Opinion
Opinion filed May 11, 1929.
Vendor and Purchaser — Executory Contract — Implied Condition as to Title in Contract for Sale of Realty — Character of Undertakings of Parties to Such Contract — Conclusiveness of Agreed Statement of Facts — Notice by Vendee to Mutual Agent of Vendor and Vendee of Intention To Rescind — Legality of Contract To Convey Realty Not Then Owned by Vendor — Rule as to Time for Acquiring Title — Rescission — When Vendee Need Not Tender Performance — Right of Way as Encumbrance Making Vendor's Title Defective — Partial Failure of Vendor's Title as Ground for Rescission — Motive for Rescission.
1. Contract to sell farm and certain specified personal property thereon for agreed sum, part of which, to bind bargain, was deposited with third person, as agent of both parties, to be forfeited if purchaser failed to live up to his agreement respecting payment of balance or purchase price, and stipulating time when final writings were to be drawn, held executory.
2. In every executory contract for sale of land, there is an implied condition that vendor will transfer to vendee a title unencumbered with defect, unless contract is expressly to contrary.
3. Undertakings of parties to executory contract for sale of farm and certain personal property thereon, held concurrent and dependent, and neither could put other in default without performing or tendering performance, or showing that he was ready and willing to perform.
4. Where case is heard below on agreed statement of facts, nothing can be added by way of inference, except what necessary inference requires.
5. Where purchaser, in contract to sell farm and certain personal property thereon for agreed sum, gave notice to third person, to whom part of purchase price was paid to bind bargain, who was acting as agent for both parties, that purchaser was not going on with purchase, such notice was equivalent to notice to vendor, and was enough to put purchaser in default under contract and preclude him from claiming earnest money, unless he then had right to rescind contract.
6. An agreement whereby one engages to convey in future property which, at time of making contract, he does not own is not illegal.
7. Ordinarily, one contracting to convey realty, title to which he does not have at time of making contract, has all time that contract gives in which to get title, and cannot be put in default by premature tender of purchase money, but where nature of defect of title is such that vendor cannot acquire it, purchaser may rescind and put end to contract, even before day for delivery of deed arrives, it being insufficient that vendor is "willing" to perform.
8. Vendee in contract for conveyance of realty is not required to tender performance, where nature of defect of title is such that vendor cannot acquire it, and need not wait for time set in contract for final writings to be drawn before rescinding contract, since law never requires a useless gesture.
9. Right of way 100 feet in width for electric power line across land agreed to be conveyed in contract, held an encumbrance making vendor's title defective, giving vendee right of rescission before day set in contract for drafting of final writings, where agreed statement of facts failed to indicate that right of way could be acquired by vendor, either by negotiation or processes of law or equity.
10. A partial failure of vendor's title is enough to give rise to a right of rescission.
11. Motive actuating rescission is immaterial, if party actually has right to rescind.
BILL of interpleader to determine person to whom money held by plaintiff should be paid. One of defendants was defaulted. The other two were ordered to, and did interplead. Heard by court on an agreed statement of facts at the September Term, 1928, Franklin County, Graham, Chancellor. Money decreed to defendant George E. Draper. Defendant F.H. Bowen appealed. The opinion states the case. Reversed, and cause remanded with directions that decree be entered awarding fund in controversy to Fred H. Bowen.
A.B. Rowley for defendant Fred H. Bowen.
P.L. Shangraw for defendant G.S. Draper.
Present: WATSON, C.J., POWERS, SLACK, MOULTON, and WILLCOX, JJ.
The plaintiff, as stakeholder, had in his hands $500, which was claimed by both Bowen and Draper, defendants. He brought a bill of interpleader against them and H.A. Gilman. The latter was defaulted, and Bowen and Draper were ordered to interplead and did so. The fund was paid into court, where it awaits the decision as to its ownership. The court below, acting on an agreed statement of facts, awarded the money to Draper. Bowen appealed.
It appears that Draper, on the 25th day of May, 1926, being then in possession of a certain farm and the personal property thereon, in Richford, entered into a written contract with Bowen, whereby he agreed to sell the farm and property to the latter for $5,000. To bind the bargain, Bowen paid to the plaintiff, the agent of both parties, the sum of $500, which by the contract was to be forfeited if Bowen failed to live up to his part of the agreement. It was stipulated in the writing how the balance of the purchase price was to be paid, and that the final writings were to be drawn on or about June 1 then next. About a week after the written contract was executed, and, so far as shown, before such final writings were drawn or demanded, Bowen informed Drew that he was not going on with the purchase, and demanded the $500, which demand was refused.
The contract evidenced by the writing of May 25 was executory (Vermont Marble Co. v. Mead, 85 Vt. 20, 80 A. 852; Waite v. Stanley, 88 Vt. 407, 92 A. 633, L.R.A. 1916C, 886), and, in every executory contract for the sale of land, there is an implied condition that the vendor will transfer to the vendee a title unencumbered with defect, unless the contract is expressly to the contrary. Crim v. Umbsen, 155 Cal. 697, 103 P. 178, 132 A.S.R. 127; Justice v. Button, 89 Neb. 367, 131 N.W. 736, 38 L.R.A. (N.S.) 1. So Bowen was entitled to a good title — not because the contract says so, but because the law says so. Refeld v. Woodfolk, 22 How. 318, 16 L. ed. 370, 375.
The respective undertakings of the parties were concurrent and dependent, and neither could put the other in default without performing or tendering performance, or showing that he was ready and willing to perform. Hambleton v. U. Aja Granite Co., 96 Vt. 199, 202, 118 A. 878. As we have seen, the case was heard below on an agreed statement of facts. To these nothing can be added by way of inference, except what necessary inference requires. City of Barre v. Town of Bethel, 102 Vt. 22, 145 A. 410. All we know about the date on which the final writings were to be drawn is that it was to be "on or about June 1." All we know about the date on which Bowen gave the notice to Drew is that it was "about a week" after May 25. Whether or not the time for making the final papers had then arrived, is not stated. If it had, the right to the deposit was in Bowen, for Draper could not then convey good title, as we shall see. Lawrence v. Dole, 11 Vt. 549, 555. If it had not the case is more difficult.
Drew being the agent of both parties, Bowen's notice to him was equivalent to a notice to Draper, and was enough to put Bowen in default under the written contract and preclude him from claiming the earnest money, unless he then had a right to rescind the contract. The mere fact that Draper did not have the title when the written contract was executed, did not affect its validity. An agreement whereby one engages to convey in the future property which, at the time of making the contract, he does not own is not illegal. Masters v. Van Wart, 125 Me. 402, 134 A. 539, 540; Paynesville Land Co. v. Graybow, 160 Minn. 414, 200 N.W. 481; Hanson v. Fox, 155 Cal. 106, 99 P. 489, 20 L.R.A. (N.S.) 338, 340, 132 A.S.R. 72; Trask v. Vinson, 20 Pick. (Mass.) 105, 109; Baird Inv. Co. v. Harris (C.C.A.), 209 Fed. 291; White v. Bates, 234 Ill. 276, 84 N.E. 906, 907. But Draper was required by his contract to acquire the title so as to be able to convey it free and clear when the time came for him to perform. Ordinarily, one so situated has all the time that the contract of sale gives him in which to get in the title, and he cannot be put in default by a premature tender of the purchase money; but, where the nature of the defect of title is such that the vendor cannot acquire it, the purchaser may rescind and put an end to the contract to purchase, even before the day for the delivery of the deed arrives. In such a case, it is not enough (as here agreed) that the vendor is "willing" to perform on his part.
Wells, Fargo Co. v. Page, 48 Ore. 74, 82 P. 856, L.R.A. (N.S.) 103, is very much in point. It, too, was an interpleader. It involved a purchase of land by one Gilbert from Benson and Hyde. The controversy was over a sum paid into the bank by Gilbert, to be forfeited if he failed to go through with his purchase. Benson and Hyde did not then own the land. It was held that since the money was originally Gilbert's, and since he made the deposit, he was entitled to have it back, unless the vendors of the land had an action against him for a breach of the contract of purchase. There, as here, the purchaser renounced the contract before the time of performance had expired. But it was held that a vendor of real estate cannot enforce the contract against a purchaser in default or who repudiates it, unless he, himself, is in a position to perform. The vendors there being unable to give title, the decree for Gilbert was affirmed. That case was approved and extensively quoted from in Higgins v. Kenney, 159 Ga. 736, 126 S.E. 827, 40 A.L.R. 685, though it was a case where the time had run. In Burks v. Davies, 85 Cal. 110, 24 P. 613, 20 A.S.R. 213, it was held that one holding an option on land, who discovers a defect in the title before the expiration of the time specified in the contract, may at once rescind and recover what he has paid thereunder. To the same effect is Goetz v. Waters, 34 Minn. 241, 25 N.W. 404. See, also, Judson v. Wass, 11 Johns. (N.Y.) 525, 6 A.D. 392. The reason why the vendee is not required to tender performance in such cases, is that to do so would be a useless gesture, which the law never requires. Hambleton v. U. Aja Granite Co., supra. For the same reason, it was not necessary for Bowen to wait for the arrival of the day on which final writings were to be drawn. The situation then would be just what it was when he gave notice to Drew. The agreed facts show that there was and had been for about a year an outstanding right of way across the farm, one hundred feet wide, owned by a power company and occupied by a pole line with crossarms and wires for the transmission of electric current. There was nothing to indicate that this right of way could be acquired by Draper, either by negotiation or the processes of law or equity. It was an incumbrance on the farm and made Draper's title defective. Clark v. Conroe's Estate, 38 Vt. 469; Russ v. Steele, 40 Vt. 310. Though a defect of this general character may in some circumstances, be too trivial for the law's notice (Brown v. Aitken, 88 Vt. 148, 92 A. 22, Ann. Cas. 1916D, 1152), it cannot be said that this one is. A partial failure of title is enough to give rise to a right of rescission. Ankeny v. Clerk, 148 U.S. 345, 37 L. ed. 475, 480, 13 Sup. Ct. 617. Nor is the motive that actuates the rescission material, if the party actually has the right to rescind. Grim v. Umbsen, supra. Decree reversed, and cause remanded, with directions that a decree be entered awarding the fund in controversy to Fred H. Bowen.