Hawkins v. Stoffers , 40 Wyo. 226 ( 1929 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] On December 6, 1923, a contract in writing was entered into between the Wasatch Development Company, hereinafter called the Development Company, as party of the first part, and Oswald T. Hawkins, respondent herein, and his wife, as parties of the second part. According to the terms of the contract, the parties traded lands, the Development Company agreeing to sell and Hawkins and wife agreeing to buy eighty acres of land in Salt Lake County, Utah, for the sum of $16,000. Of this sum, $11,600 was to be paid by an exchange of 210 acres of land in Idaho and the personal property thereon then owned by Hawkins and wife, this land to be taken over by the Development Company. The balance of $4400 was agreed to be paid in ten annual instalments of $440 each, the first instalment to be paid on December 6, 1927 and an additional one on the same day of each year thereafter until the whole amount was fully paid. The contract provided, among other things, that "a good and sufficient warranty deed, together with abstract of title showing clear and unencumbered title, to be delivered to second parties when the said payments are made in full together with interest." This clause presumably referred to the Utah property. And it was further provided that "in the event of the death or total disability of Oswald T. Hawkins, one of the second parties hereto, before all of the payments are made hereunder, first party agrees to deliver to him or his heirs a free and unencumbered title" to such portion of the Utah property as had then been fully paid for, the remaining payments to be cancelled. By another clause of the contract, which, it is agreed, is a minor covenant not authorizing the cancellation of the whole contract, Hawkins agreed to devote some of his time, commencing with the spring of 1924, to cultivating land of the Development Company adjoining the eighty acres above mentioned, and he was to receive therefor the sum of $100 per month. The Development Company also agreed to erect a frame house on the eighty acres bought by Hawkins and wife at a cost not to exceed $1500, and to erect a barn and to lay a pipeline to the land to supply it with water. At the end of the contract appeared the following guaranty:

"In consideration of the premises we the undersigned hereby guarantee to second parties the fulfillment of the obligations herein undertaken by the first party."

This was signed by George E. Stoffers and Oscar R. Stoffers, defendants and appellants herein, and by Jeremiah Stokes, Samuel E. Wolley, Charles E. Hayes and J.J. Morey, the last four not being parties to this suit.

Probably on the same date on which the contract was made Hawkins and wife made and executed deeds to the Idaho property, delivering them to the Development Company. The land was deeded in two parcels. In one of the deeds, for 160 acres, George E. Stoffers was the grantee. In the other, the Guaranteed Securities Company appears as grantee. There has, however, been an erasure and Hawkins and wife testified that the deed was in fact made to the Development Company. Hawkins, the respondent herein, took possession of the Utah property in the spring of 1924 and continued in possession until shortly before the commencement of this action. In the meantime improvements were placed on the property as provided by the contract above mentioned, and in addition thereto Hawkins himself expended thereon the sum of $1237.00. He also farmed the adjoining land as he had agreed to do and was regularly paid the sum of $100 per month up to September, 1925, the payments being made by the Guaranteed Securities Company. The amounts due for the months of September to December, both inclusive, were not paid and are sought to be recovered in this action.

The Development Company ceased to do business in the spring of 1924 and thereafter its charter was dissolved by advertisement. The Guaranteed Securities Company became insolvent in the fall of 1925 and went into the hands of a receiver. It is claimed that the Development Company was a subsidiary of, or closely connected with, the Guaranteed Securities Company. The directorate of the two companies was largely composed of the same persons. The Guaranteed Securities Company, it appears, made the payments of $100 per month to Hawkins as already indicated, and there is testimony tending to show that it also paid for the improvements agreed to be erected on the Utah property pursuant to the contract above mentioned. This company also came into possession of the deeds to the Idaho property executed by Hawkins and wife as above mentioned. The receiver, so he testified, took possession of them and of the property covered thereby, made disposal thereof and received the purchase price therefor. The business transacted between Hawkins and wife and the Development Company was transacted in the offices of the Guaranteed Securities Company. The receiver found an assignment of the contract with Hawkins, made by the Development Company to the Guaranteed Securities Company, dated December 15, 1923, in the office of the latter company, but in a rather unusual place, and it is not clear from this testimony alone that it came into the possession of the latter company. To supplement the foregoing facts, defendants and appellants offered to show that the Development Company was organized for the express purpose of acting as the agent of the Guaranteed Securities Company in holding real estate. This testimony was, under exception, excluded, on the theory that the articles of incorporation of the companies were the sole competent evidence of its powers and purposes.

Appellants further offered to show that at a meeting of the board of directors of the Guaranteed Securities Company held shortly after December 15, 1923, "a general discussion was had respecting the contract with Hawkins and wife, and that the board of directors were cognizant of the agreement and of the fact that it had been assigned to the Guaranteed Securities Company, and further that they authorized the payment of the moneys due under the agreement, as in the agreement provided." This evidence was excluded as incompetent, irrelevant and immaterial, and an exception was taken.

The receiver above mentioned, in the fall of 1925, also found among the papers of the Guaranteed Securities Company a deed from the Development Company, dated April 24, 1923, covering the eighty acres agreed to be sold to Hawkins, and other lands. He placed this deed of record on November 19, 1925, and thereupon demanded possession of the premises from Hawkins. He thereafter served a written notice to vacate on Hawkins and, according to the testimony, an agreement was thereupon entered into between them whereby Hawkins agreed to yield up the premises to the receiver and thereafter to farm the land for and on behalf of the latter. The lands covered by this deed were thereafter sold by the receiver pursuant to an order of court. The plaintiff brought this action against the defendants, part of the guarantors of the contract as above mentioned, to recover the value of the Idaho property, the value of the improvements placed by him on the Utah lands, and the amount due him for working the adjoining lands according to the contract of December 6, 1923.

The plaintiffs' second amended petition, after setting forth the terms of the contract of December 6, 1923, the fact that he took possession of the Utah property about February 26, 1924, that he vacated it pursuant to the notice given him by the receiver as above mentioned, and that there is due him $400 by reason of the work performed at $100 per month as above stated, further alleges that he was entitled to recover the value of the Idaho property and the value of the improvements placed by him on the Utah property because the Development Company violated the terms of the agreement of December 6, 1923, has failed and neglected to perform its agreement, and rendered the fulfillment of its obligations thereunder impossible because (a) it conveyed the Utah property, on April 24, 1924, to the Guaranteed Securities Company; (b) because it did not own the property at the time of the contract of December 6, 1923; (c) because it forfeited its charter; (d) because it is insolvent. Plaintiff pleaded that he had performed all of the obligations undertaken by him and that the rights of his wife were assigned to him. The appellants, in their answer, denied the impossibility of performance, and pleaded, among other things, that the two companies were the same, as above indicated, that the contract of December 6, 1923, was assigned to the Guaranteed Securities Company by it, that the assignment was accepted; that the Guaranteed Securities Company became obligated to perform the terms thereof, and that plaintiff had no right to yield possession to the receiver and should have resisted his demands. The cause was tried to the court, judgment was rendered for the plaintiff and respondent for the various items claimed by him, and the defendants have brought this case here by direct appeal. A number of errors are assigned, which may be summarized as follows: (1) That the second amended petition fails to state a cause of action. (2) That the judgment of the court is contrary to and not sustained by the evidence. (3) That the judgment is contrary to law.

1. The first contention of appellant is that the second amended petition fails to state facts sufficient to constitute a cause of action, because of the lack of necessary allegations, to recover the value of the Idaho lands and of the improvements made by him on the Utah property. It is not necessary to set out the specific allegations which counsel claim should have been made. In addition to the items above mentioned, the respondent also asked to recover the amount which remained unpaid for labor performed under the collateral agreement hereinbefore mentioned. The guaranty was unconditional and one for performance. Hecht v. Acme Coal Co., 19 Wyo. 10, 113 P. 789; Merchants National Bank v. Ayers, 37 Wyo. 136, 259 P. 804. It is not questioned that the guarantors were in default on this portion of the guaranty at the time of the commencement of the action. Hence the demurrer, which applied to the petition as a whole, was not good.

2. Appellants further argue that since the evidence shows that one of the deeds to the Idaho property was made to George E. Stoffers and one to the Guaranteed Securities Company it affirmatively appears that plaintiff has not carried out his part of the contract, and that he cannot, accordingly, recover herein. They also contend that if the deed, as above mentioned, was altered, plaintiff and respondent should first cause it to be reformed before he is entitled to sue herein. We do not think that the contention is well taken. The evidence was sufficient, we think, for the court to find that these deeds were made pursuant to and to carry out the contract and that they were accepted by the Wasatch Development Company. The latter company could assign whatever rights it had under the contract without reference to the guarantors. Whether a formal assignment had been made or not does not appear, but it is apparent that the deeds made by respondent and his wife, assuming that they were made as above stated, were so made simply in order to save the execution of another set of papers. There is so much the less merit in the contention in view of the fact that appellants claim that the Guaranteed Securities Company and the Development Company were one and the same and in view of the fact, as indicated by the testimony, that the former received the full benefit of the Idaho lands. Counsel for the appellants cite us to a number of authorities that guarantors are not liable beyond the strict letter of their contract, but the citations are of little value, are cited simply in support of elementary rules, and give us little light on the point involved.

3. The main point in the case is as to whether or not Hawkins is entitled to recover the purchase money already paid; that is to say, whether he is entitled to recover the value of the Idaho property. It is not altogether clear from the brief of his counsel upon what theory or theories they seek to recover herein. The contract was executory. While it probably contemplated that Hawkins should have possession of the lands and hence to retain them, there is no express covenant to that effect and there may be a question whether the guarantors were liable on an implied covenant. There was an express covenant that the development company would convey a clear and unencumbered title, but that covenant was to be performed in the future and there has been no breach thereof, and it is difficult to see how suit may be brought on an unbroken covenant unless it be as a result of the right of plaintiff to rescind the contract or treat it as rescinded. It is said in 39 Cyc. 2001, that as a general rule where there has been no rescission, and no cause for the rescission of a contract exists, there can be no recovery by the purchaser of partial payments made thereunder. In Way v. Johnson, 5 S.D. 237, 58 N.W. 552, an action similar to that at bar, the court said:

"So long as the contract remained in force, he could not recover the money paid. His right to recover in such cases is based upon the fact that the contract is at an end."

And in Distler v. Dabney, 7 Wash. 431, 35 P. 138, 1119, which, too, was an action by the vendee to recover the purchase price, the court said:

"The sole question was whether plaintiff was entitled to have the contract rescinded after the showing proposed to be made by the defendant's answer, and that was a question for the court."

In Kruse v. Bush, 85 Or. 394, 167 P. 308, it was said:

"In the absence of fraud or some other ground for rescission, the vendee cannot escape the obligations he has assumed in the contract of purchase, nor can he recover back the purchase money he has paid. But the rule is otherwise when the vendee is entitled to rescission."

So too, in Henderson v. Fields, 143 Ga. 547, 85 S.E. 741, a case similar to that before us, the court said:

"Unless the plaintiff is entitled to a rescission of the contract, she is not entitled to the relief sought. Her right to recover the purchase money which she has paid on the land necessarily depends upon her right to have restoration of the status."

That case further holds that there is no substantial difference between a purchaser in possession under an executed deed and one in possession under a bond to make title. Judging from some of the statements made in the brief of respondent and some of the cases cited, it is probably the theory of counsel for plaintiff and respondent that the latter had a right to rescind the contract, and therefore, sue for the breach thereof. Among the cases cited to that effect and involving points similar to those involved here are Wilhelm v. Fimple, 31 Iowa 131, 7 Am.Rep. 117; Hawkins v. Merritt, 109 Ala. 261, 19 So. 589; Martin v. Chambers, 84 Ill. 579. And although Greenberg v. Ray, 214 Ala. 481,108 So. 385; Leisch v. Baer, 24 S.D. 184, 123 N.W. 719; Quirk v. McDonnell, 195 Ill. App. 331, say nothing about the right to rescind, we take it that the right to recover the purchase money was necessarily based on the right to rescind. We shall treat the case at bar accordingly.

The right to rescind exists for various reasons. Among them are enumerated want of title and insolvency of the vendor. 39 Cyc. 1406, 1419, 2006-2008. But as said in Martin v. Chambers, supra:

"A party who seeks to rescind a contract must restore or offer to restore the property obtained, before he can recover back the purchase price paid."

And that is the general rule (27 R.C.L. 653, 654; 39 Cyc. 1423-1424), unless, of course, deprivation by paramount title makes restitution impossible, or, perhaps, useless. We see no good reason why that rule should not apply when a guaranty is sued on as in the case at bar. So it is said in 39 Cyc. 1430; Warvelle on Vendors (2nd Ed.) Sec. 868, that, ordinarily, notice of an intention to rescind must be given in some form, though that, perhaps, may be implied from an offer to restore everything of value and tendering back possession. See Winkler v. Jerrue, 20 Cal. App. 555,129 P. 804. But counsel have directed us to no case where that has been held to be necessary in case of eviction under paramount title. And it is held that no notice of claim of such title made by a third party, or suit brought by him, is essential to be given to a warrantor, though, if given, it would be advantageous to him. 15 C.J. 1265. If that is true at so vital a time, less reason for notice would seem to exist at a later time. It is not necessary, and we have thought it best, not to decide this point, until it may be more fully argued and elucidated by counsel. There was in the case at bar no restoration or offer of restoration of the property, and hence the questions of mere want of title in the vendor or its insolvency or impossibility to perform are not at all in the case and the plaintiff is in no position to recover herein by reason of the existence of these facts. His right to recover, accordingly, must necessarily be based, if he is entitled to recover at all, upon the fact that he was evicted from the premises or that he was deprived of his right by reason of a paramount title. It is said in 39 Cyc. 2009, that "where a person in possession under an executory contract of sale is evicted, he may recover from the vendor the purchase price paid." An examination of the various authorities cited will indicate, we think, that the eviction must be pursuant to a paramount title, and that when such eviction takes place, that fact authorizes rescission of the contract and recovery of the purchase price paid. The rule is that in order to recover on a covenant because of eviction, such eviction must be pursuant to a paramount title, unless notice, as hereinafter mentioned, is given. 7 R.C.L. 1197; 15 C.J. 1310. No reason exists why that rule should not be applied here. That, in fact, is conceded by counsel for respondent. If the eviction took place pursuant to such title, then, contrary to the contention of counsel for the appellants, no tender of the purchase price still unpaid was required to be made, since the law does not require a vain thing. Wilhelm v. Fimple, supra; Hawkins v. Merritt, supra; 27 R.C.L. 653; Warvelle, supra, Sec. 925.

The sole question before us, accordingly, is as to whether or not the respondent yielded to a paramount title. The burden to prove that rests upon him. 7 R.C.L. 1196, 15 C.J. 1310. For such title he relies solely on the deed of April 24, 1923, given by the development company to the Guaranteed Securities Company. But that deed was not placed of record, as hereinbefore stated, until November 19, 1925; the respondent had in the meantime, and in the spring of 1924, gone into possession of the property and was in such possession when the deed was placed of record, and the evidence specifically shows that he knew nothing of the deed until the fall of 1925. Under these circumstances the possession of the land by Hawkins gave notice to the world of his interest in the land. 39 Cyc. 1744. If he was a purchaser in good faith for value, and the testimony in the record before us indicates that he was, the deed of April 24, 1923, was, under our recording acts, absolutely void as to him. Sections 4609, 4610, Wyo. C.S. 1920; 39 Cyc. 1741-1756. And we presume that the laws in Utah are the same. Hence, it is difficult to see how the claim of counsel for respondent that this deed showed a paramount title in the receiver, who took nothing more than what the Guaranteed Securities Company had, can be sustained.

And that is not all. The respondent was bound to deal fairly with the vendor and the guarantors, and he ought not to be entitled to recover any damages which could have been prevented by him by the exercise of reasonable care. 15 C.J. 1265, 1283. It was easy for him — a rule that should be applicable here as well as when an action is brought on a covenant — to relieve himself from responsibility by giving notice to the guarantors of the claim of the receiver and of any suit which the latter might have wished to institute. 15 C.J. 1264, 1315; Tiffany on Real Property (2nd Ed.) Sec. 453. In fact, that is an absolute requirement, under statute, in some of the states, when a covenant in a deed is relied on. See Ernst v. St. Clair, 71 Colo. 353, 206 P. 799; R.L. Okla. 1910, Sec. 1166. That was the rule under the Roman law. Code Justinian, 8, 44, 8. But the respondent did not choose to take the safe course which would seem to have suggested itself to a reasonable man, but took the risk of proving that he yielded to a paramount title. We do not find it to be a prerequisite in the authorities that the title to be protected must be a legal title. It would seem that though he had only an equitable title he should have protected that or should have given the notice above mentioned, for any other course would seem to constitute unfairness toward the guarantors. See Johnson v. Oldberg, 32 S.D. 346,143 N.W. 292. It is probable — a point, however, which we need not decide — that he would have been entitled to be reimbursed for expenses incurred to protect that title or to ultimately obtain a legal title, if he could not obtain it otherwise, by a suit to quiet title. See 15 C.J. 1532. If the Guaranteed Securities Company, accordingly, was bound by the contract with Hawkins and wife, and took whatever rights it had subject thereto, then the respondent should have protected his title, or should have given the notice above mentioned. There is testimony in the record tending to show that the company last mentioned was so bound. We need not repeat that testimony here, except to add that the very fact that the Guaranteed Securities Company did not place the deed of April 24, 1923, of record is a circumstance tending to prove the foregoing fact. In addition to that, the evidence offered by appellants, but rejected, was, we think, competent and relevant on that point. Part of it was offered to show the inter-relations between the two companies, which cannot well be done by proof of the articles of incorporation of one of the companies. For a discussion of such inter-relations, see Farmers State Bank v. Haun, 30 Wyo. 322, 222 P. 45. The other testimony offered but rejected tended even more directly to show that the assignment heretofore mentioned was made and accepted by the Guaranteed Securities Company, which was important to be shown under one of the defenses of the appellants. The rejection of such testimony would seem to indicate that the trial court did not consider this point as a defense herein. We think that this, as well as the rejection of the testimony above mentioned, was error. We might say in this connection that counsel for respondent seem to think that the want of knowledge on the part of respondent of the assumption of the contract by the Guaranteed Securities Company is of some importance. We have not, so far, been able to see the force of that. It would seem that the respondent's duty was to show that he yielded only to a paramount title, which was paramount in fact, not one which might seem to him to be so, in view of his knowledge. The point has not, however, been fully presented, and hence we pass it without deciding it.

The court, in addition to the purchase money, evidently allowed the respondent the sum of $1,237 for improvements placed on the Utah land. It seems that in most jurisdictions the value of such improvements is not allowable in an action like that at bar, although there seems to be a conflict of authority. 15 C.J. 1331. The point is not argued and we do not decide it, but mention it merely so that our opinion may not hereafter be misunderstood.

The judgment of the District Court is accordingly reversed and the cause remanded for a new trial.

Reversed and Remanded.

KIMBALL and RINER, JJ., concur.