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possession, or if there is no immediate right of possession, the question appears to turn on the value of the use of the building as compared with the value of the use of the land. If the land was of little or no value to the purchaser without the building, so that the building constituted the chief element of value, it is considered that the destruction of the building before delivery of possession will excuse the purchaser from performing his contract, but otherwise if the building was a mere appurtenance and not the chief inducement of the purchase. 50 But these rules are not universally admitted. Thus, in a case in Kentucky, it is held that the fact that a storehouse on land contracted to be sold was burned before the vendee was entitled to possession or to the delivery of the deed will not relieve him from his contract obligation, where it does not appear that the burning was caused by any act or omission of the vendor.51 In California (and some other western states) there is a provision in the code that a party may rescind if the consideration, before it is rendered to him, fails in any material respect; and under this rule it is held that one who has contracted to purchase lands with buildings thereon, and who was not in possession, may rescind upon the destruction of the buildings before the consummation of the contract. 52

The question of rescission on account of the nonexistence or the exhaustion of the subject-matter has an interesting application in the case of mining leases. These leases often contain a covenant to pay a fixed rent or royalty irrespective of the amount of ore produced, or else a covenant to mine a certain minimum quantity each year, and to pay a royalty on that amount annually, whether mined or not. Whether or not the lessee must continue to pay the stipulated rent or royalty after it is discovered that

Ely v. Ely, 80 Ill. 532; Womack v. McQuarry, 28 Ind. 103, 92 Am. Dec. 306.

49 Smith v. McCluskey, 45 Barb. (N. Y.) 610.

50 Bautz v. Kuhworth, 1 Mont. 133, 25 Am. Rep. 737.

51 Henderson v. Perkins, 94 Ky. 207, 21 S. W. 1035.

52 Conlin v. Osborn, 161 Cal. 659, 120 Pac. 755. And see City of Paris Dry Goods Co. v. Spring Valley Water Co., 10 Cal. App. 212, 101 Pac. 678.

there is no ore in the mine, or after its exhaustion, depends primarily on the terms of the particular lease. But a broad general rule may be stated as follows: When the lease imports a grant of the minerals in place, and is made with reference to a known and ascertained body of ore or mineral contents, the lessee takes the risk of the quantity, just as he does of the quality. That is, he assumes the risk of a premature exhaustion of the ores. But if it appears from the terms of the lease, or from attending circumstances, that both the existence and quantity of minerals in place are in doubt, neither party giving any promise or guaranty on this point, but leaving the question to be determined by the operations under the lease, then the nonexistence or subsequent exhaustion of the minerals will terminate the lessee's liability."

§ 161. Failure of Consideration Resulting from Operation of Law or from Change in the Law.-There may be a failure of consideration, such as to warrant the rescission of a contract, when performance of it has become legally impossible on account of the enactment of a statute or ordinance or of a change in the existing law. Thus, where one takes a lease of property for the purpose of setting up a meat market in the building thereon, but the maintenance of such markets in the district where the premises are situated is forbidden by a city ordinance, he may rescind, and his right to do so is not defeated by the fact that he failed to apply to the city council for a permit." So, where land in a city is conveyed for the purpose of opening a street, under an agreement between the grantor and grantee, the sole consideration being the benefit to be derived by the grantor from the street, and an act of the legislature prohibits the parties from laying out the street, and a different plan is adopted by the authorities, a reconveyance will be ordered, as the object of the conveyance has failed."

53 Timlin v. Brown, 158 Pa. 606, 28 Atl. 236; Harlan v. Lehigh Coal & Nav. Co., 35 Pa. 287; Williams v. Guffy, 178 Pa. 342, 35 Atl. 875; Cook v. Andrews, 36 Ohio St. 174; Ridgely v. Conewago Iron Co. (C. C.) 53 Fed. 988.

54 Altgelt v. Gerbic (Tex. Civ. App.) 149 S. W. 233.

55 Quick v. Stuyvesant, 2 Paige (N. Y.) 84.

In another case, plaintiffs had purchased imported laces from defendant and paid for them, but the laces were subsequently confiscated by the government for non-payment of customs duties, and it was held that the plaintiffs were entitled to rescind the contract and demand repayment of the price.50

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But on the other hand, where money was paid to the master of a privateer for a share of the prizes which she might take on an intended voyage, and before the commencement of the cruise news of peace arrived, and the cruise was abandoned, it was held that the money could not be recovered back as on a failure of consideration, because, by the return of peace, the enterprise had become unlawful, and each party might equally have foreseen the event. So in a case in Kentucky, the fact that the rental value of leased property, for the purposes named in the contract, was destroyed by the passage of a law prohibiting the sale of intoxicating liquors in the county, was held not to entitle the lessee to have the contract canceled, as the parties must have known that the right to sell liquor on the premises depended on the law.58 In another case, one granted land to a railroad company in consideration of its agreement to furnish him with annual passes over its lines. Performance of this agreement having become unlawful under an act of Congress prohibiting the issue of such passes, and the property having in the mean time greatly increased in value, it was held that rescission of the conveyance should be denied.59

§ 162. Instrument Becoming Functus Officio by Performance of Conditions.-"It may be laid down as a general rule that where any description of writing evidencing liability on the part of the maker, whether it be commercial paper, a specialty, or other form of legal obligation, has become extinguished or discharged by subsequent events, as

56 Hamrah v. N. N. Maloof & Co., 127 App. Div. 331, 111 N. Y. Supp. 509.

57 Woodward v. Cowing, 13 Mass. 216.

58 Baughman v. Portman, 11 Ky. Law Rep. 181. And see Fred Miller Brewing Co. v. Fleming (Tex. Civ. App.) 143 S. W. 300.

59 Cowley v. Northern Pac. Ry. Co., 68 Wash. 558, 123 Pac. 998, 41 L. R. A. (N. S.) 559.

by payment or otherwise, so that the writing has become functus officio, but where its existence in an uncanceled state might subject the maker to vexatious litigation at a distance of time when the evidence of such extinguishment or discharge may have been lost, or so obscured as to render the party less able to repel the claim, in all these cases a court of equity will extend its preventive justice to call out of existence an instrument which ought not to be used or enforced, and when it is against conscience to permit the party holding to retain it." 60 On this principle, where the plaintiff, being the owner of certain land, entered into a contract with certain persons to form a corporation and sell such land and collect certain notes, receiving a portion of the proceeds thereof for their compensation, and as a matter of convenience the owner of the land delivered a deed to such persons, but the corporation was never formed and the project was abandoned, and the deed with the notes returned to the owner, it was held that he was entitled to a decree canceling the contract and the deed.1 Similar relief is proper where a note and mortgage have been executed and placed in the hands of an agent on his undertaking to secure a loan for the principal, but the agent fails in his endeavor and no money is ever received by the principal,62 or where a contract which has not been performed, the parties having failed to comply with their stipulations, remains a burden on the title to real property. But it is also a general principle that courts of equity will not decree the cancellation of instruments on the ground of their having been paid or performed, so long as the party seeking relief has an adequate remedy at law. On this ground it was held, in a case in Massachusetts, that a bond given by plaintiff to defendant on the dissolution of a partnership between them, conditioned on

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60 Garrett v. Mississippi & A. R. R. Co., 1 Freem. Ch. (Miss.) 70. And see Wiard v. Brown, 59 Cal. 194; Williams v. Shaver, 100 Ark. 565, 140 S. W. 740.

61 Bogard v. Sweet, 17 Okl. 40, 87 Pac. 669.

62 Thielen v. Randall, 75 Minn. 332, 77 N. W. 992.

63 Blight v. Banks, 6 T. B. Mon. (Ky.) 192, 17 Am. Dec. 136.

64 Butler v. Durham, 2 Ga. 413. And see Carter v. Ware Commission Co., 46 Tex. Civ. App. 7, 101 S. W. 524; Citizens' Bank of Senath v. Douglass, 178 Mo. App. 664, 161 S. W. 601.

the performance by the plaintiff of the contracts which had been entered into by the firm with their customers, would not be canceled in equity on the ground that the condition had been performed, and that the plaintiff's surety refused to deliver up the money deposited with him as security until the bond was discharged, since the plaintiff might perpetuate his evidence of performance (under a statute in force in that state), and since the defendant's right to retain the bond was not affected by plaintiff's contract with his surety.

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§ 163. Same; Payment or Discharge of Obligation.Where a debt evidenced by a promissory note, a bond, a mortgage, or other security has been fully paid or otherwise discharged, but the instrument remains outstanding, so as to constitute an apparent liability of the maker and threaten to cause him trouble, he may obtain relief in equity by a decree for its surrender and cancellation. Thus, where an insurance company is not entitled to be subrogated to any of the mortgagee's rights under the mortgage, upon paying him the amount of the mortgage after a loss, and taking an assignment of the mortgage and notes secured by it, the mortgagor may maintain an action against the company to compel the cancellation of the mortgage on the ground that the debt has been paid.o7 Even where the holder of the outstanding obligation claims that there is a balance yet unpaid, if the maker of the obligation alleges full satisfaction of it, this issue may be tried and determined in an action for its cancellation.68 And where the claim is made that an obligation for the pay

65 Brown v. Boyd, 158 Mass. 470, 33 N. E. 568.

66 Hartley v. Matthews, 96 Ala. 224, 11 South. 452; Travelers' Ins. Co. v. Jones, 16 Colo. 515, 27 Pac. 807; Fitzmaurice v. Mosier, 116 Ind. 363, 16 N. E. 175, 19 N. E. 180, 9 Am. St. Rep. 854; Rickle v. Dow, 39 Mich. 91; Hoberg v. Haessig, 90 Mo. App. 516; Canon v. Ballard, 62 N. J. Eq. 383, 50 Atl. 178; Overall v. Avant (Tenn. Ch. App.) 46 S. W. 1031; Wofford v. Thompson, 8 Tex. 222. But compare Mercantile Bank of Norfolk v. Pettigrew, 74 N. C. 326, holding that one who has paid a note without taking it up, or taking a receipt or other acquittance therefor, cannot maintain an action to have the note canceled.

67 Loewenstein v. Queen Ins. Co., 227 Mo. 100, 127 S. W. 72. 68 Miller v. Rouse, 8 Minn. 124 (Gil. 97).

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