parties thereto .are in the same position as though a separate and distinct contract had been made for building each ten miles of road.

The contract therefore is divisible, and, by reason of the execution of-a part of it, that portion may have become, and did become, a muniment of Mr. Hadley’s equitable title to the ninety sections of land, over which the administratrix has no control and which, she has no power to assign; while- the balance of the contract may remain a chose in action, which she may lawfully sell and assign.

We conclude, therefore, that the assignment by the adminis-tratrix to the appellant of the executed portion of the contract under which the lands were earned, conveyed to him no interest in such lands as against the heirs of Mr. Hadley, and gave him no legal right to a conveyance thereof from the state. And it necessarily follows that the appellant holds the legal title thereto in trust for the benefit of all parties who have an interest therein by virtue of the contract under which the lands were earned or paid for.

III. The next question is, whether the plaintiffs have an interest in such lands which they can enforce in equity against the appellant, or against the heirs of Mr. Hadley. 1. It is claimed that the plaintiffs lost all right to have a re-assignment of an interest in the original contract by their failure to demand the same during the lifetime of Mr. Hadley. The argument is, that such re-assignment, when executed, would operate to make the plaintiffs partners with Mr. Hadley in prosecuting the work under the contract, and consequently liable for losses (if any), and that to remain quiet and not demand the execution of such re-assignment until Mr. Hadley had completed thirty miles of the road, and until after his decease, was laches on their part which shuts the doors of a court of equity against them.

By reference to the agreement of Mr. Hadley wherein he covenanted to re-assign an interest in the contract to the plaintiffs (which agreement has already been set out at length), it will appear that the plaintiffs were not entitled to such reassignment until Mr. Hadley procured from the commissioners their consent to the assignment of the contract to him, and an extension of the time limited for the performance of the contract. A demand for the re-assignment before such consent and extension of time were obtained, would have been entirely nugatory. The agreement to re-assign hears date August 19, 1866, and Mr. Hadley died March 3, 1867, or less than seven months thereafter. The case fails to show at what time such consent and extension of time were obtained. The act of March 2, 1867, as we have seen, approves of and assents to such consent and extension, and it may be that the same were obtained simultaneously with the passage of the act. So far as ■we have been able to find, nothing to the contrary appears in the record. How then can it be successfully claimed that a failure to demand such re-assignment during the lifetime of Mr; Hadley, is laches f But further, this position that the plaintiffs are in default in this respect is based on the assumption that it was entirely optional with them to take a re-assignment of an interest in the contract or to abstain from so doing. I do not so understand the agreement. I think the agreement of Mr. Hadley to re-assign on the happening of a certain contingency, which agreement was accepted by the plaintiffs, although not in form executed by them, imposed upon the plaintiffs an obligation to accept such re-assignment when the same should.be tendered to them by Mr. Hadley, at any time after he obtained such consent and extension of time of the commissioners. It is true the agreement provides that he shall execute such reassignment “upon demand therefor;” but this I understand relates only to the time when he shall execute it, and does not relieve the plaintiffs from the obligation to accept it if tendered before demand made. Suppose the agreement had provided that the re-assignment should be executed by a certain day, for example October 1, 1866: Mr. Hadley would not have been .in default for a failure to execute it before that time; so he was not in default for,a failure to do so before demand, under the agreement as it is; but that fact would not, it is believed, in either case have released the plaintiffs from the obligation to accept such re-assignment when tendéred, after such consent and extension of time were obtained, and thus become jointly interested with Mr, Hadley in such original contract. ■ If these views of the proper construction of that agreement are correct, it not only disposes of the objection that the plaintiffs have been guilty of laches, but also of the objection that such agreement wants mutuality and cannot be enforced in equity for that reason. As to the alleged want of mutuality, see Cheney v. Cook, 7 Wis., 413 (pp. 423 and 424), and cases cited.

2. It is further argued that inasmuch as the plaintiffs joined in and assented to the assignment of the contract by the Military Road Company to Hadley, and in fact constituted such, company, they are now estopped from setting up or asserting any interest in such contract against the appellant, who purchased the same in good faith on the strength of such assignment, and paid a large sum of money therefor, without any knowledge that the plaintiffs claimed an interest therein.

Had the appellant purchased an interest in- such contract, and taken an assignment thereof, from a person authorized to sell and assign the same, the argument would be unanswerable. The case would then come within the principle held by the supreme court of the United States in the cases of Judson v. Corcoran, 17 How., 612, and Spain v. Hamilton’s Adm'rs, 1 Wallace, 604, cited and commented upon by the counsel for the appellant. But, taking his assignment from a person who had no authority to give it, and failing thereby to acquire any equitable interest in the lands in controvers3, we are unable to perceive how the appellant can invoke the aid of the principle asserted in those cases.' It is quite immaterial to him whether the heirs of Mr. Hadley .own the entire interest in the ninety sectiops of land or whether the same is owned by such heirs in common with the plaintiffs. In either event his condition remains unchanged.

It may be observed here that the circuit court acted upon the principle of the above cases in refusing the plaintiffs relief from the assignment of the unexecuted portion of the contract to the defendants Crowell, Fletcher and Babcock. They, being assignees in good faith and for a valuable consideration, and taking tbeir assignment from a person wbo was held authorized to make it, were protected against the prior assignment to tbe plaintiffs. We do not think, therefore, that tbe plaintiffs are estopped, for the cause above stated, from asserting their interest in the lands by virtue of their agreement with Mr. Hadley.

It is quite true that where the equities are equal the legal title must prevail. But this is not a case for the application of that rule. The equities are not equal. The appellant is legally chargeable with notice when he paid his money and took the assignment of the contract, that he was dealing with an unauthorized person, and that he could not thus acquire any interest in the lands against the equitable owners thereof, whoever such owners might be. Against such equitable owners he has no equities which are operative to sustain the legal title which he has obtained.

3. The defendants offered much evidence upon the trial, for the purpose of showing that the contract between Mr. Hadley and the plaintiffs for a re-assignment to them of an interest in the original contract was a fraud upon the commissioners; that the commissioners would not have consented to the assignment of such original contract to Hadley, or given him an extension of time to complete the work, had they known that the plaintiffs were to have any interest in it; and that the plaintiffs and Hadley knew that fact, and studiously concealed their agreement for a re-assignment from the commissioners. This class of testimony was all excluded by the circuit court.

The transaction which the defendants proposed to prove, contains none of the essential elements of fraud which vitiates contracts. The commissioners were acting as the agents of the state, and the only interest which the state had in the matter was that the road should be built, and the lands, or the proceeds thereof, properly and economically applied to the construction of the same. To the state it was a matter of entire indifference who was interested in the contract; and if the commissioners, or some of them, had conceived a dislike to the plaintiffs, and for that reason, and fearing that a knowledge of tbe plaintiffs’ interest might interfere with obtaining their consent to the assignment of the contract to Mr. Hadley and an extension of the time for constructing the road, if the parties concealed the fact of the plaintiffs’ interest from the commissioners, and left upon their minds the impression that Mr. Had-ley alone was interested in the contract, this was a deception, it is true, but it comes far short of rising to the dignity of a fraud which vitiates the contract with Hadley, and which deprives the plaintiffs of all rights under it. To accomplish these results it must appear that the deception injured somebody, and the alleged deception practiced here could not have worked such injury.

’ We think that the circuit court was correct in excluding the testimony offered for the purposes indicated.

After a careful consideration of the whole case, we are impelled to the conclusions that the plaintiffs and the heirs of Mr. Hadley are in equity the owners of the ninety sections of land described in the complaint; that their respective interests therein are correctly ascertained and fixed by the findings and judgment of the • circuit court; that the appellant holds the legal title to such lands in trust for such owners ; that a sale of the lands is proper and necessary ; and that the appellant should first be paid out of the proceeds of such sale such sum as the plaintiffs and Hadley, or either of them, owed Harriman for work done by him on such thirty miles of road, but not to exceed twenty thousand dollars; and that the balance of such proceeds should be disposed of as provided in'such judgment.

The judgment of the circuit court, being in accordance with these conclusions, must be affirmed.

By the Court.— Judgment affirmed.

The appellant moved for a rehearing, and the following opinion was filed on granting that motion, at the June term, '1872.

LyoN, J.

The argument on the motion for a rehearing calls our attention to the fact that Mr. Hadley procured an extension of time for the completion of the road, from the commissioners, within a few days after the execution by him of the agreement to re-assign to the plaintiffs a two-thirds interest in the original contract. This fact was overlooked by us in our consultations upon the case. But we do not think that it affects our former decision. We are of the opinion, that, under the circumstances of this case, the plaintiffs were not guilty of such laches as closes the doors of a court of equity against them, by failing sooner to demand such re-assignment. We think that the plaintiffs were justified in waiting until the legislature had approved the action of the commissioners extending the time for the completion of the road, before making such demand. It will be remembered that the original contract between the plaintiff and the commissioners'was not in accordance with the law, and subsequent legislation became necessary to render such contract valid. It may be that the agreement of Winslow to construct the road within two years was the consideration or inducement that prompted the legislature to enact the law of 1865, which legalized the contract; and if so, there is much force in the argument that, the commissioners had no power to extend the time for the completion of the road without the consent of the legislature. We do not hold that the commissioners, in such case, had no power to extend, the time, but only that their power to do so was so doubtful that the plaintiffs were justified in waiting for the assent of the legislature thereto before demanding the re-assignment from Mr. Hadley.

We do not find from the evidence that Mr. Hadley was expending such large sums of money, or incurring such heavy liabilities, as to make it necessary for his protection that the ■plaintiff should be especially prompt in demanding the re-assignment Had such been the case, he doubtless would have -informed the plaintiffs that he had procured the requisite consent of the commissioners and extension of time, and notified them of his readiness to re-assign to them a two-thirds interest in the contract in accordance with his agreement. It is a fact not without significance, that the evidence fails to show that the plaintiffs had any knowledge of the action of the commissioners in the premises until the act of 1867 was passed, ratifying and approving their action.

Mr. Hadley died the next day after the act of 1867 was apr proved, and Mrs. Hadley was appointed sole administratrix of his estate May 20th, 1867. The plaintiffs commenced vigorous proceedings within a reasonable time after the decease of Mr. Hadley, to enforce their rights under their contract with him. It seems to us that the plaintiffs have not so slept upon their rights that a court of equity should refuse to grant them the relief to which they are otherwise entitled. These considerations are entirely independent of the views expressed by me in the former opinion relative to the binding force upon the plaintiffs of the contract executed by' Mr. Hadley.

It is further objected that the fact that such contract was not also executed by the plaintiffs, precludes them from the right to have a specific performance thereof decreed. But the case of Cheney v. Cook, 7 Wis., 418, is an answer to this objection. (See the cases there cited.)

Again, the rule is invoked, that whatever a court of equity would have directed to be done upon proper' application, it will regard as having been so done; and it is argued that had an application to make the sale of the lands in controversy to Crowell been made to a court of equity, it- would have ordered such sale. The difficulty with this argument is, that we have no means of knowing that it was a proper sale. We may admit that there was a necessity for selling the land ; but how do we know that it could not have been sold for more than Crowell paid for it ? This point was not litigated upon the trial, and no court would have ordered the sale without proof that the price proposed to be paid was the best that could be obtained.

It is not deemed necessary to go into an extended discussion of tlie points made in the argument on the motion for a rehearing. The more important of these have been considered and decided. After a careful review of the whole case, w’e are constrained to adhere to our former decision, except upon certain points relating to the priorities of the parties in the proceeds of the sale of the lands in controversy, and concerning which we have doubts whether the judgment of the circuit court is correct.

We therefore order a rehearing upon the question as to whether the judgment of the circuit court ought to be so modified that it will provide:

1. That an account be also taken of the amount which the defendant Crowell paid to Harriman to discharge the indebtedness to him for constructing the road, which accrued prior to the time when the original contract was assigned to Mr. Had-ley, and that such amount, when ascertained, be deducted from the .$30,500 which the contract to re-assign provides shall be paid to the plaintiffs out of the proceeds of the sales of the lands, and only the balance thereof be paid to them therefrom;

2. As to the balance of the $25,000 paid by the defendant Crowell for the assignment to him of the executed portion of the original contract (which' balance is to be ascertained by deducting from the $25,000 the whole amount of the expenses of constructing the road, paid by him to Harriman), that a further account be taken of the amount or portion of such balance which has been applied to discharge the liabilities of the estate of Mr. Hadley, and that the sums so applied be paid to the. defendant Crowell out of the shares of Mr. Hadley’s heirs in the proceeds of such sales, before any part thereof is paid to the said heirs.

On the last proposition the attention of counsel is called to the decision of this court at the present term, in the case of Blodgett v. Hitt.

By the Court — A rehearing is ordered on the questions above stated.

After a rehearing, the following decision was rendered at the January term, 1878.

Ltoist, J.

A rehearing of this canse was ordered on two propositions relating to the distribution of the proceeds of the sale of the lands in controversy. These will be found stated in the opinion on the motion for a rehearing. The appellant does not here claim the relief indicated in the second proposition, against the heirs of Mr. Hadley ; and the same is therefore dismissed from further consideration.

' As to the first of these propositions, we are satisfied that the amount which was owing by the plaintiffs, or the United States Military Road Company, to Harriman, at the time the contract was assigned to Mr. Hadley, which was a lien upon the lands in controversy, and which was paid by the appellant, with interest thereon from the time of such payment, should be repaid to the appellant out of the $30,500, which the contract of August 9,1866, provides shall be paid to plaintiffs out of the proceeds of the sales of such lands. There must necessarily be an accounting to ascertain the amount of such lien and payment.

The sum thus paid by the appellant to extinguish Harri-man’s lien, was, at the time of such assignment to Mr. Hadley, a debt against the plaintiffs, or, what is the same thing, against the U. S. Military Road Company, which consisted of the plaintiffs. The appellant was compelled to pay it in order to get a conveyance of the lands. We find no proof that Hadley ever agreed to pay this debt of his assignors, or any part of it, or that it should be paid out of the general fund arising from .the sales of the land. Whether Hadley knew of its existence or not can make no difference, unless he did so agree. He might have known of the debt and lien, but he might also have trusted to his assignors to pay and discharge the same. If Hadley had paid this debt of his assignors, it is not perceived why his position would not have been the same as that of the purchaser of personal property upon which there is an existing lien which he is compelled to pay to save the property. In such case the purchaser coaid doubtless recover the amount so paid of his vendor, on the implied covenant of title, unless he purchased subject to such lien. It is clear that the appellant is in the same position in this respect, that Hadley would have occupied had he paid off the Harriman lien. ¥e think the position is entirely untenable that, because the contract between the plaintiffs and Hadley does not provide that the former should pay and discharge the lien, therefore it must be inferred that the latter should pay one-third of it, which would be the effect of making it payable out of the general fund arising from sales of the lands. To sustain this position would be to make a contract for the parties which they did not make themselves. The view which we have taken leaves the contract as the parties made it, and applies a familiar rule of law, and one which in this particular case is believed to be eminently just and equitable.

It is not deemed necessary to discuss the subject further. The judgment of the circuit court must be modified as indicated in this opinion ; and must therefore be reversed, and remanded with direction that the same be so modified.

By the Court — So ordered.

On a second motion for a rehearing, made by the appellant, the judgment was farther modified at the June term, 1873, and the motion denied.

Lyon, J.

The last opinion in this cause failed to discuss, and the judgment fails to dispose of, the question of the right of the appellant to be re-imbursed out of the proceeds of the land, which would otherwise belong to the heirs of Mr. Hadley, the sum paid by him to Mrs. Hadley. The reason for such omission is stated in that opinion. We were misled by the following remark in the brief of counsel for the appellant: “ There are no proper pleadings in this case to adjust equities between Crowell and tbe heirs of Hadley.” The argument on this motion for a rehearing informs us that the meaning of the counsel was not correctly understood. The plaintiffs having no interest in this question, their counsel has not argued this motion.

There seems to he no difficulty in the way of a full adjustment in this action of the equities of all the parties in respect to the land in controversy. The controlling facts are all before the court; and if the pleadings are technically defective or insufficient for that purpose, they should be amended.

In Blodgett v. Hitt, 29 Wis., 169, it was held that where lands are sold by an administrator, without authority, the purchaser of the same is entitled to be reimbursed out of such lands for the purchase money paid by him in good faith, and which has been applied to the discharge of incumbrances upon it. Obviously the same principle applies to a case where the purchase money is applied to the discharge of the liabilities of the estate, although the same may not exist in the form of a mortgage upon the land attempted to be sold. All such liabilities are contingent incumbrances upon the real estate, and, to the extent that the money of the appellant has paid the liabilities of the estate of Mr. Hadley, he ought to be reimbursed out of the proceeds of the lands, for which he paid his money in good faith, but to which he failed to get a title.

■’There'seems to be'no necessity for a rehearing of the cause, and the motion therefor is denied, without costs except clerk’s fees. But the judgment of this court must be modified, so that, in addition-to -the direction therein-contained, it shall also direct the circuit court to so modify its judgment that the same shall provide for payment to the appellant, out of the first proceeds of the salés of such lands which would otherwise belong to the heirs of Mr. Hadley, such sum as was paid by the appellant to the administratrix and by her applied to discharge the liabilities of the estate, with interest thereon front the time the same was so applied. There must necessarily be a further accounting to ascertain the amount so paid and applied, and the heirs, or their guardian, must have due notice of such accounting, to the end that their rights may be fully protected.

By the Court. — So ordered.

* The following are the authorities referred to: 1. To the point that Hadley’s rights to the ninety sections of land already earned under the contract descended to his heirs, counsel cited R. S., ch.5, sec. 9, ch. 92, sec. 1, and ch. 96, secs. 1-3; Matthews on Ex’rs, 4; Atherly v. Vernon, 10 Mod., 518; Davie v. Beardsham, 1 Ch. Cas., 39; Green v. Smith, 1 Atk., 572; Pollexfen v. Moore, 3 id., 272; Paul Williams, Toth., 1, Banker v. Hill, 2 Ch. R., 218; Williams on Ex’rs, 552; Livingston v. Newkirk, 3 Johns. Ch., 315, 316, citing Greenhill v. Greenhill, Prec. in Ch., 320, and Langford v. Pitt, 2 P. Wms., 629; Champion v. Brown, 6 Johns. Ch., 398; Griffith v. Beecher, 10 Barb.,432; Muldrow’s Ex’rs v. Muldrow’s Heirs, 2 Dana, 387; Holdfast v. Clapham, 1 Term, 600; Guidot v. Guidot, 3 Atk., 254, and cases cited in note; Reed v. Whitney, 7 Gray, 533; Lacon v. Mertins, 3 Atk., 1; Mayer v. Gowland, 2 Dick., 565; Howse v. Chapman, 4 Ves., 542, 550; Townley v. Bedwell, 14 Ves., 591; Lawes v. Bennett, 1 Cox, 167; Greene v. Greene, 4 Mod., 148; Fletcher v. Ashburner, 1 Bro. C. C., 497; Lechmere v. Carlisle, 3 P. Wms., 211; Bull v. Sykes, 7 Wis., 449; Durkee v. Stringham, 8 id., 1; Brayton v. Jones, 5 Wis., 117; Jarvis v. Dutcher, 16 id., 309. 2. To the point that Hadley’s heirs would take the estate charged with the same trusts as existed against it in Hadley’s life-time, Moses v. Murgatroyd, 1 Johns. Ch., 119; Kip v. Bank of N. Y., 10 Johns., 63: Robinson v. Codman, 1 Sumner, 121; Giddings v. Eastman, 5 Paige, 561; Methodist Ch. v. Jacques, 1 Johns. Ch., 450; Murray v. Ballou, id., 566; Dexter v. Stewart, 7 id., 532. 3. To the point that a pretended sale hy, an administrator of property, rights and interests which by law descend to the heirs, is wholly void, Barker v. Crosby, 32 Barb., 184; Brush v. Ware, 15 Pet., 93; S. C., 1 McLean, 533.

Rep.