McMillan v. Smith, A-8888

• Decision Date: 14 November 1962
• Docket Number: No. A-8888,A-8888
• Parties: W. W. McMILLAN et al., Petitioners, v. R. E. SMITH et al., Respondents.
• Court: Texas Supreme Court

Page 437

363 S.W.2d 437

W. W. McMILLAN et al., Petitioners, v. R. E. SMITH et al., Respondents.

No. A-8888.

Supreme Court of Texas.

Nov. 14, 1962.

Rehearing Denied Jan. 23, 1963.

Bell & Singleton, Houston (Otto Yelton, Houston, of firm), for petitioners.

Hofheinz, Sears, James & Burns, Houston, for respondents.

GREENHILL, Justice.

This is a suit for specific performance of a written contract for the sale of the McMillan Ranch in Brazoria County, Texas. The suit was brought by the purchasers, R. E. Smith and Roy Hofheinz of Harris County. The sellers, W. W. McMillan, Arthur Mandell, and Herman Wright, filed a cross action for rescission of the contract. The major issues are whether the buyers made a sufficient tender of the purchase price; and if they did not, whether such failure precluded them from obtaining specific performance. A determination of those issues requires a construction of the contract, particularly as to the necessity for the payment for an alleged vacancy of approximately 36 acres within the area.

Trial was to the court sitting without a jury. At the conclusion of the buyers' (plaintiffs') evidence, both parties rested. The sellers moved for judgment upon the basis that the undisputed evidence showed an inadequate tender by purchasers. The trial court entered a take-nothing judgment against the buyers and declared the contract null and void.

A majority of the Court of Civil Appeals reversed the judgment of the trial court and remanded the cause for a new trial. 352 S.W.2d 872. The 'majority opinion' is by Justice Werlein. The concurring opinion by Justice Coleman agrees with that of Justice Werlein only as to the result reached: that of reversal and remand. Otherwise he disagreed with Justice Werlein on major issues. Chief Justice Bell, in dissent, agreed with Justice Werlein in many respects, but he would have affirmed the judgment of the trial court because of what he regarded as an insufficient tender by the buyers. Both buyers and sellers applied to this Court for writ of error.

Under the contract of sale dated August 24, 1959, the sellers agreed to furnish an abstract of title showing good and merchantable title to the ranch. Upon examination of the abstract submitted, buyers' attorney listed twenty-five objections to titile many of which were removed by sellers. In February of 1960, sellers advised buyers of their refusal to take action on several objections and their (sellers') inability to clear others. Sellers were thus in default on the contract. Thereafter buyers repeated their request for removal of these defects on several occasions and finally gave sellers written notice on February 29, 1960, of their election to take title subject to unsatisfied objections as authorized under the contract.

In this letter of February 29, buyers demanded that sellers execute a deed which conveyed the entire ranch, with the exception of certain outstanding royalty and mineral interests. This deed, which was drafted by buyers' attorney, included a general warranty to all land conveyed, but excepted from the warranty all claims arising under certain canal and county road easements. Pursuant to the agreement, the purchasers agreed to assume an indebtedness of $152,874.43 which was secured by a deed of trust lien on the property. It was in this same letter that buyers made their tender of $525,000, less deductions for the debt assumed, survey costs, filing fees, Federal documentary stamp tax, and the 'reasonable cost and expense of curing and clearing title.' The last deduction of $27,898.12 is the focal point of the controversy and is the foundation of sellers' position that buyers failed to make an adequate tender of purchase price as a condition precedent to specific performance.

As will be later set out, the contract provided that if the sellers did not own 1,184 acres, or if it should be determined that the over-all parcel of land, after survey, should contain less than 1,184 acres, the consideration to be paid would be adjusted at the rate of.$443.42 per acre, or this amount would be added per acre for land in excess of 1,184 acres.

The buyers' deduction of $27,898.12 as the 'reasonable cost and expense of curing and clearing title' was detailed as follows:

(a) $1,500.00: this charge was buyers' estimate of the reasonable cost and expense for procuring two quitclaim deeds from the Sharp and Sandidge interests and for obtaining a certificate of succession of ownership from a school district. The amount included anticipated attorneys fees, court costs and miscellaneous legal costs 'since suit in trespass may be necessary.'

(b) $16,093.04: this amount was asserted to be the reasonable cost of acquiring title to a vacancy existing within the ranch. Buyers claimed that a survey of the ground and an examination of the abstract both revealed a 36.293-acre vacancy of unpatented school land to which sellers owned no title. For this failure of title, buyers deducted.$443.42 per acre pursuant to a provision in the contract referred to above. They nevertheless demanded a general warranty deed to all the land including the area in the vacancy.

(c) $10,305.08: this amount was buyers' calculation of the cost of removing three easements which prevented sellers' title from being good and merchantable. The survey of the property had established that the total gross acreage of 1202.825 acres included easements of 18.76 acres in the Houston Lighting and Power Company (which easement was unrecorded); 4.28 acres in the Dow Chemical Company; and .20 acre in the Trunkline Gas Company. Approximately 5 acres of the power company easement was across the alleged vacancy. Buyers' position was that sellers had made no attempt to get the easements removed; and that by negotiations with the holders of the easements, it was possible to get them removed. In buyers' letter of February 29, 1960, they stated that they did not know what it would take to get the easements removed. But buyers estimated that it would be at least.$443.42 per acre. So buyers demanded a general warranty deed to the land which was subject to the easement but deducted.$443.42 per acre from the purchase price for such land. An 18-acre county road easement and an 11-acre canal easement are not in issue here.

Following buyers' final demand and tender, the sellers, in a letter dated March 18, 1960, refused to execute the deed demanded of them, asserting that the $27,898.12 deduction was unauthorized and that the tendered purchase price was therefore insufficient. In the same letter, sellers stated that they were rescinding the contract by reason of buyers' insufficient tender. At all times, buyers insisted that each of the disputed deductions set out above was expressly authorized under the contract of sale.

Upon the trial of the case, the purchasers pleaded that they were ready, willing and able to carry out the contract. They offered to do complete equity as between the parties, and deposited $336,038.10 in the court, the amount they regarded as owing. They further pleaded that 'in the event the Court * * * determines that any further sum is due to Defendants under the sale agreement, Plaintiffs stand ready, willing and able and here and now offer to deposit such further sum in court or pay the same to the Defendants, as the Court may order.' There is no question as to the solvency of the purchasers.

The controlling parts of the agreement read as follows:

'1. Subject to the following terms, conditions, and stipulations Sellers have agreed to sell and Purchasers have agreed to buy all of the following described tracts or parcels of land lying and being situated in the County of Brazoria, State of Texas:

'All of the property owned or claimed by the Sellers in Section 76 (and other sections adjacent thereto).

'2. The Sellers will convey the surface to all of such lands by general warranty deed to the Purchasers * * * (The mineral estate was also to be conveyed by general warranty deed, subject to any outstanding royalty and mineral interests shown of record)

'4. The overall consideration of $525,000.00 is subject to the agreement and understanding of the parties that 1,184 surface acres are contained within the overall parcels of lands to be conveyed under this agreement. Should it be determined upon examination of abstracts of title that the Sellers do not own 1,184 surface acres, or should it be determined that the overall parcel of lands actually contains less than 1,184 acres or more than 1,184 acres by survey upon the ground, conducted by a Licensed State Land Surveyor selected by the Purchasers, at Sellers' cost, the final cash consideration to be paid shall be adjusted at the rate of.$443.42 per acre, such sum to be deducted for acreage short of 1,184 acres, or added for acres in excess of 1,184 acres. Provided, that if either examination of title or survey reveals that the over-all parcel of lands contains less than 1,000 acres, Purchasers shall be entitled to cancel this contract and have the earnest money returned to them.

'6. Sellers agree to furnish the Purchasers an abstract of title covering the above described lands from the sovereignty of the soil to a current date, which abstract shall be furnished without delay and within a reasonable time from and after the date of this agreement, and which abstract of title, upon examination, will show a good and merchantable title in the Sellers as represented in Paragraph 2 hereof, to the satisfaction of Purchasers' attorneys. Within a reasonable time after delivery of such abstracts, Purchasers will either...