Loud v. Pomona Land Water Company/Opinion of the Court

Many of the special matters set up by the defendant below were clearly irrelevant and unavailable as defenses to the suit. Thus, the various matters of inducement for entering into contracts, and the alleged representations made by agents of the plaintiff prior to their execution, and the purpose of the defendant in making the purchases with a view to the resale of the lands at a profit, together with his being a stranger in California, unacquainted with the laws of that state, the business methods in common use, or those used by the plaintiff, and his hesitancy about entering into the contracts, his want of knowledge as to the extent of the risk and liability he would incur thereby, and his reliance upon representations that he would not under such contracts, by the laws of the state, incur any liability beyond the amounts he should pay and the loss of the lands, were matters which, if true, could constitute no answer to the suit upon the sealed contracts. The errors assigned to the action of the court in excluding testimony relating to these matters are not well taken. The deeds to Charles W. Brown and to other parties, antedating the contracts in suit, and having no connection with the lands covered thereby, offered for the purpose of showing what constituted water rights and water stocks; the representations of the plaintiff's agent as to title to the land and stock, made before the execution of the contracts; the defendant's lack of knowledge of the by-laws of the irrigation companies; the abandonment of the lands since 1888; the transcript of the patent of the United States of January 20, 1875, to Henry Dalton and others of the San Jose ranch, without an official seal attached, and wanting a proper certificate from the presiding judge of the court,-were incompetent to control the terms of the written contracts, or to show any defect in plaintiff's title.

The other matters set up and relied upon, so far as the same were material or available able as defenses to the suit,-such as fraud in obtaining the contracts from defendant, want of title in the plaintiff to the lands and stock in the irrigation companies representing water rights,-were not supported by proof. These irrelevant and unestablished matters of defense need not be further discussed.

The defendant presented 27 requests to charge, the legal questions arising under which are embodied in the general proposition, covered by the last special ground of defense, that the plaintiff did not, when the last installment of the purchase money matured, nor at any time, convey or tender a conveyance of the land and stock described in the contracts in suit, respectively, or in either or any of them, to the defendant. This presents the real controverted question in the case, and its determination turns upon the point whether the covenants in the contracts are dependent or independent; that is to say, whether the covenant upon the part of the defendant below to pay the stipulated price for the lands purchased, or agreed to be purchased, is a condition precedent to the performance by the plaintiff of his covenant to convey such lands.

The contention of the plaintiff in error is that the covenants are dependent and concurrent, and that he is not bound to perform his agreement to pay the purchase price without a tender of performance on the part of the land company. On the contrary, the defendant in error insists, as held by the court below, that the covenants were independent, and the plaintiff in error is bound to pay the stipulated price as a condition precedent to its obligation to convey or tender any conveyance of the lands described.

If the acts to be performed by the land company and the purchaser, respectively, are dependent and concurrent, neither party would be entitled to an action against the other without the averment of performance, or the tender of performance, on his part. If, however, the payment of the purchase price for the lands is a condition precedent to the land company's covenant to convey, then it is entitled to enforce payment without conveyance or tender of conveyance, and the allegation of its readiness and willingness to convey, upon payment of the purchase money, was sufficient.

The question whether covenants are dependent or independent must be determined in each case upon the proper construction to be placed on the language employed by the parties to express their agreement. If the language is clear and unambiguous, it must be taken according to its plan meaning, as expressive of the intention of the parties, and, under settled principles of judicial decision, should not be controlled by the supposed inconvenience or hardship that may follow such construction. If parties think proper, they may agree that the right of one to maintain an action against another shall be conditional or dependent upon the plaintiff's performance of covenants entered into on his part. On the other hand, they may agree that the performance by one shall be a condition precedent to the performance by the other. The question in each case is, which intent is desclosed by the language employed in the contract?

In this case there is no ambiguity in the language of the contracts. The covenant and agreement of the land company is that, 'after the making of the payment and full performance of the covenants hereinafter to be made and performed by the party of the second part [Loud], the part of the first part [the land company] will, in consideration thereof, convey by deed of grant, bargain, and sale, to the party of the second part, his heirs or assigns,' the described lands, together with the designated shares in the irrigation companies. A subsequent clause of the contract provides that 'this instrument is not, and shall not be construed as, a conveyance, equitable or otherwise; and until the delivery of the final deed of conveyance, or tender of all payments precedent thereto, the party of the second part, his heirs or assigns, shall have no title, equitable or otherwise, to said premises;' and it is further provided that time is of the essence of the contract.

If these terms and provisions of the contracts are to be understood in their plain and obvious meaning, they clearly express the intention of the parties to be that the purchaser shall first pay the purchase price of the lands contracted for before he is entitled to demand a conveyance therefor. It is also clear that the purchaser (the defendant below) could not have legally demanded from the land company a deed or conveyance for the lands until after the purchase money had been fully paid. The payment or tender of payment of the purchase price for the land was a condition precedent to the right to the conveyance. The authorities, both in England and in this country, fully sustain this construction of the contract. A brief referconstruction of the contract. A brief reference will be made to some of the principal cases on the subject.

In the learned note of Serjeant Williams to the early case of Pordage v. Cole, 1 Saund. 320, it is said that 'if a day be appointed for payment of money, or port of it, or for doing any other act, and the day is to happen, or may happen, before the thing which is the consideration of the money, or other act, is to be performed, an action may be brought for the money or for not doing such other act before performance; for it appears that the party relied upon his remedy, and did not intend to make performance a condition precedent; and so it is where no time is fixed for performance of that which is the consideration of the money or other act.'

In Porter v. Shephard, 6 Term R. 665, involving the right of a lessee to terminate the lease, it was held that the words 'from and after payment of rent and performance of covenants' constituted a condition precedent.

In the subsequent case of Grey v. Friar, 4 H. L. Cas. 565, where the opinion of the judges was asked by the house of lords as to whether a proviso constituted a condition precedent, the case of Porter v. Shephard was followed, and the proviso held to be a condition precedent.

In Goldsborough v. Orr, 8 Wheat. 217, it is said that, where the acts are stipulated to be done at different times, the covenants are to be construed as independent of each other.

So, in Goodwin v. Lynn, 4 Wash. C. C. 714, Fed. Cas. No. 5,553, the rele was laid down that, to ascertain whether covenants are dependent or independent, the intention of the parties is to be sought for rather in the order of time in which the acts are to be done than from the structure of the instruments.

In Construction Co. v. Seymour, 91 U.S. 646, 650, it was said by Mr. Justice Miller, speaking for the court, that, 'where a specified thing is to be done by one party as the consideration of the thing to be done by the other, it is undeniably the general rule that the covenants are mutual, and are dependent, if they are to be performed at the same time; and if, by the terms or the nature of the contract, one is first to be performed as the condition of the obligation of the other, that which is first to be performed must be done or tendered before that party can sustain a suit against the other. There is no doubt that in this class of contracts, if a day is fixed for performance, the party whose duty it is to perform or tender performance first must do it on that day, or show his readiness and willingness to do it, or he cannot recover in an action at law for nonperformance by the other party.'

In many cases, both in England and in the United States, the rule of construction is adopted that an agreement to pay by installments or at different times would make the covenants independent, since such an agreement manifests a willingness to rely on the covenants of the other contracting party for title or performance as the consideration for such payments; also, where the acts stipulated to be done are to be done at different times, the covenants are generally construed to be independent of each other.

The land company's contention as to the proper construction of the contracts is supported by the following authorities, among others that might be cited: Davis v. Heady, 7 Blackf. 261; Gale v. Best, 20 Wis. 44; Sayre v. Craig, 4 Ark. 10; Mayers v. Rogers, 5 Ark. 417; Hill v. Fisher, 34 Me. 143; Leftwich v. Coleman, 4 How. (Miss.) 167.

The cases of Bank of Columbia v. Hagner, 1 Pet. 455, and Washington v. Ogden, 1 Black, 450, are not in conflict with the foregoing decisions and the propositions they announce. The stipulations of the contract in the former case were not similar to those in the case under consideration, while in Washington v. Ogden the agreement was expressly made dependent on the surrender and cancellation of a previous contract, made by the plaintiff, for the sale of the same lands to a third party, without which surrender the vendor could not give a good title.

Neither do the cases of Hill v. Grigsby, 35 Cal. 658, and Bohall v. Diller, 41 Cal. 532, cited on behalf of the plaintiff in error, control the present case. In Hill v. Grigsby the instrument provided that the plaintiff should convey 'as soon as' the purchase money was paid. In Bohall v. Diller the terms of the contract were that the plaintiff, 'upon payment of the purchase money, was to convey.' These stipulations were properly held to be dependent covenants, and that neither party could sue without performing, or an offer to perform, on its part. But in the case at bar the terms of the contract contain no stipulation that the covenants of the repective parties are to be performed at the same time or concurrently. On the contrary, the clearly expressed intention was that the payment of the purchase price of the lands should precede the performance of the land company's covenant to convey the lands and water stocks. The consideration to be paid covered both the lands and the stocks, and its payment was a condition precedent to a transfer of either or both. The provision that the stock was to be delivered by the land company and accepted by the purchaser (subject to the by-laws of the irrigation companies), 'when payment in full is made for the above-described land,' in no way changes the proper construction of the contracts, or establishes that the stock was to be transferred concurrently with the payment for the lands. The expression 'when payment in full is made for the above-described land' confirms the construction that the payment was a condition precedent to the conveyance of either stock or land, or both. The purchaser had no right to a transfer of the stock before he became entitled to a conveyance of the land.

We cannot accede to the contention of the plaintiff in error that the contract should be so construed as to make payment of the first installment of purchase money a condition precedent to the covenant to convey, but that the last installment of purchase money should be treated as dependent or concurrent with the covenant to convey. The covenants are to be interpreted as of the date of the execution of the contract, and as applying to each and all the installments of purchase money alike. Covenants like those in the case under consideration are not of a shifting character, independent at one time and dependent at another, or independent as to one or more installments of purchase money, and dependent in respect to others, unless there is a clearly-expressed intention on the part of the contracting parties that such should be the case. No such intention is either expressed or implied in the language of the contracts in suit. The payment of all the installments of purchase money is a condition precedent to the performance of the land company's covenant to convey.

In respect to the nine applications for purchase declared in counts 41 to 49, inclusive, of the declaration, while the terms are not so clearly expressed as in the 20 contracts already considered, it is fairly implied that the installments of purchase money were to be paid before the land company was under any obligation to convey.

The forty-ninth count, based upon the application to purchase lot 11, does not stand upon any different principle from the rest. It is true that the purchaser did not pay the first installment in full, but the land company had the right to accept the partial payment, and treat the contract as a subsisting one; and it was so treated by Loud, who took possession of the lot, and exercised acts of ownership over it up to 1888 at least. Under these circumstances, he is not in a position to claim that the contract was terminated because of his own failure to pay the first installment in full.

It is earnestly urged on behalf of the plaintiff in error that the contracts declared upon required the land company to deliver stock in the irrigation companies which should represent and convey title to water or water rights to the extent of one inch of water under four-inch pressure, measured from center of aperture, for each 100 shares of stock; in other words, that the purchaser's contracts entitled him to water rights, as distinguished from stock in the irrigation companies, by means of which water could be procured in the quantity designated. This position cannot be sustained, for the contracts, by their express terms, stipulated for the transfer of stock in the designated irrigation companies, which stock was to be delivered and accepted subject to the by-laws of such companies. The statements that this stock represented so many inches of water, under a certain pressure, were words of description as to the quantity of water which the irrigation company would undertake to furnish to the owner of the designated shares of stock.

It is urged that the stock which the land company had transferred to Loud, and produced for his acceptance at the trial, was not shown to have been fully paid up. This objection is not well taken. It appears by the testimony of the secretary of the land company that the land company delivered water until February, 1887,-before the organization of the irrigation companies. It is further shown that the land company had numerous artesian wells, pipe lines, fiumes, and ditches from which water supplies were furnished for irrigating purposes; and it further appears that these wells, water facilities, pipe lines, etc., were transferred by the land company to the several irrigation companies, which, in consideration thereof, delivered fully paid up stock to the land company, or to a trustee for its benefit. Certificates of this stock were, under proper directions of the officers of the land company, made out in the name of Loud, and produced and tendered at the trial. There is no evidence showing that the consideration given by the land company for the shares of stock in the irrigation companies was in any was inadequate, so as to impair its right and title thereto as fully paid up stock.

It is further said on behalf of the plaintiff in error that the stock proposed to be transferred to him gave no special rights or privileges, and constituted no easement to the lands purchased. This is, however, a mistake. In the articles of association of each of the irrigation companies, which were put in evidence, it is declared 'that the purpose for which this corporation is formed is to acquire water, water rights, flumes, ditches, aqueducts, reservoirs, and other property that may be necessary or convenient for the supplying of water to such person or persons or their assigns in the counties of Los Angeles and San Bernardino, state of California, to whom the Pomona Land and Water Company has sold water rights, or to whom it may hereafter sell water rights, or to whom it may transfer water stock of this corporation, but to no other person or persons whomsoever.'

In addition to this provision in the charters of the irrigation companies, it is provided by section 552, Deering's Ann. St. (Civ. Code Cal.), relating to the right to water, to irrigate lands sold by water or irrigating companies, that, 'whenever any corporation organized under the laws of this state furnished water to irrigate lands which said corporation has sold, the right to the flow and use of said water is and shall remain a perpetual easement to the land so sold, at such rates and terms as may be established by said corporation in pursuance of law.'

Those provisions are recognized and sustained by the courts of California in McFadden v. Board, 74 Cal. 571, 16 Pac. 397, and Applegarth v. McQuiddy, 77 Cal. 408, 19 Pac. 692.

It is shown that the defendant in error had the requisite amount of stock in the irrigation companies to perform its contracts with the plaintiff in error, and the land company offered to prove, as a matter of fact, that the stipulated quantity of water was attached to the lands by the stock in the irrigation companies, but this offer was withdrawn on the objection of the defendant below that it was immaterial. The proper construction of the contracts was that the defendant in error was to deliver stock in the designated irrigation companies, which would attach to the land and entitle the purchaser to the quantity of water represented by the stock, and the stock which the land company thus held and proposed to transfer was clearly within the terms of the contract.

There are other points of minor importance presented on behalf of the plaintiff in error, but the controlling question in the case turns upon the character of the covenants contained in the contracts; and, in the view we have taken of that matter, the defendant in error had the right to enforce the payment of the purchase money for the lands agreed to be purchased, without first having conveyed, or tendered a conveyance, of the lands purchased. This question of law, depending upon the proper construction of the contracts, was not affected by any evidence either introduced or offered.

Our conclusion is that there is no error in the judgment of the court below, and it is accordingly affirmed.