Thew v. Thew

This is an action to enforce the provisions of a property settlement agreement upon the theory that the covenant therein contained constitutes a covenant running with the land. The parties filed a stipulation setting forth the facts. The plaintiff (herein referred to as “first wife”) had instituted an action for divorce from one Hollie H. Thew. While the action was pending, the plaintiff and Hollie H. Thew (herein referred to as “husband”) entered into a property settlement agreement dated February 21, 1933. Included in the property divided by the agreement was a section of desert land which is the land involved in this action. The title to this land stood in the name of the husband, although it constituted community property. This section of land, as well as other real and personal property, was conveyed under the agreement by the first wife to the husband, the conveyance being thus expressed: “ (1) The party of the second part, (the wife) for and in consideration of the covenants and agreements hereinafter contained, does by these presents absolutely and forever relinquish, release, surrender, transfer, grant and convey to the party of the first part all the right, title and interest she may now have as a joint

Other real and personal property was conveyed by the husband to the first wife, with similar recitals. The agreement contains mutual waivers of interest. In addition to setting forth these mutual conveyances and waivers, the document contains a covenant by the first wife and several covenants by the husband. One of the covenants of the husband is thus expressed: (4) The Party of the first part does further contract and agree that he will pay to the party of the second part ten (10%) per cent of the net profit derived from the sale . . . (of the property here in question) or in the event of the extraction of any mineral deposits herefrom, ten (10%) per cent of the profit derived from such mineral deposits.” (Italics ours.) After the agreement was executed, an interlocutory decree of divorce was granted, followed by the final decree of divorce on September 4, 1934. Immediately thereafter, to wit, on September 5, 1934, the husband and the appellant (herein referred to as “second wife”) were married. It was stipulated that within six months after her marriage, the second wife was informed of the property settlement agreement and the covenant in question and had actual knowledge thereof.

The court found that appellant and her husband, from the money received from the sale of minerals extracted from the property in question under contract with the Chamberlain Company, since January 4, 1937, paid respondent one-tenth of the sums which they received until the death of ITollie H. Thew on May 14, 1937.

In the verified complaint there appears as exhibit A a quitclaim deed of the property in question dated March 18, 1935,

On January 16, 1937, conveyances were executed which resulted in placing the land in question, as well as other property, in the names of the husband and second wife as joint tenants. These instruments were recorded January 18, 1937, at 10:11 and 10:12 A. M. respectively.

Subsequent to the death of the husband, the second wife received $985.74 from the sale of bentonite extracted from the land in question. The second wife is still the owner of the land, except as her right, title or interest is or may be affected by the covenant to which we have referred. The stipulation of the parties attempted to dispose of all admissions contained in the pleadings in conflict with the facts set forth in the stipulation.

By the judgment the court decreed “That Margaret L. Thew, the plaintiff, do have and recover of and from the defendant Cora A. Thew, the sum of $98.57, which is ten per cent net of $985.74 admitted by defendant to have been received . . . for Bentonite extracted . . . from the land . . . pursuant to an agreement since May 14, 1937” and that “. . . in addition ... is entitled to 10 per cent of the net of any and all additional money received or to be received by defendant for Bentonite and/or other mineral substance extracted and sold from the land . . . and is likewise entitled to 10% net of the amount which shall be received from the sale of the said land as a whole . . . whenever the same may be sold” and “that the covenant in the property settlement agreement . . . whereby Margaret L. Thew quitclaimed and granted her rights ... to Hollie H. Thew . . . and whereby Hollie H. Thew agreed to give said wife 10% net of sale price of the said land or in the event of extraction of any mineral deposits therefrom, that he would pay her 10% net of the profits derived from the sale of such

From this judgment the defendant has taken this appeal.

Appellant argues that the covenant is void for uncertainty; that it reads in the disjunctive “or” and that therefore the parties to the agreement did not contemplate that the first wife should participate in both the sale price and the profit from the mineral extracted; that the agreement does not set forth the means by which the “profit” as that term is used, can be ascertained, citing Civil Code, section 1598, and Prince v. Lamb, 128 Cal. 120 , 126 [ 60 Pac. 689 ].

Respecting the provision relating to the profit from the extraction of mineral deposits, it appears to us that the term “profit” in its ordinary interpretation as here applied, clearly indicates and embraces the excess of returns over expenditures and cost of production. The record indicates that the second wife and her husband made payments to the first wife from the profits above mentioned under the property settlement agreement for a period of several months. Apparently there was no confusion, during that period, as to its interpretation, or the intention of the parties.

It is a general principle that whenever uncertainty arises concerning the provisions of an agreement the court will always inquire as to how the parties themselves understood the language and when they have acted upon that understanding, the finding of the court that it should be construed as acted upon will not be disturbed by an appellate tribunal. (Sutliff v. Seindenberg, Stiefel & Co., 132 Cal. 63 [ 64 Pac. 131 , 469]; secs. 1649, 1655 and 1656, Civ. Code.)

The remaining portion of the covenant relating to the ten per cent of the net profit to be derived from “the sale” of the land is deserving of more serious consideration. Since no sale actually took place, we do not have the conduct of the parties to guide us but must resort to inferences

That construction, we think, is rational and logical and should be adopted. Sections 1641 and 1643 of the Civil Code provide: “The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other” and “a contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties”.

It could not be reasonably contended that the intention of the contracting parties to the property settlement agreement meant a net profit on “every” sale that might or would take place after “the sale” or one sale, or the first sale made after the agreement was signed. As to the mode or method of arriving at what is commonly understood ¡o be the net profit from “the sale” section 1656 of the Civil Code helps

We observe that there is no specific law defining what are “net profits from sales”. Since the language of the covenant relates “ten (1.0%) per cent of the net profit, derived from the sale” the implied parts can relate only to net profit from the sale. The customary and usual costs of the sale are an escrow fee, a policy of title, execution and recording of deeds, payment of taxes, judgment liens, if any, relator’s commission for making the sale, etc. Excluding the original cost to the community estate, what is left is a “net profit”. This particular property was community property at the time of making the agreement. Subsequent to the execution and delivery of that instrument, it became the sole and separate property of the husband, Hollie Thew, but subject to the reservation and covenant. On the basis

As to any extra claim for management or expenditure of work and time after the separation, there is no evidence that he expended any extra time on it or mined the land himself. The only rational charges he could have had in mind would have been the ones which came about in the sale of the land as we have enumerated above. To hold otherwise would result in a forced construction predicated on facts not in evidence and the drawing of inferences from facts not proven. If, as we have seen, Hollie Thew intended to give his wife the one-tenth of the net value of the land as of the day and date of the property settlement agreement, either by an immediate sale thereafter, which would have concluded his pact with his first wife, or, lacking a sale, then by ten per cent of the money received by him as royalties, we must also assume that, whether he himself remained alive to effect the payment of that one-tenth value either by a sale or by mining the land, the original intention to pay the one-tenth of the value of the land could not expire with his death if the debt was not fully paid, but would have to pass on to those who took the title impressed with that obligation. If he did not in truth and fact intend that she should have the one-tenth of the value of the land, he most likely would not have made the provision that it was to come out of the land itself. Doubtless he would have made some other provision for the payment of the one-tenth of the value of the land, either in instalment payments that had nothing whatever to do with the land, or provision for payment of a lump sum based on an agreed valuation of the land as of the date of the property settlement agreement. This he did not do. It is a fair construction that the one-tenth was to come out of the land and only the land.

Section 1654 of the Civil Code states the rule of construction which is most applicable to the facts related. “In cases of uncertainty not removed by the preceding rules, the language of a contract should be interpreted most

Appellant argues that there was no intention that the first wife should retain any interest in the property. In the instant case Cora A. Thew, the appellant, took title to the land with full and actual knowledge of the covenant concerning the percentage respondent was to receive out of the land, and this knowledge she had long prior to the time she acquired title and long prior to the making of the agreement for the mining of the property with the Chamberlain Company. The quitclaim deed from the first wife to Hollie H. Thew was recorded prior to the recordation of appellant’s joint tenancy deed. She had full knowledge of similar reservations and covenants therein.

We will not endeavor to discuss, analyze, or distinguish the difference between personal covenants and covenants which run with the land. In so far as the facts of this case are concerned, a complete answer is stated in Richardson v. Callahan, 213 Cal. 683 [ 3 Pac. (2d) 927 ], where the court said: “The marked tendency of our decisions seems to be to disregard the question of whether the covenant does or does not run with the land and to place the conclusion upon the broad ground that the assignee took with knowledge of the covenant and it was of such a nature that when the intention of the parties coupled with the result of a failure to enforce it was considered, equity could not in conscience withhold relief.” (See, also, Pomeroy’s Equity Jurisprudence, 2d ed., secs. 688 and 689; Whitney v. Union Ry. Co., 11 Gray (Mass.), 359 [ 71 Am. Dec. 715 ], 7 R. C. L., p. 1102, sec. 18; Washburn on Real Property, vol. 2, see. 1205; Sacramento S. F. L. Co. v. Whaley, 50 Cal. App. 125 [ 194 Pac. 1054 ].)

We conclude, therefore, that having taken title with knowledge of the covenant and having acted upon it without evidencing any uncertainty as to its provisions, and knowing the intention of the parties who made the covenant, appellant is bound both in law as well as in equity, to carry out the covenant according to the original intention of the makers thereof.

The judgment is affirmed.

Barnard, P. J., and Marks, J., concurred.