Case Name: WINN v. TAYLOR
Court: Oregon Supreme Court
Jurisdiction: Oregon
Decision Date: 1920-06-15
Citations: 98 Or. 556
Docket Number: 
Parties: WINN v. TAYLOR.
Judges: 
Reporter: Oregon Reports
Volume: 98
Pages: 556–581

Head Matter:
Submitted on briefs at Pendleton May 3,
affirmed June 15,
Tehearing granted Jujy 27, argued on rebearing at Pendleton October 28, 1920, former opinion sustained January 18, 1921.
WINN v. TAYLOR.
(190 Pac. 342; 194 Pac. 857.)
Covenants — Lease—“Encumbrance.”
1. An outstanding lease was an “encumbrance”' witbin tbe meaning of the covenant of a warranty deed against encumbrances.
Covenants — Lease—Admitting Receipt of Rent — Burden of Proof —Deed.
2. In an action by grantee in a warranty deed, where defendant admitted the execution of tbe warranty deed and tbe receipt of rental from a lessee for the ensuing year, it developed upon him to prove his right to retain such rent.
1. On unexpired lease as breach of covenant against encumbrances, see note in Ann. Cas. 1914D, 1176.
Appeal and Error — Assumption of Burden by Respondent — Harmless Error.
3. Where real question in dispute in action by grantee against grantor for breach of a covenant against encumbrances was whether defendant or plaintiff was entitled to rent which accrued after the execution of the warranty deed, defendant cannot complain that case was tried on the theory that plaintiff must show that his title was to relate back prior to the time lessee made a payment to defendant of rent for the ensuing year.
Covenants — Breach of Covenant — Encumbrances—Measure of Damages.
4. When the breach of a covenant against encumbrance in a warranty deed consists of the existence of an unexpired term or lease, the measure of damages, in the absence of any special circumstances, is the value of the use of the premises for the time during 'which the grantee has been deprived thereof.
Pleading — Complaint Sufficient to Sustain Judgment After Verdict.
5. A complaint which was not specific was broad enough after verdict to sustain a judgment, where the defendant met the issue and affirmatively pleaded his rights in the matter and admitted necessary facts.
Covenants — Interest Allowed Grantee — Action Collecting Rent.
6. Where grantor in warranty deed breached covenant against encumbrances, in that a lease existed, and collected the rental for the ensuing year, to which grantee was entitled, the grantee in an action to recover such rental was entitled to interest on the amount of the rent from the date of collection by the defendant, in view of Section 6028, L. O. L.
ON REHEARING.
Appeal and Error — Theory of Trial must be Adhered to.
7. The theory upon which the ease was tried in the court below must be strictly adhered to on- appeal.
Appeal and Error — Theory Determined from Entire Record and Brief.
'8. The theory on which the ease was tried below, which governs on appeal, must be determined fiom the entire record and the briefs of counsel, construing the pleadings on the theory most apparent, most clearly outlined by the facts stated, and according to their •general scope and tenure.
Vendor and Purchaser — “Warranty Deed” Implies Usual Covenants of Warranty.
9. The term “warranty deed” in a contract of sale has a well-understood meaning as a deed containing the usual covenants generally inserted in a warranty deed, including the covenants that the land is free and clear from encumbrances.
Contracts — Variance Held Immaterial as not Misleading.
10. In applying the general rule that _a plaintiff declaring on a written contract cannot recover on an oral contract 'or o,ne partly oral, Section 97, Or. L., making variance immaterial unless it actually misled the adverse party to his prejudice must be considered, and a variance between allegation of a written contract and proof of one partly oral was not prejudicial where the other party alleged the oral agreement.
Pleading — Omission of Essential Allegation cannot be Aided by Verdict.
11. If the complaint is lacking in some material or essential allegation to establish a good cause of action, there can be no aider by verdict.
Pleading — Conclusions of Law cannot be Substituted for Statements of Fact.
12. Conclusions of law cannot be substituted for a statement of facts constituting the plaintiff’s cause of action, but a statement of fact may be such that it cannot be made without including a conclusion.
Pleading — Defective Complaint Which Did not Omit Material Averment Held Cured by Verdict.
13. Where the complaint, after rejecting conclusions of law, did not omit any material allegation, its defects are cured by the verdict which established every reasonable inference that can be drawn therefrom.
Deeds — Contract Provisions as to Covenants Connected With Title or Possession Merged in Deed.
14. The deed given in execution of a contract for the sale of land and accepted" as such governs the rights of the parties as to any inconsistent 'covenant connected with the title, possession, quantity or emblements of the land, though it does -not supplant collateral and independent covenants.
Covenants — Breach by Existing Lease Gives Bight of Action for Bental Value; “Bent.”
15. Where the covenant against encumbrances was breached by an existing lease, the measure of the grantee’s damages is the rental value of the land for the time possession is withheld from him,- and he may recover the rent for such time collected by the vendor; “rent” being the compensation paid for the use of the demised premises which is treated as a profit arising out of lands and tenants corporeal.
Covenants — Grantor Covenants Against Known and Unknown Encumbrances.
16. The covenant against encumbrances in a warranty deed, protects the purchaser against existing encumbrances of which he has knowledge, as well as against those which are unknown to him.
Covenants — That Tenant Attorned After Expiration of Term for Which Vendor Collected Rent Does not Defeat Purchaser’s Right to Rent.
17. Where the vendor collected a year’s rent in advance shortly before conveying by warranty deed with covenant against encumbrance, the fact that at the expiration of the time for which rent was collected the tenant attorned to the purchaser does not defeat the purchaser’s right to recover from the vendor the rental value prior to that time.
From Umatilla: Fred "W. Wilson, Judge.
In Banc.
On April 21, 1914, the defendant was the owner of a 600-acre farm in Umatilla County, and executed a lease thereof to M. W. Hansell for a period of four and one-half years from that date to October 1, 1919, at a stipulated cash rental of $5,100 for the first year, which also paid for the summer fallow and alfalfa then growing on the premises, and which was given in advance. The léase further provided for the payment of “the sum of $6 per acre due and payable on October 1, 1914; and on all land cropped in the summer of 1914; and $6 per acre due and payable on October 1, 1915, and each October 1st thereafter during the life of this lease on all the above-described premises.” Pursuant to the terms of the lease Han-sell at once took possession, ever since has been, and now is, holding the premises, and in all respects has complied with the terms and provisions of that agreement.
On August 21, 1917, the defendant executed to the plaintiff this writing:
“Received of Hey Winn ten thousand dollars, which I accept as earnest money on the purchase price of following described lands which I agree to deed to said Iley Winn on the further payment of forty thousand dollars on or before November first, nineteen hundred seventeen, and balance of fifty thousand four hundred forty dollars in cash or by note secured by first mortgage on said lands, said note if given to draw 6% per cent interest from November first payable annually and said note payable on or before ten years after date of same.”
Then follows a description of the land, which is identical with that leased to Hansell except for the addition of a 40-acre tract of timber. The complaint alleges:
“That under said contract * * the defendant agreed to sell and the plaintiff agreed to purchase the above-described land, the defendant sold and assigned to the plaintiff all the defendant’s rights, titles and interest in and to said described land, and that it was further made a part of the contract that the defendant should execute a warranty deed of conveyance to said property to the plaintiff as soon as was convenient, and the plaintiff should make the payments upon said premises agreed to between the plaintiff and defendant.
“That under the terms of agreement entered into between the plaintiff and defendant, wherein the plaintiff agreed to purchase said described land, the plaintiff was to be deemed the owner of said described land as of the date of the contract of purchase, which was August 21, 1917.”
It is then averred that on October 17, 1917, the defendant made to the plaintiff a deed to the said lands, with the following covenants:
“Together with all and singular the tenements, hereditaments and appurtenances hereunto belonging or in anywise appertaining and also all his estate, right, title and interest in and to the same, including dower and claim of dower.
“To have and to hold the above described and granted premises unto the said Iley Winn, his heirs and assigns forever. And the said Moses Taylor, grantor above named, does covenant to and with the said Iley Winn, the above-named grantee, his heirs and assigns, that the above granted premises are free from all encumbrances, except the right of way of the Oregon-Washington Railroad & Navigation Company through the lands described in said sections sixteen (16) and seventeen (17) and that he will, and his heirs, executors and administrators shall warrant and forever defend the above granted premises, and every part and parcel thereof, against the lawful claims and demands of all persons whomsoever, save and except as to encumbrance above mentioned.”
Concurrent therewith and in accordance with the agreement of August 21, 1917, the plaintiff gave to the defendant a mortgage on the said lands in the sum of $50,000 to secure a promissory note of the same date for that amount, payable on or before five years after date, with interest at the rate of 6% per cent per annum.
The complaint says that under the terms of the lease Hansell paid the rental on October 1st of each and every year; that in the fall of 1917, on account of such rent, he paid the defendant the sum of $3,522 without the consent or authority of the plaintiff; that according to the contract between them the plaintiff was entitled to that sum; that after its receipt he demanded payment of it from the defendant; and that the defendant has neglected and refused to pay the same or any part thereof to the plaintiff.
For a second cause of action the plaintiff claims $52 on account of a pasture bill, and prays for judgment for $3,522 with interest at 6 per cent per annum from October 2, 1917, and the further sum of $52 and costs.
The answer admits the making of the lease to Han-sell; that on August 21, 1917, the defendant agreed in writing to sell the real property to the plaintiff; that the latter then paid to the defendant “the sum of $10,000 on the purchase price”; that he “agreed to deed said land to the said plaintiff on payment of the balance of the purchase price,” and that the warranty deed of October 17, 1917, was executed by the defendant. It is also admitted that “under the terms of the said lease the said M. W. Hansell paid lease money about the first day of October each year; that on or about the second day of October, 1917, the said M. W. Hansell paid as lease money the sum of $3,522 dollars to the defendant”; and that the latter refuses to pay the same, or any part thereof, to the plaintiff.
As. a further and separate answer the defendant alleges that at the time of making the written contract with the plaintiff, on August 21,1917:
“It was specifically understood and agreed prior thereto and at said time and as a part of the same transaction, though not so stated in said writing, that the defendant would be entitled to collect the lease money coming due and payable on account of said real property from said M. W. Hansell on the first day of October, 1917, and he did collect it. Thereafter, on October 18,1917, at the time when the plaintiff paid another portion of the purchase price and secured the payment of the balance of it, thereby completing the purchase of the said real property, defendant executed and delivered to the plaintiff a warranty deed to it; but before doing so it was expressly and specifically understood and agreed by and between plaintiff and defendant that the lease money which was due and payable on the said first day of October, 1917, should belong to the defendant.”
Replying, the plaintiff made a general denial of all new matter in the further and separate answer.
At the trial ten of the jurors signed a verdict in favor of the plaintiff for the full amount of his claim, upon which judgment was entered against the defendant, and the latter appeals. He had filed a motion for judgment notwithstanding the verdict, on the ground that the complaint did not state facts sufficient to constitute a cause of action, and a motion for a new trial, both of which were overruled. He makes twenty-two assignments of error, found upon the admission of verbal testimony, the instructions of the court and the overruling of his motions.
Affirmed.
For appellant there was a brief submitted over the name of Messrs. Peterson, Bishop & Clark.
For respondent there was a brief prepared and submitted by Mr. Homer I. Watts and Messrs. Haley, Haley & Steiwer.

Opinion:
JOHNS, J.
It is admitted that on April 21, 1914, the defendant executed the lease to Hansell for a period of four and one-half years, for a stipulated yearly cash rental; that on August 21, 1917, for a consideration of $10,000 the defendant contracted in writing to convey the lands to the plaintiff on or before November 1, 1917; that pursuant to such agreement, on October 17, 1917, he executed to the plaintiff his warranty deed, and that in consideration thereof the plaintiff gave him his note for $50,000, dated August 21,1917, and a mortgage on the conveyed realty to secure the payment thereof. Although the lease recited that the first year's rent was paid at the time of execution, there was no stipulation as to when rent for remaining years should be paid. But it is admitted that after the execution of the contract and prior to the giving of the deed Hansell paid the defendant rent in advance from October 1, 1917, to October 1, 1918.
There are no reservations or exceptions in the conveyance from the defendant to the plaintiff. The execution of the lease and the warranty deed and the payment of the rent in question are all set forth and alleged in the complaint; and in legal effect the plain tiff claims that he is entitled to the rent from October 1, 1917, to October 1, 1918, which Hansell paid in advance to the defendant.
It is admitted that at the time of executing the lease Hansell took possession of the premises; that he has held them ever since, and that his possession is lawful; and it inferentially appears that the lease was of record.
Although the contract between the plaintiff and the defendant does not specify the nature of the conveyance to be made by the defendant, yet, pursuant thereto the defendant executed a warranty deed, covenanting that the premises were "free from all encumbrances" except the railroad right of way, and that he would "warrant an(L forever defend the above-granted premises, and every part and parcel thereof, against the lawful claims and demands of all persons whomsoever, save and except as to encumbrance above mentioned," meaning the right of way. Concurrent with the execution of the deed the plaintiff became the owner of the lands in fee simple, and through its legal force and effect would be entitled to the use, possession and enjoyment thereof. But at that time .the premises were subject to the Hansell lease and the defendant had collected rent in advance for the year beginning October 1, 1917. In Fritz v. Pusey, 31 Minn. 368 (18 N. W. 94), it is said:
"An 'encumbrance,' within the meaning of a covenant against encumbrances, includes any right or interest in the land which may subsist in third persons to the diminution of the value of the land, but consistent with the passing of the fee by the conveyance. # * Hence an outstanding lease is an encumbrance."
Crawford v. McDonald, 84 Ark. 415 (106 S. W. 206), holds that:
"The statutory covenant against encumbrances, implied by the use of the words 'grant, bargain and sell' in a deed, was broken at the time the deed was executed where the grantor had previously executed a written lease of the land which had not expired. ' '
Brass v. Vandecar, 70 Neb. 35 (96 N. W. 1035), upholds the doctrine that:
"An unexpired term or lease, which prevents the grantee in the deed from recovering possession of the land described therein, is an encumbrance."
Defining "encumbrance," we find the following in 22 Cyc., page 73:
"It is an interest in or chargeable on land, which may subsist in, or in favor of, a third person consistently with a transfer of the fee, but diminishes the value of the estate to the occupant. It is an estate, interest or right in lands, diminishing their value to the general owner; a paramount right in or weight upon the land, which may lessen its value."
See, also, 2 Words & Phrases, Second Series, p. 1021, and authorities there cited. In Friendly v. Ruff, 61 Or. 42, 46 (120 Pac. 745, 746), this court, speaking through Mr. Justice Burnett, said:
"An encumbrance, within the terms of such a covenant, includes any right to or interest in the land to the diminution of its value, but consistent with the passage of the fee by the conveyance. Within the rule thus laid down, any adverse right or privilege which would interfere with or curtail the full and exclusive enjoyment of the fee simple title by the grantee in the contract would justify the allegation of a breach of such a covenant."
We hold that the outstanding lease to Hans ell was an encumbrance within the meaning of the covenants in the deed, for which an action would lie for breach.
As the defendant admitted the execution of the deed and the receipt of the rental, it devolved upon him to prove his right to retain the snm in question. That matter was fairly submitted to the jury under instructions favorable to the defendant, and the jury found for the plaintiff. The latter assumed the burden of proof, and undertook to show that when the deed was executed on October 17, 1917, his title related to his contract of August 21, 1917, and that for such reason he was entitled to the rent which the defendant thereafter collected from Hansell. It will be noted that when the deed was executed, the plaintiff gave his note for $50,000 to the defendant as of August 21, 1917, the date of the contract, and that it drew interest from that date. That was strong evidence tending to show that it was intended that the plaintiff's title should relate back, and that he should become the owner of the property as of August 21, 1917. Although the case was tried, and the jury was instructed, upon that theory, it was not prejudicial to the defendant, and was a matter about which he had no right to complain. The real question in dispute is whether the defendant or the plaintiff was entitled to the rent which accrued after the execution of the warranty deed. Although he was not bound by that rule, yet in his complaint the plaintiff adopted the amount of rental collected in advance by the defendant, as the measure of his recovery. Such a measure was sustained in Fritz v. Pusey, 31 Minn. 368 (18 N. W. 94), where it was held that:
"When the breach of either of the above covenants consists of the existence of an unexpired term or lease, the measure of damages, at least in the absence of-any special circumstances, will be the value of the use of the premises for the time during which the grantee has been' deprived of such use. ' '
The same rule is laid down in Brass v. Vandecar, 70 Neb. 35 (96 N. W. 1035). Although the complaint might have been more specific, the defendant met the issue, and affirmatively pleaded that under an oral agreement with the plaintiff he had a legal right to the advance rental which he received, and according to the admitted facts that pleading is broad enough after verdict to sustain the judgment.
'It is also contended that the plaintiff was not entitled to interest upon the amount of his claim prior to the rendition of judgment. The jury found substantially that the advance rental collected from Hansell by the defendant in October, 1917, belonged to the plaintiff. The action was commenced on October 1, 1918, about one year afterwards. Section 6028, L. O. L., provides:
"The rate of interest in this state shall be 6 per centum per annum on money received for the use of another and retained beyond a reasonable time without the owner's consent, express or implied."
There is no dispute concerning the amount of the rent involved or the time of collection. Under such a state of facts the plaintiff was entitled to interest.
The judgment is affirmed. Affirmed.
Former opinion sustained January 18, 1921.