T. E. REED, Appellant,
WALTER McLAWS and ANNA L. McLAWS, Appellees
APPEAL from a judgment of the Superior Court of the County of Navajo. John P. Clark, Judge. Judgment reversed and cause remanded for a new trial.
Mr. W. Dean Nutting, and Messrs. Gust, Rosenfeld, Divelbess, Robinette & Coolidge, for Appellant.
Messrs. Wilson, Compton & Wilson and Mr. Guy Axline, for Appellees.
[56 Ariz. 558] ROSS, J.
This is an action for damages for breach of contract to purchase land. On March 22, 1929, the McLaws, husband and wife, plaintiffs herein, agreed to sell, and defendant Reed agreed to buy, a section of land and certain equipment located in Navajo county. Parts of the contract read:
"The sale price of the said premises, and which the second party agrees to pay, is Seven Thousand Dollars ($7,000), Two Thousand Nine Hundred Eighty-seven and 4/100 Dollars ($2,987.04) of which is paid by the second party assuming the balance of principal and interest due to the First National Building and Loan Association, a corporation, who hold a mortgage on the premises, the balance of principal and interest of which is $2,987.04. And the second party agrees to pay this amount as provided by the mortgage, recorded in the office of the County Recorder of Navajo County, State of Arizona, in monthly installments as they fall due. The remainder of the Seven Thousand Dollars ($7,000), to-wit: Four Thousand Twelve and [56 Ariz. 559] 96/100 Dollars ($4,012.96) shall be paid as follows, to-wit: One Thousand Dollars on March 22, 1930; One Thousand Dollars on March 22, 1931; One Thousand Dollars on March 22, 1932, and One Thousand Twelve and 96/100 Dollars ($1,012.96) on the 22nd day of March, 1933; together with interest at the rate of six per cent per annum on all deferred payments, payable annually.
"The title to the said property shall remain in the first parties until all covenants, stipulations and agreements herein contained shall have been performed in full; and in the event of a failure to perform any
of the covenants under the terms of this contract; the second party shall forfeit all right hereunder, either at law or in equity, without demand or notice, as liquidated damages, but not as a penalty; it being understood that this contract is subject to the terms and conditions of the 1921 Laws affecting such contracts, enacted by the 1921 Legislature of the State of Arizona.
"It is further agreed that the title to the above described real and personal property shall be delivered to the second party free and clear of and from all encumbrances or whatsoever kind or nature, and that the title shall be a good and merchantable title...."
Other provisions of the contract were that the plaintiffs would (1) put the De Laval pump and sixteen HP Stover engine at the irrigation well in good running order, so as to pump at least 600 gallons of water per minute, on or before June 1, 1929; (2) would drill a well or two wells, combined or singly, not to exceed 200 feet deep, 8 inches in diameter and completed in good condition, on or before June 1, 1929, and (3) would assign their application to the Aztec Land & Cattle Company for lease of sections 5, 7, 9, 17 and 19, Township 17, North, Range 20 East, G. & S.R.M., to defendant Reed if such application were allowed.
Defendant entered into possession of the premises very soon after the signing of contract and continued [56 Ariz. 560] in such possession until on or about August 1, 1929, when he left them and never returned. He made payments of around $40 per month, for three or four months, on the mortgage as he had agreed to do, and paid appellees $100 to be applied on the contract. The defendant failed to make full payment of the mortgage as he had agreed, and this action was brought to recover damages for such failure or breach.
On December 9, 1929, the buildings on the premises were destroyed by fire. The property was insured with the Importers & Exporters Insurance Company, with loss, if any, payable to mortgagee, First National Building & Loan Association. The policy provided that if required to pay the mortgage the insurance company should be subrogated to the rights of the mortgagee to the extent of the payment. The insurance company having paid the proceeds of the policy, amounting to $2,541.94, to the mortgagee, the latter assigned the mortgage to the insurance company. This mortgage was foreclosed by the insurance company for such sum, interest and costs, and the property was, on July 15, 1933, sold under special execution for $2,814.60, or the amount of the judgment. On the theory that plaintiffs' ...