#### Woodman, Appellant, vs. Blue Grass Land Company, Respondent.

*April 8*

October *3, 1905.*

*'Vendor and purchaser: Contracts: Breach: Rescission: Recovery of earnest money: Election: Corporations: Recording articles: Failure to index: Equity: Specific performance: Marketable title.*

*1.*Where one party to an executory contract, before the time appointed for performance, repudiates it by deliberately declaring he will not perform, the other party may treat the contract as terminated and recover the damages sustained by the other’s breach, unless it be a contract of which specific performance is desired and could properly be decreed.

2. In such case the effect of the termination is to stop the performance at the point then reached, subject to the payment of damages, but not to undo what has already been done thereunder.

3. Where earnest money was voluntarily paid at the inception of a land contract as part payment thereon and was rightfully in the *490vendor’s possession, and tlie vendee repudiated tile contract while there was still ample time for the vendor to perform, the vendee does not thereby reinvest himself with the title to the earnest money.

4. Where a purchaser of land wrote frequent and emphatic letters-to the vendor stating that he considered the contract rescinded or annulled, demanding return of the earnest money, and threatening immediate suit if it was not returned, such acts amount to clear, unequivocal, and absolute refusal to perform the contract on his part.

5. In such case, under the evidence, stated in the opinion, the vendor is *held*to have never treated the vendee’s repudiation as a breach, but to have Kept the contract alive, and he must therefore show ability to perform on his part in order to defeat the vendee’s claim for recovery of the earnest money.

6. Where it appears from the evidence that the articles of a corporation were duly made and filed and actually recorded as required' by law, but had not been indexed, the mere failure of the register of deeds to properly index the record does not invalidate-the corporation or suspend its legal powers.

7. Action for specific performance of a land contract pan be maintained notwithstanding the existence of liens presently payable, since the court can, by its decree, make provision for their payment and discharge out of the purchase money then due.

S. A lien on realty, which may be paid out of the purchase money simultaneously with the delivery of the deed, does not make an otherwise perfect title unmarketable.

Appeal from a judgment of tbe circuit court for St. Croix county: E. W. Helms, Circuit Judge.

*Affirmed.*

Tbis is an action to recover earnest money paid by tbe plaintiff to tbe defendant upon an executory contract for the conveyance of land on tbe ground of failure of performance by tbe defendant. Tbe defense was, in substance, *that the*plaintiff, repudiated tbe contract before tbe expiration of the-time within which it might be performed and thus forfeited any claim to tbe return of tbe earnest money. Trial by jury was waived and tbe case tried by tbe court. Tbe evidence showed that on June 30, 1902’, tbe plaintiff and defendant, a corporation, entered into a written contract called an earnest-money contract. Tbis contract acknowledged receipt by tbe *491defendant from tbe plaintiff of $1,000 as part paymént for 9,000 acres of land at $3.50 per acre, then sold and agreed to be conveyed by the defendant to the plaintiff, in Oneida county, Wisconsin, on certain conditions, among which were that one third of the consideration in addition to said $1,000 was to be paid upon delivery of a properly executed -contract for the conveyance of the lands according to a draft of such contract attached, and the balance of the consideration in five equal annual instalments; that within twenty days an abstract was to be furnished by the defendant; that the plaintiff was to have till August 30, 1902, to examine the title, and that, if defects should be found in the title rendering the same unmarketable, defendant should have a reasonable time after written notice thereof to cure such defects, but if the title to any portion of the land was not marketable, and could not be made so within the time limited, then such portion (not exceeding 500 acres) was to be excepted from the operation of the contract; and if the title to at least 8,500 acres was made marketable within the limit of time, and the plaintiff refused to accept the same or to perform his part of the contract, then the earnest money was to be forfeited to the defendant as liquidated damages. It further appears that after some delay (which delay was waived by the plaintiff) an abstract was furnished by the defendant to the plaintiff August 2, 1902; that on the 12th day of the same month the plaintiff sent a letter to the defendant, stating a number of defects in the title to various parcels of the land, including unpaid taxes, outstanding tax certificates, an uncanceled mortgage of $8,000 on a part of the land, and an alleged easement of flowage; that on August 23, 1902, the plaintiff sent a letter to defendant stating that the lands were incumbered and that the contract was thereby rescinded and that plaintiff would not carry it out, and demanding a return of the earnest money as well as the payment of $300 damages; that after-wards, on the same day, plaintiff and defendant, by a memo*492randum in writing upon said contract, agreed that tbe time should be extended to October 1, 1902; that on September 2, 1902, the plaintiff wrote a letter stating that he was informed that serious damage had been done to the land by forest fires, and that he considered the contract rescinded and demanded the return of the $1,000 earnest money; that on the 19th of the same month he wrote again, demanding the return of the earnest money and threatening suit in case it was not paid; that on the 22d of the same month he sent a formal notice to the defendant stating that by reason of the failure of title, and incumbrances upon the lands, and deficiencies therein ■occurring since June 30, 1902, he declared the' agreement annulled and demanded the return of the $1,000 earnest money; that on the 20th of September the defendant wrote to the plaintiff stating that it expected to carry out the contract and would not return the earnest money, but would perform the •contract on its pai4 on or before October 1st; that on September 25th the defendant wrote again, stating that it intended to carry out the contract and refusing to return the earnest money; that on September 29th the plaintiff wrote to the defendant again, stating that the contract was rescinded and renewing his demand for the return of the earnest money; that on October 14th the defendant’s attorney ■called on the plaintiff at his office in Minneapolis, having in his possession a satisfaction of the $8,000 mortgage above referred to and also a contract such as was contemplated by the earnest-money contract, and announced to the plaintiff that he had such instruments in his possession and ashed plaintiff what he proposed to do about the contract, and plaintiff replied that he refused to carry it out; that after service ■of the written notice of defects in the title the defendant undertook to remove the objections to said title, and continued to make efforts to carry out tbe contract on its part up to the time when it received the notice from the plaintiff of Sep*493tember 2d, at wbicb time it ceased its efforts, believing that tbe plaintiff would not perform tbe contract; that most of tbe defects claimed by tbe plaintiff in tbe title either did not exist or werp in fact cured by tbe defendant after tbe notice of sucb defects was given, but that tbe $8,000 mortgage was undischarged, and that there were outstanding tax certificates on twenty-seven forties of tbe lands, issued upon the tax sale of 1896, tbe aggregate amount.of such certificates not exceeding tbe sum of $200. Upon these facts tbe trial court concluded that plaintiff was not entitled to recover said earnest money, and judgment for tbe defendant was rendered, from which tbe plaintiff appeals.

For tbe appellant there was a brief by *John W. Bashford*and *B. M. Bashford,*attorneys, and *R. M: Woodman, pro se,*and *Francis B. Hart,*of counsel, and reply briefs signed by *Francis B. Hart*and P. *M. Woodman,*and oral argument by *Mr. Woodman.*

*Harold Ha'i'ris*and *John Barnes,*for tbe respondent.

Tbe following opinion was filed May 2, 1905:

WiNsnow, J.

While there were a "number of questions raised by tbe appellant in this case and ably argued by him in person both in bis brief and upon bis oral argument, it appears very conclusively to us that a single well-established legal principle adopted by this court establishes tbe correctness of tbe judgment. That principle is that,when one party to an executory contract, before tbe time appointed for performance, repudiates it by deliberately- declaring that be will not perform, tbe other party may treat tbe contract as terminated and recover tbe damages sustained by tbe other’s breach. *Merrick v. N. W. Nat. L. Ins. Co.*124 Wis. 221, 102 N. W. 593. The injured party is not required to perform on bis part, unless, indeed, it be a contract of wbicb specific performance is desired and could properly be decreed; but be *494may cease bis own efforts to perform and demand damages for tbe other’s breach. In this state and in many jurisdictions that action may be maintained at once, but in some j u-risdictions it cannot be maintained until the day of performance has been passed. That question, however, is of no importance here. *Merrick v. N. W. Nat. L. Ins. Co., supra; Davis v. Bronson,*2 N. Dak. 300, 50 N. W. 836; *Gibbons v.*Bente, 51 Minn. 499, 53 N. W. 756; *Shaw v. Republic L. Ins. Co.*69 N. Y. 286; Leake, Contracts (4th ed.) 615-617; 9 Cyc. 637, 638, 698, 699. The principle is that, unless the contract be one of which a court of equity will decree specific performance, either party may terminate it pending its performance, subject only to the payment of the damages which the other party sustains thereby. The effect of such termination is to stop the performance at the point then reached, subject to the payment of damages, but not to undo what has •already been done thereunder. In other words, the act of termination or repudiation stops the progress of events just where it finds them, but has no retroactive effect, and cannot, in reason, have any such effect. Applying that principle to the present case, it is very plain that the plaintiff cannot recover. The earnest money was voluntarily paid by the plaintiff at the inception of the contract as a part payment thereon and was rightfully in defendant’s possession. The plaintiff repudiated the contract while there was still ample time for the defendant to perform. By that act he did not and could not affect the character of the acts which had already been performed in carrying out the. contract, and manifestly could not reinvest himself with the title to the earnest money. This is so plain that further discussion is unnecessary.

*Francis B. Hart,*for the motion.

*Harold Harris*and *John Barnes, contra.*

*By the Oourt.*— Judgment affirmed.

The appellant moved for a rehearing.

*495Tbe following opinion, was filed October 3, 1905:

WiNsnow, J.

A motion for rebearing bas been made by tbe appellant in tbis case, and we have endeavored to give it tbat careful consideration wbicb tbe importance of tbe principles involved and tbe ability of tbe argument made demand. No serious fault is found with tbe legal principle stated in tbe former opinion. It is admitted tbat tbe court correctly stated tbat “when one party to an executory contract, before tbe time for performance, repudiates it by deliberately declaring tbat be will not perform, tbe other party may treat tbe contract as terminated and recover the damages sustained by tbe other’s breach.” But it is argued tbat (1) there was no absolute and unequivocal repudiation in fact, and, (2) even if there was such a repudiation, still tbe defendant did not treat it as a breach, and hence cannot now take advantage of it, but must show full performance on its own part.

As to tbe first of these contentions we shall spend little time upon it. Tbe frequent and emphatic written declarations of tbe plaintiff tbat be considered tbe contract rescinded or annulled, demanding return of tbe earnest money, and threatening immediate suit if it was not returned, seem to us as amounting to very clear, unequivocal, and absolute refusals to perform.

Tbe second contention, however, is far more serious. Tbe law with regard to an anticipatory breach of an executory contract doubtless is tbat tbe other party must treat it as a breach, and-tbat if be do not do so, but continue to demand performance, be will be held to bave kept tbe contract alive for tbe benefit of both parties. In other words, be cannot treat tbe repudiation both as a breach and as no breach at tbe same time. Benjamin, Sales (Ith Am. ed.) § 568; Anson, Contracts (2d Am. ed.) 311; 9 Cyc. 698, 699; *Dingley v.*Oler, 111 U. S. 490, 6 Sup. Ct. 850. Tbe court found in tbe present case tbat tbe defendant ceased its efforts to remove tbe ob* *496jections to tbe title after receipt of tbe plaintiffs letter of September 2d. Had this been tbe only fact in evidence throwing-light on tbe conduct of tbe defendant, it might perhaps be said that it did in fact treat tbe plaintiffs repudiation as a breach; but it appears without dispute that tbe defendant notified the plaintiff by letter dated September 20, 1902, that it should carry out tbe contract on its part, and should expect tbe plaintiff to do tbe same, and again on September 25th sent a letter of like purport. Tbe defendant also alleges in its answer that it was at all times ready, able, and willing to carry out tbe provisions of its said contract, and that on October 1, 1902, it tendered to tbe plaintiff a satisfaction of tbe $8,000 mortgage and a duly executed contract of sale, as required by tbe option contract, and has ever since a date prior to said October 1st been ready, willing, and able to perform its part of tbe contract. On mature reflection we are of opinion that it very clearly appears by these facts and admissions that tbe defendant never treated tbe plaintiff’s repudiation as a breach, but has continued to demand performance, and has thus kept tbe contract alive, and must now show ability to perform on its own part' in order to defeat plaintiff’s claim for recovery of bis earnest money.

This brings us *to the*second branch of tbe ease, namely, tbe question whether tbe defendant bad marketable title to at least 8,500 acres on October 1, 1902. It will be noticed that tbe contract does not require tbe defendant to exhibit a marketable title. A number of defects in tbe title were claimed upon the trial, but only two deserve serious attention, and these two will be briefly considered.

(1) Tbe defendant’s title came through tbe Brown-Bobbins Lumber Company, a corporation, and tbe abstract of title failed to show that tbe articles of incorporation bad ever been recorded in tbe office of tbe register of deeds of Oneida county, as required by subd. 7, sec. 1772, Stats. 1898. It was shown by tbe evidence that the articles were duly made *497and filed and actually recorded as required by law, but bad not been indexed. Tbe mere failure of tbe register of deeds to properly index tbe record cannot be regarded as invalidating tbe corporation or suspending its legal powers. Tbis stems too clear to require argument.

(2) Tbe lands were incumbered by a mortgage for $8,871.85 to one Bisbop, executed March 3, 1902, being tbe mortgage referred to as tbe $8,000 mortgage in tbe statement of facts herein. Tbis mortgage contained a provision to tbe effect that tbe mortgagee, upon request, would release any portion of tbe lands at any time upon payment of $2.50 per acre. A release of tbe mortgage in full was signed by Bisbop on October 1, 1902, and acknowledged on tbe following day, and was in possession of tbe defendant’s attorney when be called on tbe plaintiff October 14, 1902. .It also appeared that twenty-seven forty-acre parcels of tbe land were sold for taxes in May, 1896, but that no tax deeds bad been issued .upon tbe certificates, and that tbe aggregate amount of the' tax certificates and interest did not exceed $200. These in-cumbrances may be treated together. They were all presently payable and aggregated a little more than $9,000. There: were 8,760 acres of land, tbe title to which was certainly marketable, subject to these last-named liens. Tbe purchase' price was $3.50 per acre, or $30,660 in tbe aggregate. One third of tbis sum, or $10,220, was payable on delivery of the land contract October 1st. Tbe defendant on that day could have brought and maintained bis action for specific performance of tbe contract, notwithstanding tbe existence of these liens, because they were presently payable, and tbe court could by tbe decree make provision for their payment and discharge out of tbe purchase money then due. 26 Am & Eng. Ency. of Law (2d ed.) 109; *Guild v. Atchison, T. & S. F. R. Co.*57 Kan. 70, 45 Pac. 82; *Frain v.*Klein, 18 App. Div. 64, 45 N. Y. Supp. 394; *Edmison v.*Zborowski, 9 S. Dak. 40, 68 N. W. 288. Tbe idea is that a lien which may be paid *498out of tbe purchase money simultaneously with tbe delivery of the deed does not make an otherwise perfect title unmarketable.

*By the Court.*— Rehearing denied, without costs.