Court Opinion

ID: 8780621
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:16:54.277395+00
Date Added: 2024-06-11T17:02:49.043902
License: Public Domain

SANBORN, Circuit Judge
(dissenting). Marr expressly agreed in the contract of sale to convey the real estate to Nixon 60 days after September 20, 1909 — that is to say, on November 19, 1909 — “in fee simple, clear of all incumbrances whatever by a good and sufficient warranty deed,” and Nixon agreed to pay him on that dáy the $2,487.-50 for which this suit was brpught. A deed in escrow is not delivered, and does not take effect, until the party holding the escrow delivers it to the grantee, and an agreement that the deed in escrow shall be delivered to the grantee at a certain time is an agreement that it shall then first take effect. Washington v. Ogden, 66 U. S. 450, 456, 17 L. Ed. 203; Durham v. Hadley, 47 Kan. 73, 81, 27 Pac. 105; O’Neill v. Douthitt, 40 Kan. 689, 20 Pac. 493; George v. Conhaim, 38 Minn. 338, 37 N. W. 791, 792; Murphin v. Scovell, 41 Minn. 262, 265, 43 N. W. 1; Michigan Home Colony Co. v. Tabor, 141 Fed. 332, 336, 337, 72 C. C. A. 480; Century Dictionary, title “Escrow”; Black’s Dictionary, title “Escrow.”
When the time came for this conveyance and payment, the city of Tulsa had, by the exercise of its power of eminent domain, acquired the indefeasible right to take a strip through this land for a public street, by paying the award which the commissioners had made therefor. Nixon alleged in his answer that, without notice of any condemnation proceedings, he made the contract to buy this land free from all incumbrances “for the special and particular purpose, which purpose was jvell known to the complainant, of using said property as a storage yard for pipes, steel derricks, casings, building, and outhouses”; that the right which the city had acquired to take the property by paying the award constituted an incumbrance on the title on November 19, 1909, which diminished its value $2,487.50, so that Marr could not then convey it clear of incumbrances, as he had agreed to do; and he asked that the amount of his damages be set off against Marr’s claim to recover the $2,487.50. The majority of the court say, upon this state of facts:
“The real question presented is whether in this action Nixon is entitled to have set off against the balance of the purchase price damages sustained by reason of an appropriation thereof by the city for a street. This, we think, depends upon whether, at the date of the contract of sale, the city had appropriated or acquired a vested right to the property in question for street purposes.”
But this is a suit in equity instituted by Marr to enforce specific performance of this contract of sale, and there is no doubt that in such a a suit the vendee may remain in possession of the property and recoup any damages he has sustained on account of any failure or inability of the vendor to comply with his agreement to convey a good title free from incumbrances. Williams v. Neely, 134 Fed. 1, 5, 67 C. C. A. 171, 175, 69 L. R. A. 232, and cases there cited; Farmers’ Loan & Trust Co. v. Denver Railway Co., 126 Fed. 46, 50, 51, 60 C. C. A. *919588, 592, 593; Burnes v. Bumcs, 137 Fed. 781, 791, 70 C. C. A. 357, 367.
On November 19, 1909, the date on which Marr, on September 20, 1909, had agreed to convey the title to this land clear of all incum-brances, it was subject to the indefeasible right or option of the city of Tulsa to purchase the strip through it for a street for the. fixed price, for the amount of the award of the commissioners. This option or indefeasible right neither Marr nor Nixon could remove. And the unavoidable effect of these facts seems to me to be that this right in the city to take this strip by paying the fixed price was an incumbrance upon Marr’s title, that lie could not convey the title subject to this in-cumbrance clear of all incumbrances, as he had agreed to do, and that Nixon had the right in this suit in equity to recoup or set off the damages he had sustained on account of Marr’s' inability and consequent failure to convey, or to offer to convey, the title' clear of this incum-brance. And an examination of many opinions of courts has convinced my mind that the stronger reasons and the great weight of authority — indeed, as it appears to me, all the direct authority on the precise question here at issue — sustains this conclusion. Johnston v. Callery, 173 Pa. 129, 33 Atl. 1036; Maloy v. Holl, 190 Mass. 277, 76 N. E. 452, 453; Kares v. Covell, 180 Mass. 206, 62 N. E. 244, 91 Am. St. Rep. 271; Cavenaugh v. McLaughlin, 38 Minn. 83, 35 N. W. 576; Copeland v. McAdory, 100 Ala. 553, 13 South. 545, 546.
In the case last cited, which was an action for the breach of a covenant against incumbrances in a deed on account of a right of way for a street, the court, after reviewing numerous authorities, said upon this subject:
“When, as in this case, there is not a failure of title, the fee remaining in the grantee, but a part of the land is subject to a perpetual easement, which may not be removed by the payment of money, the measure of damages is The depreciation of value by reason of the incumbrance.”
Conceding now, as the majority contend, that from the date of the contract, September 20, 1909, Nixon became the equitable owner of this land, that he was entitled to the subsequent award for its taking by the city for a street, and that the title to the right of way over this street had not vested in the city, because it had not paid the award on November 19, 1909, the date on which Marr had agreed to convey the land to Nixon clear of all incumbrances, nevertheless the incum-brance, the city’s option, its indefeasible right to take this strip by paying the award, Marr’s inability to convey the title on November 19, 1909, clear of this incumbrance, as he had agreed to convey it, and Nixon’s damages for Marr’s breach of his agreement, and his right to recoup these damages in this suit in equity or to set them off against his contract to pay for the land remained in effect.
The fact that after the contract was made Nixon was the equitable owner of the land and entitled to any award for its condemnation did not deprive him of Marr’s agreement to convey the legal title to him on November 19, 1909, clear of all incumbrances, tior of his right to recoup, set off, or recover his damages for the breach of that agreement. The equitable ownership and possession of land by ,a vendee *920unde'r an executory contract neither satisfies nor releases his vendor’s covenant therein to convey the legal title to him free from incumbranc-es at some future time. And, in my opinion, the vendee’s ownership in equity, his right to the award, and the condition of the title when the contract was made and dated are immaterial in this case, and the only question it presents is: Was Marr’s legal title clear of all incum-brances on or after November 19, 1909, the date on which he had agreed so to convey it? The condition of the title at the date of the contract is immaterial, because the removal of any incumbrance then existing prior to November 19, 1909, would have enabled Marr to convey the property free from that incumbrance.
Nor is it to my mind any answer, to the claim of Nixon that the title to this land was incumbered, that the city had not on November 19, 1909, exercised its option, had not enforced its right, had not paid the award and acquired the perpetual easement which it had the right to acquire by the payment of that award. The claim here is not that the legal title or the proprietary right to the land or to the easement had vested in the city on November 19, 1909,. but it is that the city then had an option to purchase it for a fixed price, and therefore an incum-brance upon it. Any right to or interest in land, consistent with' the passing of the fee, which diminishes its value or its use, is an incum-brance. 3 Washburn on Real Property, § 2385; 1 Tiedemann on Real Property (3d Ed.) ■§ 617. And an indefeasible option or'right in a third person to purchase land, or a perpetual easement over it for a price certain, is an incumbrance upon the title of the owner, although ■that option has not been exercised or enforced, and such a right the city had acquired before the day on which Marr had agreed to convey the title to this property clear of all incumbrances.
• To the suggestion that Marr can and will convey to Nixon the land and the right to the award, subject to this right of the city to take the strip through the land for a street upon payment of the award, the answer, is that this is not what Marr contracted by his written agreement to convey. He agreed to convey the title to this land free of all incumbrances, and a conveyance of the land subject to the right of the city to take the strip through it for a street upon the pajanent to Nixon of a price certain is not such a conveyance. Would a conveyance by a vendor of a tract of land worth $10,000, subject to an indefeasible right in a third party to purchase it by paying $5,000 to the vendee, constitute a performance of a vendor’s prior contract to convey a good title to the land to the vendee free of all incumbrances? If the city had condemned for streets ail the tract of land in this case for which Nixon agreed to pay $4,975, and the commissioners had awarded only $1,000 damages for the taking, before November 19, 1909, the day Marr had agreed that he would convey the property clear of all incumbrances, would his conveyance of this land and the right do the $1,000 have constituted a conveyance of the land and its title clear of all incumbrances? No more is his tendered conveyance of this land and the right to the present award of the commissioners, subject, as the title is, to the city’s right to take the strip for a street upon its-payment of the award already made. .• ..
*921If, subsequent to the date of the contract and prior to November 19, 1909, the lien of taxes had attached to this land, that lien would have constituted an incumbrance, and Marr could not have performed his contract to convey on the latter day free from incumbrances until he had removed that lien. Densmore v. Haggerty, 59 Pa. 189, 190; Wilson’s Ex'r v. Tappan, 6 Ohio, 172, 175; Nunngesser v. Hart, 122 Iowa, 647, 649, 98 N. W. 505; Clinton v. Shugart, 126 Iowa, 179, 183, 184, 101 N. W. 785; 1 Warvelle on Vendors (2d Ed.) § 179.
In Kares v. Covell, 180 Mass. 206, 62 N. E. 244, 91 Am. St. Rep. 271, the vendor gave a bond for a deed of a good title free from all incumbrances, and between the date of the bond and the time for the delivery of the deed about one-fourth of the land was condemned for a highway. The vendee sued to rescind the contract and to recover back what he had paid, and the vendor defended on the grounds that: (l)‘Tlie title was to be free from incumbrances at the date of the bond for the deed, and not at the time fixed for the delivery of the deed; but the court said:
“Tt would seem to be clear that, when by the terms oí this preliminary contract it is provided that when the time comes for the execution of the final contract the land is to he conveyed by a good and sufficient warranty deed oí the obligor, conveying a good and clear title to the same free,from all incumbrances, the language refers to the title which is to pass by the deed, and not to the state of things existing at the time of the preliminary contract.”
And this is clearly so in the case in hand, for Marr could have conveyed on November 19, 1909, free of any incumbrance on the property on September 20, 1909, which he had removed prior to November 19, 1909, and it was doubtless with the purpose of giving him an opportunity so to do that the contract to convey free of incumbrance 60 days after its date was made. (2) That the vendee became the equitable owner of the land from the date of the bond for the deed, and consequently the agreement to convey at a future time related to the date of the bond, and not to the date o f the delivery of the deed; but the court decided that the contract of the vendor was to convey at the time of the delivery of the deed a title clear of incumbrances. (3) That the agreement was to convey free of any incumbrance the vendor created; but the couit held that it was to convey free of all incumbrances, that a condemnation proceeding constituted air incumbrance, and that the vendee should recover.
In Cavenaugh v. McLaughlin, 38 Minn. 83, 35 N. W. 576, the ven-dee paid $250 in part payment for a contract of sale of land and took a contract from the vendor which provided that the sale should be completed within 15 days after the delivery of the abstract of title, that if the title should be found defective the agreement should be void and the $250 should be refunded, but that if the title was found good and the vendee did not complete his purchase he should forfeit the $250. An examination of the records disclosed the fact that the common council of the city of St. Paul had made an order for the widening of a street and the taking of 10 feet off the east side of the contracted premises for the purpose, but no award of damages had been made or paid. Nevertheless the vendee refused to take the property, and *922brought a suit to recover back the $250 on the ground that -the title was defective, and the Supreme Court of Minnesota sustained his action. Answering the contention made in that court, as it is here, that the vendee could not recover because he was the equitable owner of the property and would receive the award of damages for the taking for the street, Chief Justice Gilfillan said;
“A conveyance, indeed, at any time before tlie condemnation proceedings bad culminated in a vested title in the city, would have passed to the grantee the right to receive the damages allowed for the taking; but. evidently that alone was not what the plaintiff expected to get. and the defendant expected to pass to him. The land and a good title (without defects) was what was stipulated for. It must be concluded that by good title was meant one indefeasible by reason of anything existing and affecting the land at the time.”
In the opinion of the majority the two cases which have just been cited are noticed, and the suggestion is made that the vendees in those cases rescinded their contracts, while Nixon enforces his and seeks to recover damages for the breach thereof. But these decisions are even more compelling than they would have been if the actions there had been for damages, because an action for damages is maintainable in every case of this nature that will sustain a rescission, but there are many cases of this class which will sustain actions for damages, but will not sustain suits for rescission, because the parties cannot be put in statu quo. In every case of this nature, as the Supreme Judicial Court of Massachusetts .well said in Kares v. Covell, 180 Mass, at page 208, 62 N. E. at page 245, 91 Am. St. Rep. 271:
“The plaintiff may, at his election, take what the defendant can give him, and hold the defendant answerable to him in damages as to the rest, or. where the parties may be put in statu quo, he may rescind the contract and recover back the money he has paid.”
Nixon has elected to take what the vendor can give him. and to hold him answerable in damages for the rest, and according to these decisions he is entitled to his damages in this suit.
It was the settled law in the state of Pennsylvania that the title of the owner of land was not divested by condemnation proceedings until compensation was made for the taking or security therefor was given. In Johnston v. Callery, 173 Pa. 129, 33 Atl. 1036, a contract of sale was made whereby the vendor agreed to convey the land free of incumbrances, and the Supreme Court of that state held that it was a good defense to an action for the purchase price that before the time for the delivery of the deed a railroad company had selected and adopted a line of railroad across the land, although no award of damages had been made and no compensation for the proposed taking had been made or secured.
The majority cite in support of their view Stevenson v. Loehr, 57 Ill. 509, 11 Am. Rep. 36, and Kuhn v. Freeman, 15 Kan. 423; but neither of those cases involved the liability for the breach of an ex-ecutory contract to convey land or title clear of all incumbrances, while that question, as we have seen, was involved, was carefully considered, and determined in the three cases which have just been reviewed. Stevenson v. Roehr was an action on promissory notes of *923vendees, and their defense was that the covenants of a general warranty deed which they had accepted had been broken to their damage by the condemnation by a railroad company of a right of way across the land before they received the deed. The court held that the condemnation conferred special benefits upon the land which the defendants purchased far in excess of the damages caused thereby, so that in these benefits they had received all the damages they had sustained by the condemnation and more, and that they could not recover these damages again by setting them off against their notes to the vendor. It also held that the purchaser was, after the contract of sale was made, the equitable owner of the land and entitled to any damages awarded for its taking. But these questions are not involved in this suit, nor is their decision controlling, and the liability of a vendor for the breach of an executor)- contract to convey clear of incumbrances by reason of a condemnation after the date of the contract and before the time for the delivery of the deed was neither presented, argued, considered, nor decided in Stevenson’s Case.
Kuhn v. Freeman was an action on the promissory notes of a deceased vendee against his legal representative. It presented by demurrer the single question whether or not the complaint on these promissory notes stated any cause of action. The plaintiff pleaded that the vendee had agreed to purchase the land for $3,000, that he had paid $1,500 and had given the notes for the balance, that he had died intestate, that one of the defendants was the administrator of his estate, that the vendor had tendered to the heirs of the vendee deeds of the property subject to a right of way for a railroad across it which a corporation had acquired by condemnation proceedings after the date of the contract of sale, and for which it had paid the award of the commissioners, $219.80, to the county treasurer. The court rightly overruled the demurrer, for the pleading clearly stated a cause of action on the notes, and there was no plea or suggestion that the incum-brance diminished the value of the land more than the $219.80 to which the defendants were entitled. The contract for sale in that case was a bond for a deed. Bonds for deeds commonly except from the agreement to convey free from incumbrances all incumbrances accruing subsequent to their dates (Dunn v. Yakish, 10 Okl. 388, 61 Pac. 926), and the probability is that there was such an exception in the bond in that case, for nothing is said about an executory agreement to convey free from incumbrances. There is in the opinion some desultory discussion of the effect of a condemnation of land upon the covenants in a deed, but no consideration or decision of the question in the case at bar — the question whether or not an executory covenant to convey al a stated future time clear of all incumbrances can be performed without removing the indefeasible right which a stranger has acquired after the contract and before the agreed date of conveyance to purchase a perpetual easement over a portion of the land for a street or a railroad by paying a fixed price therefor. The opinions of the courts which treat that question hold, and what seem to me the stronger reasons persuade, that it cannot.
*924t In my opinion the defendant below was entitled to prove and to recoup the damages he sustained on account of the right which the city of Tulsa acquired to purchase the perpetual easement over the strip of land through his property for the amount of the award of the commissioners, and it was reversible error to deny him that right.