Hollingsworth v. Colthurst

The opinion of the court was delivered by The plaintiff sued for stipulated damages claimed to have been suffered on account of the defendant's refusal to carry out a contract for the purchase and sale of real estate. The transaction involved an exchange of land, and the contract contained the following provision: "It is further agreed and understood by the parties to this contract that each party shall furnish an abstract showing satisfactory title to the above-named properties."

The petition did not allege that the plaintiff furnished an abstract showing satisfactory title to his land, or that the defendant refused to receive an abstract of title or to investigate the title offered, or that the defendant arbitrarily or capriciously rejected such title or otherwise acted in bad faith in the matter. It was merely stated that the plaintiff furnished an abstract showing a good and sufficient title, and that the defendant refused to accept a warranty deed free of encumbrances. A demurrer to the petition was sustained, and the plaintiff prosecutes error.

The question involved is not a new one in the law, and this court has already indicated its views respecting the principles to be applied. Parties to a contract may lawfully stipulate that performance by one of them shall be to the satisfaction of the other. The obligation of a contract is not destroyed because it contains such a provision, as Chancellor Kent seems to have believed. (Folliard v. Wallace, 2 Johns. [N. Y.] 395.) If such a contract be made, the party to be satisfied is the judge of his own satisfaction, subject to the limitation that he must act in good faith. He should fairly and candidly investigate and consider the matter, reach a genuine conclusion, and express the true state of his mind. He can not act arbitrarily or capriciously, or merely feign dissatisfaction. The application of these principles is not limited to transactions involving personal taste and preference. All this follows from the decision in the case of Campbell v. Holcomb, 67 Kan. 48,72 P. 552. In the following cases the principles upon which Campbell v.Holcomb was determined were applied to transactions involving the title to real estate: Stotts v. Miller, 128 Iowa, 633, 105 N.W. 127;Liberman v. Beckwith, 79 Conn. 317, 65 A. 153; Averett, Trustee, andals. v. Lipscombe, 76 Va. 404; Church v. Shanklin, 95 Cal. 626,30 P. 789, 17 L.R.A. 207. Very respectable courts hold contrary views, but this court is not disposed to follow them, believing that the better reasoning as well as the weight of authority supports the conclusions announced.

In this case, no third person having been named as umpire, it was left to the defendant to determine whether or not he was satisfied. He was bound to meet the responsibility in the same upright and straightforward manner as if he had been a stranger to whom the title was to be satisfactory. Having done this, his satisfaction or dissatisfaction fixed the rights of the parties. It is of no consequence that a court or jury might believe that he ought to have been satisfied or that a reasonably prudent purchaser would have been satisfied. In every city there is likely to be some attorney who is regarded as much more technical than his fellow members of the bar in his requirements respecting abstracts and land titles. Suppose the matter in controversy had been left to such an attorney, and that in all probity he had expressed dissatisfaction: the defendant would have been absolved. Evidence that the attorney entertained unreasonable views would only be relevant in connection with proof of dishonesty or want of good faith. The same is true here.

The plaintiff argues that a land title is either good or bad, that an abstract will show a title either good or bad, and that there can not be, in common sense or reason, dissatisfaction with a good title. The experience of every lawyer teaches that it is frequently a very difficult and perplexing question whether a land title is good, and although he may not be able to give clear reasons why it is bad he may be incapable of bringing himself to the point of approving it.

The argument is answered by the supreme court of Connecticut, inLiberman v. Beckwith, 79 Conn. 317, as follows:

"Titles sold and transferred may be good, bad, or doubtful, absolute or limited. The same title may be satisfactory to one purchaser and not to another. One might be quite willing to buy a doubtful title, while another would not be satisfied with a marketable title so limited as to involve a special risk of litigation in his use of the property purchased." (Page 321.)

There is no more difficulty in proving the good faith of a party to a contract who determines for himself whether he is satisfied than there is when a third person is the umpire, or than there is in many other instances where only the good faith of the inquiry and not the grounds of the conclusion is open to question.

The judgment of the district court is affirmed.