Court Opinion

ID: 3840313
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:09:26.420565+00
Date Added: 2024-06-11T07:40:31.241372
License: Public Domain

Rehearing denied April 8, 1930                        ON PETITION FOR REHEARING                              (286 P. 558)
Plaintiff claims that this court erred in holding that the following provision contained in the note, to wit: "said units of stock are not to be issued or delivered until this note is paid in full; and then the *Page 528 
said unit shares of stock are to be issued and delivered," were dependent promises, and also in holding that the bank, in the absence of performance upon its part, could not maintain this action without first alleging and offering to prove that it was able and had offered to deliver the stock to defendants. In support of this contention, it cites Hawley v. Bingham, 6 Or. 76, and contends that the doctrine there announced was applicable to these mutual promises and that in effect that case has been overruled by what we hold to be the law in the instant case.
Whether covenants are dependent or independent is a question of the intention of the parties as deduced from the terms of the contract. If the parties intend that performance by each of them is in no way conditioned upon performance by the other, the covenants are independent, but if they intend performance by one to be conditioned upon performance by the other, the covenants are mutually dependent: 5 Page on Contracts, §§ 2941-2951, et seq.; Williston on Contracts, § 824; Burkhartv. Hart, 36 Or. 586 (60 P. 205).
In determining whether the parties in the instant case intended that payment of the entire amount due upon the note was to be conditional upon the delivery of the stock at the time the note was paid, we must consider not only the words of the particular clause quoted above but also the language of the whole contract as well as the nature of the act required and the subject-matter to which it relates. When so considered, it will be seen that the mutual covenants go to the whole consideration on both sides — the payment of a certain definite sum of money by one side and the issuance and delivery of a specified number of shares of stock by the other. While there is no fixed definite rule of law by *Page 529 
which the intention in all cases can be determined, yet we must remember, as stated by Professor Williston, that, since concurrent conditions protect both parties, courts endeavor so far as is not inconsistent with the expressed intention to construe performances as concurrent conditions. 2 Williston on Contracts, § 835. See also 5 Page on Contracts, § 2948. The necessity of construing these covenants as concurrent in order to avoid gross injustice in the instant case is apparent for without a delivery of the stock the whole consideration for which the note was given must of necessity fail. While it is true that it is the intention which the parties had at the time the contract was entered into and not an intention which later arose because of subsequent events, yet it is very apparent that the intention, as expressed in the contract, was that upon payment of the note the stock was to be delivered at and when the note was paid. In this action the bank is seeking to enforce payment of the note without delivering or offering to deliver the stock. If successful in the action, the bank will recover the entire consideration without defendants receiving anything in exchange therefor.
Before referring to the Oregon cases upon this subject, which we think are in thorough accord with the rules above stated, we will refer to other authorities upon this question. Under the very early English common-law decisions covenants contained in the contract were held to be independent and could be enforced in many instances where the party seeking to enforce them was himself in default. Those decisions are no longer the law in England, nor have they ever been followed, so far as we know, in this country; certainly not in this state and, of course, they are not the rule of decision in this case. Certain rules in respect to dependent covenants were formulated and deduced from previous *Page 530 
English decisions by Lord Mansfield in Kingston v. Preston, 2 Doug. 689, and Boone v. Eyre, 1 Hen. Bl. 273n, and later by Serjeant Williams in a note to Pordage v. Cole, 1 Wm. Saund. 319L, in which the law applicable to dependent conditions became well established in England. Serjeant Williams' rules were adopted by the courts and were thereby given the force and effect of judicial authority. The fourth and fifth rules announced by Serjeant Williams are as follows:
"4. But where the mutual covenants go to the whole consideration on both sides, they are mutual conditions, and performance must be averred. 5. Where two acts are to be done at the same time, as, where A covenants to convey an estate to B on such a day, and in consideration thereof B covenants to pay A a sum of money on the same day, neither can maintain an action without showing performance of, or an offer to perform his part, though it is not certain which of them is obliged to do the first act; and this particularly applies to all cases of sale."
These rules were recognized as authoritative statements of the law by Mr. Justice BEAN in the Burkhart case, where he said:
"* * * The old decisions turned upon a technical construction of the language used, but the modern doctrine is that a contract should be construed according to the meaning and intention of the parties. It is unnecessary for us to make special reference to the several rules upon the subject or the various decisions of the courts. It is sufficient to say that `in the absence of very clear indications to the contrary, promises, each of which forms the whole consideration for the other, will not be held to be independent of one another, and a failure of one party to perform on his part will excuse the other from liability to perform': Clark, Cont. 656. Applying this principle to the case in hand, it is quite clear the court committed no error in holding that the *Page 531 
nonperformance of its contract by the trust company within a reasonable time was a defense to an action upon the note. The whole consideration for the note was, as alleged, the performance by the company of its agreement, and if it failed to do so the consideration necessarily failed."
The Burkhart case was cited and followed in Pennings v.Giboni, 86 Or. 110 (167 P. 598), and again in Taylor v. Tripp,97 Or. 611 (191 P. 1054). The same doctrine is recognized and followed by the courts as well as the text-writers. See 2 Williston on Contracts, §§ 813, 835, and 5 Page on Contracts, §§ 2941-2951 et seq., and the cases cited therein. It now seems to be the settled law, as stated by Professor Williston, that "the presumption in bilateral agreements, unless some reason can be shown to the contrary, is that the promises are dependent," and that this doctrine of implied dependency, where no intention is expressed, rests solely on its fairness, which is, he says "a quite sufficient basis." In section 813, Professor Williston says:
"* * * When A and B promise respectively to buy and sell stock in a corporation on May 1, the natural meaning of such language in the year 1500 may have been that the promises were independent. Four hundred years later that is not the natural construction. The customary methods of doing business of the kind by concurrently conditional performances are understood by the parties, and, therefore, determine the meaning of their language. But whether or not it is possible to imply a condition as matter of fact by ordinary rules of construction, the general and far-reaching principle of justice should also be observed that performance on one side should not be required, if the other party is materially in default in the performance which he was to give in exchange." *Page 532 
Again, he says in section 835:
"Since concurrent conditions protect both parties, courts endeavor, so far as is not inconsistent with the expressed intention of the parties, to construe performances of mutual promises as concurrent conditions. Therefore, not only, when no time is mentioned for either performance but also, where each party promises to perform his side of a bilateral contract `on or before' a stated day, though the contract does not state that each shall perform on the same day, concurrent conditions are implied, if the performances in their nature are capable of being performed concurrently. * * *."
The case of Hawley v. Bingham, supra, relied upon by plaintiff, if it means what plaintiff contends for it, is not applicable to the mutual promises involved here. In fact, it is impossible to state with any definiteness what the facts in that case were. There the question arose upon an objection to the sufficiency of the complaint. The note sued on there contained a clause which recited that the sole consideration was an agreement and promise that, upon payment of the note, the payees will sell and transfer to the maker a machine which the payees "have this day entrusted to the care of the undersigned." Whether this was an agreement merely to execute some assurance of title to a machine already in the possession of the defendant it is impossible to say. Referring to this case in the Burkhart case, Mr. Justice BEAN said:
"In Hawley v. Bingham, 6 Or. 76, the consideration for the note was a mere agreement and promise of the payee;"
We think the facts in this case clearly bring it within the rule announced in the Burkhart, Pennings and Taylor cases and that the doctrine there announced is controlling *Page 533 
upon this question, and that, as said by Professor Williston, which we will again quote:
"When A and B promise respectively to buy and sell stock in a corporation on May 1, the natural meaning of such language in the year 1500 may have been that the promises were independent. Four hundred years later that is not the natural construction."
It follows that the petition for rehearing should be denied.
ROSSMAN, J., dissents.