Hall v. Yaryan

• Decision Date: 26 January 1914
• Citation: 138 P. 339,25 Idaho 470
• Parties: WILLIAM J. HALL, Appellant, v. JAMES F. YARYAN et al., Respondents
• Court: Idaho Supreme Court

138 P. 339

25 Idaho 470

WILLIAM J. HALL, Appellant, v. JAMES F. YARYAN et al., Respondents

Supreme Court of Idaho

January 26, 1914

ESCROW AGREEMENT-BREACH OF CONTRACT-FORFEITURE OF INSTALMENT-RIGHT TO RECOVER INSTALMENT-TERMINATION OF ESCROW INTEREST.

1. Where a deed is executed and placed with a depositary accompanied with an escrow agreement directing the holder of the deed as to what shall be done with the deed and the conditions upon which it shall be delivered to either party upon the making of payments as provided for in the escrow agreement, the holder thereof should deliver the deed to the grantee in accordance with the terms of the escrow which constitutes a delivery of the deed and vests title in the grantee. On the other hand, upon breach of the contract and failure by the grantee to make the payments as required by the escrow agreement, the holder thereof may return the deed to the grantor in accordance with the terms of the escrow and thereby terminate the interest of the grantee under the contract.

2. Where a grantee under an escrow agreement has failed to make payments as provided by the terms of the escrow and the parties, grantor and grantee, subsequently made a contract extending the time for making a payment and fail to communicate knowledge thereof to the escrow holder, and the latter has no knowledge of such agreement, he may properly surrender the deed to the grantor in compliance with the terms of the escrow agreement.

3. The purchaser of land upon instalments, who defaults in the payment of an instalment as stipulated by the agreement cannot rescind the contract or breach the same and refuse to make the payments as they fall due, and thereupon maintain an action against the vendor for instalments previously paid.

4. Where a vendor rescinds a contract to sell real estate on instalments or makes a breach thereof, or the vendee rescinds or breaches the contract, and the vendor accepts such rescission and acts thereon, the vendor may maintain his action to recover instalments previously paid.

5. Where a deed is placed in escrow subject to be delivered to the grantee upon the payment of stipulated instalments at fixed times, and the vendee fails to make the payments as provided by the agreement, and the deed and escrow are returned to the vendor, the rights and interests of the vendee in the land are thereby terminated, and it is not necessary for the vendor to prosecute an action in foreclosure in order to divest the vendee of any interest in the property.

APPEAL from the District Court of the Third Judicial District for Ada County. Hon. Chas. P. McCarthy, Judge.

Action for debt. Judgment for defendants. Plaintiff appeals. Affirmed.

Judgment affirmed, with costs in favor of respondent.

T. C Coffin, V. P. Coffin and Harry Keyser, for Appellant.

"The deposit of a deed in escrow subjects both parties to the conditions upon which it was deposited and neither can withdraw from the same." (Tharaldson v. Everts, 87 Minn. 168, 91 N.W. 467; In re Cornelius' Estate, 151 Cal. 550, 91 P. 329.)

The deed being delivered as an escrow it is no longer revocable by the vendor, but it will take effect whenever the condition has happened or been complied with on which it is to be delivered. (Cannon v. Handley, 72 Cal. 133, 13 P 315; Prutsman v. Baker, 30 Wis. 644, 11 Am. Rep. 592; Burnham v. Burnham, 58 Misc. 385, 111 N.Y.S. 252; Anderson v. Goodwin, 125 Ga. 663, 54 S.E. 679.)

"A vendor who, after receiving money on the contract, rescinds it for the vendee's breach, has the burden to show, as against the vendee's claim for return of the money, what damages he has sustained by the breach." (Green v. Barney, 102 Cal. 18, 36 P. 1026.)

When parties to a contract stipulate that in case of a violation thereof the party making default shall pay a stipulated sum, the courts will take the sum so fixed as the injured party's measure of damages only when it appears that to do so will no more than compensate his loss, but, if the sum so fixed in such contract will more than compensate the innocent party, the court will regard the same as a penalty. (Gillilan v. Rollins, 41 Neb. 540, 59 N.W. 893; McCarty v. Moorer, 50 Tex. 287; Dunn v. Morgenthau, 175 N.Y. 518, 67 N.E. 1081; North & South Rolling Stock Co. v. O'Hara, 73 Ill.App. 691.)

No greater sum can be recovered under a penalty than that which will compensate the party suing for his actual loss. (Willson v. City of Baltimore, 83 Md. 203, 55 Am. St. 339, 34 A. 774; Johnston v. Whittemore, 27 Mich. 463; In re Dagenham Dock Co., L. R. 8 Ch. App. 1022.)

Cavanah, Blake & MacLane, for Respondents.

Where time is of the essence of a contract for the sale of real estate and the vendee fails to make payment upon the day specified, he cannot, because the contract is terminated by the vendor, maintain an action to recover back from the vendor payments previously made, regardless of whether a provision in the contract for the retention of such payments by the vendor in the event of the vendee's default is to be construed as one for liquidated damages or one for a penalty and void as such. (Glock v. Howard etc. Co., 123 Cal. 1, 69 Am. St. 17, 55 P. 713, 43 L. R. A. 199; List v. Moore, 20 Cal.App. 616, 129 P. 962; Oursler v. Thacher, 152 Cal. 739, 93 P. 1007; Poheim v. Meyers, 9 Cal.App. 31, 98 P. 65; Wheeler v. Mather, 56 Ill. 241, 8 Am. Rep. 683; Young v. Jordan, 183 Ill. 459, 56 N.E. 85; Downey v. Riggs, 102 Iowa 88, 70 N.W. 1091; Roberts v. Yaw, 62 Kan. 43, 61 P. 409; Keefe v. Fairfield, 184 Mass. 334, 68 N.E. 342; Satterlee v. Cronkhite, 114 Mich. 634, 72 N.W. 616; 4 Detroit Leg. N. 724; Goldman v. Willis, 64 A.D. 508, 72 N.Y.S. 292; Palmer v. Washington etc. Inv. Co., 43 Wash. 451, 86 P. 640; Woodman v. Blue Grass Land Co., 125 Wis. 489, 103 N.W. 236, 104 N.W. 920.)

The party who has advanced money or done an act in part performance of the agreement and then stops short and refuses to proceed to its ultimate conclusion, the other party being ready and willing to proceed and fulfill all his stipulations according to the contract, will not be permitted to recover back what has thus been advanced or done. (Hansbrough v. Peck, 5 Wall. (U. S.) 497, 18 L.Ed. 520; Edgerton v. Peckham, 11 Paige (N. Y.), 352.)

It is unnecessary, as is held in the cases of Glock v. Wilson, and List v. Moore, supra, to discuss whether the stipulation for forfeiture of payments is one for liquidated damages or for a penalty, and whether it is enforceable or is void. There is a line of cases of which Drew v. Pedlar, 87 Cal. 443, 22 Am. St. 257, 25 P. 749, and Green v. Barney, 102 Cal. 18, 36 P. 1026, are examples, in which it is held that where rescission takes place by mutual consent the vendee may recover back payments previously made. The cases in which such recovery is allowed, except those wherein the vendor himself is at fault, are cases of mutual rescission. This rule is clearly distinguished in Glock v. Howard, supra, and also in Merrill v. Merrill, 103 Cal. 287, 35 P. 768, 37 P. 392. (See, also, Phelps v. Brown, 95 Cal. 572, 30 P. 774; Cleary v. Folger, 84 Cal. 316, 18 Am. St. 187, 24 P. 280.)

A quite similar case, where a cancelation of a prior agreement for the purchase of land and surrender of possession thereunder was held to bar any recovery of the purchase payments theretofore made, is Winton v. Spring, 18 Cal. 451.

AILSHIE, C. J. Sullivan, J., concurs.

OPINION

AILSHIE, C. J.

The appellant, William J. Hall, on about the 30th day of March 1911, entered into a contract with James F. Yaryan and wife, whereby he agreed to purchase from them a farm for the sum of $ 12,585. A deed was executed and placed in escrow in the First National Bank of Idaho. The escrow agreement was indorsed on the envelope in which the deed was placed, and recited that the first payment of $ 2,000 had been made and the receipt of that sum was acknowledged. It then provided for the payment of $ 1,000 on the 30th of March, 1912, $ 1,000 on March 30, 1913, and the balance of $ 8,585 on or before seven years after the date of the escrow. It was then recited in this agreement, which was signed by both parties, that "time is the essence of this agreement, and should the grantee herein fail to make payments as herein agreed, then this escrow and deed to be returned to the grantors herein and all payments made at that time to be kept by the grantors or their heirs or assigns as liquidated damages." Hall was unable to meet the $ 1,000 payment which fell due March 30th, 1912, and so a few days before it fell due he went to see Yaryan about the matter, telling him that he was not going to be able to make the payment and that he did not want to lose the $ 2,000 that he had paid. Yaryan insisted that he would have to live up to the terms of his contract and that if he failed to make the payment he would forfeit what had been paid. No agreement was reached at this time and Hall returned home, and some time thereafter and subsequent to the date on which the payment had fallen due, they met and had a further interview with reference to the matter, which resulted in the execution of a lease on these premises which was dated March 30, 1912, but which, as a matter of fact, was executed on about the 13th day of May, 1912. This was an ordinary form of lease for a period of seven months from the 30th day of March, and the only reference which it contained to the previous agreement to sell or the escrow agreement was the closing paragraph thereof which is as follows: "It is further understood and agreed that should the second party herein make payments to the first party herein, as shown by one certain escrow dated March 30, 1911, on or before July 1, 1912, then this lease is to be delivered up and considered void and of no...