Richardson v. Van Dolah, 24048.

• Citation: 429 F.2d 912
• Decision Date: 21 July 1970
• Docket Number: No. 24048.,24048.
• Parties: Harold I. RICHARDSON, Appellee, v. A. T. VAN DOLAH, Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

429 F.2d 912 (1970)

Harold I. RICHARDSON, Appellee, v. A. T. VAN DOLAH, Appellant.

No. 24048.

United States Court of Appeals, Ninth Circuit.

July 21, 1970.

COPYRIGHT MATERIAL OMITTED

James K. Tallman (argued), Wilson & Wilson, Anchorage, Alaska, for appellant.

W. C. Arnold (argued), Anchorage, Alaska, for appellee.

Before BARNES, ELY, and HUFSTEDLER, Circuit Judges.

ELY, Circuit Judge:

This appeal arises from a judgment rescinding two written agreements, a conditional sale contract and a mining sublease, between appellant Van Dolah and appellee Richardson.¹

The conditional sale agreement provides for the sale of certain real and personal property situated in the Palmer Recording District of the State of Alaska. The real property consists of unpatented placer mining claims, and the personal property consists of undescribed mining equipment located on the claims. Upon the execution of the agreement, appellee was to pay $40,000 cash and tender a $10,000 promissory note payable fifteen days from the date of the agreement. One-half of this $50,000 was to be applied toward the $150,000 price of the real property and one-half toward the $150,000 price of the personal property. The remaining $125,000 owed for the real property was to be paid in monthly installments of $1,500 plus 5% interest during the next nine years. An identical schedule was established for the payment of the remaining $125,000 owed for the personal property.

Upon payment of the initial $50,000, appellee was to acquire possession of the real and personal property and the right to all ores mined and proceeds accruing from his use of the property. The appellant had a first choice option on all the gold processed from the claims and was to receive ten percent of the net proceeds from certain oil, gas, and hydrocarbon leases on the property. Title to the real and personal property was to remain in the appellant "until all the terms, covenants, agreements and conditions of the Agreement were fully performed by the appellee." At that time a "quitclaim Deed of conveyance" to the mining claims and a "Bill of Sale" to the personal property were to be transferred from escrow to the appellee.

Appellant covenanted that she was the owner of the claims, that the required assessment work had been performed, and that the claims were valid and in good standing, free and clear of all liens, encumbrances, and claims of any party. A similar covenant related to the personal property. The appellee agreed to perform all work necessary to insure that the unpatented placer mining claims did not revert to the state or federal government or to any individual, corporation, or entity. Finally, the agreement stated that the parties had entered a leasing agreement as of the date of the conditional sale agreement and that the violation of either agreement would be a violation of the other agreement.

In the mining sublease the appellant agreed to "lease, let and demise" certain property to appellee. Some of the property was held by appellant under a leasing agreement with a third party; the remainder was supposedly owned outright by appellant. Appellee was given the right to mine and remove mineral ore from the property. He agreed to do the required assessment work and assumed the obligation of beginning extensive development work on May 1, 1968. The appellant was to receive a royalty of approximately ten percent of the net proceeds from the property and reserved the right to terminate the lease if the appellee failed to cure any default within a specified period. Finally, the agreement provided that the appellant and appellee had entered a conditional sale agreement as of the date of the sublease and that any violation of either agreement would be a violation of the other agreement.

About four months after the two agreements had been signed and appellee had taken possession, various defects were discovered in the titles to the claims. Richardson had apparently become pessimistic about his prospects under the agreement, and his attorney uncovered the alleged defects. Richardson brought the alleged defects to Van Dolah's attention, but they were not immediately cured. Richardson then instituted his suit.

The District Court found that the conditional sale agreement and the sublease were executed on or about June 26, 1967, that the agreements were interlocking in their terms, and that the sublease was for the same consideration as, and an integral part of, the conditional sale agreement. By the express terms of the conditional sale agreement, appellant was found to have covenanted that she was the owner of the unpatented mining claims and that they were in good standing and valid. By her agreement to lease the property under the sublease, appellant was found impliedly to have covenanted that she had good right and title to make the sublease.² It was found that the appellee went into possession of the property in reliance on these covenants of title and had performed all of his obligations under both of the agreements up to the time of trial.

The court found that prior to learning of the title defects which form the basis for this suit, the appellee went into possession of the property, paid appellant $62,000 toward the total consideration of $300,000, and expended $28,169 in rehabilitating the property, repairing the personal property, and preparing to commence placer mining.

The court further found that the appellee learned of the title defects on or about October 10, 1967, and instituted suit on November 11, 1967, after the appellant failed to take corrective action. The court found that there was a substantial failure of consideration because incurable title deficencies prevented the ground from being mined as a block except by willful trespass on the public domain. The use of the mining equipment was thus found to be frustrated and its value largely destroyed because it could be moved elsewhere only at great expense.

The District Court, finding that the defects of title were incurable and that they constituted a substantial failure of consideration, decreed rescission. The decree also directed that Van Dolah should refund to Richardson the $62,000 that the latter had paid toward the $300,000 purchase price of the property and that Richardson should also receive $28,169, which he had expended for the benefit and preservation of the property, and his costs of suit. Van Dolah was allowed no credit for the rental value of either the real or personal property during the eighteen-month period between June 26, 1967, when Richardson took possession, and January 10, 1969, when the decree was entered.

Pending restitution, appellee was granted an equitable lien on all of appellant's interest in the real and personal property described in the sale agreement and the right to retain possession of the property which was the subject of both the sale and lease agreements until the lien was discharged. When Van Dolah was unable to pay the monies specified by the decree, the court ordered foreclosure. At the foreclosure sale, Richardson purchased the whole of Van Dolah's interests for the amount of the lien. Thus, for his out-of-pocket costs of $90,621, almost a third of which was spent in improving the property, Richardson acquired all of Van Dolah's interest in both the real and personal property, for which $300,000 was to be paid under the sale agreement, and in the property covered by the sublease.

Appellant presents several arguments in connection with her basic contention that the contracts should not have been rescinded. Although we reject all but two of these arguments, we mention them briefly. The first is based on the fact that the conditional sale agreement contemplated the transfer of a "Quitclaim Mineral Deed" which would convey only whatever "right, title, and interest" Van Dolah had in the placer claims. She thus invokes the rule that when a vendor agrees only to convey all of his right, title, and interest in certain property, the vendee may not complain of title deficiencies as long as he receives all of the interest that the vendor possesses. See, e.g., Talman v. Dixon, 253 N.C. 193, 116 S.E.2d 338 (1960). Van Dolah argues that her contracted covenants of title are rendered ineffective by the application of this rule.

We agree with appellant that the deed and the sale agreement should be read together. Tjosevig v. Donohoe, 262 F. 911, 916 (9th Cir. 1920). This approach, however, leads to a result contrary to that urged by appellant. While the agreement contemplated the ultimate delivery of a quitclaim deed, it also contemplated an interim period during which the covenants of ownership were operative. And while title to the claims themselves was to remain in the seller during the nine-year escrow period, title to the ore was to vest in the buyer upon its removal from the earth. Thus, for some nine years, Richardson required assurance that Van Dolah had the right and the power to transfer title to the extracted minerals. This assurance was provided by the covenants made by the seller in the sale agreement. Since these covenants are not inconsistent with the provision for ultimate conveyance by quitclaim deed, the fact that a quitclaim deed was to be delivered at the close of escrow did not negate the effectiveness of the covenants during the escrow period.

We also reject Van Dolah's alternative argument that, assuming the covenants are given effect, they do not become operative until the close of escrow. Our attention is directed to the typical contract for the sale of land. In the typical situation, however, it is because the vendor's present ownership of the land is not critical that title to the land, which is not conveyed until the close of escrow, is only required to be a good title as of the close of escrow. See McCubbin v. Urban, 247 Iowa 862, 77 N. W.2d 36 (1956). Here, the vendor's present ownership of the minerals was critical. Her title to the...