Stewart v. Mann

Mr. Justice Burnett

delivered the opinion of the court.

1-3. The bankruptcy of the company did not impair the obligations of the contract with the plaintiff, nor lessen his privileges under the same. It did not foreclose his interest in the land. He was not compelled thereby to take title on less favorable terms than those for which he stipulated. In buying at the sale and taking the conveyance from the trustee with the condition inserted therein, as above quoted, Mann placed himself precisely in the situation of the company at the outset of the transaction between it and the plaintiff. The defendant contends that Reimers did not assign to the company his contract for the purchase of Mann’s undivided half of the land. That, however, cannot avail Mann in the present juncture, for he took the deed mentioned with the condition stated, and this binds him to perform the covenants of the company. If he had desired to avoid this result it was his business to foreclose his contract with Reimers whereby he might have rid his own half of the land of the obligations of the agreement between himself and Reimers. With them would have fallen plaintiff’s interest in the Mann half for that interest depended upon and was derived from the Reimer’s contract. Mann avoided this course, however, and bought in the whole tract on the terms already described, which estops him from shirking the obligations of the company under its covenant with the plaintiff: Cummings v. Jackson, 55 N. J. Eq. 805 ( 38 Atl. 763 ); Hill v. Minor, 79 Ind. 48 ; Crawford v. Edwards, 33 Mich. 354 ; Miller v. Thompson, 34 Mich. 10 ; Goos v. Goos, 57 Neb. 294 ( 77 N. W. *73 687); Hadley v. Clark, 8 Idaho, 497 ( 69 Pac. 319 ); Selby v. Sanford, 7 Kan. App. 781 ( 54 Pac. 17 ); Mississippi Valley Trust Co. v. Hofius, 20 Wash. 274 ( 55 Pac. 54 ). The result is that the situation is equivalent to that existing between the company and the plaintiff at the outset. The plaintiff was not in default in his payment. He preferred a claim for damages for the neglect of the company and of Mann to cultivate the orchard as required by the contract. This was not a breach of the stipulation on the part of the plaintiff. It is not necessary to determine whether the demand was well or ill founded. However, it seems to have provoked the defendant Mann to repudiate the obligations originally resting upon his predecessors in title, something he had no right to do, having assumed them as already shown. His conduct constitutes what Stewart is entitled to consider a breach of the contract on the part of Mann. In the language of Mr. Justice Vann, in Elterman v. Hyman, 192 N. Y. 113 ( 84 N. E. 937 , 127 Am. St. Rep. 862 , 871, 15 Ann. Cas. 819), as applied to Stewart:

“He accepts ‘the situation which the wrongdoing of the other party has brought about,’ and tries to get out of the land what he paid on it under the contract. * * The vendee does not rescind when without fault he goes into a court of equity and insists on a right springing from the contract and payment thereon pursuant to its terms. He does not repudiate the contract, but stands on it and affirms it as the foundation of the right he seeks, to enforce, as fully as if he sought entire specific performance. He does not abandon his equitable ownership by trying to assert it in the only way that it can be asserted. The contract has been performed by him, wholly it may be, or in part, as in the case before us, and as, owing to the fault of the vendor, he cannot have the full performance to which he is entitled, he asks for partial performance by the *74 enforcement of the trust created by the contract and payment as provided thereby. He does not sue for money had and received, but to enforce a lien on land into which the money went. Nor does he rescind the contract, which is the source of his lien, by seeking to enforce it to the only extent now possible, owing to the breach by the vendor, but he demands that equity should give him the interest in the land that he acquired by the contract and payment. The denial of that right would be an encouragement to wrongdoing, and to hold that an attempt to foreclose the equitable lien is a rescission of the contract would deny the right in all cases, including those in which the vendee is in possession and has made improvements.”

4. The doctrine of the cases is to the effect that a vendee acquires an estate in land under an executory contract for the purchase of the same in proportion as he pays the purchase price and is not in default in the performance of his covenant. The vendor holds the legal title to that extent in trust for the vendee. When the seller repudiates or fails to perform the contract the vendee has the right to get out of the land what he put into it, by foreclosing his equitable lien upon the premises. His right to do so is well recognized by the authorities: Gerstell v. Shirk, 210 Fed. 223 ( 127 C. C. A. 41 ); Howard v. Linnhaven Orchard Co., 228 Fed. 523 ; Brede v. Rosedale Terrace Co., 158 App. Div. 438 ( 143 N. Y. Supp. 583 ); Stockwell v. Melbern (Tex. Civ.), 185 S. W. 399 ; Tyler v. Cate, 29 Or. 515 ( 45 Pac. 800 ); Feldblum v. Laurelton Land Co., 151 App. Div. 24 ( 135 N. Y. Supp. 349 ); Ihrke v. Continental Life Ins. & Invest. Co., 91 Wash. 342 ( 157 Pac. 866 ). This latter case is one almost precisely like the instant contention in every particular. The subject is treated in a very exhaustive opinion written by Mr. Justice Fullerton, of the Washington Supreme Court, and is well *75 worth reading in connection with the matter involved.

5. When Mann sought to rescind the contract he should have put the plaintiff in statu quo; he did this only in part, by merely returning what the plaintiff had paid directly to him. Stewart had a right to accept the situation thus thrust upon him and, by foreclosing his vendee’s lien, compel the defendant Mann, so far as his rights in the premises were involved, to make complete restoration to the plaintiff, so as to place him where he was in the beginning; in other words, to complete the process of rescission by repayment of the full sum the plaintiff had already invested in the land. The result is that the decree of the Circuit Court is reversed and one here entered in accordance with the prayer of the complaint, except that no interest can be allowed prior to the date of this decree: Sargent v. American Bank & Trust Co., 80 Or. 16 ( 154 Pac. 759 , 156 Pac. 431 ). Reversed. Decree Rendered.

Mr. Chief Justice McBride, Mr. Justice Moore and Mr. Justice Bean concur.

Denied July 10, 1917.