Walker v. MACKEY

Petition eor Rehearing

Before Brand*, Chief Justice, and Rossman, Lusk, Latourette**, Warner and Tooze, Justices.

Petition denied.

TOOZE, J.

Defendant Ena Fay Mackey petitions for a rehearing.

Defendant in her petition alleges that this court *212erred in its statement of the facts of the case and in reaching certain legal conclusions.

It is frankly conceded that in our opinion we did inadvertently misstate some of the facts and, therefore, welcome this opportunity to correct such error. Among other things, we said:

“It did not appear until the trial of the case that the defendant State Highway Commission was in truth an innocent purchaser for value, and was, therefore, entitled to a dismissal of the suit as to it. Nor until the trial did plaintiff discover the interest of the Highway Commission in the land. This development rendered it impossible to decree specific performance of the entire contract, because defendants had put it beyond their power to fully perform.” (Italics ours.)

Defendant maintains that we erred in stating that it did not appear until the trial that the defendant Highway Commission was in truth an innocent purchaser for value. As shall later appear, we did not err in making that assertion.

We did err in stating that it was not until the trial that plaintiff discovered the interest of the Highway Commission in the land. Correspondence between the parties in late 1948 shows that plaintiff then knew that defendants had conveyed a right of way to the Highway Commission, which included a part of his two-acre tract. This also appears by the allegations of plaintiff’s complaint.

In our opinion we also said:

“The last payment in the sum of $50, evidenced by a similar receipt, was made August 21, 1947, or one week following the conveyance to the Highway Commission.” (Italics added.)

The deed to the State Highway Commission was executed on August 14,1948, as shown by the pleadings *213and the evidence and as stated in our opinion. The receipt was issued August 21, 1947. Obviously the statement made by us is erroneous.

Defendant also asserts that we erred in stating that the conversation between E. John Mackey and plaintiff’s carpenter in the fall of 1948 was “the first objection either defendant ever made to plaintiff’s possession and use of the premises.” (Italics added.) Considering the evidence as a whole, we did not err in that statement. In support of her claim, defendant invites attention to a more or less isolated portion of plaintiff’s testimony on cross-examination. She overlooks other testimony of plaintiff, as well as some of her own testimony. Plaintiff testified positively that Mrs. Mac-key had never notified him to quit building and to get off the premises, nor claimed that his dwelling was not being erected on the land he purchased, until she delivered to him the letter of her attorney, dated November 22,1948, and quoted in our opinion.

It is true that before plaintiff commenced construction of his house in the late summer of 1948, there had been several discussions between the parties about the particular land that was being sold and purchased and about the inadvisibility of building the house until the survey promised by defendant had been made. In none of these discussions was objection made by defendant to the possession and use of the premises by plaintiff. The conversation related entirely to the exact boundary lines of the two-acre tract, which could be determined only by a survey. But long before that, plaintiff had taken possession and, without any objection by defendants, had erected a barn, constructed a fence for a corral, and had fenced the greater portion of the two acres claimed by him. Instead of objecting, defendant had actually furnished some of the material used *214in the boundary fence construction. Furthermore, plaintiff had made substantial payments upon the agreed purchase price.

The acts of plaintiff last above mentioned were, in and of themselves, sufficient to entitle him to specific performance of the oral contract. The erection of the dwelling house was not necessary to perfect plaintiff’s right to equitable relief. As we stated in our original opinion: “His right to specific performance of the contract was fixed and complete long before defendants Mackey sold a part of the same land to the Oregon State Highway Commission.”

The exact boundary lines of the two-acre tract became a matter of dispute between the parties, as noted in our opinion, and this dispute was not finally settled until the court made its findings.

Defendant never attempted to repudiate the contract until November 22, 1948, though prior to that time she had offered to return to plaintiff the money he had paid on the purchase price, if he would quit the premises and remove his improvements therefrom, which offer he had refused.

Defendant’s attempt to repudiate the contract, as evidenced by the letter of her attorney, dated November 22, 1948, led to a series of negotiations between the parties for an amicable adjustment of their differences. These negotiations extended over a long period of time, but finally proved fruitless. They consisted largely of correspondence. The last communication from plaintiff’s attorney to defendant is dated November 2, 1950, and in which the following appears:

“Bob Walker has been in again about his land deal with you, and he tells me that you have never gotten together on any settlement, and he is insisting now that the matter be closed.
*215“As you know from former letters, lie wants a deed from you for the property (the two aeres) which you agreed to sell to him and which he took possession of and improved.
“He is ready at any time and offers to pay you the balance agreed between you; but, of course, he wants a deed to the property.
“There is one condition which has come about and that is you have given a deed to the state highway commission for a road which takes off, as I understand, about 50 feet of the frontage of the two acres he was buying; and also, under your deed to the highway commission, no access to the highway is permitted to or from this property; and he expects this to be taken care of in some satisfactory way.
“The part in the highway is of more value than the property at the west end which gets into lower ground. So he is entitled to reduction in the price on that account and also to have some arrangement by which he can reach the road from his property.
“All of these things are matters which require adjustment, but Bob is ready to go ahead and fulfill his part of the agreement and asks that you do the same on your part.
“I am writing to the state highway commission in reference to the matter as well and know we will have something from it unless you get the matter fixed up with Bob in the meantime.”

On November 24, 1950, defendant’s attorney wrote to plaintiff, the first paragraph of that letter reading as follows:

“Ena Fay Mackey has instructed me to file a complaint in order to determine once and for all your arguments about purchasing from her a tract of land in the southeast quarter of the northeast quarter of Section 20, Township 2 South, Range 9 West, W. M., Tillamook County, Oregon.”

*216This suit was commenced by plaintiff on December 11,1950.

In our original opinion we did not discuss the pleadings in the case. As a prelude to the discussion to follow, a brief review of those pleadings seems necessary.

Plaintiff in his complaint alleged the making of the oral contract, his acts of part performance thereunder, his ability and willingness to fully perform on his part, and defendants’ refusal to perform. He also alleged the facts regarding defendants’ conveyance of a part of his two-acre tract to the Highway Commission and the use thereof by the Commission in the construction of the nonaccess highway. He charged that the Highway Commission had purchased from the defendants Mac-key with knowledge and notice of his rights in the land. He also alleged the necessity of an easement of way over defendants’ remaining lands for ingress to and egress from his property. He asserted that if he was denied access to the throughway, his damages would be not less than $250, recoverable from the defendants Mackey. He prayed for specific relief and for general equitable relief.

The sole defense of the defendants Mackey was that no contract had been entered into for the sale to plaintiff of the two acres. They affirmatively alleged that there had been some negotiations relating to such a sale, but claimed that before the negotiations had ripened into a contract, they had rescinded the whole transaction and tendered back to plaintiff the money he had paid them.

The defendant Highway Commission made a general appearance by answer. In brief, it affirmatively pleaded that it was a bona fide purchaser for value of all the land conveyed to it by the defendants Mackey, *217including that portion claimed by plaintiff. It alleged specifically that a search of the records had been made, and that it had no notice or knowledge, actual or constructive, of plaintiff’s interest in the land. It also asserted that the defendants Mackey had represented to it that they actually possessed said real property “and that no other person or persons whosoever had or claimed to have any right to the possession thereof; and that no other person or persons whosoever had or claimed to have any right, title or interest in or to said lands.”

By his replies, plaintiff put in issue the affirmative allegations contained in the separate answers of the defendants.

Under the issues as formed by the pleadings the court was required to determine who owned the land in dispute, and in that connection the question whether the Highway Commission was an innocent purchaser for value was material. Although plaintiff knew long before he commenced suit that the land had been deeded to the Commission, he did not know until the trial that the said defendant had in truth purchased without knowledge of his interest in the property. True, the Highway Commission made the claim that it had purchased without notice of plaintiff’s rights, but its mere claim did not establish the fact. Defendant seeks to make a point of the fact that the Commission offered no evidence on the trial to establish its good faith, but that is immaterial. The burden of proof was upon the plaintiff to establish his charges. After the evidence all had been presented and the court found that plaintiff had not sustained the burden of proof resting upon him, it properly dismissed the suit as to the Commission, thus denying plaintiff any relief from that defendant.

*218The evidence offered on the trial did present a real factual matter for decision respecting the innocence of the Commission. The testimony revealed that long before the negotiations between defendant and the Highway Commission for the sale and purchase of the land, plaintiff had taken possession of the two-acre tract and had made improvements thereon, as before noted. The improvements, consisting of the corral, boundary fence, and barn, were visible to anyone. However, there was nothing peculiar about these improvements that might indicate to anyone interested that they belonged to or were used by some person other than defendants. To all appearances, they constituted proper improvements for defendants’ own farm operations. Under these circumstances, these improvements would not necessarily constitute notice to the defendant Commission that someone other than defendants had an interest in the land, and particularly so if, as alleged by the Highway Commission in its answer, the defendants represented that they were the sole owners of all the land being conveyed, and that no one else was interested therein. As witnesses on their own behalf, defendants did not deny making these representations. Construction of the dwelling house by plaintiff did not commence until shortly before the deed was executed, and at the time of the conveyance such work of construction had not progressed to any great extent. Moreover, for a considerable period of time prior to and during the negotiations between defendant and the Highway Commission, plaintiff lived at Nehalem, in Tillamook county, approximately 30 miles away from the land in dispute, and he was not upon the premises except occasionally. It also appears from the record that the negotiations between defendant and the Highway Commission occurred in May, 1948, although the *219deed was not executed until August. At that time, of course, plaintiff was not upon the premises, nor was the dwelling house under construction.

There was no evidence tending to show that the Highway Commission observed any of the activities connected with the erection of the dwelling house on the land, nor of plaintiff’s presence thereon in conjunction with such construction. Obviously there were no recorded documents to indicate plaintiff’s interest in the property.

Plaintiff did not know of the negotiations between defendant and the Highway Commission and, of course, did not advise the Commission of his interest in the land prior to execution of the deed.

It was upon this record that the trial court found that the Highway Commission was an innocent purchaser for value. However, had the trial court found for plaintiff upon that issue, an entirely different situation would have presented itself.

Under the law as firmly established in this state, the vendee, under an executory contract of sale of land, is deemed to be the equitable owner of the property, and the vendor holds legal title to it in trust for the vendee as security for the unpaid balance. Grider v. Turnbow, 162 Or 662, 641, 94 P2d 285; Miner v. Zweifel, 118 Or 182, 245 P 729.

It is manifest, therefore, that if the Highway Commission, with knowledge, actual or constructive, of plaintiff’s rights in the land, dealt with the defendants Mackey as it did, such dealings would have had no effect, except as hereafter stated, upon plaintiff’s ownership of the property.

If, with such knowledge of plaintiff’s interest in the land, the Highway Commission took possession *220thereof for highway purposes, without paying plaintiff compensation therefor, plaintiff would have a right of action against the state of Oregon, for the damages sustained. Tomasek v. State Highway Com., 196 Or 120, 248 P2d 703. Regardless of who owned the land, the Highway Commission had the lawful right to take the property for highway purposes without first tendering compensation. Art. 1, § 18, Const, of Oregon. As to the right of the Highway Commission to take and use the land for a public use and to permanently deprive the owner of possession thereof, the question of its good faith in purchasing from defendants Mackey was wholly immaterial. But as to plaintiff’s right to be compensated by the Commission, it was very material. However, in no event could the owner compel a return of the property, his sole remedy being that of damages.

Furthermore, the highway relocated and reconstructed upon a portion of plaintiff’s land had been designated by the Highway Commission as a throughway, or nonaccess road. Plaintiff’s tract constituted farm property. Under the law, had the Commission been compelled to deal with plaintiff, it was mandatory that it provide plaintiff some access to the highway as a condition of its right to take a part of his land for highway purposes. Chapter 226, § 14, Oregon Laws 1947, provides:

“Whenever a throughway is located, relocated, constructed or reconstructed through or over farm, or agricultural property and thereby all reasonable ingress and egress have been destroyed, the commission shall provide access from such abutting property or properties to the throughway by a service road or by direct access, unless by agreement with the owner or owners of such abutting properties access to said throughway has been *221waived by the property owner or had been acquired by the state, either by agreement or by the exercise of the power of eminent domain.”

The right of plaintiff as an owner to compensation for the land taken is a constitutional right. Tomasek v. State Highway Com., supra. The right of access to the throughway has been given by statute, if it does not already exist under the constitution. However, we are not called upon to decide the constitutional question in this case and indicate no opinion thereon. These rights of plaintiff and the corresponding duties of the Highway Commission do not arise out of tort. They are in their very nature contractual.

Section 8-702, O.C.L.A., as amended by ch 3, Oregon Laws 1941, in part provides:

“ A suit or action may be maintained against '* # * the state of Oregon by and through and in the name of its state highway commission upon a contract * * * made by such commission * * * and within the scope of its authority, and not otherwise # * #

"When the Highway Commission takes land for a public use, in the absence of an express agreement on its part to pay compensation therefor, the law will imply such a promise. Also, when it takes farm land for the purpose of constructing a nonaccess highway, in’ the absence of an express contract providing access to such highway, the law will, by reason of the statute, if not by the constitution, imply such a contract.

Such implied contracts may be enforced against the Highway Commission pursuant to the provisions of § 8-702, OCLA, as amended, supra, as that statute applies to all contracts, whether express or implied. As to the enforcement of such contracts, the state has expressly waived its immunity to suit.

*222However, the enforcement of plaintiff’s- rights against the Highway Commission was dependent upon his ability to prove it was not an innocent purchaser for value. Had he prevailed upon that issue, the court could have ordered the Commission to provide bim access to the throughway and, as a further incident to its. equitable jurisdiction, awarded him compensation for the value of land taken.

In her brief, after directing attention to portions of the record wherein appears evidence establishing the fact that we erred in stating that plaintiff did not discover the Highway Commission’s interest in the land until trial, defendant states:

“The above references to this record most conclusively shows [sic] the error of this court upon this crucial and hey holding.” (Italics ourg.)

Her principal contention is based upon the theory that the erroneous finding of fact made by- this court was necessary to its final decision. Defendant bases her argument upon a wrong premise. ' ’

As a matter of law, defendant contends that because plaintiff possessed such knowledge of the facts as heretofore outlined before he commenced his suit, he had no cause of suit, and the court was without jurisdiction to award a money judgment after denying specific performance. She.cites as authority 1 Pomeroy, Equity Jurisprudence 5th ed, 436, § 237d; 438,- § 237e; 442, § 237f.

Section 237d states the following rule:

“The doctrine that equity, having once become possessed of a cause, will retain it for the purpose of administering full and complete relief,., does not apply when the facts relied on to sustain the equity jurisdiction fail of establishment.”

*223We have no quarrel with that rule. It is but another way of saying that not only is it necessary “to allege a cause of suit in equity, but also to establish it by proof on the trial, before an equity court is permitted to award relief otherwise cognizable only at law”, as we stated in our opinion.

Section 237e contains this statement:

“Where the aggrieved party shows that he is entitled to equitable relief, but the granting thereof appears to be impossible or impracticable, the court may proceed with the case, it seems, determine disputed issues, and adjust the rights and obligations of the parties, awarding damages in lieu of the desired equitable remedy.”

This is substantially what we said in our opinion. Defendant seems to place her principal reliance upon what is said in § 237f, because she quotes all but the last paragraph thereof as follows:

“In suits for a specific performance the following rules have been established by American decisions: If through a failure of the vendor’s title, or any other cause, a specific performance is really impossible, and the vendee is aware of the true condition of affairs before and at the time he brings his suit, the court, being of necessity obliged to refuse the remedy of specific performance, will not, in general, retain the suit and award compensatory damages, because, as has been said, the court never acquired a jurisdiction over the cause for any purpose. (Italics ours.)
“A second rule is, that if the remedy of specific performance is possible at the commencement of a suit by the vendee, and while the action is pending the vendor renders this remedy impracticable by conveying the subject-matter to a bona fide purchaser for value, the court will not compel the plaintiff to bring a second action at law, but, having ac*224quired jurisdiction, will do full justice by decreeing a recovery of damages.
“The third rule is as follows: If a specific performance was originally possible, but before the commencement of the suit the vendor makes it impossible by a conveyance to a third person; or if the disability existed at the very time of entering into the contract on account of a defect in the vendor’s title, or other similar reason, — in either of these eases, if the vendee brings his suit in good faith, without a knowledge of the existing disability, supposing, and having reason to suppose, himself entitled to the equitable remedy of a specific performance, and the impossibility is first disclosed by the defendant’s answer or in the course of the hearing, then, although the court cannot grant a specific performance, it will retain the cause, assess the plaintiff’s damages, and decree a pecuniary judgment in place of the purely equitable relief originally demanded. This rule is settled by an overwhelming preponderance of American authorities.” (Second and third italics ours.)

There is nothing in our original opinion that conflicts with these statements by Mr. Pomeroy. It will be noted as to the first rule announced that Mr. Pomeroy speaks of a situation where “a specific performance is really impossible” and the facts are known to the vendee before suit is commenced. It also will be observed that in spealdng of the third rule Mr. Pomeroy comments on a situation where, “before the commencement of the suit” the vendor “makes it impossible” to perform by a conveyance to a third person. Neither of these rules is applicable to the facts in this case. Here specific performance was not impossible. The second rule stated comes nearest to the situation prevailing in the instant litigation, though it is not exactly applicable to our factual situation. (Italics ours.)

*225Defendant did not quote the last paragraph of § 237f, which states a further rule as follows:

“Another rule has been suggested, as follows: ‘Even though the court should deny a specific performance of the contract in the exercise of that judicial discretion which it has in all cases asking that particular relief, yet, if the facts be such that the plaintiff might fairly and reasonably have expected the court to grant the equitable relief of specific performance, there would be such a show of equitable cognizance and doubtful remedy and probable cause as would save the plaintiff from the penalty of a dismissal of the bill for want of jurisdiction because of a plain, adequate and complete remedy at law.’ ”

Also see Jones v. Gainer, 157 Ala 218, 47 So 142, 131 Am St Rep 52; Shipley v. Fink, 102 Md 219, 62 A 360, 2 LR ANS 1002; Goddard v. American Queen, 27 Misc 482, 59 NYS 46; McAllister v. Harman, 101 Va 17, 42 SE 920.

Defendant also invites our attention to 4 Pomeroy, Equity Jurisprudence 5th ed, 1058, § 1410, which reads as follows:

“When the impossibility of a specific performance is disclosed at the hearing, and the suit was brought by the plaintiff in ignorance of such fact, the court will award the remedy of damages. If the vendor has disabled himself from performance after making the contract, and if the disability existed at the time of making the contract from a defect in his title, a court of equity will, in either of these cases, award damages to the vendee-plaintiff, provided he commenced his suit in good faith without any knowledge of the disability; but will not, in general, grant damages if the plaintiff was aware of the disablility at the time of bringing his suit.” (Italics ours.)

*226Here Mr. Pomeroy again speaks of ‘ ‘impossibility”. We agree that if a vendor, before snit is brought, renders it impossible to perform, and plaintiff brings his snit with knowledge of snch disability, equity will not award damages in lieu of specific performance.

But, as we point out in our opinion, the conveyance to the Highway Commission simply prevented performance by defendants Mackey of the entire contract. At the time the suit was commenced, as well as upon the completion of the trial, a substantial performance was possible. A right to specific performance had not only been alleged, but it also had been established by the proof. That is the test of the jurisdiction of an equity court to award a money judgment. The court could have ordered defendants to perform so far as they were able, and awarded plaintiff an abatement in the purchase price. Apparently that would have met with plaintiff’s approval.

In the final letter written by plaintiff’s attorney before suit was commenced is the following significant statement:

“The part in the highway is of more value than the property at the west end which gets into lower ground. So he is entitled to reduction in the price on that account and also to have some arrangements made by which he can reach the road from his property.”

In effect, this was an offer to accept partial performance with an abatement in the purchase price and a way of ingress to and egress from plaintiff’s property. Upon the trial plaintiff was not directly asked anything with respect to partial performance under the conditions stated, but the foregoing letter was introduced into evidence as one of his exhibits. Plaintiff offered no testimony contradictory thereto. Defend*227ants did not offer partial performance. On the contrary, they denied the existence of the contract of sale and purchase in its entirety. That created the principal issue in the case, and upon which plaintiff prevailed.

Plaintiff’s complaint shows that he did not seek a reconveyance from the Highway Commission; neither did he ask for a money judgment other than damages from defendants Mackey in the event he was prohibited access to the throughway. His complaint alleged all the material facts. Heading it as a whole, it is clear that plaintiff sought such performance at the hands of defendants Mackey as they were able to perform.

Defendant in her petition for rehearing contends that plaintiff’s complaint fails to state facts sufficient to state a cause of suit for specific performance. After calling attention to the allegations regarding defendants’ sale to the Highway Commission and the construction of the highway, defendant asserts:

“Under these allegations, respondent was not entitled to specific performance, without an allegation to the effect that plaintiff would accept partial performance.”

In developing this theory, defendant goes on to say:

“The issue, made in the pleadings, that State Highway Commission was a purchaser with notice of respondent’s rights was wholly immaterial. The complaint affirmatively alleged facts which required a denial of specific performance against Highway Commission. * * *.
“When respondent did not choose to take less than the whole and demanded the whole of his tract, respondent knew or should have known, that no equitable relief against the Highway Commission could be obtained and respondent’s complaint and evidence were both insufficient.” (Italics ours.)

*228Defendant proceeds upon an erroneous construction of the pleadings. Plaintiff did not seek specific performance at the hands of the Highway Commission. There is not a word in the complaint that supports such a theory. Specific performance was asked only from the defendants Mackey.

Although plaintiff did not in so many words allege that he would accept partial performance from defendants Mackey, nevertheless, considering the allegations of his complaint as a whole, they had that effect. His right to specific performance as against defendants Mackey was in no way dependent upon establishing his case against the Highway Commission. We are of the opinion that the complaint stated facts sufficient to have warranted a decree against the defendants Mackey for partial performance, and also that proof was adequate.

Of course, when plaintiff failed to establish his charges against the Highway Commission, the court was without power to enter any decree against that defendant, such, for example, as ordering it to provide plaintiff with access to the throughway. Defendants Mackey could not provide such access. Under all the facts and circumstances of this case, we cannot say that partial performance would have been practicable. It follows, therefore, that in lieu thereof, the award of a money judgment was just and proper.

Defendant states that the conclusions and decree of the trial court were based upon a theory different from that adopted by this court. This is immaterial. The important thing is that although the court’s reasoning may have been wrong, its conclusions were correct.

Though the question is not raised by defendant’s petition for rehearing, yet we wish to take this oppor*229trinity of noticing one other statement in onr opinion. In speaking of partial performance, we said: “But plaintiff could not he compelled to accept partial performance.” As applied to the facts in this case, that statement is dictum. It might he misunderstood and hence should he totally disregarded. That question is not before us, and we do not wish to he understood as expressing any opinion thereon.

The petition for rehearing is denied.