Earley v. France

• Decision Date: 15 April 1919
• Citation: 42 N.D. 52,172 N.W. 73
• Parties: EARLEY et al. v. FRANCE.
• Court: North Dakota Supreme Court

42 N.D. 52

172 N.W. 73

EARLEY et al.

v.FRANCE.

Supreme Court of North Dakota.

March 28, 1919.

Dissenting Opinion, April 1, 1919.

Rehearing Denied April 15, 1919.

Syllabus by the Court.

Where negotiable promissory notes are made, evidencing payments stipulated in a contract for a deed for the purchase price of land, such notes are the principal obligation and the contract, evidencing a lien, the incident thereto, and upon the transfer of such notes, or a part thereof by the vendor, the contract evidencing such lien passes pro tanto as an incident therewith.

The vendor in such contract cannot both cancel and rescind such contract and enforce payment upon such notes.

Where a portion of such notes, so given, have been transferred by the vendor to one who has, in turn, surrendered his equity in the land involved to the vendor, even though so done through negotiation therefor had with the vendee, and has agreed in a contract that the vendor may enforce a default against the vendee for such notes so given for his equity, the assignees of such person, taking with full notice, cannot enforce an action upon such notes, after the vendor has declared a default and rescinded such contract.

Appeal from District Court, Barnes County; Coffey, Judge.

Action by James J. Earley and another against W. H. France. Judgment for defendant, motion for judgment non obstante or for a new trial denied, and plaintiffs appeal. Affirmed.

Christianson, C. J., and Birdzell, J., dissenting.Winterer, Combs & Ritchie, of Valley City, for appellants.

C. S. Buck, of Jamestown, for respondent.

BRONSON, J.

This is an appeal from judgment rendered in the district court of Barnes county upon a verdict for the defendant, and from the order of the trial court denying a motion for judgment non obstante, or for a new trial. In the district court two actions were submitted upon the same evidence and separate verdicts returned by the jury. The Bank of Sanborn is the plaintiff in one of the actions, and the appellants herein, the plaintiffs in the other. In the action brought by the Bank of Sanborn a verdict was rendered in its favor. In substance the record discloses the following facts: One Beeson, a resident of Wilkin county, Minn., has been engaged in the real estate business for some 25 years. He had a contract for a deed from one Porter covering 320 acres of land in Wilkin county, Minn. On October 29, 1912, he made a contract for a deed concerning this land with one Deree, of Kandiyohi county, Minn., for an expressed consideration of $9,920. Deree paid him on this contract $2,000. On July 9, 1914, Deree made a written contract with Beeson which recited therein that Deree desired to sell and transfer to Beeson his interest in such lands so that Beeson could sell the same under a contract for a deed to the defendant, France, who agrees to deliver to Beeson a stock of merchandise valued at $3,500, which amount is to be credited as payment on Deree's interest in the lands; that Deree's interest in the lands, after deducting the price of such merchandise, is $2,480, less the amount that was owing to Beeson on the contract and other indebtedness. That, under a contract for a deed made between Beeson and France on the same date for the sale of such lands, there were three notes signed by the defendant payable to Beeson, one for $800, due on or before November 1, 1915; one for $800, due on or before November 1, 1916; and one for $880, due on November 1, 1916, evidencing payments to be made on such contract. That it was agreed that Deree should sell to Beeson his interest in such lands and surrender to Beeson his contract therein, in consideration of which Deree was to receive from France the stock of goods, and also the three notes above mentioned for the balance of his equity in the lands; such notes to be indorsed by Beeson without recourse; and such notes further to be held by Beeson as security for the payment of his indebtedness. That it was further agreed that, in case the notes in question were not paid when due, Beeson should use his best endeavors to collect the same under his contract for the deed.

On the same day, July 6, 1914, Beeson entered into a contract for a deed with the defendant, France, whereby he agreed to convey to the defendant the land involved for an expressed consideration of $14,400 to be paid as follows: $500 in cash; $3,500 through a stock of merchandise; $1,800 on or before November 1, 1915; $1,800 on or before November 1, 1916; $1,880 on or before November 1, 1917; and $4,920 on November 1, 1918-with interest at 6 per cent. payable annually. The three payments of $1,000 and $1,880, respectively, were to be evidenced by six notes for $1,000 and $800, and $1,000 and $880, respectively, made by said defendant, France, payable to Beeson. It was further agreed in this contract that Beeson had a contract for a deed from one Porter and was to get proper conveyance from Porter. In connection with these contracts, some preliminary negotiations were had between the defendant, France, and Deree. Deree had this land under such contract. France had his stock of goods at Sanborn. Some sort of an agreement was signed with reference to an exchange. The written agreement was not introduced in evidence. Witnesses testify that it provided that Mr. Deree was to take over the stock of merchandise, and the defendant, France, to take the land in Minnesota with the provision that the agreement should not be binding unless the real estate in Minnesota proved to be as represented, and also that the defendant, France, should go down and look at the land, and if the deal did not go through he was to receive his expenses if the land was not as represented. The defendant then went down the same evening to see the land in Minnesota. He found out that Deree had a contract for the land with Beeson. While in Minnesota, he went to Beeson's office and there signed a contract for a deed, which he testifies was on July 11, 1914. While there he paid Beeson $450 by check and delivered a bill of sale of his stock to Deree. At the time the defendant made and delivered to Beeson the promissory notes, namely, two for $800, and one for $880, and the promissory notes for $1,000 each mentioned in the contract.

On the next day, France, Mr. Deree, and a son of Mr. Beeson returned to Sanborn. Beeson testified that it was not a fact that Deree was to receive the three notes in question so that he could raise money by using such notes and pay Beeson what he owed before Beeson was willing to enter into the contract with France. Further that his son took the notes to Sanborn for the reason that Deree thought he could get money on the notes sufficient to pay Beeson what he owed him at that time on an outside matter. He further testified that France said to Deree that his note was good at the Bank of Sanborn, and that such bank would take his notes. Deree and a son of Beeson came to Sanborn, and Deree there sold one $800 note to the bank and borrowed $1,100 upon his own note by putting up the other two notes with such bank as collateral security. The bank had knowledge of this entire transaction concerning these contracts for a deed. Later, the two notes put up as collateral security were transferred by the bank to the plaintiffs herein who were directors of such bank. The defendant, France, paid $164.70 interest on such contract up to November 1, 1914. He did not, and was unable to, make further payments. Thereafter proceedings to cancel the contract for a deed were initiated by Beeson by notice thereof dated November 30, 1915. Such notice was served upon the Bank of Sanborn, and on the defendant, France, and upon Deree during the first week of December, 1915. Prior to that time, on November 8, 1915, the bank commenced action on the notes so purchased, and at the same time caused a warrant of attachment to be issued. Later on September 26, 1916, the appellants herein instituted action against the defendant upon the other two notes not then due and caused a warrant of attachment to be issued, alleging in their complaint that the action was so commenced before the debt became due for the purpose of obtaining an attachment against the property of the defendant. The defendant in his answer to the complaint of the plaintiffs set up a failure of consideration, and that the defendant was not indebted to said Beeson or any of his assigns on said notes. The evidence shows that these two notes involved herein were taken over by the appellants apparently still as collateral notes to the indebtedness of Mr. Deree of the $1,100 note which was a demand note.

The appellants challenge, by specifications of error, the judgment and order of the trial court, principally upon the ground that the evidence is insufficient to support the verdict, and that under the instructions given by the court to the jury it was possible for the jury to render a verdict for the defendant even though the defendant knew at the time he made the notes that they were to be used for the purpose of paying Deree for his equity in the land and though they were in fact used for such purposes.

[1][2] Upon this record, it is clear that Beeson could not recover upon these notes if action had been brought by him; such notes are simply evidences of the purchase price to be paid in accordance with the payments stipulated in the contract. The purchase price to be paid is the principal obligation; the contract for the deed is incident thereto. Although the vendor holds the legal title to the land through the contract, it is nevertheless in the nature of a lien to secure the purchase price stipulated. Woodward v. McCollum, 16 N. D. 49, 111 N. W. 623, and cases cited. The vendor may either enforce the same upon the covenants therein to pay through specific performance, or he may declare a forfeiture and rescind the contract under the express terms thereof. He cannot both enforce the contract and rescind the same. As...