Rea v. Pierson

• Court: Nebraska Supreme Court
• Writing for the Court: EBERLY, J.
• Citation: Rea v. Pierson, 114 Neb. 173, 206 N.W. 760 (Neb. 1925)
• Decision Date: 30 December 1925
• Docket Number: 23290
• Parties: MARY WALLER REA ET AL., APPELLEES, v. FRED PIERSON ET AL., APPELLANTS

206 N.W. 760

114 Neb. 173

MARY WALLER REA ET AL., APPELLEES, v. FRED PIERSON ET AL., APPELLANTS

No. 23290

Supreme Court of Nebraska

December 30, 1925

APPEAL from the district court for Lancaster county: WILLIAM M MORNING, JUDGE. Reversed.

REVERSED.

W. T Thompson, Grant G. Martin, Beeler, Crosby & Baskins and Kennedy, Holland, DeLacy & McLaughlin, for appellants.

Hastings & Hastings, Frost & Kinsinger and Henry Howard, contra.

Heard before MORRISSEY, C. J., DEAN, DAY, GOOD, THOMPSON and EBERLY, JJ.

OPINION

EBERLY, J.

This is an action at law prosecuted by Mary Waller Rea and B. M. Rea, plaintiffs and appellees, and Mary L. Short, intervener and appellee, against Fred Pierson and P. F. May, defendants and appellants, to recover the sum of $ 32,000 and interest upon a contract in writing, entered into between the plaintiffs and defendants, which provided briefly as follows: (1) The defendants agree "to sell and convey to" plaintiffs "the following described property, to-wit" (description of Nebraska land and incumbrances thereon), "the said above described property to be valued at $ 20 per acre." (2) The plaintiffs agree "to give in payment for the above property $ in cash and the property hereinafter described" (description of Iowa land and incumbrances thereon), "$ 32,000 equity, which" defendants "agree to take as part payment" thereon. Defendants agree "to carry back all differences in second mortgage" (on Nebraska land) "to be paid as follows: $ 10,000 due June 19, 1923, and $ 15,000 due in 1927, and the balance in June, 1930."

Plaintiffs transferred Iowa land to defendants as required by the contract and defendants accepted transfer and took possession thereof. Defendants, however, wholly failed to transfer Nebraska lands to plaintiffs and to perform the other terms of the contract by them to be performed. The plaintiffs thereupon commenced this action, and now, together with the intervener, are prosecuting it upon the theory that by reason of the said default they are entitled to receive from the defaulting parties the sum of $ 32,000 and interest, the same being "the agreed valuation" of the lands conveyed by them to the defendants as fixed and determined by the language of the contract above quoted, and also upon the additional ground that their equity in the lands thus by them conveyed "was of the reasonable value of said agreed sum of $ 32,000."

To the petition the defendants answered, and to the answer replies were filed. Trial was had to the court, the jury being waived. Judgment was entered for plaintiffs, including a finding generally on all issues against defendants and each of them; that all material allegations of the petition and of the petition in intervention are fully sustained by the evidence, and that there is due plaintiffs Mary Waller Rea and B. M. Rea the sum of $ 9,334, and that there is due Mary L. Short, intervener, the sum of $ 28,000. From this judgment the defendants prosecute an appeal.

Defendant Pierson assigns the following grounds as error: (1) That there is gross error on the part of the trial court in basing the measure of damages on the sum of $ 32,000 named in the contract: (2) that the court erred in disregarding the plea of estoppel interposed by defendant Fred Pierson; (3) in permitting Mary L. Short to intervene; and (4) that the judgment of the trial court is contrary to the law and the evidence.

As to plaintiffs' first contention, it is thought that the rule of this court announced in the case of Miller v. Ruzicka, 109 Neb. 152, 190 N.W. 216, is controlling. The language made use of in the contract presented in the instant case, "$ 32,000 equity which parties of the first part agree to take as part payment," analyzed and construed in the light of the context and surrounding circumstances means nothing more nor less than the "equity" in the preceding lands, to be valued at $ 32,000, which "parties of the first part agree to take as part payment," etc. Thus construed, an inspection of the contract involved in Miller v. Ruzicka, supra, and the contract upon which the present action is based discloses that the controlling words in both contracts are substantially and essentially the same. And this fact necessitates the same construction be made and the same conclusion reached as was arrived at by this court in the case of Miller v. Ruzicka, supra. In that case Miller sought to recover from Ruzicka, who failed to perform his contract, the sum of $ 4,500 and interest, basing his right of recovery upon the fact that the words in his contract referring to the land in question, "the above-described property to be valued at $ 4,500," was the valuation which must be taken and accepted as the agreed valuation for all purposes of the contract and for fixing the damages in event of a breach thereof. This is substantially the contention which the plaintiffs make in the present case. In answer to this contention, Flansburg, Justice, in delivering the opinion of the court says:

"The plaintiff relies upon the fact that the property was valued by the parties at $ 4,500, which, it is claimed, is equivalent to a promise to pay that amount of money. However, we do not so interpret the contract. The obligation of the defendants in this case was to transfer certain property and to pay certain moneys in addition. The property, it is true, was valued in the contract at $ 4,500, but that was an estimate agreed upon by the parties for the purpose of determining what marginal difference in value between the properties must be covered by a money consideration. The defendants did not guarantee that their property was worth $ 4,500; nor did they, by their contract, agree to pay $ 4,500 in lieu of the property, should they refuse or fail to transfer the property to the plaintiff. The parties not having made such a contract, the court cannot establish such a one for them."

And the court, also, in the syllabus of that case, announced the rule:

"Where one party agrees to convey certain land to another for a tract of land and a money consideration, the fact that the parties have recited the value of their lands in the contract, as a basis for a determination of the marginal consideration to be paid in money by the second party, does not, of itself, amount to a contract by the second party to pay in money an amount equal to the value placed upon his land in case he fails to transfer the land as agreed."

In view of the rule announced in the case above referred to, under this contract in suit, the values fixed therein to the respective properties by its terms to be conveyed are simply estimates agreed upon by the parties for the purpose of determining what marginal differences between the properties must be covered by the notes and mortgages to be given as in said contract provided. The parties in said contract do not guarantee that their respective properties were worth the amounts or valuations affixed to each, nor do they by their contract agree to pay such amounts in the event of default. The case here presented is merely to determine the amount of damages occasioned by defendants' failure to perform. If this contract be considered a contract of sale, the recovery of the parties is governed by the rule announced by this court in Beck v. Staats, 80 Neb. 482, 114 N.W. 633, which is:

"The measure of damages for the breach by the vendor of an executory contract for the conveyance of real estate, where the breach is caused either from the refusal or the inability of the vendor acting in good faith, is the difference between the value of the land at the time of the breach and the price he contracted to receive, and in addition thereto the vendee may recover the amount advanced upon the purchase price."

The equity conveyed in this view of the law becomes "the amount advanced upon the purchase price" by the plaintiffs, and to determine this amount it would be a mere question of determining the fair market value of the equity transferred. If the contract be deemed a contract of exchange, the actual recovery remains the same, viz., the value of the equity transferred plus the value of the bargain lost. In the present case the plaintiffs apparently ask nothing by the way of damages for loss of bargain, hence their recovery would be limited to the fair market value of the equity conveyed by them under the terms of the contract.

The defendant Pierson strenuously insists that he is released from all liability upon the cause of action set forth in plaintiffs' petition herein by reason of estoppel alleged to have been created in his favor by Mrs. Rea transferring an $ 8,000 note and mortgage, knowing at the time of the transfer that Pierson had named as a condition to her right to transfer the mortgage that she release him from liability in connection with the Nebraska-Iowa land deal. The facts in connection with this transaction, considered briefly, are as follows: Prior to November 24, 1920, defendant Pierson was the owner of the note for $ 8,000 and the real estate mortgage securing the same executed by one Louis R Hagenmeister and wife covering real estate in Garden county, Nebraska. On the date mentioned, pursuant to an arrangement entered into between Pierson and Mrs. Rea and one C. O. Jones, this note was indorsed by Pierson, and together with the mortgage securing the same was delivered to Jones as collateral security to notes aggregating $ 7,768 of Mrs. Rea, due 90 days thereafter, then owned by Jones. It appears that certain securities were at this time provided for the benefit of Pierson to indemnify him against loss growing out of this transaction. At all events, the transaction was wholly concluded, and by the agreements made contemporaneous therewith the rights and liabilities of...