Shively v. Semi-Tropic Land & Water Co.

California Supreme Court Aug 15, 1893 No. No. 19141Published

Before: Garoutte

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Holding. When a vendor rescinds a land sale contract due to the vendee's default and subsequently sells the property to third parties, the vendor is liable to the vendee for the return of purchase money paid, less any actual damages sustained by the vendor. A complaint's failure to allege sufficient facts to establish a rescission may be cured by admissions contained within the defendant's answer.

Issues

Whether a vendor's sale of land to third parties constitutes a rescission of a prior contract with a defaulting vendee.
Whether a defective complaint failing to allege sufficient facts for rescission can be cured by admissions in the defendant's answer.
Whether a vendee in default may recover purchase money paid after the vendor has rescinded the contract.

Disposition. affirmed

Quotations verified verbatim against the opinion

“That a defective complaint may be cured by admissions of the answer is well settled.”

Synopsis

Vendor and Purchaser—Rescission of Contract of Sale—Recovery Back of Purchase-money Paid — Forfeiture Clause. —When a contract of sale and purchase of land is abandoned or rescinded by the parties, the purchaser, though in default, may recover back installments paid upon the purchase-money, less the actual damage to the vendor occasioned by his breach of contract, notwithstanding a forfeiture clause in the contract rescinded.

Id. —Action by Assignee of Purchaser—Honey Had and Received—Contract Prohibiting Assignment. — An action by the assignee of the rights of a purchaser of land to recover back from the vendor, upon an alleged rescission of the contract of purchase, the installments paid on the purchase price of the land, is an action for money had and received, and not an action arising under the contract; and the assignment by the vendee of the cause of action is no violation of the provisions of the contract prohibiting its assignment.

Id. — Sales of Land by Vendor to Third Parties—Rescission—Insufficient Complaint—Answer Supplying Defect.—A conveyance to third parties by a vendor of land contracted to be sold to a purchaser does not of itself constitute a rescission or abandonment of the contract by the vendor, or a breach of his contract; and a complaint in an action to recover back purchase-money paid, alleging a rescission of the contract merely by reason of sales by the vendor to third parties, who took possession as owners thereof, and made large and lasting improvements thereon, does not state a cause of action; but the defect in the complaint is supplied where the answer avers that the defendant treated the contract as rescinded and sold the land to other parties.

Id.—Pleading—Defects in Complaint Cured by Answer.—When a complaint fails to set forth material facts so that no cause of action is stated, but the answer avers such facts, the omission in the complaint becomes immaterial, and the defect therein is cured by the answer.

Garoutte, J. On the tenth day of October, 1887, Lewis Shively purchased a tract of land from the defendant under a written contract for the sum of $4,004; $1,334.66 was paid in cash, the balance was to be paid in three installments, the last payment being due on the 10th of October, 1889, and the deferred payments, if not paid when due, were to bear interest at the rate of twelve per cent per annum until paid. The first payment was the only one made by Shively, and nothing further [260]was done by either party to the contract until the defendant on the eighth day of April, 1890, and after all the payments had been due, wrote a letter to Shively notifying him to pay up, or return the contract, or the defendant would foreclose. Subsequently, the balance of the money not being paid, defendant sold the land to other parties. Prior to the bringing of this suit Lewis Shively assigned to the plaintiff all his right, title, and interest in the claim and contract in question, and to all sums of money paid by him under said contract. This action was commenced in October, 1891, and is in the nature of an action for money had and received to recover back the first payment made by Lewis Shively under the contract. Judgment went for plaintiff, and this appeal is taken from the judgment and order denying the motion for a new trial.

Respondent rests his case upon the claim that appellant, having sold the land to other parties, thereby rescinded the contract and rendered itself liable for a return of the money already paid. Appellant insists that Shively’s failure to pay the deferred payments when due, or when demanded, was such a default upon his part as to relieve appellant of any further obligation toward him. Appellant states in his answer that by reason of respondent’s default as to the non-payment of the installments due, it treated the contract of sale as rescinded, and thereupon sold the land to other parties. While in a subsequent portion of the answer there is a denial of the allegation that defendant rescinded the contract by reason of such sale, yet the pleading, taken in connection with the balance of the record, indicates that a rescission by defendant was fully admitted. This is conclusively shown by an answer to an interrogatory of the court, wherein counsel for appellant said: “We treated the contract as rescinded, and after about a year and a half sold the land to other parties. That is alleged and admitted in the pleadings.”

The general principle involved in this case, as disclosed by the pleadings and facts stated, has been directly passed upon by this court in a number of recent decisions, and the law upon the question must be deemed settled beyond dispute. These cases hold that when a contract of sale and purchase of land is abandoned or rescinded by the parties, the vendee, though in

Shively v. Semi-Tropic Land & Water Co.

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