On Rehearing.
(194 Pac. 857.)
The judgment in this case having been affirmed by an opinion of Mr. Justice Johns, ante, p. 556 (190 Pac. 342), we have again considered it on reargument.
Iley Winn, plaintiff and respondent, prosecuted an action at law against Moses Taylor, defendant and appellant, in the Circuit Court of the State of Oregon for Umatilla County. Winn sought to recover from *568Taylor the sum of $3,522, the value of the annual rental, which sum had been paid to Taylor by one M. W. Hansell, as lessee of certain farm lands owned by Taylor at the time of the execution of the deed • and thereafter by him conveyed to Winn, as will hereafter more fully appear. On the twenty-first day - of August, 1917, Taylor, for the consideration of $10,000 paid to him as earnest-money by Iley Winn, executed a writing in which he agreed to “deed to Iley Winn certain lands therein described on the further payment of $40,000 on or before November 1, 1917, and $50,440 in cash or by note secured by first mortgage on said lands,” 'and to “furnish an abstract of title showing all of said lands clear of encumbrance.” On the seventeenth day of October thereafter, Taylor conveyed the said lands to Winn by warranty deed containing a covenant that the premises granted “are free from all encumbrances, except the right of way of the Oregon-Washington Railroad & Navigation Company. * * ” The lands at that time were subject to the outstanding lease made by Táylor to Hansell, executed on the twenty-first day of April, 1914, covering the period of time from that date until the first day of October, 1919, and were at all times herein mentioned in the lawful possession of Hansell. While the terms of the lease are obscure, it has been continuously construed by the landlord and tenant as requiring the annual rental to be paid in advance on October 1st of each year, and it has been so paid. At the time of' the execution and delivery of the deed conveying the premises to Winn, he knew that the lands were subject to the lease. Subsequent to the execution of the writing of August 21, 1917, and prior to the delivery of the deed, Taylor, on October 2d, collected the said sum of $3,522, annual rent, in advance, *569covering the term from October 1, 1917, to October 1, 1918. In the action at law between the parties each claimed to be entitled to said annual rent for the crop season of 1918, paid to Taylor as aforesaid.
Plaintiff, in effect pleaded, among other things, the defendant Taylor’s ownership of certain lands; that the defendant executed a written lease to M. W. Hansell, whereby said lands were demised for a term of 5% years from April 21, 1914, to October 1, 1919; the lessee’s entry and continuous possession of said lands under the terms of said written instrument; that on August 2, 1917, plaintiff and defendant entered into a written contract, whereby plaintiff agreed to purchase, and defendant agreed to sell, said lands according to the terms therein expressed; that plaintiff paid defendant $10,000 upon the contract of purchase ; that it was further made a part of the contract that the defendant should execute a warranty deed of conveyance to said property to the plaintiff as soon as was convenient, and the plaintiff should make the remaining agreed payments; that under the terms of the agreement plaintiff was to be deemed owner of said lands from August 21, 1917; that the defendant did execute and deliver to plaintiff a warranty deed to said property (October 17, 1917); that the lessee paid defendant $3,522 on October 2, 1917, as advance rent.
The defendant answered the complaint ■ and admitted the execution of the writing bearing date August 21, 1917, whereby he agreed to sell to plaintiff the real property described in plaintiff’s complaint, but alleged that—
“It was specifically understood and agreed prior thereto and at said time, and as a part of the same transaction, though not so stated in said writing, that the defendant would be entitled to collect the lease *570money coming due and payable on account of said real property from said M. W. Hansell on the first day of October, 1917, and he did collect it.”
He also alleged that—
“Thereafter, on the seventeenth day of October, when the plaintiff paid another portion of the purchase' price and secured the balance of it, thereby completing the purchase of the said real property, defendant executed and delivered to the plaintiff a warranty deed to it; but, before doing so, it was expressly and specifically understood and agreed by and between plaintiff and defendant that the lease money which was due and payable on the first day of October, 1917, should belong to- the defendant.”
The defendant attached the writing made by him on August 21, 1917, and made the same a part of his answer.
Prom the answer, the evidence, and perhaps from the complaint itself, it appears that the writing mentioned in the complaint contained .but a portion of the agreement.
The tenant Hansell, for the crop season of 1919, attorned to the plaintiff.
From a judgment of the court upon the verdict of the jury in favor of plaintiff in the sum of $3,522, the defendant appeals to this court.
Former Opinion Sustained on Rehearing.
For the petition there was a brief over the name of Messrs. Peterson, Bishop & Ciarle, with oral arguments by Mr. Peterson and Mr. Ciarle.
For respondent there was a brief over the names of Mr. Homer I. Watts and Messrs. Raley, Raley é Steiwer, with oral arguments by Mr. Raley and Mr. Steiwer.
BROWN, J.In counsels’ brief in support of their petition for rehearing, it is asserted, in substance, that the court, at the former hearing, had ignored the theory upon which the case was tried in the lower court.
7, 8. It is well settled that the theory upon which the case was tried in the court below 'must be strictly adhered to on appeal: 2 R. C. L., p. 79, § 55. But how is the theory of a case ascertained? As taught in the same section of R. C. L.:
“In order to determine the theory of a case as presented to the trial court, the appellate court will look to the entire record and the briefs of counsel, and will construe the pleadings on the theory most apparent, most clearly outlined by the facts stated, and according to their general scope and tenor”: Knight & Jillson Co. v. Miller, 172 Ind. 27 (87 N. E. 823, 18 Ann. Cas. 1146); Oolitic Stone Co. v. Ridge (1908), 169 Ind. 639 (83 N. E. 246); Lake Erie etc. R. Co. v. McFall (1905), 165 Ind. 574 (76 N. E. 400); M. S. Huey Co. v. Johnston (1905), 164 Ind. 489 (73 N. E. 996); Seymour Water Co. v. City of Seymour (1904), 163 Ind 120 (70 N. E. 514).
9. Both the complaint and the answer allege the execution and the delivery to plaintiff by the defendant of a warranty deed conveying the lands described in the contract of August 21, 1917. The complaint shows that on October 17, 1917, the date of the execution and delivery of the warranty deed by Taylor to Winn, the lands thereby conveyed were encumbered by a lawful outstanding lease terminating October 1, 1919. The complaint further shows the amount of the damage, as measured by the rental value of the lands. The covenant of the deed warranting against encumbrances was broken at the instant it was made. The term “¿warranty deed” is well understood. As *572stated in Neff v. Rubin, 161 Wis. 514 (154 N. W. 978):
“The term ‘a warranty deed’ in a contract for the sale and conveyance of land has in the law the clear and definite meaning that the vendor will convey the title to the premises by deed containing the usual covenants generally inserted in a warranty deed, which includes the covenant that the land is free and clear from encumbrances: 1 Warvelle, Vendors (2 ed.), §§418, 419. The court at an early day held that a contract to convey by ‘a good and sufficient warranty deed’ entitled the vendee to a warranty deed of the land ‘free from all encumbrances’: Davidson v. Van Pelt, 15 Wis. 341. Other cases to the same effect dealing with such contracts and the effects of covenants to convey by deed are: Falkner v. Guild, 10 Wis. 563; Bateman v. Johnson, 10 Wis. 1; Davis v. Henderson, 17 Wis. 105; Curtis L. & L. Co. v. Interior L. Co., 137 Wis. 341, 347 (118 N. W. 853), and cases cited on p. 348; Kramer v. Carter, 136 Mass. 504.”
10. The defendant attacks the complaint as pleading conclusions of law and as being insufficient and controlled by the instrument in writing executed on August 21, 1917, referred to in the complaint and made a part of the answer. It is a general rule of law that when a plaintiff declares on a written contract, he cannot be allowed to recover on proof of a verbal contract, or on one partly oral: 13 C. J. 753. But in making an application of this rule it should be remembered that Section 97, Or. L., provides that—
“No variance between the allegation in a pleading and the proof shall be deemed material, unless it have actually misled the adverse party to his prejudice in maintaining his action or defense upon the merits.”
The record shows that both the defendant and the plaintiff relied only partially upon the contract in writing, and as a part of the same transaction a parol *573understanding was had in reference to the rent for the term from October 1, 1917, to October 1, 1918. The allegation of the complaint did not mislead the defendant. He made the writing a part of his answer and alleged a special contract in reference to the rent in defense to plaintiff’s cause. It is said by an eminent law-writer that—
“The utmost liberality is shown by the courts in conforming the averments of the pleading to the case ■as proved, if the ends of justice will be .subserved thereby”: Sec. 574, Pomeroy’s Code Eemedies (4 ed.).
Mr. Justice Bean, in the. case of Wehrung v. Portland Country Club, 61 Or. 48, 54 (120 Pac. 747, 749), said:
“It is within the discretion of the trial court to disregard a variance between an allegation and the proof, and nothing short of an abuse of such discretion can be assigned as error upon an appeal: Brown v. Moore, 3 Or. 435, 438. A variance between the allegation of a pleading and the proof is not material, unless the adverse party has been actually misled to his prejudice upon the merits; and the party claiming or alleging that he was so misled must prove to the satisfaction of the court in what respect he was misled: Dodd v. Denny, 6 Or. 156, 158; Hill v. Mellon, 3 Or. 542. In such case, in the absence of proof showing that the party has been so misled, it is the duty of the trial court to treat the alleged variance as immaterial: Moore v. Frazer, 15 Or. 635, 638 (16 Pac. 869). Where the party has not proved that he has been misled, the court may either direct the fact to be found according to the evidence, or may ordér an immediate amendment without costs: Section 98, L. O. L.; Stokes v. Brown, 20 Or. 530 (26 Pac. 561); Denn v. Peters, 36 Or. 486, 490 (59 Pac. 1109); Creecy v. Joy, 40 Or. 28, 31 (66 Pac. 295). In the case at bar, there is an absence of proof showing that the defendant, upon, the trial of the cause, was misled *574to its prejudice in making its defense. Therefore, on this appeal, there is nothing upon which to base a finding that the trial court abused its discretion in this regard.”
To the same effect is Nelson v. Dowgiallo, 73 Or. 342 (143 Pac. 924, 1199).
11. The- complaint in this case is not an example of perfect pleading, but is sufficient after a verdict. In holding this, we do not overlook the rule that, if the complaint is lacking in some material or essential allegation to establish a good cause, there can be no aider. As stated in Nye v. Bill Nye Milling Co., 42 Or. 560, 561 (71 Pac. 1043, 1044):
“This principle has been so often announced by this court that further elaboration is unnecessary: Weiner v. Lee Shing, 12 Or. 276 (7 Pac. 111); Booth v. Moody, 30 Or. 222 (46 Pac. 884); Foste v. Standard Ins. Co., 34 Or. 125 (54 Pac. 811); Wright v. Ramp, 41 Or. 285 (68 Pac. 731).”
12. Conclusions of law cannot be substituted for a statement of facts constituting the plaintiff’s cause of action: Nye v. Bill Nye Milling Co., 42 Or. 560 (71 Pac. 1043); Chamberlain v. Townsend, 72 Or. 207 (142 Pac. 782, 143 Pac. 924); Hochfeld v. Portland, 72 Or. 190, 194 (142 Pac. 824); Greenberg v. German-American Ins. Co., 83 Or. 662, 665 (160 Pac. 536, 163 Pac. 820); Hyde v. Kirkpatrick, 78 Or. 466, 473 (153 Pac. 41, 488). But, as stated in Oregon H. Builders v. Montgomery Inv. Co., 94 Or. 349, 356 (184 Pac. 487, 489):
“It is sometimes difficult to distinguish between conclusions of fact and conclusions of law, because it may be that a statement of fact cannot be made without including a conclusion, or it may be that a conclusion of law is such that, in the attending circumstances, it must be stated in the form of a statement of fact.”
*57513. In the instant case, rejecting statements of mere conclusions of law, we believe that the complaint is not defective by reason of omitting some material allegation, and therefore, as written by Justice Thayer in Weiner v. Lee Shing, 12 Or. 276 (7 Pac. 111):
“The verdict * * establishes every reasonable inference that can be drawn therefrom.”
In the case at bar, the plaintiff was entitled to recover from the defendant, unless it was understood and agreed between the parties, as alleged by way of defense in the answer, that the defendant was to have the advance rent payable October 1, 1917, for the crop season for the year 1918. Testimony was adduced by the defendant upon this issue and 'it was submitted to the jury. The jury found against the defendant’s contention. As the case stands, in the. writing executed by Taylor on the twenty-first day of August, 1917, wherein he agreed to convey the said premises to Winn, no reservation was made of the rent. On the other hand, he promised in that writing to convoy to Winn the said land by deed, and to furnish an abstract showing that the lands conveyed were free from all encumbrance. On October 17th following the execution of the writing, he made a deed to the lands conveyed, with the following covenants:
“And the said Moses Taylor, grantor above named, does covenant to and with the said Iley Winn, the above-named grantee, his heirs and assigns, that the above-granted premises are free from all encumbrances, except the right of way of the Oregon-Washington Eailroad & Navigation Company through the lands described in said sections sixteen (16) and seventeen (17) and that he will, and his heirs, executors and administrators shall warrant and forever *576defend the above granted premises, and every part and parcel thereof, against the lawful claims and demands of all persons whomsoever, save and except as to encumbrance above mentioned.”
As part payment for the lands, Winn executed his promissory note and secured the same by a mortgage upon the lands, which note bore interest at the rate of 6% per cent per annum upon the sum of $50,000 from August 21, 1917, the date of the said writing.
14. Any inconsistencies between the terms of a contract of purchase of real estate and the terms of the deed are governed by the latter, into which the former are merged, and Winn’s right to relief from the encumbrance depends upon the covenants for title which he received in his deed from Taylor: Rawle on Covenants for Title, § 320. To the same effect, see Howes v. Barker, 3 Johns. (N. Y.) 506 (3 Am. Dec. 526). In the case of Houghtaling v. Lewis, 10 Johns. (N. Y.) 297, it was held that—
“Articles of agreement for the conveyance of land are, in their nature, executory, and the acceptance of a deed, in pursuance thereof, is to be deemed, prima fade, an execution of the contract, and the agreement thereby becomes void, and of no further effect. Parties may, no doubt, enter into covenants collateral to the deed, or cases may be supposed when the deed would be deemed only a part execution of the contract, if the provisions in the two instruments clearly manifested such to have been the intention of the parties. But the prima facie presumption of law arising from the acceptance of a deed is that it is an execution of the whole contract,* and the rights and remedies of the parties, in relation to such contract, are to be determined by such deed, and the original agreement becomes null and void.”
The court cites Howes v. Barker, 3 Johns. (N. Y.) 506 (3 Am. Dec. 526), and observes that Chief Justice *577Kent in that case said he could not surmount the impediment' of the deed which the plaintiff had accepted from the defendant, and that he thought himself bound to look to that deed as the highest evidence of the agreement of the parties.
It is said in the case of Bull v. Willard, 9 Barb. (N. Y.) 641, that—
“Contracts for the sale of land are, in their nature, executory; and generally, the acceptance of a deed, in pursuance of a contract, is prima facie an execution thereof, and the rights and remedies of the parties are to be determined by the deed. * * ”
The court also holds that a covenant, in order to be deemed collateral and independent, so as not to be destroyed by the execution of the deed, must not look to, nor be connected with, the title, possession, quantity, or emblements of the land which is the subject of the contract. If it does so, the execution of the deed, in pursuance of the contract, will operate as an extinguishment of it.
In the case of Shontz v. Brown, 27 Pa. 123, 131, it is held:
“When a condition is performed it is thenceforth merged and gone. The presumption of law is that the acceptance of a deed in pursuance of articles is a satisfaction of all previous covenants, and where the conveyance contains none of the usual covenants the law supposes that the grantee agreed to take the title at his risk. * * The general rule is that a purchase is consummated by the conveyance; after which the parties have no recourse to each other except for imposition or fraud,- or upon the covenants in the deed”: Bailey v. Snyder, 13 Serg. & R. 160; Farmers’ etc. Bank v. Galbraith, 10 Barr. 490.
A well-known authority on real estate has written thus:
*578“When a deed is delivered and accepted as performance of a contract to convey, the contract is merged in the deed. Though the terms of the deed may vary from those contained in the contract, still the deed must be looked to alone to determine the rights of the parties. ‘No rule of law is better settled than that where a deed has been executed and accepted as performance of an executory contract to convey real estate, the contract is functus officio, and the rights of the parties rest thereafter solely on the deed’ 2 Devlin on Eeal Estate (3 ed.), § 850a, and authorities there cited.
In Coleman v. Hart, 25 Ind. 258, it is said that, “An oral agreement is merged in the covenants of a deed. ’ ’
15. From the evidence and the pleadings, it would seem that the plaintiff had a right of action by reason of a breach of the covenant against encumbrances.
In the case of Seitzinger v. Weaver, 1 Rawle (Pa.), 377, it is said:
“Now, every burden on the estate, or clog on the title, such as a term for years, * * is an encumbrance. This special covenant of seisin is broken by the existence of an encumbrance created by the vendor, the instant it is sealed and delivered”: Citing Funk v. Voneida, 11 Serg. & R. 109.
The Supreme Court of this state, speaking through Mr. Justice Burnett, in Friendly v. Ruff, 61 Or. 42, 46 (120 Pac. 745, 746), thus defines the term “encumbrance”:
“An encumbrance, within the terms of such a covenant, includes any right to or interest in the land to the diminution of its value, but consistent with the passage of the fee by the conveyance.”
“ ‘Encumbrance,’ when used in reference to real estate, includes every right to, or interest in, the land granted, to the diminution of the value of the land, *579but consistent with the passing of the fee by the owner thereof”: Bouvier’s Law Dictionary, and numerous authorities there cited.
This court has approved the following definition of the term “rent”:
“ ‘Rent,’ in the legal sense, is a compensation paid for the use of demised premises, and is treated as a profit arising out of lands and tenements corporeal”: Kaston v. Paxton, 46 Or. 310 (80 Pac. 209, 114 Am. St. Rep. 871).
To the effect that the unexpired lease to Hansell constituted a breach of the covenant of the deed protecting Winn against encumbrances, see Estep v. Bailey, 94 Or. 59, 64 (185 Pac. 227). Also, see list of cases in note, Musial v. Kudlik, 87 Conn. 164 (87 Atl. 551, Ann. Cas. 1914D, 1176).
16. Defendant asserts that plaintiff had full knowledge of the outstanding lease and knew that defendant had collected the rent in advance, and that his action in accepting the warranty deed and paying the full purchase price for the land constituted a full settlement and satisfaction of any disputed claim he may have had for rent for the year from October 1, 1917, to October 1, 1918. This contention of defendant is erroneous. The rule of law, as stated by Justice Brewer, is that—
“The very purpose of the covenant is protection against defects; and to hold that one can be protected only against unknown defects would be to rob the covenant of more than one half its value, besides destroying the force of its language. If, from the force of the covenant, it is desired to eliminate known defects, or to limit the covenant in any way, it is easy to say so. General in its language it reaches to ail defects within its terms, known or unknown”: Barlow v. Delaney (C. C.), 40 Fed. 97.
*580Mr. Justice Moore, in speaking for this court, in substance held that—
“The fact that an encumbrance not excepted from the operation of the covenant was known to the grantee is no defense to an action for breach of such covenant”: Corbett v. Wrenn, 25 Or. 305 (35 Pac. 658).
It is now held almost universally that when a grantor executes a warranty deed containing covenants, as in the case at bar, the covenantor covenants against known, as well as unknown, defects. This is so even though both parties may be in -possession of all the facts: Brown v. Taylor, 115 Tenn. 1 (88 S. W. 933, 112 Am. St. Rep. 811, and note, 4 L. R. A. (N. S.) 309 and note); Musial v. Kudlik, 87 Conn. 164 (87 Atl. 551, Ann. Cas. 1914D, 1176, and note). In the case of De Mars v. Koehler, 62 N. J. Law, 203 (41 Atl. 720, 72 Am. St. Rep. 642), the court says that — :
“Knowledge of the existence of an encumbrance not only did not" destroy its inherent character as an encumbrance, but might, and often did, lead to the purchaser’s requiring the grantor to protect him by covenant.”
This reversed a former New Jersey case that had often been cited to the contrary.
17. In the case at bar, the general rule of law is that, in the absence of any special circumstance, the measure of recovery is the rental value of the land from October 1, 1917, to October 1, 1918, the period of time for which Taylor collected the rent: Estep v. Bailey, 94 Or. 59, 66 (185 Pac. 227). See, also, Christie v. Ogle, 33 Ill. 295; Wragg v. Mead, 120 Iowa, 319 (94 N. W. 856); Brown v. Taylor, 115 Tenn. 1 (88 S. W. 933, 4 L. R. A. (N. S.) 309); Beutel v. American Mach. Co., 144 Ky. 57 (137 S. W. 799, 35 L. R. A. (N. S.) 779, and note). The fact that *581Hansell attorned to the plaintiff for the rent of the premises for the crop season of 1919 does not affect in the. least, or satisfy, the encumbrance that existed upon the place for the crop season of 1918: Musial v. Kudlik, 87 Conn. 164 (87 Atl. 551, Ann. Cas. 1914D, 1176).
“Damages under a covenant against encumbrances in a warranty deed are a just compensation for the injury actually suffered”: 7 R. C. L. 1180, § 103; Funk v. Voneida, 11 Serg. & R. (Pa.) 109 (14 Am. Dec. 617).
The actual injury was the rent for the crop season of 1918.
When an encumbrance cannot be removed, as in the present case, where the tenant Hansell held possession under a valid lease, the plaintiff may be “allowed the annual value, or interest on the purchase money, during the length of time his enjoyment is suspended, or what would be a fair rent for the land”: 2 Devlin on Real Estate (3 ed.), §920.
Former Opinion Sustained on Rehearing.