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written lease cannot be canceled or surrendered by parol agreement alone, but an executed parol agreement for surrender of a lease effects such cancellation; parol proof of a verbal agreement to surrender, effective when executed, being admissible.

2. Frauds, statute of 140-Written contract of lease may be canceled or surrendered by parol agreement duly performed.

A written contract for the lease of land may

tinct parol agreement between the parties performed by them; the conduct of the parties operating by way of estoppel.

who were invited to join in the enterprise by purchasing stock, and that relation required good faith on his part in making full disclosure to the shareholders of all matters chat might affect their several interests which they were purchasing. Tegarden v. Big Star Zinc Co., 71 Ark. 281, 72 S. W. 989; Porter v. Morris, 131 Ark. 386, 199 S. W. 106; Old Dominion Co. v. Bigelow, 188 Mass. 315, 74 N. E. 653, 108 Am. St. Rep. 479; Dick-be canceled or surrendered by a subsequent diserman v. Northern Trust Co., 176 U. S. 204, 20 Sup. Ct. 311, 44 L. Ed. 423; Erlander v. New Sombrero Phosphate Co., 3 App. Cas. H. L. 1218, 36 Law Times Rep. 222. Such relation does not absolutely preclude a person who occupies it from selling property to others with whom he is interested, but his relation does call for the utmost good faith, and the sale is voidable where any advantage is taken, or where there is a failure to disclose the fact that the person so making the sale is interested in the transaction. The same rule applies as in the case of a corporation. 1 Thompson on Corporations, § 457; 7 Ruling Case Law, 70.

[3] It is also contended that the relief granted by the chancery court was erroneous in its extent, for at most it should only have been granted against appellant for the amount of profit which he is alleged to have secretly obtained. The contract being voidable at the election of the shareholders, they might have elected to keep the property and sue for the recovery of the excessive profits derived by appellant and his associates in the transfer of the lease, but they had a right to rescind the contract for fraud and recover the price paid for the stock. In other words, they had a right to set aside the transfer of the lease and to recover what they had severally paid in the purchase of stock.

There was an expense of about $900 for erecting a derrick on the land, and it is also argued that this amount should have been deducted from the amount recovered. Since the lease is canceled, the benefit, if any, from the erection of the derrick on the land will inure to the holder of the lease, being appellant and his associates, to whom the lease reverts upon the cancellation of the transfer to the association. Our conclusion is therefore that the chancellor was correct in his decree, and the same is affirmed.

(149 Ark. 442)

FORD V. MILLER. (No. 82.) (Supreme Court of Arkansas. July 4, 1921.) 1. Frauds, statute of 63 (2)-Executed parol agreement for surrender of lease effects cancellation.

Under Crawford & Moses' Dig. § 4866, relative to leases for terms exceeding a year, a

3. Appeal and error 1009 (4)-Finding of chancellor not disturbed unless against evidence.

A finding of fact made by a chancellor will not be disturbed on appeal unless against the preponderance of the evidence.

Appeal from White Chancery Court; Jno. E. Martineau, Chancellor.

Suit by John E. Miller against T. J. Ford. From decree for plaintiff, defendant appeals. Affirmed.

John E. Miller brought this suit in equity against T. J. Ford to cancel an oil and gas lease executed by his grantor, E. J. Nalley, to Ford. The lease was sought to be canceled on the ground that the parties to it had by parol agreement surrendered it, and that their agreement in this regard had been executed.

T. J. Ford defended on the ground that there had been no surrender of the lease, and that it was still in force.

According to the evidence adduced for the plaintiff, E. J. Nalley, and F. B. Nalley, his wife, conveyed the land which is the subject-matter of this lawsuit to John E. Miller by warranty deed for the sum of $2,500 in hand paid and the assumption by said Miller of a mortgage on the land amounting to $1,100. On the 3d day of May, 1919, E. J. Nalley and F. B. Nalley, his wife, executed an oil and gas lease to T. J. Ford for the period of ten years under certain conditions set out in the lease contract. On the 14th day of June, 1919, T. J. Ford, J. E. Miller, and T. J. Bowers entered into a written contract whereby Miller became interested in certain oil and gas leases owned by T. J. Bowers and T. J. Ford. Among the leases was the one referred to above from E. J. Nalley and wife to T. J. Ford.

According to the testimony of E. J. Nalley, T. J. Ford and T. J. Bowers had made an oral agreement with him to purchase the land set out in the lease contract under

consideration. Nalley had previously leased the land to Bowers and Ford, and they had verbally agreed with him to cancel the lease at any time that he wished to sell the land. Pursuant to this oral agreement they de livered the lease to Nalley, and the under

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(232 S.W.)

standing was that the lease was canceled. C. E. Yingling and John D. De Bois, both The lease had been filed for record, but the of Searcy, for appellee. lessees had never gone into possession of the land. Nalley held possession of it all the time.

According to the testimony of John E. Miller, Bowers and Ford first intended to purchase the land from Nalley. They ap plied to him for assistance in making the purchase, and he agreed with them to advance one-third, or even one-half, of the purchase money and take a corresponding interest in the land. When the time to complete the contract arrived, Ford and Bowers could not raise the money, and they agreed that Miller might purchase the land from Nalley, and further agreed that they would surrender the oil and gas lease on the land which they held. They did actually surrender to Nalley the lease contract and told Miller that they had done so. The plaintiff then purchased the land from Nalley and paid him the purchase price thereof. Nalley corroborated the testimony of Miller to the effect that the lease contract had been surrendered to him at the time he completed his contract with Miller and executed to him a warranty deed to the land.

According to the testimony of T. J. Ford, Bowers and himself were interested in buying oil and gas leases. Subsequently they took Miller in with them. Ford surrendered the lease in question to Nalley because he thought Nalley was about to sell the land to a man at Helena, Ark., and he had verbally agreed with Nalley at the time the lease contract was executed to surrender the lease contract to Nalley at any time Nalley had a chance to sell the land. Nalley agreed to return the lease to Ford if he did not make the sale to the Helena man. Before Ford surrendered the lease to Nalley, he asked Miller about it, and Miller told him that it was all right to surrender the lease in the manner indicated because it was on record.

Bowers corroborated the testimony of Ford. Bowers acted as agent for Nalley in the sale of the land to Miller.

According to the testimony of Nalley and Miller, they understood that there was an absolute surrender of the lease contract by Ford and Bowers to Nalley before Miller completed his contract for the purchase of the land from Nalley and paid the purchase money and received a deed therefor.

The chancellor found that there had been an executed oral contract for the surrender of the lease between Ford and Nalley, and that Miller purchased the land upon the faith of it, and that Ford was therefore estopped from claiming that there was no valid cancellation of the lease.

From a decree entered in favor of the plaintiff, Miller, the defendant, Ford, has duly prosecuted an appeal to this court.

Brundidge & Neelly, of Searcy, for appellant.

HART, J. (after stating the facts as above). The lease contract between Ford and Nalley covered a period of 10 years under the conditions and terms recited in the contract.

Section 4866 of Crawford & Moses' Digest provides, in effect, that no lease for a term of years except a lease for a term not exceeding one year shall be assigned, granted, or surrendered unless it be by deed or notice in writing signed by the party so assigning, granting, or surrendering the same, or by his agent lawfully authorized by writing or by operation of law.

There was no written surrender or assignment of the lease in question. On that account counsel for the defendant claims that the attempted cancellation or surrender of the lease is void under the section of our statute of frauds just referred to.

[1] Under the statute of frauds it is settled that a written lease cannot be canceled or surrendered by parol agreement alone, but it is equally well settled that an executed parol agreement for the surrender of a lease will affect such cancellation. The rule of law invoked does not prohibit parol proof of a verbal agreement to surrender, which is effective when executed; but only goes to the extent of holding that such parol agreement does not of itself constitute a surrender and cancellation of the lease. 24 Cyc. 1327; Taylor's Landlord and Tenant, 9th Ed. vol. 2, pars. 511-516. Because the written contract for the lease is not the essence of the contract, but only the evidence of it, the destruction of the written instrument does not of itself affect the surrender or the cancellation of the contract.

[2] In addition to the text-writers cited above, it is well settled that a written contract for the lease of land may be canceled or surrendered by a subsequent, distinct, and independent parol agreement between the parties performed by them. In such cases the conduct of the parties operates by way of estoppel. Phelps v. Seely, 22 Grat. (Va.) 573; Jordan v. Katz, 89 Va. 628, 16 S. E. 866; Goldsmith v. Darling, 92 Wis. 363, 66 N. W. 397; Brewer v. National Union Bldg. Ass'n, 166 Ill. 221, 46 N. E. 752; Auer v. Penn., 92 Pa. 444; Stotesbury v. Vail, 13 N. J. Eq. 390; Williams & Davis v. Jones, 1 Bush (Ky.) 621; and Coe v. Cassidy, 72 N. Y. 133. This rule has been recognized and applied by this court in Hay v. Goldman, 71 Ark. 251, 72 S. W. 563, and Williamson v. Crossett, 62 Ark. 393, 36 S. W. 27.

In the instant case according to the testimony of Nalley, there was an absolute surrender of the lease by the delivery of it by Ford to Nalley for the purpose of cancellation. Nalley was at that time in possession of the premises and continued in the posses

were payable on or before a certain date and N.

sion thereof. According to the testimony of price, then B., who was to sign the notes, should Nalley and Miller, Miller paid the purchase be given a right to pay them and be substituted price of the land and received a warranty to the rights of N., construed as not giving the deed therefor from Nalley upon the faith right of substitution to B. on payment of the of the surrender of the lease. Upon the first note merely, although the two last notes completion of the sale Nalley turned over had a right to pay off the notes before all bethe possession of the property to Miller. came finally due, and then have specific perThus it will be seen that the verbal con-formance, and that he did not have the money tract for the surrender of the lease was fully performed, and the court was right in holding that this operated as a matter of fact to cancel the lease. It is true that the testimony of Miller and Nalley was disputed by the testimony of Ford and Bowers, but the chancellor found the facts for the plaintiff.

[3] There is nothing in the record tending to show that the finding of the court was against the preponderance of the evidence. Under the settled rules of this court the finding of fact made by a chancellor will not be disturbed on appeal unless it is against the preponderance of the evidence. We do not find that to be the case here, and the decree will be affirmed.

(149 Ark. 297)

(No. 58.)

BOTHE et al. v. NOACK. (Supreme Court of Arkansas. June 20, 1921.) 1. Specific performance 17- Party for whose benefit a land sale contract is made may have specific performance, the same as if he had signed it.

Although a party did not sign a contract for the sale of land, where it was made for his

benefit, he became entitled to specific performance of it according to its terms, the same as if he had signed it.

2. Specific performance

17-Where party signed land sale notes, he thereby accepted the contract, and became entitled to have it performed.

Where a contract between plaintiff and one defendant for the purchase of land provided that another defendant should sign the notes, which he did, he thereby became bound to pay them, and accepted the terms of the contract, which was that, if he paid the notes, he should be substituted to purchaser's rights, so that he could have it specifically performed. 3. Vendor and purchaser 78-Land sale contract held not to provide that failure to pay first note made all become due.

A contract for the sale of land held not to mean that failure to pay the first note when due was such a breach as would prevent the party failing from having specific performance, where the language of the agreement did not indicate that the parties regarded time as of the essence.

4. Vendor and purchaser

49-That purchaser failed to pay first purchase-money note did not give another paying it a right to be substituted in his place.

A land sale contract provided that, if N. was anable to complete the payment of the purchase

himself, and had to borrow it, makes no difference, where he made the tender before the last two notes fell due.

5. Vendor and purchaser

77-That party,

who had a right to pay purchase notes, did so before due, held not to prevent purchaser having specific performance.

A contract for the sale of land construed as giving B., who was to sign the purchase notes, a right to pay the two last notes before maturity, they being payable on or before fixed date; but such prior payment did not substitute the notes all became due before losing his right B. for the purchaser, N., because N. had until of specific performance of the contract.

6. Tender 24-Where purchaser's tender of money paid by signer of purchase notes was refused, he did not need to deposit the money in court.

Where a contract of sale of land to N. provided that B. should sign the notes, and N. made a tender of the amount which B. had

paid, and B. declined the tender, it was not nec-
essary that N. should deposit the money in
the registry of the court.
7. Set-off and counterclaim

13-In suit for specific performance of land sale agreement, one party as landlord may not set up a counterclaim against another as tenant.

ment B. signed the purchase notes and N. Where N. purchased land, and by agreebrought suit against B. and the vendors to cancel a deed to B. and for specific performance of the land sale contract, B. could not by way of cross-complaint set up an account against N. as his tenant on another tract, since a counterclaim is allowed only in actions for recovery of money and must tend in some way to diminish or defeat plaintiff's recovery.

Appeal from Arkansas Chancery Court; John M. Elliott, Chancellor.

Suit in equity by B. F. Noack against H. Bothe and others to cancel a deed and for specific performance of a written contract to sell the plaintiff the same land. Decree for plaintiff, and defendant Bothe appeals. Affirmed.

B. F. Noack brought this suit in equity against H. Bothe and Chas. Schuerer and Martha Schuerer, his wife, to cancel a deed executed by the Schuerers to Bothe to 170 acres of land in Arkansas county, Ark., and to have specific performance of a contract in writing by Chas. Schuerer to him to the same land. Bothe defended the suit on the ground that Noack had breached his contract with Schuerer and was not entitled to the specific performance of it, and that under its

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(232 S.W.)

terms he was entitled to a deed to the land from Schuerer.

The contract which is the basis of this lawsuit was in writing, and was signed by Chas. Schuerer and Martha Schuerer and B. F. Noack on the 26th day of July, 1919. The body of it is as follows:

"Parties of the first part have this day sold to second party under conditions hereinafter named the following lands situated in the Southern district of Arkansas county, Arkansas, to wit: [Here follows description of the lands.] The purchase price is to be paid as follows: $100 cash in hand; the balance as follows: Second party hereby assumes the payment of one certain mortgage given to the American Investment Company, of Oklahoma City, Oklahoma, for the sum of $3,500; first parties are to pay the interest upon $3,500 to the 1st day of August, 1919, and second party is to pay all interest accruing after the 1st day of August, 1919. Second party shall pay the remainder of the purchase price as follows: $2,000 January 5, 1920, and $2,900 January 5, 1921. However, it is agreed between the parties hereto that in the event the year 1920 be a poor crop year, or if second party does not make an ordinary crop, and is unable to pay the sum of $2,900 January 5, 1921, then he is hereby given the option to pay the sum of only $1,450 upon said 5th day of January, 1921, and in the event he only pays $1,450 on January 5, 1921, then he shall pay the other remaining $1,450 on the 5th day of January, 1922. That part of the unpaid

purchase price, which is to be paid directly to the first party, shall bear interest from this date until paid at the rate of 8 per cent. per

annum.

"First parties hereby warrant that they have a fee-simple and merchantable title to the aforesaid land, and when that part of the purchase price due to them is paid in full they will make to second party a good warranty deed to said land, and will release and relinquish unto him all rights of dower and homestead in and to said lands, and to that end the said Martha Schuerer, wife of Chas. Schuerer, does lease said dower rights and homestead.

"Second party shall execute to the first parties his promissory note for that part of the purchase price which is to be paid directly to first parties, and the said notes are to be signed by H. Bothe. In the event second party should be unable to complete the payment of the purchase price, then Mr. Bothe is hereby given the right to pay the aforesaid notes, and in the event he does so pay said notes, he shall be substituted to all rights of second party under this contract, and he shall be entitled to have from first parties the said warranty deed.

"First parties agree to deliver to second party full and complete possession on or before the 5th day of January, 1920.

"Second party agrees to install a rice well, pump, and fixtures, and have the same ready for operation for the pumping season of 1920. "Two notes, of $1,450 each, shall be executed to secure the payment of $2,900 aforesaid; these notes shall be due and payable January 5, 1921, unless second party is unable because of poor crop to pay both of said notes at that time. In the event that he is unable to pay

both of said notes January 5, 1921, then he shall only pay one of said notes on said date, and the other note shall be paid January 5, 1922."

According to the testimony of B. F. Noack he paid Schuerer $15 to bind the contract for the purchase of the land before the written contract was executed. Bothe paid the balance of the $100 recited in the contract as having been paid upon the date of its execution. The first note described in the contract for the purchase of the land was for $2,000, due January 5, 1920. Noack did not receive notice from the bank which held the note for collection that it was due. The first Noack

thought of it being due was on the 14th day of January, 1920, when Bothe asked him where he was going to move. Noack responded that he was going to move on the place that he had bought from Schuerer. Bothe then said that he had paid the purchase price of the land and that the land was his. Noack tried to get him to go to De Witt with him, so that he could get the money and pay off the notes given to Schuerer for the purchase price of the land. Bothe refused to go with him, saying that Noack would not be able to get the money. Noack told him that he could borrow the money. Afterwards Noack borrowed $5,400, the balance of the purchase price due on the land and tendered it to

Bothe. Bothe refused the tender. Gartus Mumsen lent the money to Noack with which to pay for the land. His testimony corroborated that of Noack to the effect that the money was tendered to Bothe and he refused the tender.

H. Bothe was a witness for himself. Ac

cording to his testimony, the bank demandcording to his testimony, the bank demanded payment of him of the $2,000 note due January 5, 1920, and, Noack having failed to pay the note, Bothe paid it. He knew that Noack had no money or property, and that nothing could be made out of him by suit. On January 14, 1920, Bothe paid off the remaining notes and demanded a deed to the property from Schuerer. The two remaining notes were made payable on or before a certain date. Bothe knew that Noack was not able to pay these notes, and he elected to pay them off before they became due to stop interest. Noack had not taken possession of the land at this time. Noack at that time was a tenant on Bothe's land, and owed him a supply account of $639.44, which has not been paid. The land in question has greatly increased in value since the execution of the contract copied above.

Chas. Schuerer and Martha Schuerer, his wife, executed a deed to the land to Bothe when he paid off the purchase-money notes. Subsequently B. F. Noack entered into possession of the land and has held possession of it since.

The chancellor found the issues in favor of B. F. Noack and it was decreed that the

[4] The contract provides that Noack should assume the payment of a mortgage on the property for the sum of $3,500. Noack is designated in the contract as the second party, and Chas. Schuerer and Martha Schuerer are called the first parties. That part of the contract upon which Bothe relies is as follows:

deed from Chas. Schuerer and Martha (guage used indicate that the parties regardSchuerer, his wife, to H. Bothe, should be ed time as the essence of the contract. canceled, and the title to the land in controversy was divested out of H. Bothe and vested in B. F. Noack. Bothe was given a lien upon the land for the sum of $5,355.21, the amount of the purchase price of the land paid by him. Noack was given 90 days within which to pay Bothe said sum of money, and in the event of nonpayment the land was ordered sold for the payment of the same. To reverse that decree H. Bothe has duly prosecuted this appeal.

"Second party shall execute to the first parties his promissory note for that part of the purchase price which is to be paid directly to first parties, and the said notes are to be signBotts & O'Daniel, of De Witt, for appel- ed by H. Bothe. In the event second party lant. should be unable to complete the payment of

Chapline & Morrison, of Stuttgart, for ap- the purchase price then Mr. Bothe is hereby pellee.

HART, J. (after stating the facts as above). The correctness of the decree of the chancellor depends upon the construction to be given the contract for the purchase of the land signed by Noack and Schuerer on the 26th day of July, 1919. On the one hand, it is claimed by Bothe that Noack committed a breach of the contract by failing to pay the note for $2,000 due on January 5, 1920, and that therefore he was not entitled to a specific performance of the contract. Counsel for Bothe contend, further, that the contract was made for the benefit of Bothe, and that Bothe having paid the $2,000 note when it fell due, and knowing further that Noack could not himself pay the remaining notes, had a right to pay them off before they became due and to take a deed to himself to the land. On the other hand, counsel for Noack claim that Noack had the right to pay the purchase money at any time before the last note fell due and demand the execution of a deed to himself to the land. He claims that Bothe had no rights under the contract until all the purchase-money notes fell due and Noack failed to pay them.

[1, 2] Although Bothe did not sign the contract, it was made for his benefit, and he was entitled to the performance of it according to its terms, the same as if he had signed it. The contract between Schuerer and Noack provided that the notes for the purchase money of the land should also be signed by H. Bothe. Bothe signed these notes, and thereby became bound to pay them and accepted the terms of the contract. Thereafter he became interested in the contract, and was entitled to have it performed according to its terms.

[3] We are of the opinion, however, that the contract does not mean that, upon the failure of Noack to pay the first note when it became due, he had committed such a breach of the contract as would prevent him from having specific performance thereof. There is nothing in the contract providing that upon the nonpayment of one note that ali should become due. Neither does the lan

given the right to pay the aforesaid notes, and in the event he does so pay said notes he shall be substituted to all the rights of second party under this contract, and he shall be entitled to have from first parties the said warranty deed."

It will be noted that the language used is that, if Noack should be unable to complete the payment of the purchase price, then Bothe is given a right to pay the purchasemoney notes and be substituted to the rights of Noack. The contract does not give the right of substitution to Bothe upon the payment of the first note merely. It is true the last two notes are payable on or before a certain date, but that fact merely could not give Bothe the right to be substituted in place of Noack. It only gave him the right to pay off the notes. Noack had the right to have the specific performance of the contract, if he paid the purchase-money notes off before they all finally became due. It did not make any difference that he did not have the money himself. He had the right to borrow the money with which to pay the purchase price. This he did, and made a tender of the amount due to Bothe before the last two notes fell due.

[5, 6] We hold that under the terms of the contract Bothe had the right to pay the last two notes on the 14th day of January, 1920, because they were made payable on or before a certain date; but the fact that he paid them before they became due did not give him a right to be substituted for Noack, for the reason that Noack had until all the notes became due before he lost his right to have specific performance of the contract. He made a tender of the amount due, which had been paid by Bothe, and Bothe declined the tender. Therefore it was not necessary that Noack should deposit the money in the registry of the court. He stood ready to pay the amount at any time, and the court protected the rights of Bothe by giving him a lien on the land for the purchase money paid by him. Strickland v. Clements, 83 Ark. 484, 104 S. W. 175.

[7] By way of cross-complaint, Bothe ask. ed for judgment against Noack in the sum of $639.44, which Noack owed him on account.

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