Case Name: GEORGE T. COULTER v. EMMA McCORD SCHOFIELD
Court: Supreme Court of the Territory of Hawaii
Jurisdiction: Hawaii
Decision Date: 1932-03-05
Citations: 32 Haw. 296
Docket Number: No. 2029
Parties: GEORGE T. COULTER v. EMMA McCORD SCHOFIELD.
Judges: Perry, C. J., Banks and Parsons, JJ.
Reporter: Hawaii Reports
Volume: 32
Pages: 296–308

Head Matter:
GEORGE T. COULTER v. EMMA McCORD SCHOFIELD.
No. 2029.
Argued November 25, 1931.
Decided March 5, 1932.
Perry, C. J., Banks and Parsons, JJ.

Opinion:
OPINION OF THE COURT BY
BANKS, J.
(Perry, C. J., dissenting.)
This is a suit on a promissory note for $>650 with interest from date, together with costs and attorney's fees. The note was executed by the defendant on March 30, 1927, and was payable one year thereafter to the order of the United Realty Company, Limited. Prior to the commencement of this action it was duly transferred and assigned to George T. Coulter, the plaintiff, for collection. Defendant pleaded the general issue and also gave notice in her plea that she intended to rely on "illegality, fraud, release, compromise, recoupment, accord and satisfaction and payment." The court below, trying the case without a jury, rendered a decision against the plaintiff and in favor of the defendant and entered judgment accordingly. Plaintiff brings the case here on exceptions.
The case was tried on the following agreed statement of facts: "It is hereby stipulated by and between the parties in the above entitled cause that on the 12th day of March, 1927, the United Realty Company, Ltd., acting through Magoon Brothers, Ltd., their agents, accepted the sum of one hundred dollars ($100.00) from Emma McCord Schofield as part payment for the purchase of a certain piece of real property and delivered and presented to the defendant Emma McCord Schofield a standard form of Hawaiian Realty Board receipt, a true copy of which is hereby attached to this stipulation and made a part hereof and marked exhibit 'A;' that on, to-wit: the 31st day of March, 1927, the United Realty Company, Ltd., an Hawaiian corporation, entered into an agreement with the defendant Emma McCord Schofield for the sale of certain real property for the purchase price of three thousand seven hundred fifty dollars ($3750.00), described in said agreement, a copy of said agreement is hereby attached to this stipulation and made a part hereof and marked exhibit *B;' said instrument being drawn up and prepared by the vendor, and was duly recorded on May 3, 1927, in the office of the registrar of conveyances; that on, to-wit: the 31st day of March, 1927, the date Tipon which the agreement, marked exhibit '33/ attached to this stipulation and made a part hereof, was entered into, the United Realty Company, Ltd., was the owner of the property described in said agreement; that pursuant to the agreement contained in exhibits 'A' and '33/ the defendant Emma McCord Schofield paid to the United Realty Company, Ltd., as aforesaid, the sum of one hundred ($100.00) dollars in cash and on the same day of execution and delivery of exhibit 'B' the defendant executed and delivered to the Upited Realty Company, Ltd. her certain promissory note in the sum of six hundred fifty ($650.00) dollars which is the same note set forth in the complaint in the above entitled action and said one hundred ($100.00) dollars and note is the seven hundred fifty ($750.00) dollars mentioned in paragraph 2-a of exhibit 'B/ that on, to-wit: the 5th day of May, 1927, prior to the time the note executed by the defendant was due, the United Realty Company, Ltd. executed and delivered to The Dowsett Company, Ltd., an Hawaiian corporation, the indenture of that date, a copy of which is attached hereto and made a part hereof and marked exhibit 'C' which said agreement was recorded in said registrar's office on January 7, 1928; that on, to-wit: the 11th day of July, 1928, the release, a true copy of which is attached hereto and made a part hereof and marked exhibit 'D' was duly executed and delivered and was recorded on July 27, 1928, and that the said The Dowsett Company, Ltd. had notice of the said note prior to the execution of exhibit 'O;' that shortly prior to the commencement of this action, to-wit: in July, 1930, the United Realty Company, Limited, demanded of defendant that she pay the amount covered by said promissory note, to-wit, the sum of six hundred fifty dollars ($650.00), together with interest thereon from March 31, 1927, but defendant refused to pay the same; that thereafter and prior to the commencement of this action the United Realty Company, Limited, transferred said promissory note to plaintiff by written endorsement on the back thereof for collection; that plaintiff since said transfer has made demand upon defendant for the aforesaid sum of six hundred fifty dollars ($650.00), together with interest thereon from the 31st day of March, 1927, but the defendant refused to pay the same and no part of the same has been paid either to the United Realty Company, Limited, or to plaintiff. A true copy of said promissory note is hereto attached and made a part hereof and marked exhibit 'E.' It is further stipulated that the foregoing constitutes a complete statement of all the facts in this case."
By the "indenture" (which was a quitclaim deed), referred to in the stipulated facts as having been executed by the United Realty Company to the Dowsett Company on May 5, 1927, the former conveyed to the latter all of its interest in certain described lands, including the land which the realty company had previously contracted to sell to Mrs. Schofield. The habendum clause of this deed is as follows: "To have and to hold the same together with the tenements, rights, easements, privileges and appurtenances to the same belonging or appertaining, or held and enjoyed therewith unto the said grantee, its successors and assigns forever, subject, however, to the following agreements of sale." Among the itemized agreements of sale is that entered into with Mrs. Schofield.
Subsequent to this deed the Dowsett Company and Mrs. Schofield agreed, in writing, to cancel the contract between the realty company and Mrs. Schofield, the agreement, after some preliminary recitals, being expressed as follows: "That the said The Dowsett Company, Limited, and the said Emma McCord Schofield, for and in consideration of the sum of one ($1.00) dollar, to each by the other paid, do hereby covenant and agree to and with each other that the said agreement so dated the ,31st day of March, 1927, between the said Emma McCord Schofield and the said United Realty Company, Limited, be, and the same is hereby revoked, cancelled and annulled, and each and all of the parties thereto, or therein interested, are released and discharged from any and all obligations created thereby or thereunder."
The ultimate question presented is whether Mrs. Schofield was released by this agreement from her obligation to pay to the United Realty Company or its assignee, the plaintiff herein, the note upon which the present action is brought. The circuit judge took the view that she was released. This view was predicated upon the assumption that the $650 represented by the note was a part of the purchase money outstanding under the contract between Mrs. Schofield and the realty company and that when the Dowsett Company took a grant from the realty company of its interest in the land, subject to this contract, the legal effect was to transfer to the Dowsett Company complete ownership of the note. Whether this conclusion is sound or unsound depends, we think, upon how the note for $650 was regarded by Mrs. Schofield and the realty company. If in their contract they agreed that its payment was a condition precedent to Mrs. Schofield's right to a conveyance of the property, then under a well-recognized principle of law it was undoubtedly an outstanding part of the purchase price and the right to collect it or forego its collection passed to the Dowsett Company. It is said in 39 Cyc. 1664: "By the weight of authority, if a vendor under contract to convey land or bond for title conveys the land to a third person subject to the contract, the second grantee is entitled to the purchase money outstanding on the contract, unless there is an agreement to tlie contrary."
If, on the other hand, the note was understood by the parties to be a part of the cash-down payment on the purchase price of the land and the vendor obligated itself to convey the title regardless of whether the note was paid or not, then it did not under the contract represent a part of the outstanding purchase price and the rule quoted would not be applicable. The relevant portions of the contract are as follows: "This agreement made and entered into this 31st day of March, 1927, by and between United Realty Company, Limited, an Hawaiian corporation, hereinafter called the seller, and Emma McCord Schofield, hereinafter called the purchaser, Witnesseth: That the seller hereby agrees to sell to the purchaser, for and in consideration of the sum of thirty-seven hundred and fifty ($3750.00) dollars, to be paid as hereinafter provided" (then follows description of property) : "subject to the terms and conditions hereinafter set forth; 1. That the purchaser agrees to purchase said premises hereinabove described for the said consideration of thirty-seven hundred and fifty ($3750.00) dollars, payable as hereinafter provided: 2. That the purchaser, in consideration of the mutual promises and agreements of the seller herein set forth, agrees as follows: (a) To pay the sum of thirty-seven hundred and fifty ($3750.00) dollars, of which the sum of seven hundred and fifty ($750.00) dollars as a deposit is now paid, the receipt of which the seller hereby acknowledges, the balance of three thousand ($3000.00) dollars to be paid as follows: in equal quarter-annual payments with interest at the rate of seven per cent (7%) per annum on all unpaid balances, the entire principal sum and interest to be paid on or before the expiration of six years from the date hereof."
The conditions upon which the vendor obligated itself to deliver a deed to tlie property described are as follows: "To deliver or cause to be delivered to the purchaser, at the expense of the. seller, a deed of the property herein intended to be conveyed, free and clear of all incumbrances, upon the payment in full of the purchase price, plus the interest at the rate of seven per cent (7%) per annum within the time hereinabove set forth."
One of the facts agreed upon is that of the $750 recited in the contract to have been paid, only $100 was paid in money and the note involved in this suit was taken for the balance. It seems clear from the covenant of the realty company to deliver title that the only prerequisite to the enforcement of this agreement was the payment of the $3000 mentioned in the contract as the balance due. This is apparent from the last phrase in the covenant. No other payments on the purchase price were required by the contract to be made "within the time hereinabove set forth," except the installments aggregáting $3000. If this does not limit the payment which Mrs. Schofield was obliged to make it is entirely meaningless. There is not the slightest reference to the $650 evidenced by the note here involved. The significance of the omission of the $650 from the amount Mrs. Schofield was obliged to pay before demanding a deed is emphasized by the fact that the contract recites that $750 had been paid and that the balance due was $3000. The view we take is further sustained by the following-clause of the contract: "If the purchaser shall fail to pay any one of the said installments, either of principal or interest, as the same become due as hereinbefore mentioned, for payment thereof, and for the space of thirty (30) days thereafter, or if the purchaser shall fail to observe or perform any of the agreements herein contained and on her part to be observed and performed, then, and in any of such cases, the seller may, after giving notice thereon by publication once a week for at least three (3) successive weeks in a newspaper printed and published in Honolulu aforesaid, sell the said lot or parcel of land with all improvements thereon at public auction at such time and place as to it may seem best (Then follows a provision for the application of the proceeds of the sale.) Again, there is no reference to the $650 evidenced by the note and so far as the payment of the purchase price is concerned the only default that would justify the vendor in selling the property at public auction was the failure to pay the installments on the $3000.as they became due.
Since the purchaser was not required by the contract to pay the amount represented by the note as a condition precedent to the exercise of her right to demand a deed nor to pay it in order to protect herself against the sale of the property by the vendor at public auction, there seems to be no basis for the contention that it was, under the contract, an outstanding part of the purchase price of the land which passed to the Dowsett Company. In that respect it differs from the balance of $3000 which the purchaser by the terms of the contract was required to pay before she could assert her right to a conveyance of the property or before she could protect herself against a forfeiture of that right. This latter amount was by the contract made an outstanding part of the purchase price, and under the rule quoted from Corpus Juris, supra, complete dominion over it passed to the Dowsett Company. If the $650 had been similarly treated by the parties the rule would have applied to it as well in spite of the fact that the receipt of $750, of which only $100 was paid in money, was acknowledged in the contract. Under these circumstances, if they had existed, the note would have merely represented a part of the balance of the purchase price of the land, which the purchaser was required to pay before her right to demand a deed accrued. In other words, the note, although taken in lieu of cash, would have been nothing more than a postponement of her obligation to pay $650 in order to assert her rights under the contract.
J. R. Cades (Smith & Wild on the briefs) for plaintiff.
H. E. Stafford (also on the brief) for defendant.
It would be inaccurate to say that the view we take of the contract between Mrs. Schofield and the realty company leads to the conclusion that the realty company could recover judgment on the note even though it repudiated the contract and refused to convey the land. In that case there would he an entire failure of consideration which would not only furnish Mrs. Schofield a complete defense but would entitle her to recover the $100 she had already paid. There is a wide difference between making a conveyance of a good title the consideration for the note and making the payment of the note a condition precedent to the conveyance of such title.
Por the foregoing reasons the exceptions are sustained, the judgment is set aside and a new trial is granted.