Arnold v. Fraser

• Decision Date: 09 October 1911
• Parties: ARNOLD et al. v. FRASER.
• Court: Montana Supreme Court

43 Mont. 540

ARNOLD et al.

v.FRASER.

Supreme Court of Montana.

Oct. 9, 1911.

Appeal from District Court, Yellowstone County; Sydney Sanner, Judge.

Action by M. A. Arnold and another against James G. Fraser. From a judgment for plaintiffs, defendant appeals. Affirmed.

Hathhorn & Brown, for appellant. O. F. Goddard, for respondents.

HOLLOWAY, J.

This is a suit in equity, brought to secure a decree canceling a certain contract. Issues were joined upon the original pleadings, and the cause brought to trial before the court sitting with a jury. By agreement of counsel and the approval of the court, after a portion of the evidence had been taken, the jury were discharged, the parties permitted to reform their pleadings, and the cause was thereupon tried and submitted to the court. The plaintiffs filed an amended and supplemental complaint-referred to in the brief as the substituted complaint-and the defendant filed an answer thereto which contains certain admissions, certain denials, and four affirmative pleas denominated ““counterclaims.” From the record it appears that on May 1, 1907, the plaintiffs and the defendant entered into a contract in writing, by the terms of which the plaintiffs agreed to sell to the defendant, and the defendant agreed to purchase from the plaintiffs, certain real estate and personal property situated near Billings, Mont. The purchase price agreed upon was $37,000, payable in six installments: $2,000 upon the execution of the contract, and the balance, with interest, payable in five annual installments, the last payment to be made May 1, 1912; each of the deferred payments being represented by a promissory note. In the contract the land is described by legal sectional subdivisions and by government lots. As ground for a cancellation of the contract the plaintiffs allege breaches by defendant in the following particulars: (1) The failure and refusal of defendant to pay the installment and interest due May 1, 1908; (2) failure to pay the installment and interest due May 1, 1909; (3) failure to keep the buildings insured; and (4) the failure to pay certain assessments on stock in irrigation companies. Plaintiffs allege that, after breach by the defendant, they gave notice of their intention to terminate the contract as required by it and they brought into court the promissory notes for cancellation and redelivery to defendant. They allege that the defendant has had the free use and enjoyment of the property during the seasons of 1907 and 1908, and received a part of the crop for the year 1909. They allege that the fair rental value of the land was $1,500 per year, and that the defendant has had the use of the personal property and has received in benefits from the use and occupation of the property more than he has paid to, or for the use of, plaintiffs. The answer admits that an installment of the principal and the interest were due on May 1, 1908, but there is apparently a denial that these amounts have not been paid. There is an admission that the installment and the interest due May 1, 1909, have not been paid. Upon motion of plaintiffs the court struck out the first three of the so-called counterclaims, and upon the issues joined found for the plaintiffs and entered a decree, from which decree and an order denying his motion for a new trial the defendant has appealed.

The first contention made is that the complaint does not state a cause of action; that it is deficient in the following particulars:

(a) It does not appear therefrom that the notes representing the deferred payments were tendered to the defendant before this suit was instituted. The complaint does allege that the notes were brought into court for cancellation and returned to defendant, and we think this is sufficient. Maloy v. Berkin, 11 Mont. 138, 27 Pac. 442; 6 Cyc. 313.

(b) It is said that the complaint is open to attack because it fails to allege that the land mentioned in the contract was free from incumbrances, and that plaintiffs were able to convey title. If this was an action to recover the purchase price or damages for a breach, such an allegation might be necessary; but in a suit to cancel the contract we are unable to understand what office such an allegation would perform. However, in paragraph 9 of the complaint, the plaintiffs allege facts sufficient to meet the rule for which appellant contends.

(c) It is further urged that the complaint is defective in failing to allege that plaintiffs have tendered to defendant the money paid by him under the contract. Upon the trial of this cause in the district court, and upon this appeal, both parties have proceeded upon the assumption that it is necessary for the complaint to contain an allegation that the plaintiffs have returned, or offered to return, to the defendant the moneys paid by him to or for plaintiffs' use, or an equivalent allegation, and we shall determine this appeal upon the theory of the parties as thus presented, reserving the question whether in a suit to cancel a contract of this character it is necessary for the plaintiff to place the defendant in statu quo, or to allege in his complaint that he has done so or made tender. Assuming for the purposes of this appeal that such an allegation is required, we think the complaint sufficient; for it alleges that the defendant has had the use of the premises from the date of the contract to the commencement of the action; that the rental value of the property exceeds the amounts paid by defendant to, and for the use of, plaintiffs. All that the law requires under the rule recognized by the parties hereto is that the defendant shall be placed in as favorable a position as he was at the date of the contract, and plaintiffs' allegations in that respect are sufficient. It would be idle to require the plaintiffs to return to defendant the amount of payments made, if a decree in plaintiffs' favor would require defendant to account for an equal or greater amount. In Lytle v. Scottish Am. Mort. Co., 122 Ga. 458, 50 S. E. 402, it is well said: “He [the vendee] is not entitled to a return of his purchase money until he has allowed, as a deduction therefrom, all damages caused by his breach, one element of which will be the fair rental value of the property during the time he occupied it, even up to verdict.” 29 Am. & Eng. Ency. of Law (2d Ed.) 649, 652; Wilson v. Moriarty, 77 Cal. 596, 20 Pac. 134.

2. It is insisted by appellant that at the time this action was commenced he sustained toward respondents the relationship of mortgagor to mortgagees, and that plaintiffs' only remedy was by foreclosure, under section 6861, Revised Codes. This contract is not in form a mortgage but an agreement to sell. However, it is insisted that, since notes were given for the deferred payments, the vendee let into possession, and the legal title retained by the vendors, equity will treat the transaction as a mortgage, and cases are cited which appear to lend support to this view.

An examination of the authorities, however, will disclose the distinguishing characteristic in every instance. Every such case must be determined on its own facts and circumstances; for it is a cardinal rule in equity that the intention of the parties must give character to their transactions. In Western Nat. Bank v. National Union Bank, 91 Md. 613, 46 Atl. 960, the court said: “An equitable mortgage results from different forms of transactions in which there is present an intent of the parties to make a mortgage, to which intent, for some reason, legal expression is not given in the form of an effective mortgage; but in all such cases the intent to create a mortgage is the essential feature of the transaction.”

This contract purports to be an agreement by the plaintiffs to sell, and by the defendant to purchase, certain real and personal property upon the terms and conditions specified. It provides that time shall be of the essence of it,...