Sheehan v. McKinstry

Decision Date24 October 1922
CourtOregon Supreme Court

Department 1.

Appeal from Circuit Court, Josephine County; F. M. Calkins, Judge.

Suit by Andrew E. Sheehan against E. T. McKinstry and G. W. Donnell as trustee for the First National Bank of Southern Oregon. From a decree denying relief to either party, plaintiff appeals. Reversed and remanded, with directions.

This suit was brought to obtain a strict foreclosure of the equitable estate of the defendant McKinstry in certain real property in Josephine county, Or., the legal title to which is in the plaintiff, and to set aside and cancel a mortgage thereon, given by McKinstry to the defendant bank to secure the payment of a promissory note executed by McKinstry and wife to the defendant Donnell, as trustee. The equitable estate was acquired under a written contract entered into on March 30, 1912, between plaintiff, the owner of the land, and McKinstry, who contracted to purchase the same. By this contract the plaintiff agreed to sell and convey, and McKinstry agreed to buy and pay, the sum of $18,500 for the property. The contract recites that $4,000 of said purchase price was paid upon the execution of the contract. It provides that the balance shall be paid in stated installments, the last one falling due on August 20, 1920 and that the installments shall, until paid, bear interest at the rate of 6 per cent. per annum from August 20, 1911. By the terms of the contract it is provided that McKinstry shall have possession of the land, and while in such possession shall pay the taxes thereon. McKinstry took immediate possession of the property, and remained in possession until after January 27, 1917, when this suit was commenced. The contract required, and pursuant to its terms the plaintiff did, jointly with his wife, make and execute, a good and sufficient deed, with full covenants of warranty, conveying the premises to McKinstry, and deliver it to the defendant bank in escrow, together with a copy of the contract, with instructions to the bank to deliver the deed to McKinstry upon his performance of the conditions and payment of the stipulated installments provided for by said contract. The contract also provided that the plaintiff should furnish to McKinstry "an abstract of title to said described premises showing good and sufficient title, free and clear of all liens and incumbrances to the date of this agreement." Under said contract McKinstry paid $6,000 upon the principal sum, and $2,460 interest. At McKinstry's request, the plaintiff conveyed one acre of said land to a third party, and credited McKinstry's interest account with $100, the amount received therefor.

At the time this suit was commenced McKinstry was in default in the payment of interest, and had failed to pay two of the stipulated installments, one for $2,000, payable on or before August 20, 1915, and one for $2,000, payable on or before August 20, 1916. He was also in default in not having paid as required by the contract, the taxes for the year 1915 amounting to $170.88, nor has he paid the taxes for 1916 amounting to $194.98. On January 2, 1914, McKinstry mortgaged his interest in the land to the defendant bank to secure a note given to defendant Donnell, as trustee.

In his answer McKinstry alleges that the plaintiff himself is in default in not having performed the terms and conditions of the contract, and seeks to recover from the plaintiff the amounts paid by him under the contract. The other defendants answered jointly, alleging the execution and delivery of said mortgage by McKinstry, and prayed for the foreclosure thereof, that the amount due thereon be declared to be a lien against said property and the property be sold in satisfaction thereof, and that, in case McKinstry should recover from plaintiff, the lien of the mortgage attach to the moneys so recovered, and that said money be applied in satisfaction of the mortgage. Upon the trial the court below refused to grant relief to either party, and dismissed the suit. The plaintiff appeals.

V. A C. Ahlf, of Grants Pass, for appellant.

H. D. Norton, of Grants Pass, for respondents.

RAND, J. (after stating the facts as above).

The first matter affirmatively alleged in McKinstry's separate answer is that the plaintiff granted an extension of time to pay the stipulated installments under a provision in the contract which provides that "in the event of financial depression, panic or reverse circumstances," making it impossible for McKinstry to make any of the payments stipulated, the plaintiff shall, upon request, grant an extension of one year within which such payments may be made. No testimony was offered, either to support or contradict this contention. In the state of the record, the original pleadings not being before us, it is impossible to determine whether this allegation is admitted or denied by the reply. The printed abstract of record shows an admission in the reply of matters alleged in certain numbered lines of the answer, but fails to show what was alleged on said lines. But assuming that such extension of time was granted as contended for, it can be of no avail to the defendant, for the reason that it is alleged in the complaint and admitted by the answer that the installment for $2,000, which became due, under the terms of the contract, on August 20, 1915, has not been paid; so, if an extension of the time in which to make the payment was granted as contended for, the payment would fall due on August 20, 1916, and, as the suit was not commenced until January 27, 1917, the defendant was in default at the commencement of the suit whether such extension was made or not. He was also in default in not having paid the 1915 tax, as he had agreed to do.

The defendant McKinstry alleges that the plaintiff failed to furnish him with an abstract as provided for under the contract, and because of such alleged failure he seeks to recover the money paid to plaintiff under said contract. By the terms of the contract plaintiff was required to furnish an abstract showing a merchantable title to the premises in himself on the day the contract was entered into. The furnishing of such an abstract was therefore one of the terms of the contract, the observance of which was as essential as that of any other term or condition by him stipulated to be performed. Decker v. Jordan, 79 Or. 109, 113, 154 P. 431. And if the plaintiff failed to perform this condition of his contract the defendant is entitled to the relief demanded, because the furnishing of an abstract showing a merchantable title, unless waived by the defendant, is a condition precedent to plaintiff's right to demand payment under the contract, and "as a general rule a purchaser of land by executory contract is entitled to an equitable lien thereon for the amount paid upon the purchase price if the contract fails because of some act or conduct of the vendor or his inability to perform it." 27 R. C. L. p. 628, § 385. Substantial performance of an executory contract for the sale of realty does not exist if there is a defect in the title, either as to the holder or as to any substantial or material part of the realty agreed upon; nor is the contract substantially performed if the performance tendered is substantially or materially different from that provided for by the terms of the contract. And if the part of the realty to which title fails is a material part of the subject-matter for which the purchaser has stipulated, the purchaser may, if he wishes, treat such failure of the title as a discharge of the entire contract. 5 Page on Contracts (2d Ed.) § 2790. In a case where the question of an abstract was not involved, this court said in Collins v. Delashmutt, 6 Or. 51:

"It is now a settled principle of law governing all executory contracts for the sale of real property that there is an implied warranty on the part of the vendor that he will convey a good title. A contract to make a good and sufficient deed is not satisfied by the execution of a merely formal conveyance, which, on account of defects in the vendor's title, fails to pass a good title to the vendee. * * * No purchaser should be compelled to take a defective or incumbered title. It would be unjust to require him to take a bad title, and to remit him to the doubtful chances of an action on the covenants in his deed, with the risk of the possible insolvency of his vendor."

It appears from the testimony offered by the defendant McKinstry that an abstract of title to the premises involved was prepared and was in the possession of McKinstry. He produced this abstract, and from the certificate attached thereto it appears that it only refers to instruments recorded prior to the 28th day of September, 1911, while the...

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  • Panushka v. Panushka
    • United States
    • Oregon Supreme Court
    • February 17, 1960
    ...contract has long been followed in Oregon. Walker v. Goldsmith, supra (14 Or. at page 137, 12 P. at page 543); Sheehan v. McKinstry, 105 Or. 473, 483, 210 P. 167, 34 A.L.R. 1315; Re Estate of Denning, supra (112 Or. at page 628, 229 P. at page 914); Lea v. Blokland, supra (122 Or. at page 2......
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