Montgomery v. Cook

• Decision Date: 18 April 1966
• Docket Number: No. 7662,7662
• Citation: 76 N.M. 199,413 P.2d 477,1966 NMSC 73
• Parties: George H. MONTGOMERY and his wife, Juanita Montgomery, Plaintiffs- Appellees and Cross-Appellants, v. Erminee COOK, Individually and as Administratrix of the Estate of V. G. Cook, Deceased, Defendant-Appellant and Cross-Appellee.
• Court: New Mexico Supreme Court

Page 477

413 P.2d 477

76 N.M. 199

George H. MONTGOMERY and his wife, Juanita Montgomery Plaintiffs- Appellees and Cross-Appellants, v. Erminee COOK, Individually and as Administratrix of the Estate of V. G. Cook, Deceased Defendant-Appellant and Cross-Appellee.

No. 7662.

Supreme Court of New Mexico.

April 18, 1966.

Lowell Stout, Easley & Pyatt, Hobbs, for appellees and cross-appellants.

Girand, Cowan & Reese, Hobbs, for appellant and cross-appellee.

CHAVEZ, Justice.

This case arose from a real estate purchase contract entered into between plaintiffs-appellees and cross-appellants, George H. Montgomery and Juanita Montgomery, his wife, hereinafter referred to as 'vendees,' and V. G. Cook and his wife, Erminee Cook, defendant-appellant and cross-appellee, hereinafter referred to as 'vendors.'

On September 29, 1955, in the office of attorney T. R. Johnson, Hobbs, New Mexico, vendors executed a warranty deed to vendees covering the property in question, and left said deed with Mr. Johnson to be placed in escrow in the Lea County State Bank in Hobbs in accordance with the escrow agreement. The contract was executed by vendors in Johnson's office on September 30, 1955. On October 3, 1955, vendees executed the contract in Midland, Texas, and also executed a deed of trust, covering the land in question, and a vendor's lien note in the amount of $76,800 to be paid in ten yearly installments of $7,680 each beginning January 2, 1957. These instruments and the escrow agreement were delivered to Johnson's office in Hobbs a few days thereafter; however, said instruments were misplaced in Johnson's office and were not delivered to the escrow agent. Between September 29, 1955, and September 28, 1956, and within the year's limitation provided in the escrow agreement, vendees drilled and equipped three sufficient irrigation wells on the two sections of land in question and root plowed, raked, leveled and deep plowed both sections in substantial compliance with the terms of the agreement. Vendors received tax statements in 1955 and 1956 covering the land in question and vendors paid the taxes for those years without notifying vendees of their pro rata share of the 1955 taxes, or the amount of the 1956 tax statement. In neither year did vendees inquire as to their share of the taxes or attempt to pay the same, as provided by the contract, and vendees did not pay the January 2, 1957, installment due on the contract.

The contract provided that the bank was authorized to deliver the warranty deed to vendees, and the vendor's lien and deed of trust to vendors, at such time as vendees furnished the bank with satisfactory evidence that vendees had deep plowed, leveled or land planed the subject land, and drilled three irrigation pumps thereon, said improvements to be made within one year from the date of the contract.

The trial court found:

'9. In October, 1956, and again in November, 1956, the plaintiff George H. Montgomery went to the escrow agent Lea County State Bank and advised the bank's escrow officer that plaintiffs had performed the conditions of the escrow contract which entitled them to the deed. The escrow officer advised plaintiff that none of the escrow papers including the deed had ever been placed with the escrow agent and that delivery of the deed could not be made. Proof of compliance with the conditions of the contract was not asked of the plaintiff nor furnished by him.

'10. Plaintiff did not make demand for delivery of deed upon Theodore R. Johnson or Defendant Cook except by copy of the letter of March 27, 1957, and by the letter of April 5, 1957. Upon receipt of the letter of April 5, 1957, from plaintiff, the defendant V. G. Cook instructed his attorney Theodore R. Johnson not to place the deed and other papers in escrow, and they were retained by said attorney.

'11. The letter of March 27, 1957, from plaintiffs' attorney to the escrow agent was notice to the escrow agent not to deliver any of the escrow instruments to any of the parties.

'12. Plaintiff did not pay the January 2, 1957, installment of the Vendor's Lien Note nor make a tender of payment on or before the due date.

'13. On March 6, 1957, defendants gave plaintiffs 30 day written notice by registered mail of default of the January 2, 1957, installment payment and further notified plaintiffs that if payment was not made within 30 days the contract would be terminated and cancelled. Plaintiffs did not make payment within the 30 day period but did notify defendants that they were ready to and would make the payment when the deed was placed in escrow in the Lea County State Bank. The deed was never placed in the bank and the payment was never made or further tendered.

'14. From the time the contract was reduced to writing until the filing of the answer in this case, Theodore R. Johnson was the attorney for the Cook Defendants, and the Montgomery Plaintiffs relied upon the counsel and advice of another attorney. Plaintiff Montgomery did deliver the papers to the office of Theodore R. Johnson with the understanding that Mr. Johnson would deliver them to the escrow agent.

'15. In May, 1957, plaintiff removed the pumps and motors from the three irrigation wells and moved them from the premises.

'16. In 1957, plaintiff cultivated about three-fourths of the south half of Section 9 and did not cultivate any of the other land.

'17. The value of the land at the time of the purchase contract was $76,800.00. The value after plaintiff had completed the work was $125.00 per acre or $160,000.00.

'18. Plaintiffs grew 385 acres of cotton for the year 1956 and produced 3/4ths of a bale per acre. The cotton was put in a government loan, the government loan allowance being 31cents to 34cents per pound, and an average bale weighed 500 pounds. The land produced approximately 288 bales of cotton, having a loan value of approximately $155.00 per bale.

'19. On June 8, 1957, plaintiff moved his hired man from the premises and did nothing thereon from that date. Defendants took possession for the balance of 1957 and raised some cotton and feed.

'20. Plaintiffs expended the total sum of $49,120.00 in root plowing, raking, leveling and deep plowing the land and in drilling and casing three irrigation wells and that said sum was reasonable and necessary.

'21. The land was not damaged by the operations of the plaintiffs thereon, but in fact the value of the land was enhanced thereby.

'22. The only evidence of rental value of the land is $4.00 per acre, testified to by the Witness Hilburn.'

Vendors' point I is that a vendee in default may not rescind a real estate contract and obtain restitution for improvements made or recover damages sustained. The first subpoint raised is that the trial court erred in conclusions of law Nos. 2 and 3, that failure of vendors to deliver the deed to the escrow agent constituted a substantial and material breach of contract. Vendors contend that, at the time demand was made by vendees' letters of March 27, 1957, and April 5, 1957, for delivery to the escrow agent, vendees were not entitled to such delivery because at that time they were in default; and since vendees had been notified by vendors on March 6, 1957, that unless the defaulted installment payment due January 2, 1957, was paid within thirty days, their interest in the property would be canceled and terminated under the provisions of the contract. Vendors argue that vendees not having remedied said default, may not now complain of vendors' failure to place the deed with the escrow agent.

The escrow agreement and contract for the sale contains the following paragraph with regard to the warranty deed:

'The sellers have this date executed a warranty deed in favor of the purchasers and obtained therein a vendor's lien note and deed of trust in favor of the sellers, which warranty deed, vendor's lien note and deed of trust shall be deposited, along with the original of this contract, in escrow in the Lea County State Bank, Hobbs, New Mexico, and such bank shall act as escrow agent of both parties and is hereby specifically authorized to deliver said warranty deed to the purchasers and the vendor's lien note and deed of trust to the sellers at such time as the purchasers have furnished said bank with satisfactory evidence that the purchasers have deep plowed, leveled or land planed such land and drilled 3 irrigation wells thereon and installed suitable irrigation pumps therein.'

In 1956 vendees were informed by the escrow agent that the deed had not been placed in escrow. In March and April, 1957, vendees demanded delivery of the deed from vendors, but vendors had specifically instructed their attorney to withhold such delivery.

The escrow agreement and contract for sale further provides, in the paragraph allowing vendees 30 days in which to remedy any default, that:

'* * * the sellers may immediately terminate and cancel this contract and in the event of such termination or cancellation the Lea County State Bank, Hobbs, New Mexico, is hereby specifically authorized to return said warranty deed to the sellers. * * *'

It is apparent that the parties did not specifically provide that the delivery of the warranty deed to the escrow agent would be a condition precedent to vendees' obligation to make the contract payments. However, it is well settled that in appropriate instances a condition precedent may be deduced from the construction of the entire contract in order to reach the most equitable result. Palisades Properties, Inc. v. Brunetti, 44 N.J. 117, 207 A.2d 522; Metschke v. Marxsen, 176 Neb. 240, 125 N.W.2d 684; 17 Am.Jur.2d, Contracts, §§ 321, 322; 17A C.J.S. Contracts §§ 338, 344.

Here vendors absolutely refused to place the deed with the escrow agent unless the payment due on January 2, 1957, was made. We find no contract provisions requiring vendees to make the first payment before vendors have the duty to place the instruments in escrow. Neither do vendors base...