Shell v. Strong , 151 F.2d 909 ( 1945 )

PHILLIPS, Circuit Judge.

On August 1, 1932, Strong and Shell entered into a written contract which recited that Strong had purchased seven quarter sections of land situated in Wichita County, Kansas, and had paid therefor $9,600, and that Shell was desirous of obtaining a one-half interest in the profits that might be derived from the use or sale of such land. It provided that Shell should pay one-half of all taxes on the land becoming due and payable for the year 1932 and succeeding years during the life of the contract; that Shell should have a one-half interest in all the profits realized from the land during the life of the contract, either from crops or from the sale of the land; that Shell should have an option to purchase, for $4,800, a one-half interest in the land at any time during the life of the contract, and that upon the exercise of such option, Strong would convey a one-half interest in the land to Shell, or such person as Shell might designate, by a good and sufficient warranty deed; and that the contract should continue for a period of five years from August 1, 1932.

Shell managed and rented the land and collected the income therefrom from the date of the contract until the year 1936. Thereafter, Strong managed the land. During the term of the contract, each paid one-half of the taxes and one-half of the incidental expenses and received one-half of the net income. On or about August 1, 1934, the parties made a settlement of the interest due from Shell to Strong, and Shell was given credit for the amount of interest which had accrued to that date. Shell made no direct payments of interest after August 1, 1934, but on or about October 15, 1936, Strong received $478.18 as a bonus under an oil and gas mining lease on a portion of the land, and after deducting an expense item of $1.50, credited one-half of the remainder, or $238.34, on interest due from Shell. Shell consented to such application of the bonus money.

On July 31, 1937, Shell tendered to Strong $5,373.87, and demanded a deed to_ an undivided one-half interest in the land. Strong refused to accept the tender and refused to convey the one-half interest to Shell. The sum tendered included the agreed price of $4,800 and the balance of the interest due from Shell to Strong to July 31, 1937, and other items for which Shell was liable under the contract.

On July 31, 1942, Shell brought this action against Strong seeking specific performance of the contract to convey an undivided one-half interest in the land.

Strong filed an answer in which he set up a number of defenses. At the pretrial conference, all of such defenses were abandoned except laches.

At the trial, evidence was introduced with respect to the value of the land on July 31, 1937, and July 31, 1942, and the intervening period. The trial court found that there was no material difference in the value of the land on July 31, 1937, and July 31, 1942; that there was a decrease in value between July 31, 1937, and the early part of 1939, and that in 1940 the land began to increase in value. The trial court concluded, as a matter of law, that Shell had abandoned the contract and was barred from relief in equity by laches. Shell has appealed.

Lapse of time alone does not constitute laches.¹ Delay will not bar relief where it has not worked injury, prejudice, or disadvantage to the defendant or others adversely interested.²

Since laches is an equitable defense, its application is controlled by equitable considerations.³ It cannot be invoked to defeat justice,⁴ and it will be applied only where the enforcement of the right asserted will work injustice.⁵

A court of equity is not bound by the statute of limitations, but, in the absence of extraordinary circumstances, it will usually grant or withhold relief in analogy to the statute of limitations relating to actions at law of like character. Under ordinary circumstances, a suit in equity will not be stayed for laches before, and will be stayed after, the time fixed by the analogous statute, but if unusual conditions or extraordinary circumstances make it inequitable to allow the prosecution of a suit after a briefer, or to forbid its maintenance after a longer, period than that fixed by the analogous statute, a court of equity will not be bound by the statute, but will determine the extraordinary case in accordance with the equities which condition it. When a suit is brought within the time fixed by the analogous statute, the burden is on the defendant to show, either from the face of the complaint or by his answer, that extraordinary circumstances exist which require the application of the doctrine of laches. On the other hand, when the suit is brought after the statutory time has elapsed, the burden is on the complainant to aver and prove circumstances making it inequitable to apply laches to his case.⁶

Shell brought his action within the period of the analogous statute of limitations. The burden was upon Strong to establish such a change in conditions to his prejudice that would make it inequitable to grant Shell relief by way of specific performance. The trial court evidently believed the burden rested on Shell to explain his delay in bringing the suit.

By waiving the other defenses asserted in the answer and urging only laches as a bar to relief, Strong conceded he had no other defense to the action. It is clear, therefore, that in refusing to accept the tender and convey a one-half interest in the land to Shell, Strong breached the contract. Strong stood before the court, admitting that he had breached the contract and asking the court to condone the breach and deny Shell any relief in equity solely because Shell had waited until the last day of the analogous statute of limitations to commence the action and because, although there was no substantial difference in the value of the land on the date of the tender and on the date of the commencement of the action, there had been some fluctuation in value during the intervening period.

Strong did not deny that the contract was valid and enforceable against him. He did not deny his obligation to convey. In that sense, he did not repudiate the contract. He simply refused to accept the tender and make the conveyance.

The record is devoid of any proof that Strong either acted or refrained from acting to his prejudice in reliance upon a belief that Shell would not insist on performance of the contract.

While farmlands in Kansas fluctuate in value, increasing in value during periods of ráinfall adequate for the growing of crops, and decreasing in value during periods of drought, such lands are not comparable with undeveloped mining properties, the exploration of which may prove them to be of great value or to be practically worthless, or with other properties highly speculative in character.

It is a general rule that the mere fact that the value of the land, which is the subject of the contract, has increased or diminished since the contract was executed will not warrant a court in refusing to grant a decree of specific performance, in the absence of a showing that the plaintiff in bad faith delayed bringing his action in order to speculate on a change in value to his advantage.⁷

Strong wholly failed to establish any prejudice to him as the result of the delay in the commencement of the action. While the land did fluctuate in value in the interim, since the value of the land at the time of the tender and at the time suit was commenced was substantially the same, Strong suffered no disadvantage from the delay.

We are of the opinion that Strong wholly failed to establish any basis for the application of the doctrine of laches.

The judgment is reversed and the cause remanded with instructions to enter judgment awarding Shell specific performance of the contract.

1 Calkin v. Hudson, 156 Kan. 308, 133 P.2d 177, 184; Dusenbery v. Bidwell, 86 Kan. 666, 121 P. 1098, 1101; Kansas Electric Utilities Co. v. Bowersock, 109 Kan. 718, 202 P. 92, 96; Spradling v. Hawk, 133 Kan. 545, 1 P.2d 268, 271; Preston v. Shields, 159 Kan. 575, 156 P.2d 543, 549.

2 McGill v. National Bank of Topeka, 147 Kan. 605, 77 P.2d 944, 946; Spradling v. Hawk, 133 Kan. 545, 1 P.2d 268, 271; Harris v. Defenbaugh, 82 Kan. 765, 109 P. 681, 683; Dusenbery v. Bidwell, 86 Kan. 666, 121 P. 1098, 1101.

In Kansas Electric Utilities Co. v. Bowersock, 109 Kan. 718, 202 P. 92, 96, the court said:

“It has been said that:

“ ‘Laches in legal significance is not mere delay, but delay that works a disadvantage to another.’ * * * ”

In Harris v. Defenbaugh, 82 Kan. 765, 109 P. 681, 683, the court said:

“ ‘Laches does not, like limitation, grow out of the mere passage of time; but it is founded upon the inequity of permitting the claim to be enforced — and inequity founded upon some change in the condition or relations of the property or the parties.’ * * * A large number of eases are cited where laches is held to be a defense, but they all proceed upon the theory that not mere delay, but delay that works a disadvantage to others, must be shown before the doctrine can be invoked.”

3 Columbian National Life Ins. Co. v. Black, 10 Cir., 35 F.2d 571, 575, 71 A.L.R. 128.

4 Winget v. Rockwood, 8 Cir., 69 F.2d 326, 333.

5 Winget v. Rockwood, 8 Cir., 69 F.2d 326, 333; Hiett v. Inland Finance Corp., 210 Cal. 293, 291 P. 414, 417; Motel v. Andracki, 299 Ill.App. 166, 19 N.E.2d 832, 835; Earley v. Automobile Ins. Co. of Hartford, Conn., Mo.App., 144 S.W.2d 860, 863; Platte Valley Bank v. Lemke, 141 Neb. 218, 3 N.W.2d 396, 399.

See, also, Harris v. Defenbaugh, 82 Kan. 765, 109 P. 681, 683.

6 Backus-Brooks Co. v. Northern Pac. R. Co., 8 Cir., 21 F.2d 4, 12; Columbian National Life Ins. Co. v. Black, 10 Cir., 35 F.2d 571, 575, 71 A.L.R. 128; Gaskins v. Bonfils, 10 Cir., 79 F.2d 352, 357; City of Roswell, New Mexico, v. Moun tain States T. & T. Co., 10 Cir., 78 F.2d 379, 384; Kelley v. Boettcher, 8 Cir., 85 F. 55, 62.

Cf. Russell v. Todd, 309 U.S. 280, 288, 60 S.Ct. 527, 84 L.Ed. 754.

7 Franklin Telegraph Co. v. Harrison, 145 U.S. 459, 473, 12 S.Ct. 900, 36 L.Ed. 776; Willard v. Tayloe, 8 Wall. 557, 570, 571, 19 L.Ed. 501; Eakin v. Wycoff, 118 Kan. 167, 234 P. 63, 67; Anderson v.

Anderson, 251 Ill. 415, 96 N.E. 265, 267, 268, Ann.Cas.1912C, 556; Harris v. Greenleaf, 117 Ky. 817, 79 S.E. 267, 269, 270, 4 Ann.Cas. 849; Keogh v. Peck, 316 Ill. 318, 147 N.E. 266, 268, 38 A.L.R. 1151; Brown v. Brown, 274 Ill. 325, 113 N.E. 634, 636; Forest Preserve Dist. of Cook County v. Emerson, 341 Ill. 442, 173 N.E. 477, 478; East Jellico Coal Co. v. Carter, Ky., 97 S.W. 768, 770: Pomeroy’s Equity Jurisprudence, Vol 5, § 2219.

See, also, Indiana & Arkansas Lumber & Mfg. Co. v. Brinkley, 8 Cir., 164 F. 963, 969, 970; Wilson v. Colorado Mining Co., 8 Cir., 227 F. 721, 727.