Court Opinion

ID: 9537454
Source: CourtListenerOpinion
Date Created: 2023-08-07 07:18:33.817171+00
Date Added: 2024-06-11T14:56:42.025722
License: Public Domain

McCLINTOCK, Justice,
concurring in part and dissenting in part.
I agree with the majority that the judgment should be reversed and the cause remanded for further proceedings. In two major aspects I disagree with the reasoning upon which the opinion is based and do not want silence to indicate my approval thereof. Moreover, I disagree with the disposition proposed by the majority in that they hold the sole remedy of the purchasers is a claim for damages based on possible breach of covenants in the deed. In my opinion there exists a definite claim for damages for breach of covenant in the agreement which survived the execution of the deed. More importantly, I would not foreclose the development of facts justifying the remedy of rescission.
I cannot agree that the provisions in the purchase agreement concerning the sellers’ *1231duty to provide a title insurance policy and a commitment to issue a title insurance policy merged with the deed when it was executed, nor do I believe that damages are the only possible remedy. For these reasons I concur in the reversal but dissent from the disposition of the appeal.

Covenant to Furnish Title Insurance

My first area of disagreement is with the majority’s interpretation of the agreement as requiring that sellers “[pjrovide buyers,' Price and Sedam, with a title insurance policy showing ‘merchantable fee title in Bakkens’.” While I cannot deny that the literal language of the agreement so provides, I do not believe that this language reflects the intentions of the parties because it imposes an absurd obligation. Ordinarily it is presumed that parties read and understand the terms of their contract and that their intentions are manifested in the contract. J. W. Denio Milling Co. v. Malin, 25 Wyo. 143, 165 P. 1113, 1115 (1917). As a general rule courts will ascertain the intentions of the parties by interpreting the language that is used in the contract and will not resort to adding what has been omitted or omitting what has been added. Goodman v. Kelly, Wyo., 390 P.2d 244, 248 (1964). However, if the plain language of the contract imposes an impossible or absurd condition upon one of the parties the contract will be interpreted so as to effectuate the intentions of the parties at the time of contracting. Schaffer v. Standard Timber Company, 79 Wyo. 137, 331 P.2d 611, 614 (1958). In arriving at an interpretation that will give a reasonable meaning to the contract a court may disregard, supply or transpose a phrase in the contract. McNeil v. Graner, 91 Cal.App.2d 858, 206 P.2d 38, 42 (1949).
Keeping these general rules in mind, the interest of the parties must be determined. The sole purpose of securing title insurance was to protect the buyers in the event there should develop a flaw in the title. Affidavits of the parties show they contemplated the purchase of only one title policy. I feel it would be an exercise in futility for the sellers to be insured, since they would part with all title upon execution of the conveyance, and the buyers are the ones who need the insurance. Furthermore, title insurance policies are not issued for the purpose of “reflecting” a title; that is the office of an abstract of title. A title policy insures against loss. Although paragraph 8 of the agreement refers to “SELLER,” it must be read in conjunction with paragraph 10. This latter paragraph requires that a commitment for insurance be furnished within 15 days after acceptance of the offer indicating the willingness of the insurer “to issue the required Title Insurance Policy upon completion of sale.” (Emphasis added.) A sale is completed when the deed is executed and delivered. I do not believe that the two paragraphs, read together, can mean anything except that it is the buyers’ title that is to be insured.
The only reasonable explanation of why the contract requires that the title insurance policy reflect “merchantable fee title in SELLER” is that there was an error in drafting this paragraph. In order to give effect to the intentions of the parties the phrase “reflecting merchantable fee title in SELLER” must be transposed. I would move the phrase, “reflecting merchantable fee title in SELLER,” now appearing at the end of paragraph 8 to the approximate middle of the paragraph so that the paragraph would read:
“Promptly after SELLER’S acceptance of this offer, SELLER shall, at SELLER’S expense, deliver to.BUYER or his AGENT or Attorney an Abstract of Title extended to approximate date hereof, reflecting merchantable fee title in SELLER, or in lieu thereof to furnish BUYER a Title Insurance Policy in the full amount of the purchase price of the real property in a Title Insurance Company authorized to do business in the State of Wyoming, reflecting merchantable fee-title — in—SELLER . . . ” (Emphasis and overstrike indicate transposition.)

Covenant Survived Delivery of Deed

The present action is neither one to secure specific performance of nor to rescind *1232an executory contract. The question is, then, what happens to the covenant to deliver abstract or title policy after the deed has been executed and delivered? The majority have concluded that once the deed was executed the provisions of the purchase agreement merged into the deed, and the contract covenant to provide title insurance is no longer operable. I disagree.
The significance of a failure to provide a title insurance policy after the deed has been executed has been before the supreme courts of New Mexico and Idaho. Both states have held that the covenant has not merged with the deed and that the remedy is a suit at law for damages for breach of covenants. In Chavez v. Gomez, 77 N.M. 341, 423 P.2d 31, 33 (1967), it is said:
“Generally speaking, provisions in an executory contract to convey are performed when the conveyance is made. Contract provisions as to title, possession, quantities or emblements of the land are, again generally speaking, conclusively presumed to be merged in a subsequently delivered and accepted deed. * * *
“Where the contract provisions are not performed by delivery and acceptance of the deed, there is no merger. Such provisions are collateral to and independent of the deed. Norman v. Turley, supra [24 N.M. 526, 174 P. 999],
******
“The provision for furnishing either abstract of title or title insurance was collateral to and independent of the deed. The doctrine of merger by deed does not apply.” (Emphasis added.)
In Jolley v. Idaho Securities Inc., 90 Idaho 373, 414 P.2d 879, reh. denied (1966), the parties had contracted to exchange real properties. One of the provisions in the agreement was that each party would furnish to the other abstract of title as to the property to be conveyed, showing good and marketable title free and clear of all encumbrances except those recited in the agreement. Such an abstract had not been furnished by the corporation to the Jolleys, but the deeds had been executed and delivered. The Jolleys later made substantial objections to the transaction and attempted to secure a rescission of the whole deal. The Idaho Supreme Court considers the authorities at some length, including its previous decision in Christiansen v. Intermountain Ass’n of Credit Men, 46 Idaho 394, 267 P. 1074 (1928). Based upon its analysis of the previous cases, particularly Christian-sen, the court concluded that
“. . . the agreement to furnish the abstract was not merged by the Jolleys accepting the corporation deed and that as a prerequisite to furnishing such abstract, the corporation was required to furnish one showing the ‘Title of the transferror to be good and marketable and free and clear of all encumbrances except those set forth herein.’ ” 414 P.2d at 886.

Disposition of Appeal

It does not follow, however, that merely because the covenant to furnish a title policy has survived the delivery of the deed the buyers may necessarily claim rescission of that deed. While the distinctions between an executory and executed contract are not always observed, as noted by the majority there is a very real difference. Unless there are other factors present it would seem that the buyers in this case must be left to their action at law for breach of the covenants.
If the factual record had been more developed I might have agreed with the majority that the buyers should be left to an action at law. But no determination has been made as to the authority of the county clerk to refuse to record the deed. If there has been a violation only of the platting and dedication law, § 34-12-101 et seq., W.S. 1977, in that sellers have made too many partial conveyances out of lands owned by them, as prohibited by § 34-12-102, that law permits the county clerk to cause a plat to be made and have the costs thereof assessed against the sellers. Damages would appear to provide a plain and adequate remedy in that case and no basis for the exercise of the equitable powers of the courts is indicated. If the violation is of the *1233real estate subdivisions act, § 18-5-301 et seq., W.S.1977, the solution may be much more involved. The latter act appears to be much more complicated. Consistently with authority in the statute, the board of commissioners has adopted regulations, but they are not before us. Buyers appear to rely upon the subdivisions act as governing the legality of the conveyance but then rely upon the platting and dedication law as permitting them to recover attorney fees. We are not aware of which law is applicable and the record and briefs do not enlighten us. It may be financially or otherwise impractical to comply with the law and for the buyers to enjoy the benefit of their purchase. Under such circumstances I do not think that we should dispose of this case on some theory of law that may or may not be applicable to the facts as they actually exist.
Many of the authorities which I have considered refer only to fraud as a basis for rescission where the contract has been executed by delivery of the deed. However, in an annotation in 84 A.L.R. 1008, 1010 it is said that the doctrine of merger applies with certain exceptions, one of which is in case of “fraud or mistake.” It is said in 27 Am.Jur.2d Equity § 28, p. 552 that
“It is a broad general principle that a court of equity has jurisdiction to relieve a party to a transaction from the consequences of mistake. * * *
“ * * * The fact of mistake being established, the court may, for example, correct that which has been done by virtue of its process, divest a title which has been acquired, or interpose to prevent a forfeiture.” (Emphasis added.)
It is possible that the situation is analogous to that presented to the Supreme Court of Virginia in Miller v. Reynolds, 216 Va. 852, 223 S.E.2d 883, 886 (1976). In that case the parties had contracted for and taken conveyance of a tract of land on the assumption and representation that the land would be suitable for housing construction using a septic tank for sewage disposal. After conveyance it developed that the property could not be so developed because of improper soil conditions. Notwithstanding the delivery of the deed, rescission was ordered in the trial court. In sustaining this decision the supreme court said that an express representation had been made by the sellers that the land was suitable, which was an inducement to buy the property. The court discusses the doctrine of merger but continues:
“The remedy of rescission is equitable in nature and is a remedy granted or denied within the sound discretion of the trial court. Each case is dealt with in the light of its own circumstances. ‘In eases of plain mistake or misapprehension, though not the effect of fraud or contrivance, equity, will rescind the conveyance, if the error goes essentially to the substance of the contract, so that the purchaser does not get what he bargained for, or the vendor sells that which he did not design to sell. . . .’16 M.J., Rescission, Cancellation and Reformation, § 11, p. 138.
“In the instant case the buyers did not get what they bargained for because they could not construct a dwelling on the property. The sellers did not sell what they intended to, for their intention was to convey a lot on which the buyers could get from the proper authorities a permit to construct a building and have it serviced by a septic system. The mistake was a mutual mistake, and a material one, affecting the substance of the contract. The equities of this case clearly require rescission.”
Although in the case before us buyers did not plead mistake, contrary to the requirements of Rule 8(c), W.R.C.P., they did argue it before the district court and here. The district court rejected the argument because it appeared that both parties were aware that there might be some county restrictions upon the subdivision and conveyance of the parties. I am concerned that the parties may have in good faith contracted and attempted to consummate that contract upon the basis that there was nothing to prevent the conveyance, and then, without fault on either side, found *1234that they were mistaken. If this was error going “essentially to the substance of the contract,” then it seems to me that equitable relief would be proper. In keeping with the provisions of Rule 15, W.R.C.P., that the right of amendment shall be liberally allowed, and in view of the . completely unsatisfactory state of the record, buyers should be permitted to amend their complaint in such a way as properly to raise any question concerning any claimed mistake of the parties as to the applicability of the subdivision statutes and the court should then determine whether it is possible to effect the purposes of the parties in entering into this transaction. Sellers would, of course, be entitled to allege and prove any defense pertinent to such equitable proceedings. After trial of the factual issues and a full development of the subdivision question, the district court should be allowed to enter such judgment as is indicated, either for damages or rescission.