Larson v. Smith

• Decision Date: 11 March 1916
• Docket Number: 30707
• Citation: 156 N.W. 813,174 Iowa 619
• Parties: JOHN J. LARSON, Appellee, v. JOHN E. SMITH et al., Appellants
• Court: Iowa Supreme Court

156 N.W. 813

174 Iowa 619

JOHN J. LARSON, Appellee, v. JOHN E. SMITH et al., Appellants

No. 30707

Supreme Court of Iowa, Des Moines

March 11, 1916

Appeal from Wright District Court.--JOHN L. KAMRAR, Judge.

ACTION for the specific performance of a contract between plaintiff and defendant Smith for the sale and conveyance of real estate. Defendant Collins was made a party because he claimed to have purchased the land from Smith without knowledge of plaintiff's contract. Defendant Smith denied the execution of the contract in the form it now appears; pleads that it was obtained from his through fraud and without consideration, and is void. Collins pleaded his purchase of the land from Smith without notice of plaintiff's claim. On these issues, the cause was tried to the court, resulting in a decree for plaintiff as prayed, and defendants, Smith and Collins, appeal.--Modified and Remanded.

Modified and Remanded.

Nagle & Nagle, John E. Smith and Kenyon, Kelleher & Price, for appellants.

Birdsall & Birdsall, for appellee.

DEEMER J. EVANS, C. J., WEAVER and PRESTON, JJ., concur.

OPINION

DEEMER, J.

I.

Plaintiff Larson, is a farmer living in Wright County, Iowa, and defendant Smith was, at all times material to our inquiry, a resident of Somonauk, Illinois, and defendant Collins is a resident of Webster County, Iowa. In September of the year 1909, Smith came to Iowa to find a tenant for the land in controversy, consisting of 120 acres in Wright County, and induced plaintiff to enter into a contract of lease. That agreement was reduced to writing, and signed by the parties on or about September 8th, and was for the term of five years from and after March 1, 1910, and the rental agreed upon was two fifths of the corn and grain raised upon the land, and $ 2.50 in cash annually for all the hay and pasture land. Smith was to furnish some of the seed for the land and also to do from $ 30 to $ 40 worth of tiling each year, Larson to haul the tile, board the men and fill the ditches. The lease contained the usual covenants and stipulations regarding the payment of rent, etc., and concluded as follows:

Smith "hereby agrees with said Larson that he may purchase the above described land at any time before July 1, 1914, on the following terms: The purchase price to be $ 75 per acre, of which $ 1,500 is to be a cash payment, and for the balance of the purchase price, Smith will accept a note drawing four per cent. interest per annum, payable annually, same to be secured by a mortgage on the above described land, said mortgage to be a first lien. Said note to run for not to exceed seven years. Said Larson agrees to see that the house on the above described land is occupied by a good, desirable tenant at least 10 months of each year this lease is to run, and for the full term if possible. Said Smith agrees to furnish posts, wires and staples for repair of fences and material for other ordinary repairs, and Larson agrees to do such work free of charge. Smith agrees to pay the bill for shelling his share of corn, but Larson is to pay all threshing bills."

This lease was duly acknowledged by the parties, but was not recorded until June 26, 1914. On March 1, 1910, plaintiff went into the possession of the property under this lease, and was in possession thereof at the time this action was commenced. Down to the time of the commencement of the suit, plaintiff had performed all the conditions of the lease on his part, and defendant Smith was satisfied therewith. On June 3, 1914, Larson went with his attorney to Illinois to see Smith, for the purpose of enforcing his option to buy, and there made the necessary tender to Smith and demanded a deed in accord with the stipulations in the lease. Smith refused to perform, claiming that he had fixed the price for the land at too low a figure, and that he had already disposed of it to his codefendant, Collins, for $ 100 an acre. Within a few days, plaintiff served Smith with a written notice of his election, and tendered him the money, note and mortgage called for by the contract. Smith refused to receive it, and the tender had been kept good by a deposit with the clerk of the courts. Defendant Collins, who is a real estate agent, in some manner heard that the land could be purchased, and in the fall of the year 1913, he went to Illinois to see the owner, Smith, and on September 15, 1913, he entered into a written contract for the purchase of the land, paying $ 50 down when the contract was signed. This agreement reads as follows:

"Somonauk, Ill., Sept. 15, 1913.

"I hereby agree to sell my farm of 120 acres to M. J. Collins of Clare, Iowa, for $ 100 per acre, subject to terms as follows: $ 50 cash, $ 2,000 Mch. 1-14, the balance of purchase money to run 10 years with interest at 5%. Interest payable annually. Optional payments, any or all at any time, or not any for full term of 10 years. Said lands situated as follows: E 1/2 of SW 1/4 & SE 1/4 of NW 1/4, Sec. 2, Twp. 92, Range 25 West 5 P. M., Wright Co., Iowa.

"John E. Smith.

"M. J. Collins."

Collins knew that a tenant was in possession of the premises which he purchased, and was afterwards, and before the payment of any part of the purchase price except the $ 50, shown a copy of the plaintiff's lease which contained the option to purchase. In the latter part of March of the year 1914, Collins made a deposit with a bank in Somonauk, Illinois, of $ 2,000 to be paid to Smith on delivery of deed and abstract covering the land in controversy, and also, as we understand it, offered to make a note, or notes, and mortgages to comply with the terms of his agreement with Smith, and Smith made a deed to the lands running to Collins, which excepted from the covenants "a lease of the premises held by tenant now in possession." Smith claimed that this was in accord with the original agreement, but Collins, through his attorneys, objected to this clause; yet they finally agreed to accept it. The papers had not changed hands at the time this action was commenced, and Collins had actual notice of the option written in plaintiff's lease in November of the year 1913, before he had paid any of the purchase price except the $ 50 in cash. There is some dispute in the testimony regarding the value of the land at the time the option was granted, but the decided weight of the testimony is that it was not worth more than $ 75 an acre. It was wet and covered with ponds at that time, and has since been partially drained, having been included in a drainage district and taxed for its part of the expense thereof. It rose rapidly in value after the year 1910, and in 1913, is said to have been worth from $ 100 to $ 115 an acre, and in 1914, from $ 120 to $ 125. These are outside figures, but they demonstrate that, on account of the improved condition of the lands themselves and the extraordinary rise in value common to all Iowa lands, there was an increase in value of approximately $ 45 to $ 50 an acre during the period called for by plaintiff's option. Collins did not pay the outside price when he purchased; and during the year thereafter, the land increased from $ 10 to $ 15 an acre in value. Smith is the man whose judgment seems to have been bad, if he made the deals which are here in controversy. In this state of the record, it seems clear that, as between plaintiff and the defendants, plaintiff is entitled to the relief demanded by him. On the face of it, the option was good; and when plaintiff elected to enforce it, assuming that he did all that was required of him in the matter of making tender, he was entitled to a specific performance of the agreement. Such an option is valid in law and enforceable in equity, if proper election is made. King v. Raab, 123 Iowa 632; Crawford v. Paine, 19 Iowa 172, 176; Goodpaster v. Porter, 11 Iowa 161, 162; Butler v. Threlkeld, 117 Iowa 116, 90 N.W. 584. When Collins purchased, he was told that Larson was in possession of the land, as he in fact was; and before paying anything more than the $ 50 to bind the bargain, he was shown a copy of the lease which contained the option under which plaintiff is now claiming. At best, he was only a purchaser to the extent of the $ 50 paid; and as he has had not parted with his $ 2,000, and the mortgage to secure the balance has not been delivered, or the deed to Collins delivered, the commencement of this action was notice to him; so that he is not a good-faith purchaser and entitled to protection as such. Phillips v. Blair, 38 Iowa 649; Murphy v. Anderson, (Minn.) 128 Minn. 106, 150 N.W. 387.

We may also, in this connection, dispose of the claim that the option contract was so inequitable that it should not be enforced in equity. This matter is to be determined not as of the date when it was finally exercised, but upon the situation as it existed when the contract was entered into. The future could not then be foretold. It was reasonable to suppose that lands would continue to advance, but no one could know that to a certainty. Of course, the plaintiff took no chances under the contract, but that was one of the reasons why he did not enter into a binding contract to purchase. Smith may have made a mistake in judgment in granting so long an option, and in the character of the contract he was willing to make regarding the payment of the consideration; but if not induced by fraud or without consideration, these circumstances are not sufficient to justify a court in refusing specific performance. The optionee is entitled to the rise in value of the lands. King v. Raab, supra; Peterson v. Chase, (Wis.) 115 Wis. 239, 91 N.W. 687; Anderson v. Anderson, (Ill.) 24 A. & E. Ann. Cas. 556, and cases cited.

II. By this process of elimination, we are brought down to the real issues in the case: ...