Thornhill v. Olson

• Citation: 31 N.D. 81,153 N.W. 442
• Parties: THORNHILL et al. v. OLSON.
• Decision Date: 07 June 1915
• Court: North Dakota Supreme Court

31 N.D. 81

153 N.W. 442

THORNHILL et al.

v.OLSON.

Supreme Court of North Dakota.

March 31, 1915.

Rehearing Denied June 7, 1915.

Syllabus by the Court.

One Havlicheck and wife entered into a written contract of sale of 400 acres of land, near Minot, to plaintiffs. Eighty acres of Illinois land was to be accepted in part payment. The contract provided for inspection of the Illinois land. It was reported to be satisfactory. H. and wife then executed to Thornhill their warranty deed to the 400 acres and a bill of sale of the personal property thereon pursuant to the contract. Plaintiffs executed their deed to the Illinois land. All deeds, bill of sale, and the preliminary contract of sale, accompanied by a written escrow agreement, were deposited in the Second National Bank of Minot. This bank received, as depositary in escrow, all of the deeds to be delivered according to the conditions of the written escrow agreement, which provided that the deeds were “to be delivered to the parties who are entitled to same upon performance of the agreements set forth” in the preliminary agreement of purchase and sale of the land. The original sale agreement stipulated for an initial payment of $1, made and received; that certain mortgages should be assumed by the purchaser; and the further payment of $3,000 in cash should be made by Thornhill to H., but with no definite time fixed for payment. Abstracts of title to all land here and in Illinois were also to be furnished. No stipulation was made for inspection of them. These papers were so deposited in escrow on April 15, 1912. Four days later H. and wife executed and delivered their warranty deeds, immediately placed of record, to the 400 acres to defendant Olson, as grantee, who, under the findings of the jury, it must be assumed bought with notice of the escrow arrangement and the previous deposit of the papers thereunder with the bank. On April 23d plaintiffs procured title to the Illinois tract, which before that time they did not own, although they had attempted to deed same by the invalid deed in which the wife of one of said grantors had not joined, and which deed had been one of the instruments deposited in escrow. May 11th a second and valid deed to the Illinois tract was deposited with the bank to replace the invalid one or to cure any defect of title thereunder, and on that day plaintiff served notice on H. and wife to appear at the bank at a certain hour that day to close up the escrow matter. They did not appear. On April 19th Thornhill served Olson with a written notice of the escrow arrangement, stating that “all interest, right or title you acquire in said premises you take subject to the equities of the undersigned under and by virtue of said contract for deed.” On May 11th plaintiffs, acting by their agent, the Brush-McWilliams Company, deposited with said bank a check drawn by plaintiffs on an Illinois bank and indorsed by the Brush-McWilliams Company, which check was payable to said bank, as payee, for the sum of $3,000. The bank thereupon treated the check as cash, but retained it, and it never has been cashed. On deposit with it of said check the bank delivered on May 11th the deed of H. and wife, held by it in escrow, to plaintiffs. Neither H. and wife nor Olson have ever participated in the escrow proceedings after April 15th, nor done any act to recognize the same or toward performance of the original contract of sale after the deposit in escrow made April 15th; but on the contrary have disregarded the same, Olson having claimed at all times to have been a good-faith purchaser, without notice of the escrow proceedings. He has paid H. and wife part, if not all, of the consideration for his deed. The action, though in equity to quiet title, is based upon title arising under a valid delivery by the bank to plaintiffs of the deed in escrow. It was tried as a law action to a jury, which found for plaintiffs for possession and $750 damages for detention thereof. Findings and conclusions were also made in accordance with and supplemental to the verdict. Defendant appeals as in an action at law on specifications of error, and not as on a trial de novo, and the case is submitted on appeal as a law case on an appeal from both an order denying a new trial and from the judgment. Held, that the delivery of the deed by the bank to plaintiffs was unauthorized, and was in disregard of the escrow agreement in that it was delivered without a cash payment made by plaintiffs of $3,000 to said depositary, as was stipulated for by the escrow agreement before a valid second delivery of the deed could be made.

Under the escrow agreement said depositary was without authority to accept a check as and in lieu of a cash payment, and that the doctrine of substantial performance does not apply to a second delivery of deeds under a written escrow agreement.

The conditions stipulated for in an escrow agreement in writing upon which the second delivery of the deed shall be made are conditions precedent to its valid second delivery, and the consent of the grantor to its second delivery is deemed to be withheld until full compliance has been had with the escrow agreement. As a deed delivered without consent of the grantor passes no title, consent being essential to its validity, a deed delivered by the depositary in violation of the escrow agreement is no delivery and passes no title.

The depositary is the agent of both parties, but neither for one more than the other, and is empowered to aid neither, and is merely a conduit used in passing title for convenience and safety. A delivery by the depositary in excess of its powers is a nullity.

The reception by the bank of the check in lieu of money did not amount to a loan of money by the bank to the plaintiffs, and will not be treated as such.

The act of the depositary in accepting the check as cash was not the act of the grantors, but was void as in excess of authority conferred by them upon the bank.

The question involved is one of performance of the escrow agreement-not of the ability of the plaintiffs to perform that agreement-as such ability, without full performance, cannot amount to compliance.

It is assumed, without deciding, that the deposit of papers with the bank amounted to a deposit in escrow. Plaintiffs can have no standing on their claim of title, unless the same constituted an agreement in escrow.

The case is treated on this appeal as it was tried below, and treated by the parties on the appeal, viz., a review of errors at law in a law action, and not a trial de novo.

It appears from the theory had of the case on trial and on appeal that no title can ever be shown to have been in plaintiffs, and that they can never recover on the basis of title having passed to them, and are therefore without possibility of relief in this action; and the same is accordingly ordered dismissed.

Additional Syllabus by Editorial Staff.

The legal delivery by the depositary of a deed placed in escrow is technically known as the “second delivery.”

Appeal from District Court, Ward County; Leighton, Judge.

Action by Fred C. Thornhill and another, copartners as Willets & Thornhill, against Jourgen Olson. From judgment for plaintiffs, and denial of new trial, defendant appeals. Reversed, and action dismissed.

Christianson and Burke, JJ., dissenting.

Palda, Aaker & Greene, of Minot, for appellant. Greenleaf, Bradford & Nash, of Minot, for respondents.

GOSS, J.

The complaint is in the usual form of an action to quiet title, alleging plaintiffs to be the owners in fee of the 400 acres involved. The relief sought is confirmation of title in plaintiffs and possession, and $2,000 for use and occupancy, and general equitable relief. The answer claims title in defendant and demands a dismissal. A jury was used, and a general verdict was found for plaintiffs. In addition thereto the court filed findings and conclusions. Judgment was rendered in the plaintiffs' favor, quieting title in them to the land and awarding them judgment in the sum of $750 damages. Motion for new trial was made, based upon errors of law occurring at the trial and insufficiency of the evidence to justify the verdict and findings. Defendant appeals from both the judgment rendered and the order denying a new trial.

[1] In brief the facts are that both parties to this action are real estate dealers operating at Minot, the plaintiffs through the Brush-McWilliams Company, managed by H. J. Halvorson. In April, 1912, Frank Havlicheck and wife owned the real estate the subject of this suit. On the 8th of that month they entered into a written agreement with Thornhill for the sale to him of the land and all the personal property thereon for a consideration of some $6,900, and the further transfer to them of an 80-acre tract in Illinois, and stipulating that the Illinois tract should be examined by one Voitan, a son-in-law of Havlicheck, and if found as stated the contract should be “binding and in full force and effect.” The contract provided as to the money consideration as follows:

“In consideration thereof the second party [Thornhill] covenants and agrees to pay the sum of three thousand dollars in cash, one dollar of which is paid and receipt whereof is hereby acknowledged; as a consideration of the performance of this contract said second party shall assume and pay one mortgage for $3,300 due 1917 drawing 8% interest and one mortgage for $600 due 1915 drawing 9% interest.”

Soon after the execution of this preliminary agreement Voitan inspected the 80-acre tract in Illinois, and on return made a favorable report to Havlicheck. Further papers were then executed. These consisted of a warranty deed, by Bob Willets and F. C. Thornhill, as grantors, to Frank Havlicheck, as grantee, purporting to convey the Illinois 80-acre tract. On the same date, April 15, 1912, Havlicheck and wife executed to plaintiffs a bill of sale of the personal property on the farm and also their...