Read v. Loftus

The opinion of the court was delivered by Benson, J.:

The defendants predicate error upon the orders overruling an objection to evidence under the petition, a demurrer to the evidence, and a motion to set aside the findings of fact. It is argued that the contract was merged in the deed and mortgage, and that the only remedy in case the title is defective or should fail is upon the covenants of the deed; also, that the plaintiff waived any right to rescission by long-continued delay. It is further urged that the amount allowed for improvements was excessive, and that the defendants were entitled to rent of the property as improved by the expenditures with which they are charged.

The principal question is whether the provisions of the contract concerning the title were waived by the acceptance of the deed. It is urged in support of the alleged merger that the contract was superseded and extinguished by the deed, and that all its stipulations were merged therein. That this is the effect of a deed when subsequently accepted in satisfaction of the conditions of an executory contract must be conceded. This conveyance, however, was made cotemporaneously with the contract, which contained provisions for the future delivery of an abstract showing a good title satisfactory to the plaintiff’s attorney. No payment was made at the time; even the $500 deposited remained in the bank, to be delivered only when the abstract should be approved. The provision for an *491 abstract to be furnished in the future, and the clause requiring an expenditure of $3000 for improvements, indicate that the transaction was not considered or ti eated by either party as finally closed by the delivery of the deed and mortgage. In addition to this, the court found that these papers were delivered contrary to the intention of the parties, and not with any intention to waive or modify the terms of the agreement.

It was held in Hampe v. Higgins, 74 Kan. 296 :

“A written contract for the sale of real estate is superseded and extinguished by a subsequent deed of conveyance between the same parties which covers in its provisions all of the stipulations contained in the contract.” (Syllabus.)

In the opinion it was said:

“In our view the evidence furnished by the face of the two instruments and also the extrinsic circumstances shown indicate that the parties intended the deed as a complete settlement of all further controversy concerning the sale and conveyance of the land. The transaction was initiated by the contract of sale and closed with the deed.” (Page 298.).

In this case the deed did not cover the stipulations contained in the contract, and the circumstances do not conclusively show, as they were held to do in that case, that the transaction was closed. On the contrary, both parties treated it as still open, and the contract as being in force. In various cases cited in support of the alleged merger it will be observed that the doctrine rests upon the acceptance of the conveyance as a performance of the contract. Thus it is said in section 850a of volume 2 of the second edition of Devlin on Deeds:

“The rule applicable to all contracts that prior stipulations are merged in the final and formal contract executed by the parties applies, of course, to a deed based upon a contract to convey. When a deed is delivered and accepted as performance of a contract to convey the contract is merged in the deed.”

*492 It was held in Slocum v. Bracy, 55 Minn. 249 , where this question of merger was considered, that it is competent to prove by parol that the deed was not accepted as a performance of the contract. The court said:

“There would be a very clear distinction . between plaintiffs’ merely accepting the instrument as a conveyance and their accepting it as performance of defendants’ contract.

“We therefore think that it would have been competent for plaintiffs to have proved by parol the allegation of their reply that their acceptance of the deed as performance of defendants’ contract was only conditional. Such evidence would not contradict the terms of the deed, or tend to prove that it was not to be operative as a conveyance according to its terms,” (Page 253.)

It can not be said, as a matter of law, that the contract was merged in the deed. No inconsistency appears between the contract and the deed, and the provisions of the former were not necessarily superseded by the latter. (Witbeck v. Waine, 16 N. Y. 532 ; Nothe v. Nomer, 54 Conn. 326 ; Close v. Zell, 141 Pa. St. 390.) The court found that no merger was intended. It is insisted, however, that this finding is not supported by any evidence. The conduct of the parties was a proper matter to be considered, as well as the language of the instruments, and in addition to this there was the testimony of the plaintiff that it was agreed that the mortgage and the deed should remain in the bank, but that carelessly or unintentionally the exchange was made, instead of leaving them there as intended. In the light of this testimony and of all the circumstances we can not say that the finding is not supported by any evidence.

The question whether the plaintiff waived the objections to the title was clearly one of fact. The mere circumstance that he took and held possession of the property is not conclusive. Possession was expressly stipulated for in the contract, and his continuance in *493 holding it is explained by the repeated promises of the defendants to remove the objections. The nature of the remedy which they proposed, namely, a suit to quiet title, would necessarily require time, and a reasonable delay for that purpose should not be construed as a waiver until some act was done or notice given evincing an intention to refuse to comply with the promise. When such notice was given the plaintiff acted promptly, by. serving his notice of rescission, offering to reconvey the premises, and demanding .a return of the note and mortgage.

The court is not called upon to determine the validity of the objections made to the title. The parties by their contract agreed that the title should be made satisfactory to the plaintiff’s attorney. This was not done. Objections which appear upon their-face to be substantial were made, and were not removed, and a final refusal to obviate them was given. That they were made in good faith is found by the court. That such a stipulation is valid and will be enforced is not an open question- in this state. (Hollingsworth v. Colthurst, 78 Kan. 455 .) The plaintiff was not required to accept a title which he had been advised was defective, and incur the risk of litigation, expense and loss. He had provided against such hazards by a stipulation that the title should be satisfactory to his attorney.

Again, it is urged that there should be no recovery because the plaintiff failed to introduce the abstract in evidence. This was unnecessary. It was in the hands of the defendants, and it was not necessary for the court to examine it, for the sufficiency of the title was not in issue.' It was only necessary to show that it had been éxamined by the plaintiff’s attorney, and, in the absence of bad faith, his objections were sufficient.

The petition contained allegations that fraudulent *494 representations concerning the title had been made. As there was no finding of fact supporting these allegations it is argued that there can be no recovery. Notwithstanding these averments the cause of action was not for fraudulent representations, but for the failure to make title as provided in the contract.

Another contention of the defendants is that the evidence disclosed the fact that the plaintiff, before entering into the contract, consulted with an attorney concerning the condition of the title, and that he must have relied upon the advice of the attorney. It is sufficient to say that notwithstanding such consultation he made these stipulations with reference to the title. Whatever advice he may- have received, he had a right to secure such guaranties and make such conditions as the other party was willing to concede.

It is contended that instead of allowing the expenditures made for improvements the court should only have allowed the value of the improvements, but this is not the rule in such cases. Upon the rescission of such a contract the party not in default is entitled to recover the necessary expenditures he has properly made upon the faith of the performance of the agreement by the other party. (King v. Machine Co., 81 Kan. 809 ; 8 A. & E. Encycl. of L. 637, 638.) Especially should this be so in a case where the contract expressly provides that he shall make such expenditures. Besides, it is said in the argument for the defendants that “we are not controverting the amounts paid, but we are seriously controverting the question as to whether they went into repairs and improvements, or operating expenses, and we make our objections upon that ground.” The amount expended for improvements and repairs was determined by the court, upon competent evidence, and the finding thereon can not now be disturbed.

Finally, it is urged that the court should have allowed rent for the property in its improved condition. *495 Manifestly this would be true if the defendants had been charged with interest upon the expenditures, but as they were not they should only recover the rent of the property as it was without the improvements.

That an agreement to purchase real estate may be rescinded where the vendor refuses or is unable to convey a merchantable title, as agreed, will not be controverted. The facts found by the court bring the case within the operation of this principle. The consideration had not been paid, except a little interest; the improvements made in pursuance of the agreement are upon the property of the vendor, and the rights of both parties were protected by the decree.

Finding no error in the proceedings, the judgment is affirmed.