Waters v. Pearson

• Decision Date: 13 January 1914
• Citation: 144 N.W. 1026,163 Iowa 391
• Parties: WATERS v. PEARSON ET AL.
• Court: Iowa Supreme Court

163 Iowa 391

144 N.W. 1026

WATERS

v.PEARSON ET AL.

Supreme Court of Iowa.

Jan. 13, 1914.

Appeal from District Court, Cedar County; W. N. Treichler, Judge.

Action at law by a vendee to recover back money paid as advance payment upon a contract of purchase of real estate which was not performed by the vendor. There was a trial to a jury, and a verdict and judgment for the defendants. The plaintiff appeals. Reversed and remanded.Robert Brooke, of West Liberty, and Ranck & Messer, of Iowa City, for appellant.

Henry Negus, of Iowa City, and J. E. McIntosh, of West Liberty, for appellees.

EVANS, J.

On July 8, 1910, the parties to this suit entered into the following written contract: “This agreement made and entered into this 8th day of July, A. D. 1910, by and between C. W. Pearson and wife, Nellie B. Pearson, his wife, and H. B. Pearson, single, of Cedar County, Iowa, witnesseth: That the said C. W. Pearson and wife, Nellie B. Pearson, and H. B. Pearson hereby agree to sell and convey to the said F. E. Waters, on the performance of the agreements of the said F. E. Waters, as hereinafter mentioned, in fee simple, clear of all liens and incumbrances, by a good and sufficient warranty deed, the real estate situated in the county of Cedar and state of Iowa, to wit: That part of the farm now known as the ‘Irvin Compton farm,’ and owned at the present time by C. W. and H. B. Pearson, laying south of the wagon road running east and west, and south of the house, containing fifty acres, more or less; also that part of the farm laying north of the wagon road running east and west, and containing one hundred and sixty acres, more or less, and the said land is a part of the land now occupiedby Irvin Compton at this date. For the purchase price of one hundred and seventy-seven dollars ($177.00) per acre, payable as hereinafter mentioned. One thousand dollars ($1,000.00) cash, which has this day been paid by the said F. E. Waters to C. W. and H. B. Pearson, the receipt of which is hereby acknowledged, one thousand dollars ($1,000.00) December 1, 1910, and the balance of the purchase price March 1, 1911. The one thousand dollars as cash payment, also the one thousand dollars payable December 1, 1910, are to draw 4% from date of payment until March 1, 1911. The said C. W. and H. B. Pearson agree to furnish an abstract of title showing the said premises to be free from all incumbrances excepting mortgage to the amount of eight thousand dollars ($8,000.00) thereof at the time of the delivery of the deed, said mortgage may be paid March 1, 1911, which deed shall be delivered March 1, 1911, at which time possession shall be given.”

The plaintiff, as purchaser, made the cash payment of $1,000 at the time of the execution of the contract, and made the additional payment of $1,000 on December 1, 1910, as provided by the contract. The contract was not otherwise performed. One of the controlling questions in the case is, Which party was in default when performance failed? Again, if the plaintiff was in default, did he thereby necessarily forfeit all right to recover back any part of the advance payments made? The action was brought by the plaintiff to recover back the sum of $2,000 thus paid by him upon the contract. The defenses interposed are in substance: (1) That the plaintiff forfeited such advance payments by his default; and (2) that the defendants' damages for plaintiff's breach of contract were greater than the sum of $2,000, and recovery of damages is asked in the form of a counterclaim. The case is necessarily submitted here on errors, and 47 of these are assigned in argument. We shall have no occasion to deal with the case in such detail. The evidence is not in substantial conflict upon material points. The following facts appear therefrom without dispute:

At the time the contract in question was entered into, the defendants were the equitable owners of the land under a contract of purchase with one Compton, which was to be performed also on March 1, 1911. Compton and the parties to this contract were all residents in the vicinity of West Liberty; the plaintiff living a few miles therefrom. On the morning of March 1st the defendants called the plaintiff by phone to appoint a meeting with him at West Liberty for that day for the purpose of closing up the contract with him. The plaintiff replied that he would not be able to be there. The defendants met Compton at West Liberty, and mutual and satisfactory performance was made of the Compton contract, though not in strict accord with its terms. The defendants had intended to pay Compton in full out of the purchase money to be received by them from the plaintiff; the amount of the price under each contract being about $38,000. The plaintiff having failed to appear, the defendants paid to Compton $13,000 of the purchase price, and executed a mortgage back upon the property for $25,000 balance due, and received from Compton a warranty deed for the property. Neither the deed nor mortgage was filed for record on that day. Such being the condition of the defendants' title on the evening of March 1st, they executed a warranty deed in due form to the plaintiff as grantee, and took the same to the plaintiff's home at about 8 p. m., and tendered the same to him, and exhibited, also, to him the deed executed by Compton to themselves. They also offered him an abstract of title certified only to December, 1910, which showed the title of the property to be in Compton, and showed, also, two existing mortgages of $5,000 and $6,000 respectively. The papers thus tendered were not examined by the plaintiff; but in lieu of examination he asked or directed that they be submitted to his attorney, Robert Brooke, at West Liberty. The defendants gave no indication whether they would or would not submit such papers to the attorney. The plaintiff was not advised of the existence of the $25,000 mortgage; the intention of the defendants being to pay off such mortgage if the plaintiff performed, and to do so before the mortgage should be placed of record. They had an arrangement with Compton whereby the $25,000 mortgage might be temporarily withheld from record, in order that it might be paid out of the proceeds of the contract with plaintiff. But this arrangement provided that the Compton deed must also be withheld from record for the same period. In other words, the Compton deed was only conditionally delivered, and was not to be filed for record until the $25,000 mortgage was either paid or filed for record. On March 2d the defendants, deeming their tender good, and the plaintiff in default, caused the Compton deed and the $25,000 mortgage to be filed for record. Five days later they entered into a lease of the premises for the ensuing year. From such latter date, therefore, it was not in the power of the defendants to perform the contract.

The plaintiff does not appear to have tendered performance at any time. It is urged in pleading and argument by defendants that he was not intending to perform, and that he had made no preparation therefor, and was wholly unable to carry out the contract on his part. The evidence in the record before us, however, is silent on this question.

Upon the record before us, we turn our attention to the two questions already stated, taking up the second question first.

1. If performance failed through the defaultof plaintiff, did the plaintiff thereby necessarily forfeit in toto the advance payments made by him?

The trial court instructed the jury as follows: “Instruction No. 10. You are instructed that, if you find for the plaintiff, the amount of his recovery will be $2,035, with 6 per cent. interest thereon from March 1, 1911. If you find for the defendants, the amount of their recovery will be the difference between the contract price plaintiff agreed to pay for the land and its fair market value on March 1, 1911, as you find from the evidence. If you find the difference between the contract price and the market value exceeds $2,000, then your verdict should be for such amount as you find the same exceeds the $2,000, paid by plaintiff. If you find that defendants' damages do not exceed the $2,000, or that defendants have suffered no damages, then your verdict should be for the defendants, without any amount stated.”

[1] The effect of the foregoing instruction was to hold that, if the plaintiff was in default, he forfeited the advance payment of $2,000, and, further, that, if the damages of the defendants by reason of the breach exceeded the sum of $2,000, the defendants were entitled to recover such excess.

Under this instruction the defendants were entitled to a verdict, even though their damages were less than $2,000, and even though they had sustained no damages whatever. This amounted to declaring a forfeiture regardless of the amount of damage. The verdict was for the defendants, without awarding any additional amount. This instruction was clearly erroneous. The contract of the parties provided for no forfeiture. Neither was time of the very essence of the contract, although the circumstances surrounding the parties did warrant the inference that prompt performance was contemplated. Neither was there any provision for liquidated damages. It is urged by appellees that the plaintiff cannot base a cause of action upon his own breach of contract, that he would thereby profit by his own wrong, and that he would thereby work a compulsory rescission of a contract which he had himself rued. Reliance is placed upon some of our previous cases which will be referred to later. This was the view adopted by the trial court in the instruction above quoted.

If the contract in question had contained a forfeiture provision, the defendants doubtless could have declared a forfeiture thereunder. But under our statute such forfeiture could not become effective until after written notice and the expiration of 30 days thereafter. This is a merciful provision of our sta...