Prentice v. Erskine

The plaintiff appeals from a judgement in favor of defendant and from an order denying said plaintiff's motion for a new trial. The parties to the action entered into a written agreement whereby plaintiff covenanted to sell and defendant to buy certain real property for six thousand five hundred dollars. Of this the sum of five hundred dollars was paid on the execution of the contract, and subsequently a mortgage on the property of one thousand dollars was paid by defendant, and that amount was duly credited. Subsequent payments were to be made annually, and defendant also agreed to pay taxes and interest and to cultivate the land properly. Defendant entered into possession of the premises under the terms of the agreement immediately upon the execution thereof. According to the contract of sale, defendant's failure to comply with any of the terms thereof would relieve plaintiff from all obligations in law and equity to convey the property, and all payments made prior to such default were to be forfeited as liquidated damages. Defendant failed to pay the taxes and the first annual installment of one thousand dollars with interest, and, upon written demand of the vendor, surrendered the premises to him. Plaintiff then sued to quiet his title. By his answer defendant asserted that the contract had been mutually abandoned and rescinded by the parties, and that plaintiff was himself in default under the agreement, because he was unable to convey clear title to the land in question owing to the existence of a perpetual right of way for a public road over said land, to an easement for an irrigating ditch across the property, and to the lien arising from a contract for the payment annually for water to be used on the premises. He asked for judgment for the one thousand five hundred dollars which he had paid to plaintiff on account of the contract of sale with interest thereon, and for four hundred dollars, the value of the necessary improvements on the place made by him during his occupancy thereof. The court, although finding that defendant had failed to pay taxes, interest, and installments according to the terms of the contract, found also that plaintiff was in default because, owing to the encumbrances on the land, he could not, either at the time of the making of the agreement or sale, or at the date of the commencement of this action, give a perfect title to the land. Judgment was given in favor of defendant for the one thousand five hundred dollars which he had paid, with interest thereon. It was found by the court that defendant had expened four hundred dollars for necessary improvements as alleged in his pleading, but that this amount was offset by the reasonable rental value of the land during his occupancy thereof. The judgment also provided for the cancellation of five promissory notes by defendant given in favor of plaintiff, each for one thousand dollars, payable in five equal annual sums respectively, and evidencing the deferred payments set forth and described in the contract of sale. Appellant contends that in the matter of the asserted rescission there is no essential difference between this case and Oursler v.Thatcher, 152 Cal. 740, [93 P. 1007]. In that case, as in this, there was a default on the part of the vendees in the performance of the conditions of the contract. There, as here, upon demand the vendees surrendered possession of the premises. It was held that these facts, together with the commencement of an action to quiet the title of the vendors, did not constitute a rescission of the contract by the mutual consent of the parties, and the vendees were properly denied judgment on their cross-complaint for the money paid as a part of the purchase price prior to their default. Respondent denies the authority of that case because there was no question in it with reference to the sufficiency of the title of the vendors. He asserts that it has long been settled law in California that one may contract to sell real property and to deliver title at a future time who has no present interest in it; and a fortiori one who owns real property subject to certain encumbrances may enter into such an agreement. In this case, admittedly, Prentice did not own the land free from all encumbrances at the date of the agreement of sale, because that instrument by its very terms provided for the future payment of an existing mortgage, and Erskine obligated himself "to pay all water assessments on the water-right covering said premises." In California it is the general rule that a defaulting vendee under an agreement of sale cannot complain because at a time prior to the maturity of the contract and the date fixed thereby for the delivery of a good and sufficient deed, the vendor was not in a position to convey full title to the land. (Joyce v. Shafer,97 Cal. 336, [32 P. 320]. See, also, Backman v. Park, 157 Cal. 607, [137 Am. St. Rep. 153, 108 P. 686], and authorities there cited.) It is a harsh rule and should not be unduly extended. If the only encumbrances upon the property were the easement for the irrigating ditch and the lien for the water-tax, we might be constrained to hold, under the authorities, that the case would fall within the rule discussed above, but as one of the defects in the vendor's title arose from the existence of a public servitude, we must conclude that plaintiff was himself in default, because that is the sort of cloud which in the nature of things he could not remove by any ordinary method of business negotiation. It would not be like a mortgage, for example, which might be extinguished by payment of the debt thereby secured, or like a lien for unpaid water rent which might be destroyed by settlement of the account. He could not either by adverse possession or by purchase take from the public the right to pass over the land on a dedicated highway. He was as completely helpless and hopeless of conveying a perfect title at any time as if the whole tract had been taken for use as a public park. The vendee might have rescinded the contract at any time even though the time for final payment had not arrived because the vendor, in the nature of things, never could offer a perfect title to him. While this case differs from Burks v. Davies,85 Cal. 110, [20 Am. St. Rep. 213, 24 P. 213], because in that case the vendee had the right to exercise his option at any time, and therefore the vendor was bound to be ready at all times during the life of the contract to convey an unclouded title, nevertheless the rule there announced is applicable, and the vendee was at all times entitled to rescind because there was no more chance to make the vendor's title complete and flawless at the maturity of the contract than at any other time. In Koshland v. Spring, 116 Cal. 700, [48 P. 62], it was said: "Since defendants were in express terms obligated to make good title as a condition of the sale, we do not concede that actual knowledge by the purchasers of dedication to public use of the extensive street surface exhibited on the map — the tract being mainly or largely agricultural and to be sold as acreage — could be deemed, while the contract remained executory, to imply a waiver of substantial fulfillment of the condition for title. (Sugden on Vendom, *p. 390; Speakman v. Forepaugh, 44 Pa. St. 363, 374; compare Devlin on Deeds, secs. 911, 913 and cases cited.) . . . So here, the reasonable construction of the contract is that defendants, the map before them, agree to make title to plaintiffs of unconveyed streets as well as lots; but it is found that there are at least grave doubts whether they have right to convey many of the streets; and the result is that they cannot enforce specific performance of the contract, and plaintiffs are entitled to return of their deposit." Vendee's right to rescission under such circumstances is upheld by such authorities as Turner v. McDonald, 76 Cal. 177, [9 Am. St. Rep. 189, 18 P. 262]; Sheehy v. Miles, 93 Cal. 288, [28 P. 1046]; Wilcox v.Lattin, 93 Cal. 588, [29 P. 226]; Easton v. Montgomery, 90 Cal. 307, [25 Am. St. Rep. 123, 27 P. 280]; Boas v. Farrington,85 Cal. 535, [24 P. 787]; Peckham v. Stewart, 97 Cal. 147, [31 P. 928]. The conduct of the parties, both being in default, the one demanding and the other surrendering the possession of the premises, amounted to a rescission of the contract.

By taking back the possession of the property, plaintiff, of course, waived his right to insist upon further payments under the agreement of sale. Consequently the notes evidencing payments to be made in the future execution of that agreement were properly shorn by the court of their apparent efficacy.

No other specifications of alleged error require comment.

The judgment and order are affirmed.

Lorigan, J., and Henshaw, J., concurred.