Richter v. Union Land & Stock Co.

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The plaintiff recovered judgment for the sum of eight hundred dollars, with interest from April 16, 1892, and costs — the principal sum adjudged being the amount of the consideration paid by the plaintiff to the defendant on a contract of the date named which the defendant had failed to perform.

The defendant appeals from the judgment and from an order denying a new trial. The material facts, as disclosed by the pleadings and findings, are as follows: The contract in question was accompanied, or rather preceded, by a deed of the same date from the defendant to the plaintiff purporting — for the consideration of eight hundred dollars in hand paid — to convey to the plaintiff "a perpetual water right for a sufficient quantity of water to properly and fully irrigate [the land described in the deed]; said water to be taken and used from the water system belonging to the party of the first part on Red Rock creek in said county," and the use of the water to be restricted to the land described.

By the contract — which was executed by both parties — the defendant agreed "to deliver in an open ditch, at the most convenient point on the margin of the [land described in the deed], at all proper and seasonable times for the irrigation of said land, a sufficient quantity of water to fully and properly irrigate the said land for the raising of all kinds of agricultural crops, each and every year perpetually"; and plaintiff agreed to pay therefor certain water rates.

The contract contained a proviso that the defendant should "not be liable in damages for a deficiency in water caused by drought, hostile diversion, forcible entry, temporary damages by flood or other accident"; and also the agreement, "that the grant this day made of water to irrigate said land, and hereinbefore mentioned, shall be and is subordinate to this agreement.",

The land referred to in the deed and contract was, at the date thereof, public land of the United States; and the defendant — who at the time was engaged in the construction of its water system, consisting of a storage reservoir Red Rock creek, and distributing canals and ditches leading therefrom — by its agent suggested to the plaintiff the acquisition of this land from the government, and represented to him that the work on its water system would be prosecuted with due diligence and completed as soon as practicable; and thereupon, on the same day, before the execution of the deed and contract, but in contemplation of their execution, the plaintiff, relying on these representations, filed in the United States land office, under the provisions of the Revised Statutes for such cases made and provided, his declaration of intention to reclaim the said land, and paid the required fee. The deed and contract were then executed, and the consideration named (eight hundred dollars) paid.

It is found by the court "that defendant has never completedsaid reservoir or completed the canals or ditches leadingtherefrom, and has not constructed a ditch nearer than one and one-half miles of plaintiff's said lands, though defendant could have done so by the first day of January, 1896, had it used due or any diligence in prosecuting its said work as it promised plaintiff it would do. That defendant failed to deliver any water, etc.; . . . . that defendant prosecuted its work with due diligence until the summer of 1895, when said defendant ceased to work thereon, and since said time . . . . has done nothing toward performing its promises and agreements hereinbefore set forth;that plaintiff received nothing of value from defendant under orby virtue of said water deed or grant, and that said deed orgrant is of no value either to plaintiff or defendant."

The two passages italicized indicate the portions of the finding objected to in the specifications of insufficiency of the evidence. With regard to the first, the specification is probably insufficient; but the case will not be materially affected if we substitute for the passage objected to the facts admitted on the trial and referred to in the specification — to wit, "that the said reservoir and canals leading therefrom were completed prior to 1893 to such an extent that defendant could have delivered water to the land of plaintiff by making a distributing ditch from the main canal to said canal; . . . . and . . . that the defendant has had sufficient water, and could have delivered the same to plaintiff each year until the spring of 1897." With regard to the finding as to the value of the supposed water right, according to the view we propose to take of the case, it is but a necessary deduction from the other facts found, and is therefore supported by the evidence upon which they rest.

The principal contentions of appellant's counsel are, that there was no breach of the contract; and that — even if the breach be admitted — there was no right of rescission, and, in fact, no attempt to rescind or offer to reconvey the "water right" before the commencement of the action.

1. With regard to the first point it is contended that the contract was to deliver water only "at all proper and seasonable times for the irrigation of said land," and that "there is no allegation or finding that a proper and seasonable time has existed." The point of the contention is that the language of the contract is not to be construed as referring merely to the proper seasons of the year for irrigation, but as requiring also, as a condition precedent to the defendant's obligation to deliver the water, that the land should be "cleared, ploughed, fenced, or in (such) manner improved" as to be ready for irrigation. But clearly the language used refers only to the recurring seasons of the year, and the case is that defendant did not deliver the water at any season of the year.

2. The position of the plaintiff that the failure of one of the parties to a contract to perform does not, in any case, constitute a failure of consideration — and that the only remedy of the injured party is to recover damages — cannot be sustained. In all executory contracts the several obligations of the parties constitute to each, reciprocally, the consideration of the contract; and a failure to perform constitutes a failure of consideration — either partial or total, as the case may be — within the meaning of section 1689 of the Civil Code.

In the case of an executed contract — as, e.g., a deed of land of which the consideration is a promise to pay the purchase money — this is not always true; because in such cases, or generally in such cases, "the vendor has waived actual performance upon the part of the vendee, relying upon his mere promise to perform."(Lawrence v. Gayetty, 78 Cal. 126, 134¹; Hartman v. Reed, 50 Cal. 485; Schultz v. McLean, 93 Cal. 358.) Which is but to say that, the actual inducement to the vendor to enter into the contract, or, in other words, the sole and sufficient consideration contemplated by him, is the mere obligation of the vendee to pay, without regard to the contingency of its performance. For in such cases, almost universally, the payment of the purchase money is secured by a lien on the land sold, and the reliance of the vendor is upon his ability to enforce the payment of the vendee, in invitum. But the rule, even if it could be regarded as universal, applies only to the rescission of executed contracts, and not to executory contracts, as in the case here.

3. Nor, where the failure of the consideration is total — which implies, of course, that nothing of value has been received under the contract by the party seeking to rescind — is it necessary that a formal rescission be made before bringing suit. In such cases a suit may always be maintained for the recovery of the consideration paid. (Santa Clara etc. Fuel Co. v. Tuck,53 Cal. 304; Rose v. Foord, 96 Cal. 154; Hayes v. Los AngelesCounty, 99 Cal. 79; 1 Chitty on Pleading, *362, note z; Russ etc.Co. v. Muscupiabe etc. Co., 120 Cal. 527.²)

In the authorities cited (except the last, where it is held that a total failure of consideration may be pleaded as a defense to a note without previous rescission) it is held that, where there has been a total failure of consideration as to one party, the law implies a promise on the part of the other to repay and what has been received by him under the contract; and accordingly it was held, in the case first cited, that an attachment was proper.

"Practically (indeed) there is no difference in the effect upon the contract between the successful defense of a plea of a want or total failure of consideration" (or, it may be added, an action to recover back the money paid on a contract of which the consideration has wholly failed), "and the successful termination of an action to rescind it. In either case the contract is rendered incapable of enforcement, the judgment being a bar to any future action." But nevertheless the legal action to recover the money paid in such a case, as money had and received to the plaintiff's use, differs, at least historically, from the equitable action to rescind and is too well established to be affected by the authorities, if there be any adverse, bearing on the latter action. The authorities bearing upon the question of diligence in rescinding can, therefore, have no application to this case; nor, indeed were the case regarded as an action for rescission would they apply. Had there been even greater delay on the part of the plaintiff than there has been, it could not be regarded as laches, but rather as an indulgence to the defendant, "and it does not lie in the mouth of the defendant to say that he waited too long." (Rose v. Foord,supra.) We are not to be understood, however, as holding that, in cases of total failure of consideration, an action to rescind cannot be maintained without previous rescission. (Kelley v.Owens, 120 Cal. 510, 511.)

4. In this case it is found by the court that the water deed of grant was of "no value either to plaintiff or defendant," and that "plaintiff received nothing of value under or by virtue of it." This finding, we are of the opinion, is not only justified by the evidence, but is a necessary deduction from the other facts found. The right conveyed was not a right in the water of Red Rock creek, either in its natural state or as collected or flowing in the proposed reservoir and ditches of the defendant, but simply "a perpetual right to a sufficient amount of water, etc., . . . . to be taken from the water system" of the defendant, and to be delivered "in an open ditch" on the plaintiff's land, and to be used thereon exclusively. By the terms of the grant, therefore, the particular water in which a right was granted could be determined specifically only by the ditch, and could have no existence as a definite entity until thus determined. Hence, the deed could not operate as a grant until the ditch — by which alone the subject of the grant could be determined — was constructed, and the subject matter of the grant thus created or brought into being. It was therefore dependent for its character as a grant upon the construction of the ditch and the delivery of the water on the land. Until then, though in form a grant, it transferred no presently existing right, but merely created an obligation to be performed infuturo, and which was extinguished by the judgment in the case. And this, indeed, seems to have been understood by the parties, as is evidenced by the express proviso "that the grant this day made of water to irrigate said land . . . . shall be and is subordinate to this agreement"; which can only mean that it was dependent for its vitality upon the defendant's performance of the contract, and was to take effect only upon the happening of that condition.

5. The defense of the statute of limitations cannot be sustained. The action was not barred by section 337 of the Code of Civil Procedure. By the express agreement of the parties, as admitted on the trial, the defendant was not required or expected to bring the water to the land before March 1, 1893; which was less than four years before the commencement of the action. In the contract the time for performance was not specified, and the court below held that it was to be construed as providing for a reasonable time. The oral agreement of the parties was, however, admissible. (Code Civ. Proc., sec. 1856; Sivers v. Sivers,97 Cal. 518.) Subdivision 4 of section 338 has no application. The action is not for relief on the ground of fraud or mistake; nor does section 343 apply. No cause of action arose until within four years before the commencement of the suit.

There remains, therefore, of the provisions pleaded only, subdivision 1 of section 339, referring to actions on contracts "not founded upon an instrument in writing." But the action is not for a breach of the original contract, but upon an obligation growing out of the failure to perform it. The plaintiff was not bound to treat the contract as abandoned on the first breach of it, or on any particular breach, but had his election still to rely upon it. The statute could not begin to run until he made his election to rely no longer upon the contract and to sue for the money paid to the defendant under it. (Ward v. Marshall,96 Cal. 155.³)

6. The failure of the plaintiff to allege in his complaint that the water deed or grant was of no value is immaterial. The facts are alleged from which this appears as a necessary conclusion. The finding of the court on this point is a mere conclusion of law from the other findings; and other findings of the court claimed to be of matters not within the issues may be regarded as immaterial. Nor was there any error in allowing legal interest on the amount recovered. It is so held in Rose v.Foord, and other cases cited supra.

We therefore advise that the judgment and order denying a new trim be affirmed.

Haynes, C., and Chipman, C., concurred.

For the reasons given in the foregoing opinion the judgement and order denying a new trial are affirmed.

Harrison, J, Garoutte, J., Van Dyke, J.

Hearing in Bank denied.

Beatty, C.J., dissented from the order denying a hearing in Bank.

¹ 12 Am. St. Rep. 29.

² 65 Am. St. Rep. 186.

³ 31 Am. St. Rep. 198.