Skinner v. Scholes

• Decision Date: 10 February 1930
• Docket Number: No. 5708.,5708.
• Citation: 59 N.D. 181,229 N.W. 114
• Parties: SKINNER v. SCHOLES et al.
• Court: North Dakota Supreme Court

59 N.D. 181

229 N.W. 114

SKINNER

v.SCHOLES et al.

No. 5708.

Supreme Court of North Dakota.

Feb. 10, 1930.

Syllabus by the Court.

Where the vendor in an executory contract to convey land fails and refuses to convey after performance or an offer to perform on the part of the vendee, the consideration for the contract fails, and the vendee may rescind.

An executory contract for the sale of land, wherein the vendor agrees to convey title by deed with the usual covenants, is not satisfied by a deed from a grantee of the vendor. The right to the personal covenants of the vendor which do not run with the land is a valuable right, and the vendee may insist upon receiving the same.

On rescission of an executory contract for the sale of land by the vendee for breach thereof by the vendor, the vendee may recover the amount of the purchase price paid by him under the contract, together with the value of the improvements placed by him upon the land.

Where an executory contract for the sale of land is rescinded on suit by the vendee on account of breach thereof by the vendor, the object sought by the judgment is to place the parties as nearly as possible in statu quo, and accordingly, where the vendee has been in possession, the interest on the purchase money paid and the use of the land will be held to offset each other.

Where an executory contract for the sale of land is rescinded by the vendee for breach thereof on the part of the vendor, the vendee is entitled to a lien upon the land for such amount as he may recover on account of payment on the purchase price and for improvements made, pursuant to section 6865, C. L. 1913, providing that one who pays to the owner any part of the price of real property under an agreement for the sale thereof has a special lien upon the property independent of possession for such part of the amount paid as he may be entitled to recover back in case of a failure of consideration.

A subsequent grantee with notice, who takes title from the vendor in an executory contract for the sale of land, takes such title subject to the right of the vendee to a lien on the land for such amount as he may recover on account of payments made and for improvements if the contract is rescinded for breach thereof on the part of the vendor.

Appeal from District Court, Grant County; H. L. Berry, Judge.

Action by W. N. Skinner against Wm. Scholes, the last acting president of the Scholes Land Company, a corporation, of Armour, S. D., now dissolved, and others. Judgment for defendants, and plaintiff appeals. Reversed, with directions.W. N. Skinner, of Watertown, S. D., Edward S. Johnson, of Carson, and Scott Cameron, of Bismarck, for appellant.

Sullivan, Hanley & Sullivan, of Mandan, for respondents.

NUESSLE, J.

This is an action to cancel an executory contract for the sale of land and for other relief. The trial court having ordered judgment in favor of the defendants, the plaintiff appeals and demands a trial de novo.

[1] The facts material on this appeal, as we find them, are substantially as follows: The defendant William Scholes was engaged in the banking business in South Dakota. He organized a corporation, the Scholes Land Company, under the laws of that state to handle land deals. He and his wife, the defendant Lillian A. Scholes, were the sole stockholders. He was the president of the corporation and his wife the secretary. On June 1, 1916, Scholes, acting for the corporation, sold to the plaintiff a section of land situated in what is now Grant county, N. D. The sale was on contract. The price was $6,000, $500 to be paid in cash, the remainder at the expiration of 10 years, with interest at the rate of 6 per cent. per annum payable annually, and the purchaser to pay all taxes levied on the land subsequent to 1916. Among other things the contract provided: “* * * The said party of the first part (the land company) hereby covenants and agrees to convey and assure to the said party of the second part (the plaintiff) in fee simple, clear of all encumbrances whatever, by good and sufficient warranty deed, the (description of the land involved). * * * First party agrees to furnish an abstract of title to said above described premises showing title in the first party free and clear of all liens and encumbrances, possession of said premises to be given to said second party upon the execution of this contract. It is mutually agreed by and between the parties hereto that the time of payment shall be the essence of this contract and that all the covenants and agreements herein contained shall extend to and be obligatory upon the heirs, executors, administrators and assigns of the respective parties.” The contract was executed and delivered. The cash payment of $500 was made. The abstract showing the then record title to the premises was delivered to the plaintiff, and the plaintiff went into possession. Thereafter he continuously occupied and used the land until June 1, 1926. In the meantime he paid the interest as the same fell due. He paid the taxes up to 1925 in amounts totaling $1,294.41. In 1918 he built fences on the land at a cost of $350. These fences remained on the land on June 1, 1926, but were somewhat in disrepair and were then of the value of $200. This land was railroad land. It later belonged to the Northwestern Improvement Company. That company contracted to sell it to one Patterson. Patterson assigned the contract, and after various assignments it came to the Scholes Land Company, which took deed to the property. The improvement company in its deed reserved mineral, gas, and oil rights. The various assignments of the Patterson contract were not of record. In 1919 the Scholes Land Company deeded the property to Mrs. Scholes and also assigned the contract of sale to her. In 1920 the company having disposed of all its property voluntarily dissolved and went out of existence. No notice was given to the plaintiff of the assignment of the contract or the conveyance of the title to Mrs. Scholes, or of the dissolution of the corporation. Plaintiff first learned that the corporation had been dissolved on May 24, 1926, and at about the same time he learned that the land had been transferred to Mrs. Scholes. All payments of interest as they were made annually by the plaintiff were sent by mail addressed to the land company and were received either by Mr. or Mrs. Scholes, and such payments were indorsed on the contract. Mrs. Scholes received the proceeds of the several payments made subsequent to the dissolution of the corporation. As the time approached for the final payment there was some correspondence between the plaintiff and Scholes. Plaintiff objected on account of the mineral reservations and because the assignments of the Patterson contract were not of record. Then it was that plaintiff learned that the corporation had been dissolved, and that Mrs. Scholes held title to the land. He at once indicated that he would insist on a deed from the land company. On June 1, 1926, the day when the final payment fell due, plaintiff tendered Scholes a draft for the amount required to satisfy the contract and demanded a deed from the land company. Scholes told him that he would not receive that money as it was impossible to deliver a deed from the land company but made no objection to the form of the tender. Scholes also told the plaintiff that Mrs. Scholes would execute and deliver her deed in satisfaction of the contract. Plaintiff, however, refused to accept a deed from Mrs. Scholes. He also promptly gave notice of rescission of the contract and tendered possession of the property. Under these circumstances the plaintiff, claiming that the land company had voluntarily put it out of its power to perform, insists that he is entitled to rescind the contract under subdivision 2, § 5934, C. L. 1913, which provides that a party may rescind a contract, if, through the fault of the party as to whom he rescinds, the consideration for his obligation fails in whole or in part. Proceeding under this theory, plaintiff brought this action seeking an adjudication that the contract be rescinded; that he recover the amounts paid by him under it as principal, interest, taxes, and for improvements made, together with interest thereon from the dates of payment thereof; and that he be given a lien upon the premises for the amount of such recovery. He offers to credit the value of the use and occupation of the premises during the time he occupied the same, but claims that the amount thus to be credited is much less than the amount of the payments made for principal, interest, taxes, and improvements. On the other hand, defendants insist that under the terms of the contract a deed from Mrs. Scholes was sufficient,and that the plaintiff must accept the same. At the time of the trial the defendants tendered a deed sufficient in form and executed by Mr. and Mrs. Scholes individually and as trustees of...