Court Opinion

ID: 9864958
Source: CourtListenerOpinion
Date Created: 2023-09-25 16:18:21.529988+00
Date Added: 2024-06-11T12:36:20.946498
License: Public Domain

Mr. Justice Francis E. Bouck
dissenting.
I respectfully dissent from the opinion of the court.
1. The Contract.
The case at bar involves a document containing a lease and an option, each of which is as complete in itself as if it were a separate instrument. Except as to formal parts. and the description of the mining property demised, the entire document is quoted in the opinion of the court. I ask the reader to refer to it in connection with this dissent.
As one reads the lease it is not unlike the typical Colorado mining lease with the usual provisions 'as to the amount and character of work and the payment of rental in the shape of royalties. The lease also provides for the payment of certain specific sums at stated times, in default of which payment, as in default of the performance of any other covenants, the lease may be terminated or ‘ ‘ forfeited ’ ’ by serving a prescribed notice. The evidence shows without contradiction that nearly one half of the sum of $15,000, payable during the period ending on July 22, 1936, was not then paid or tendered. Notice was promptly served on the lessee in the exact manner required by the lease, demanding that the delinquency be made up within the next thirty days, which was obviously deemed by the parties to be a reasonable period to remove the delinquency. No mine operator or practical miner would have any difficulty in understanding, or recognizing as a lawful fact, that failure to pay within the period lim*505ited would actually terminate the lease at the end of the thirty days. There is nothing extraordinary in the provision whereby all the royalties and all the other required payments received by the lessor before termination of the lease were to be and remain the property of the lessor, or that the lease might be terminated for not paying a required sum at the specified time. Such a provision would certainly not be considered as vesting an equitable interest in the lessee even to the extent of any payments made thereunder.
The option is wholly distinct. Its provisions are in a common form of mining opinion (compare Morrison’s Mining Rights, 16th ed., page 352); in other words, they offer a unilateral contract which may become a binding contract to sell and purchase land by compliance with the conditions of the option. Those conditions are: “The said Lessee shall have the right at his option to purchase the herein demised premises and property and receive a warranty deed conveying good merchantable title to the same free and clear of all encumbrances, provided he shall first pay to the said Lessor the full sum of eighty-five thousand dollars ($85,000.00) at any time on or before the 22nd day of November, 1937, while this lease shall be in full force and effect. Time is and shall be of the essence of Lessee’s right and option to purchase said premises, and it is expressly agreed that this option and said lease shall constitute one entire and inseparable contract, and that the forfeiture, surrender or termination of said lease for any cause shall render Ijessee’s option to purchase void. [Compare Morrison, op. cit., page 346.] If the said Lessee shall exercise his said option prior to the forfeiture, surrender, termination or expiration of said lease, then and in such event, and in such event only, the payments received by the said Lessor under said lease as royalties, as tunnel and mill usage charges or percentages, and as payment for delay in commencing the operation of said mill, shall be considered as a credit on said option price and shall reduce the same accordingly. If, however, the *506said Lessee shall fail to exercise his said option prior to the forfeiture, surrender, termination or expiration of said lease, then and in such event any and all the aforesaid payments received under said lease by said Lessor shall be retained by the said Lessor as royalties and rentals for the occupation, use and enjoyment of the demised premises by said Lessee and shall not be considered in any respect as a credit or payment on said option price, and neither the royalties or said other payments received by the said Lessor from the said Lessee under said lease, nor any improvements erected or placed in or upon said demised premises, nor work or expenditures of any kind done or made by the said Lessee within or upon said demised premises under said lease, shall in any respect be considered, held or claimed as giving the said Lessee any right, title, interest or claim, equitable or otherwise, in the said demised premises or any part thereof.” (Italics are mine.)
Moreover the option further provides: “It is agreed that the said Lessee shall exercise his said option by giving written notice to the said Lessor at the National State Bank of Boulder, Colorado, of his intention so to do accompanied by the payment or tender to the said Lessor of the entire sum, if any, which may then be payable on said option price in order to complete the same. ’ ’ (Italics are mine.)
Not only was there no payment or tender of the delinquent sum within the thirty days or at any time, and not only does no exercise of the option by notice of intention or otherwise appear, but in its pleadings the plaintiff in error lessee has not even made the requisite offer or stated its willingness to pay, as equity pleading requires, though the term of the lease has long since expired. This minimum showing of willingness to pay and to do equity is entirely lacking. In such circumstances equity would not force a foreclosure proceeding even if there were (as there is not here) an actual contract of sale and purchase^ which the plaintiff in error mistakenly claims to exist.
*507Before discussing the law applicable to the present situation, I desire to correct the doubtless inadvertent misstatement of fact, made in the answer and adopted by the court’s opinion, that the option price was $100,000. It was $85,000 (fol. 84, 90). $15,000 was paid as part consideration for the lease, regardless of whether the option would be taken up or not (fol. 40). Moreover, I need hardly mention that the expenses of working the lease referred to in considerable detail by the court’s opinion, though there are denials and the lessee has produced no proof, have no more bearing on the rights and liabilities of the respective parties than in the case of any other mining lease.
2. The Law.
I join with the majority of the court in high regard for Pomeroy’s and Williston’s texts. It is with due deference that I shall point out what in the light of the particular fact situation before us seem to me misapplications of statements in these authorities. The court’s opinion apparently ignores the sharp distinction to be drawn between a binding contract, to sell and purchase and a mere option to purchase. The latter is what we are dealing with in the case at bar. It is essentially an offer which must be accepted according to its terms before it becomes a contract. If not so accepted, the offer confers no contractual rights whatever. An optionee not accepting the offer as made does not acquire any such rights. The acceptance, as already shown above, must be accomplished “while this lease shall be in full force and effect.”' The plaintiff in error’s only contentions to overcome the effectiveness of the notice terminating the lease are that time was not of the essence of the contract, and that there could be no “forfeiture,” and that the lessee had an eqmtable interest in the property which continues indefinitely regardless of utter failure to comply with the requirements of the lease expressly adopted as conditions of the option itself. To these contentions I shall revert when I come to compare the lease and option in a case cited and *508relied upon in the court’s opinion (Fairview M. Corp. v. American M. & S. Co., 86 Colo. 77, 278 Pac. 800, hereafter referred to in 'this dissenting opinion simply as the Fair-view ease) with the document in the case at bar. Before doing so I shall refer to the distinction already mentioned which I believe the court’s opinion has overlooked, namely, the radical difference between the nature of the ultimate contract before us in the Fairview case and the nature of the contract now before us.
In passing’ we note that the court’s opinion emphasizes one single sentence appearing in a lengthy footnote (which also contains a multitude of recognized authorities on matters not bearing upon the subject matter of the sentence) in 3 Williston on Contracts (Rev. Ed.), page 2388, section 852 (note 8). That sentence says that an express stipulation making time of the essence was held in Phillis v. Gross, 32 S. D. 438, 143 N. W. 373, to be properly disregarded when inconsistent with other parts of the contract. This, however, involved a contract of sale and purchase, not a contract of option. For the latter kind of case we must go on to the next section (853, op. cit.), where Williston says:
“§853. Time is of the essence in equity in a contract of option. In a contract of option the party giving the option protects himself only by a condition. There is no obligation on the other side to perform. The question here, therefore, is not one of condition implied in law but of an express condition which must be strictly performed in order to hold the option-giver, the promisor, liable. Therefore, ‘whether the question arises either at law or in equity it is settled that time is of the essence of an option. ’ This is just as true of options embodied in other contracts as it is of the pure offer-option. * * * Where an option requires notice of intention to exercise it, as distinguished from acceptance of an offer-option, the courts generally require such notice to be received by the party to be notified in order to be effective.”
Similarly the opinion of this court in the Fairview case *509cites approvingly 5 Pomeroy, Equity Jurisprudence (2nd Ed.), section 2238. This also is a discussion of principles applying to a contract of sale and purchase. Those principles were properly applied in that case when this court found that the instrument there involved, in conjunction with certain other documents, was a contract of sale and purchase. On the other hand, the principles applying to options to purchase are found in the same work at section 2229 as follows:
“2229. (§807.) Default in Option to Purchase — No Relief. It has at times been suggested that relief for slight failure where there was substantial compliance should be applied to options to purchase land, as where the holder of the option was a day late in exercising the option. But it is clear the rule followed generally by equity is the true one — that there can be no relief against a failure to exercise an option after the day named for its expiration, for an option is no more than an offer to sell which the offerer is bound to keep open during the time set, but which expires with that time, leaving nothing for equity to operate upon. The courts very frequently refuse to give specific performance of an option sought to be exercised after the time has expired on the ground of time being of the essence. Strictly speaking, there is no contract if the election is not made before the expiration of the time, and equity finding no contract to use its discretion upon, cannot be concerned with the element of time, which presupposes an existing contract.”
See also section 2233, op. cit., under the heading “When time is of the essence. ’ ’
Now, it is to be borne in mind that in the Fairview case there was no express or other agreement as to time being of the essence, but that an express agreement to this effect appears in unambiguous and unequivocal language in the contract now before us.
»In the more recent work of Pomeroy, Specific Performance of Contracts (3d Edition, published in 1926), section 389, there is a full and able discussion of the principles *510which apply when there is — as here, but not in the Fair-view case — an express stipulation that time is of the essence. See also the next following section 390:
“§390. * * * intention of the parties controlling. The early doctrine [that an express provision declaring time to be of the essence may or should be disregarded in equity], as laid down by Lord Thurlow, was doubted by Lord Eldon; and wholly rejected by Lord Kenyon who held the contrary. It is now thoroughly established that the intention of the parties must govern, and if the intention clearly and unequivocally appears from the contract, by means of some express stipulation, that time shall be essential, then the time of completion or of performance, or of complying with the terms, will be regarded as essential in equity as much as at law. No particular form of stipulation is necessary, but any clause will have the effect which clearly and absolutely provides that the contract is to be void, if the fulfillment is not within the prescribed time. ’ ’
Even if the lease and option here had been silent as to time being of the essence (which is not the case), the natural character of mining property as fluctuating in value and changing with the mere lapse of time would present a situation upon which the trial court could properly find, as it did, that such was the case here. Op. cit., §383. Compare Morrison’s Mining Eights, 16th ed., page 355. No better illustration of the fluctuating value of mining property is found than the value fixed by the option in the Fairview case ($150,000) as contrasted with the value fixed by the option before us ($85,000), though the latter included all the identical property covered by the Fairview option and considerably more.
It should be remembered that by the assignments of error in the present case sole reliance seems placed in the Fairview case. It should also be remembered that in that case (where, as already stated, we found that the contract consisting of the original lease and option, together with subsequently executed instruments duly acted upon by the *511parties, constituted a contract of sale and purchase) this composite contract was the entire basis on which the Fair-view case (No. 12,321) was fought in this court, as appears on page 13 of the “Abstract of Becord” in Volume 1114 of the Supreme Court Library Abstracts and Briefs, where counsel for the lessee are shown to have expressly used the following language in their pleading:
“That in the original agreement of October 15, 1924, and all extensions thereof, there is no forfeiture clause, and none was intended by the parties thereto, and that time is not made or intended to be made of the essence of the original contract, lease and option and the extensions thereof, or any of them, and, therefore, all payments made in cash and/or property rights and credits by this defendant are not now, and cannot be forfeited; * * * That said payments, under the terms of said agreement and the law, constitute and are, in equity, a right and interest belonging to this defendant in and to the land and premises aforesaid.”
The foregoing allegations all stood admitted by the demurrer, the sufficiency of the allegations being therefor the only issue then before this court. Pleadings and evidence in the case at bar are in sharp contradiction to the above.

Summary.

To summarize:
In the Fairview case this court found that by the execution of subsequent agreements and by the parties’ action thereon, as pleaded and as admitted by the demurrer, there was a contract of sale and purchase, bringing the case within the principles announced in the opinion of the court in that case; neither the original lease and option nor the subsequent documents expressed the intent to make time of the essence, and the defense demurred to expressly pleaded the contrary intention;' so likewise as to forfeiture; the documents before us in that case were stated in the answer to have intended the transaction to be merely for security; as already noted, the whole issue *512then before this court was whether the defense was sufficient as stated in the answer. Therefore, since this court found that there was a contract of sale and purchase, the decision was right. There had been no occasion or opportunity for a trial in the court below on the questions of fact. The admissions of the demurrer were there necessarily fatal to the demurring lessor, which did not care to plead over.
In the case at bar, on the other hand, there has been a trial, with findings and judgment entered by the district court on the merits; the pleadings quote the lease and option in full and these both expressly provide that time is of the essence of the contract (compare fol. 77, 86), likewise that there might be a termination or “forfeiture,” and they contain a full statement of the intention of the parties; furthermore, the uncontradicted evidence shows that before and while preparing the document in question the parties deliberately expressed their intention to avoid the result in the Fairview case, this intention being unequivocally declared both orally and in the document itself.
That I have stated the correct principle in relation to cases where the parties have indicated their intention by expressly declaring time to be of the essence is apparent beyond all question from the care with which this court has qualified its opinions in cases falling within the category of the Fairview case. For example:
‘ ‘ The breach in this case is in failure to pay on the day stipulated. This breach is not fatal to the plaintiff’s rights unless time is of the essence of the contract. There is no stipulation to that effect [such as there is in the present case], and the circumstances surrounding the making of the contract, as shown in evidence, do not suggest that the time of payment was considered material by the parties. That being so, it will not be considered material in a case of this kind. In Byers v. Denver C. R. Co., 13 Colo., at page 556 (22 Pac. 953), this Court said:
“ ‘It is a well settled rule in equity that time is not of the essence of the contract to convey lands, unless made *513so by direct contract of the parties or necessary■ implication. ’
“In Hoagland v. Murray, 53 Colo. 50, 123 Pac. 664, this Court quoted with approval the case above cited. This is the general rule:
“ ‘The intent to make time of the essence must be clearly and unmistakably shown. An intention to make time essential cannot be inferred from the mere appointment of a day for the delivery of a deed, or the payment of the price.’ ” Flora v. Glover, 69 Colo. 211, 193 Pac. 665. (Italics are mine.)
Obviously this court by the present reversal has not only erroneously made a new contract for the parties but has usurped the trial court’s functions as the fact-finding authority, since the record is replete with evidence supporting all of the trial court’s conclusions of fact and law. The care with which the case was considered by the trial judge upon both the evidence and the law clearly appears from the “findings, judgment and decree,” which are quoted at fol. 970 to 997 of the record herein. I need not call attention to the principle heretofore uniformly held by this court, that this formal pronouncement of the trial court supersedes any of the trial judge’s remarks, made during the heat of the trial itself, some of which are referred to in the court’s opinion. Jones v. Boyer, 68 Colo. 568, 193 Pac. 492; Soule v. Kunkle, 71 Colo. 221, 205 Pac. 529; Davis v. Larson, 76 Colo. 527, 233 Pac. 160.
One needs only to read the testimony of the witness Russell D. George, the eminent mining expert and former state geologist, to realize that, if the trial judge believed Dr. George’s description of the conditions permitted by the lessee to exist in the mine contrary to the terms and provisions of its lease, the trial judge would have been derelict in his judicial duty not to find, as he did, that it would be inequitable not to decide in favor of the lessor. Not only would this testimony tend to prove that the plaintiff in error Rocky Mountain Gold Mines, Inc., has not shown itself ready to “do equity” when it seeks *514equity, but that it has not come into equity “with clean hands.”
Under the principles quoted from Williston and Pomeroy, and in view of the radical differences between the Fairview case and the present one, and according to this court’s previous decisions as well as under the general principles of equity, it is therefore apparent that the judgment in the case at bar should have been affirmed.
The foregoing are the principal reasons of my dissent.