Miller v. Eheinzweig

LEWIS, J.

This action was brought to foreclose a land contract made by one Baptist Kahabka, as the party of the first part, and the defendants, as parties of the second part. The defendants had organized themselves into an unincorporated company or syn*467dicate called the Arthur Avenue Land Company, for the purpose of purchasing the land described in the contract, and subdividing it into lots, and placing them upon the market for sale. There were about 10 acres of it, and it was located in the city of Buffalo. The vendor, Kahabka, transferred his interest in the contract to the plaintiff. The sole question litigated upon the trial was as to which of the two parties was obligated by the contract to pay the paving tax, amounting to $1,642.39, which was a lien upon the land at the time of the execution and delivery of the contract. The trial court held that it was incumbent upon the plaintiff to pay the tax, and from an interlocutory judgment entered upon that decision this appeal was taken.

The contract bears date January 5, 1887. The party of the first part agreed to sell to the parties of the second part the land described in the contract “for the sum of $21,252.00, which said parties of the second part hereby agree to pay as follows: Not less than $1,000 on or before the tenth day of January, 1887, and the balance in such weekly sums as shall be derived by said second parties from the sale of lots or parcels of said premises.” The parties of the second part agreed to use their best endeavors to sell lots and parcels of the premises, and pay to the credit of the party of the first part all sums received from such sale, over and above running expenses, and they guarantied that the payments should not be less than $300 every three months. “Of the quarterly payments specified in this contract, at least 75 per cent, shall be applied on the incumbrances now resting on said premises, until the same are fully paid; and the treasurer of the purchasers is hereby authorized to pay said 75 per cent, upon such incumbrances whenever said 75 per cent, shall amount to the sum of $300.00 and upwards. The party of the first part further agrees to give deeds of subdivision lots of said premises, free and clear of all liens and incumbrances now resting thereon or placed thereon by the party of the first part, whenever said lots shall be sold, and the purchase price applied in full on this contract, provided that the prices so paid and applied shall not be less than $12.00 per foot front on Walden avenue, and $10.00 per foot front of Kahabka avenue, and $10.00 per foot front on Boat street.” Said second parties agreed to pay interest on portions of the principal sum remaining from time to time unpaid, semiannually. “The said parties of the second part agree to pay all taxes and assessments which shall be levied or assessed on said premises after the date hereof, but said party of the first part hereby guaranties that all taxes and assessments heretofore levied or assessed are fully paid, except the paving tax on Walden avenue.” Then follows a provision to the effect that whenever the sum of $5,000 shall be paid upon the contract the vendor will, at the option of the parties of the second part, give a deed of such portions of the premises not theretofore deeded, and take back a purchase-money mortgage, which mortgage shall contain the same covenants and conditions as are contained in the contract. The vendor agrees to give releases of subdivision lots of said premises from the operation of such mortgage upon .the same *468conditions as are provided in the contract for the giving of deeds. The only remaining part of the contract, material to the question before us, is as follows:

“And said party of the first part, upon receiving payment at the time and in the manner above mentioned, shall, at his own proper cost, execute and deliver to said second parties, or to their assigns, a warranty deed of said premises, for the portion thereof not theretofore deeded, at the request of said second parties, free and clear of all liens ,and incumbrances, except taxes and assessments levied or assessed thereon after this date, or incumbrances placed thereon by said second parties, except the aforesaid paving tax on Walden avenue".”

The provisions of the contract upon which the defendants rely to sustain their contentions are, first, that the consideration they were to pay for the property is stated in the contract to be .$21,252. They insist that if they are held to be liable to pay the tax the amount of the tax will be added to the purchase price, and they further insist that the tax was an incumbrance upon the land, within the meaning of the contract; and they call attention to the provision permitting them to apply 75 per cent, of their payments upon the incumbrances, and further to the clause providing for'the giving of deeds of subdivision lots, free from all liens and incumbrances, upon payment of the prices per foot mentioned, and also the clause in the contract providing for the vendor giving a deed of the property upon payment of $5,000, and taking back a mortgage for the unpaid purchase price, the mortgage to contain like conditions as to releases as are provided for in the contract. Were it not for other provisions in the contract, it would be difficult to resist the defendants’ contention. The strength of the defendants.’ case must, we think, mainly rest upon the clause mentioning the consideration to be $21,252. If, however, upon a reading of the whole contract, it shall appear that the sale was made subject to the paving tax, the importance of this provision disappears. If, upon reading the entire contract, it fairly appears that the land was sold subject to the paving tax, then there is no ground for the defendants’ contention. While, in a general sense, the word “incumbrances” would be held to include a tax, it is not generally used in that sense by scriveners, in drawing contracts. When it is desired to provide against the lien of taxes, assessments, and incumbrances, all of those words are used, and the person who drew this contract thought it was necessary to mention them all. What the incumbrances were, the contract fails to state, but we learn from the evidence that there were two mortgages which were liens upon the property. One was held by a Mr. Werner, and was for $12,000. The other was owned by the plaintiff, and was for $5,000. Whether the clause of the contract providing for the deeding of subdivision lots, free and clear of all liens and incumbrances, was. intended to cover the tax in question, depends, as before stated, upon the intention of the parties, as expressed by the contract. If the sale was in fact subject to the tax, this clause amounts to nothing. It does not occur to us that the clause giving the defendants the option to apply 75 per cent, upon the incumbrances strengthens the defendants’ . contention. That clause, manifestly, was inserted for *469the protection of the defendants. It provided that they might personally make the application of the 75 per cent, upon the incumbrances, and not trust to the responsibility or good faith of the vendor to make such application. It appears from the evidence that the paving tax could have been paid in five equal annual installments, if the first installment had been paid when it was due; but that was not done, and hence the entire tax became due at once. And, while the holders of the mortgages might be willing to accept payments of principal at any time, the paving tax could not be thus paid; and if it were not paid within the time provided by the charter the land was liable to be sold for the tax. That being the situation of the tax, it is not probable that the parties understood that this tax was included in the clause relating to the payments upon incumbrances. We do not see that the clause as to the deeding of the premises upon the vendees paying the sum of $5,000 cuts any particular figure in the case; for, as we have seen, the mortgage given for the unpaid purchase price was to contain the same covenants and conditions as were provided by the contract. If these provisions of the contract upon which the defendants rely were all there are bearing upon the question, we would probably not hesitate to affirm the judgment; but they are not. There are other portions of the contract having a material bearing upon this question, and it is our duty to construe the contract in such a way as to give force and validity to all of its parts, and the language used, if that is possible. Pars. Cont. p. 622.

This paving tax is referred to but twice in the contract, and we have heretofore quoted the provisions in which it is mentioned. In neither instance was it necessary to refer to it, if the construction contended for by the respondents is the correct one. It first appears in the clause where the vendor guaranties that all the taxes and assessments levied or assessed upon the property at the date of the contract are fully paid, “except the paving tax on Walden avenue.” If this tax was to be paid by the vendor, there does not seem to have been any necessity or propriety in mentioning the exception. Again, upon the defendants’ theory of the case, it is impossible to give full force and effect to the last clause of the contract heretofore quoted, providing for the vendor giving a deed of the premises upon receiving full payment of the purchase price, free and clear of all liens and incumbrances, “except taxes and assessments levied or assessed thereon after this date, or incumbrances placed thereon by said second parties, except the aforesaid paving tax on Walden avenue.” Unless the words last quoted are meaningless, they must be construed, we think, in favor of the plaintiff’s contention. The vendor would have fully complied with the requirements of the contract on his part, so far as the form of his deed is concerned, if he had tendered to the vendees a warranty deed containing a covenant against all liens and incumbrances upon the property at the date of the contract, “except the aforesaid paving tax on Walden avenue.” The scrivener who drew the contract failed to express as clearly as he should have done the obligations of the respective parties touching this tax. The contract is so *470worded as to leave its construction in some doubt. It was so considered upon the trial, for both parties, without objection, introduced extrinsic evidence as to what was said and done while the contract was being prepared, and what occurred subsequently, with a view of showing the intention of the parties when they made the contract. Its meaning is perhaps so ambiguous’and uncertain as to have made the introduction of extrinsic testimony proper. The facts surrounding the making of a contract, and the practical construction given thereto by the acts of/the parties in carrying it out, are frequently important aids in construing it. A careful examination of the extrinsic facts in this case has strengthened our views of the true meaning of the contract. As before stated, there were two mortgages which were liens upon the land at the time of the sale, and there was, in addition, this paving tax. The defendants, after obtaining the contract, commenced the sale of lots, making payments from time to time to the vendor, and applying upon the mortgages 75 per cent, of their payments. They sold a portion of the land fronting upon the paved street, with an understanding with the purchaser that he should take it subject to its proportion of this paving tax. They fail to explain why they were requiring their vendee to assume a portion of a tax they were under no obligations to pay. Kahabka testified—and in this respect his evidence was not contradicted—that he applied to the defendants, from time to time, to pay this tax; that they replied that they had not the money to pay it, and would be obliged to make an assessment upon their stockholders to raise the money. He says that he thereafter paid the tax, and that the defendants reimbursed him for the whole amount that he paid. The secretary, Chilcott (one of the defendants), testified as follows: “Our company has paid the tax. We gave Mr» Kahabka money to pay part of it, and part of it I paid direct.” The defendants, in making their payments to Kahabka while he owned the contract, and to the plaintiff after he became the owner thereof, paid interest upon the balance due, without taking any account of their having paid the tax; paying interest, from their standpoint, upon the amount of this tax, $1,542.39, which they were under no obligation to pay. Two years after the date of the contract, and after a number of payments had been made thereon to Kahabka, he applied to the plaintiff to purchase the contract, and the plaintiff required him to obtain a statement from the defendants of the amount there was unpaid thereon; and Kahabka applied to the secretary of the company, Mr. Chilcott, for such a statement. Chilcott furnished it, and Kahabka used it with the plaintiff, in making the sale. The plaintiff testified that he relied upon it as showing the true amount due from the defendants upon the contract. It showed the amount due upon the contract, over and above the amount unpaid upon the two mortgages, to be $3,736. If the amount of the tax were charged as a payment upon the contract, the amount due was only $2,293.61. The account, as appears from the evidence, was copied from the defendants’ books, and contained some 30-odd items on both the credit and debit side of the account.

*471The first item upon the account is: To purchase price of land.....$21,252 00

The next entry is: To expense................................. 4,547 52

$25,799 52

The latter sum is made up, as appears from the statement, of eight different items, of which this paving tax of $1,542.33 is the first, and then appear the following:

To amount paid on sidewalk..................................... $ 284 92
do. water pipes.................................. 230 15
do. surveying ................................... 40 00
do. interest ..................................... 1,640 15
do. ' city and county tax.......................... 198 24
do. commissions, secretary’s salary, etc............ 553 01
Gash on hand................................................... 58 66

These sums, added, make the amount of the expense item mentioned,—$4,547.52. From this it appears that the paving tax was included with other items which legitimately belong to the expense of carrying the property. Immediately over these expense items in the statement is the entry, “To amount paid on contract, $4,300.-00.” This is significant evidence that the secretary understood that the defendants were obligated to pay the tax. This statement, as we have seen, was taken from the books of the defendants, and there is an absence of any evidence from them showing that they were ignorant of the contents of their books. The defendants were all interested in this enterprise, and we must assume that they were familiar with the condition of the account, and of what their books showed as to the amount of their indebtedness; and it would seem to follow that they must have understood that this paving tax was a part of their expense in connection with the purchase of the land. John F. Smith, one of the defendants, testified that he knew that the account was given to Miller, and that he thereafter, as treasurer, from time to time, paid the plaintiff the interest on the balance due without deducting therefrom the paving tax, and that he had made like payments to Kahabka before he assigned the contract to the plaintiff. There were several. witnesses called who testified as to what occurred at the time of the drawing of the contract. The attorney who prepared it testified that the talk, on the part of all the parties, was that the company was to pay this-Walden avenue paving tax. He says: “There was no controversy about it. It was thoroughly understood, as much as any proposition could be, and the talk was participated in by everybody connected with it.” The testimony of Kahabka and Mr. Floss, who is one of the defendants, corroborated the testimony of the attorney. Several of the defendants were called as witnesses, and testified that they were present at the time the contract was being prepared; that the question came up as to who was to pay the tax, and that the attorney who was preparing the contract replied that Kahabka was to pay it, and would pay it. In view of the conduct of the-defendants in relation to the tax, as heretofore stated, their recollection as to the conversation at the time of the making of the contract is manifestly incorrect. With a view of breaking the force of the very significant fact that the defendants voluntarily continued to *472pay interest to the holder of the contract upon an amount without deducting the tax, the defendants’ counsel became a witness on -the trial, and, under objection from the plaintiff’s counsel as to its competency, testified that he was consulted by the defendants as to the subcontract above referred to, which they had made with a purchaser for a portion of the property fronting upon the paved street, with the view of ascertaining whether they could compel their vendee to pay his proportion of this paving tax, it not having been provided in the written contract that the vendee should pay it. The counsel testified .that, after having advised them in reference to that question, they asked his opinion as to which party was -obliged to pay the tax in question, and he says he was informed that the defendants had already paid the tax to Mr. Kahabka. He testified that he advised the defendants that the construction of the contract was somewhat doubtful, in that respect, but that in his judgment they were not obliged to pay the tax, and he furtheritestified as follows:

“I advised them that the company go on making these payments, and, when ithe time came that there were only so much due on the contract as would toe sufficient to meet this paving tax, then they could offset the paving tax, -with interest, as a payment oh the contract. They wanted to raise the qu-s:tian then. I said: ‘No; you have got to ask these people for releases. You cannot sell that land without releases, and the minute you get into a row rabout this paving tax this question of releases will come up, and they will shut down on you about giving releases; and therefore I should advise you to go .on and pay this as long as you can, and not have any row with these -folks, and, when the matter is finally determined, why, you can offset it, or -claim it as a payment of so much money advanced on the contract, under -«the lien and incumbrance clause in the contract.’ ”

It is difficult to resist the conclusion, from all the evidence in the •case, that the defendants, up till the time of receiving this advice -from their counsel, fully understood that they were obligated to rpay the tax. If, as the defendants now claim, their statement of .the account furnished Kahabka was incorrect, and the paving tax should have been credited to the defendants, both Kahabka and the plaintiff were misled by the statement furnished, and the plaintiff was induced to pay Kahabka, for the contract, the amount -of the paving tax more than was actually due thereon.

In view of all the facts and circumstances of the case, we are persuaded that it was the understanding and intention of the parties, when they made the contract, that the land was sold subject to this tax, and that the defendants were obligated to pay it. It follows that the judgment appealed from should be reversed, and a .new trial granted, with costs to abide the event.

jDWIGHT, P. J., and BRADLEY, J., concur.