Under the Act of April 7, 1874, c. 80, § 2, the review by this
Court of judgments of the Supreme Court of a Territory is confined
to determining whether the facts found by the court below sustain
The facts found are certified to this Court by the territorial
Supreme Court either by adopting the finding of the trial court or
by making separate finding of it own.
Page 229 U. S. 213
One holding in escrow an agreement and money to be paid to one
of two parties according to the term of the agreement acts at his
peril in dealing with either party without the consent of the
other, and if the party to whom he pays the amount deposited is not
entitled thereto, he is liable to the other party.
An endorsement on the outside of the envelope containing the
escrow, made by an officer of the bank acting as escrow holder,
does not protect the bank if it is not in accordance with the
escrow agreement itself.
One cannot plead ignorance of a fact of which he has notice as
an excuse for violating rights of parties whom he is bound to
The fact that no officer of the bank has read an escrow
agreement does not relieve the bank of responsibility for its
action based on a separate memorandum made by one of its officers
and which does not express the terms of the agreement.
An extension verbally agreed to for completing the record title
to the property where the contract to convey expressly provides for
such an extension without specifying its length in case defects are
developed is not a parol variation or modification of a written
In this case, a bank acting a escrow holder with notice of the
contract, having, by paying over to one party, failed in its duty
to act impartially, it is liable to the other party who was
entitled to the money under the contract.
16 N.M. 689 affirmed.
The facts are stated in the opinion.
Page 229 U. S. 215
MR. JUSTICE PITNEY delivered the opinion of the Court.
This action was brought in the first instance in the District
Court of Chaves County, in the then Territory of New Mexico, by
Davisson, as plaintiff, against the Citizens National Bank of
Roswell and Mrs. Owens, as defendants. He set up a claim to be paid
$5,000 as commissions on a sale of real and personal property made
by him as broker in her behalf to one C. C. Berryman, claiming a
right to recover against the bank on the ground that Mrs. Owens had
given to him a written order directed to the bank for payment of
the $5,000 out of money of hers that was in the hands of the bank.
Mrs. Owens answered for herself and others as executors of Solon B.
Owens, deceased, denying liability to Davisson on the ground that
the sale in question had not been consummated, and, by a
cross-complaint against the bank, she set up that a contract of
sale was made by her in behalf of the executors of Solon B. Owens,
deceased, with Berryman, and, upon its execution, the sum of
$9,173.32 was, by agreement of the parties, deposited in the bank,
together with a copy of the agreement; that, after examination of
the title by Berryman, he required the executors to procure an
order of court authorizing them to sell and convey the land,
whereupon it was agreed that the time for the conveyance of the
title should be extended until such date as the executors should be
able to obtain the order so required, and that, in the meantime,
Berryman should enter into
Page 229 U. S. 216
possession of the land, and he did go into possession thereof;
that afterwards, Berryman abandoned the possession of the land and
removed to his former home in Arkansas, and because of his not
being within the jurisdiction of the territory, the executors could
not obtain service of process upon him, nor sue him for specific
performance of the contract of sale; that, under the provisions of
the contract, the executors had elected to declare said $9,173.32
forfeited by the failure and refusal of Berryman to carry out the
contract; wherefore judgment was prayed against the bank as trustee
for the executors with respect to the money in question. The bank
answered both the complaint and the cross-complaint, not denying
the making of the contract between Mrs. Owens and Berryman, but
denying that it was a party thereto or had any knowledge thereof or
concern therewith, and asserting that the $9,173.32 was deposited
with the bank by Berryman in escrow, and subject only to the terms
of a written memorandum or agreement signed by the bank's cashier,
and that, because these terms had not been complied with by Mrs.
Owens, the responsibility of the bank to her had been terminated,
and therefore the bank had paid the whole of the sum of $9,173.32
to Berryman in compliance with his demand.
Upon the issues thus joined, the parties proceeded to trial
before the judge of the district court, without a jury, who
rendered judgment in favor of the bank, dismissing both the
complaint and the cross-complaint.
Davisson and Mrs. Owens appealed to the supreme court of the
territory, which court reversed the judgment and remanded the
record to the district court with instructions to reinstate the
action and proceed in accordance with the views expressed in the
opinion. 15 N.M. 680. The grounds of decision, briefly, were that,
by the escrow agreement, the bank became agent for both parties,
that the memorandum did not authorize it to pay over
Page 229 U. S. 217
the money to either party, and that, in taking sides and making
payment to Berryman, it acted at its peril, and should be held
responsible to Davisson and Mrs. Owens if, upon a retrial, they
should sustain their right to the money as against Berryman.
The case was accordingly brought on again to trial before the
district court, without a jury, with the result that judgment was
rendered against the bank, in favor of Davisson, for $5,000 and
interest (the amount of his commissions), and in favor of Mrs.
Owens and the other executors of the estate of Solon B. Owens,
deceased, for the residue of the $9,173.32. Upon appeal by the bank
to the supreme court of the territory, this judgment was affirmed,
16 N.M. 689, and the bank appealed to this Court.
Under the Act of April 7, 1874, c. 80, § 2, 18 Stat. 27, 28, our
review is confined to determining the question whether the facts
found by the court below sustain the judgment. And these facts are
to be certified to us by the territorial supreme court, either by
adopting the findings of the trial court or by making separate
findings of its own. Stringfellow v. Cain, 99 U. S.
, 99 U. S.
-614; O'Reilly v. Campbell, 116 U.
, 116 U. S. 421
Haws v. Victoria Copper Mining Co., 160 U.
, 160 U. S. 312
Gildersleeve v. New Mexico Mining Co., 161 U.
, 161 U. S. 577
Apache County v. Barth, 177 U. S. 538
177 U. S. 542
177 U. S. 547
Crowe v. Trickey, 204 U. S. 228
204 U. S. 235
Eagle Mining Co. v. Hamilton, 218 U.
; Zeckendorf v. Steinfeld, 225 U.
, 225 U. S. 448
Rosaly v. Graham, 227 U. S. 584
227 U. S.
The supreme court of the territory, in affirming the judgment of
the district court resulting from the second trial, adopted the
findings of that court and supplemented them with certain findings
of its own. From these findings and from the admissions of the
pleadings, the essential facts of the case may be summarized as
On August 21, 1908, Mrs. Owens, residing at Roswell,
Page 229 U. S. 218
Chaves County, New Mexico, acting for herself and in behalf of
others who were her co-executors of the estate of her deceased
husband, Solon B. Owens, made an agreement in writing with C. C.
Berryman of Arkadelphia, Arkansas, for the sale to him of certain
lands, belonging to the estate situate in Chaves County, containing
360 acres, with the livestock and other personal property thereon.
Davisson negotiated the sale as broker, and was entitled to a
commission of $5,000 for his services if the sale should be finally
The price agreed to be paid by the purchaser was $80,000,
payable $10,000 in cash upon the making of the agreement (receipt
whereof was acknowledged), $12,000 by assuming payment of a note
for that amount held by an insurance company in Ohio and not yet
due, and the balance to be secured by five notes of $11,600 each,
falling due September 10, 1909, and in the four successive years
thereafter. The property was to be clear of all encumbrance
excepting the $12,000 mortgage. By the terms of the agreement, the
party of the first part, within ten days from its date (that is, on
or before August 31), was to furnish the party of the second part
at Roswell a complete abstract of title showing a good merchantable
title in the party of the first part; the purchaser was to have
until September 10th to examine the abstract, and if it showed a
good title, the transaction was to be closed at Roswell on or
before September 10th by the delivery of a warranty deed to the
purchaser, he paying the consideration according to the terms of
the agreement. There were the following additional clauses, which
should be quoted in full:
"6th. If, upon examination of the said abstract of title, it is
found that the title is not a good merchantable title, then any
objections made to said title shall be pointed out by the party of
the second part, and then the party of the first part shall have
ten days in which to cure said objections. Should it prove, upon
Page 229 U. S. 219
of said abstract, that the said title is not good, and same
cannot be made good within such reasonable time, then it shall be
the duty of the party of the first part to perfect said title at
their expense promptly, in accordance with the requirements of the
party of the second part, within the time stated, and if the party
of the first part fails, neglects, or refuses to perfect said title
in accordance with the requirements of the party of the second
part, then the party of the second part shall have the right to
perfect said title at the expense of the party of the first part,
who shall repay at Roswell, New Mexico, such sum of money as is
expended by the party of the second part in perfecting said title,
and if, upon examination of said title, it shall be shown that the
title to the said property is not good and cannot be made good,
then in such event this sale shall be annulled, and the said
$10,000 paid as purchase money hereinbefore provided for shall be
returned by the party of the first part to the party of the second
"7th. Now, if the party of the first part complies with this
contract and furnishes the abstract as provided for, and the title
is shown to be good or can be made good, and tenders to the party
of the second part at Roswell, New Mexico, a warranty deed as
provided for, and the party of the second part shall fail, neglect,
or refuse to comply with this contract, shall fail to accept deed
and execute the said notes as provided for, then, in such event,
the party of the second part shall forfeit the said $10,000 paid at
the option of the party of the first part, or at his option, and
the party of the first part shall have a cause of action against
the party of the second part, enforceable in the courts of Chaves
County, New Mexico, for a specific performance of contract."
"8th. Should the party of the second part, upon examination of
said abstract, find the title to the said property good, and within
the time stated stand willing and
Page 229 U. S. 220
able to consummate this deal, to pay the balance of purchase
money, and execute the notes as above provided for, and the party
of the first part shall fail, neglect, or refuse to execute said
warranty deed in accordance with this contract, then in such event,
the party of the second part shall have a cause of action against
the party of the first part, enforceable in the courts of Chaves
County, New Mexico, for a specific performance of contract."
"9th. Possession of said property shall be given on or before
the 10th day of September, 1908."
Upon the making of this written contract, it was folded and
placed in an envelope, together with a check made by Berryman and
payable to Mrs. Owens for the sum of $9,173.32, and the envelope
and its contents were taken by Mrs. Owens, Davisson, and Berryman
to the Citizens National Bank of Roswell, to be held by the bank
"in escrow" until September 10th, pending the furnishing an
abstract of title, a favorable report thereon, and final
settlement. With the consent and approval of all the parties, a
memorandum was indorsed upon the envelope in the following
"Check enclosed to be held in escrow until September 10, when
final settlement is to be made. Deed and abstract to be placed in
escrow with this. Abstract to be forwarded to Citizens Bank &
Trust Company, Arkadelphia, Arkansas, for examination. No money to
be paid over until abstract is approved by purchaser's attorneys.
(Signed) J. J. Jaffa, Cashier."
Up to September 10th, the Owens estate had not made good title
to Berryman, and on or about that date, it was orally agreed
between them that the estate should have thirty or forty days' time
in which to secure an order of court, and in consideration of this,
Berryman, who was stopping on expense at the hotel in Roswell, was
put in possession of the property on September 10th, and he
remained in possession thereof, exercising acts of ownership
thereon until September 22d on which date (the
Page 229 U. S. 221
time agreed upon for securing an order of sale through the
courts not having yet expired) Berryman, without just cause,
repudiated and abandoned the contract and departed from the
territory. Meanwhile, and in consideration of the verbal
arrangement of September 10th, the estate took immediate steps at
considerable expense to secure the required order of court, and did
in fact secure it on October 5th. But at some time after September
10th (the precise date does not appear), Berryman demanded of the
bank the return of his check. The bank had been notified by
Davisson of the verbal agreement of September 10th extending the
time in which to perfect the title to the land, but had no other
knowledge of this, and the granting of this extension was denied by
Berryman. The bank complied with his demand and returned to him the
check of $9,173.32, or its equivalent. It appears that no officer
of the bank ever read the contract of sale or knew of its terms,
and the bank, so far as appears, had no knowledge of what had taken
place between Mrs. Owens and Berryman after the contract and check
were left with it, except for Davisson's notification respecting
the verbal arrangement made on September 10th. After the bank had
turned over to Berryman the check or its equivalent, Mrs. Owens and
Davisson demanded from the bank their respective shares of the
money, and, the demands not being complied with, the present action
resulted. Berryman, being absent from the territory, was not joined
as a party.
The fundamental proposition that underlies the whole argument
for the appellants is that the bank had no concern with anything
beyond the terms of the escrow, as manifested in the written
memorandum indorsed upon the envelope. But this memorandum is
evidently not a complete expression of the agreement between the
parties, and indeed is unintelligible except by reference to the
contract of sale. It does not mention the names of the
Page 229 U. S. 222
parties or either of them; does not specify what "settlement" is
to be made, nor where; does not state by whom "deed and abstract"
are to be placed in escrow, nor when, nor for what purpose. Above
all, and more important for the present purpose, it does not either
state or intimate what is to be done with the check or money if
settlement is not made on September 10th, or if abstract is not
"approved by purchaser's attorney."
It is clear that the instrument of August 21st came into
existence as a binding contract between the parties thereto at, if
not before, the time it was lodged with the bank. We say this
notwithstanding the ambiguity of the findings in this regard, for
the supreme court, after having stated that the parties "entered
into" the contract, afterwards stated that "the contract itself was
never delivered to either of the parties, other than being placed
in escrow." Since the making of the contract was clearly averred in
both the complaint and the cross-complaint, and was not denied by
the bank in its answer, it followed, under the local practice
(Comp.Laws, N.M. 1897, § 2685, subsec. 67), that, for the purposes
of this action, the averment must be taken as true.
And, on general principles, the findings are to be interpreted
in the light of the issue. Reynolds v. Stockton,
140 U. S. 254
140 U. S. 268
and cased cited.
Therefore the deposit of the agreement and check with the bank
was not technically an "escrow," in the sense that the agreement
was not to take effect until performance of the condition. In the
light of all the facts of the transaction, as shown by the
findings, it is clear that the parties treated the agreement as in
force between them. And the terms of the memorandum indorsed on the
envelope are consistent with this.
The contract of August 21, 1908, being in force as a contract
between the parties, it is plain that the memorandum indorsed upon
the envelope was not intended to modify its provisions.
Page 229 U. S. 223
Upon the whole case, we are clear that the effect of the deposit
of the contract and check with the bank was to constitute it a
custodian or stakeholder for the benefit of both parties, holding
the money without right or interest in it, bound above all things
not to take sides between the parties, and answerable ultimately to
the one or the other, according to their respective rights as
The indorsement upon the envelope was a mere memorandum, not
containing any clear expression respecting the agreement of the
parties and evidently unintelligible unless read in connection with
the contract of sale. Quite as manifestly, the deposit had no
reason for existence except in aid of that contract, and as a
protection to both contracting parties.
The fact that no officer of the bank read this contract or knew
of its terms is of no avail to the bank. By the very circumstances
of the deposit, it was put upon notice that it was assuming a duty
that could not be fully understood or fairly performed without a
knowledge of the contents of the contract; it had possession of
that instrument, with full opportunity to examine it; except for
its own negligence, it would have known the terms thereof. To
permit it now to set up its own ignorance as an excuse or
justification of its conduct in violating the rights of one of the
parties to the contract would be to permit it to take advantage of
its own wrong.
Berryman's check to the order of Mrs. Owens for $9,173.32,
having been deposited as a substitute for the cash payment of
$10,000 called for by the agreement of August 21, was, of course,
subject to be forfeited under the terms of the agreement as above
recited in the event that Berryman failed to comply with his
The facts found show that, while the vendors were doing what he
had required them to do, and, so far as appears, all that they were
called upon to do, to make a
Page 229 U. S. 224
good title under the contract, he repudiated and abandoned it
without just cause, gave up possession of the property, and
departed from the territory. On familiar principles, this absolved
the Owens' estate from any further performance of conditions
precedent on their part. Roehm v. Horst, 178 U. S.
, 178 U. S. 8
178 U. S. 16
cases cited; O'Neill v. Supreme Council,
70 N.J.L. 410;
Holt v. United Security Life Ins. Co.,
74 N.J.L. 795,
It is contended that the verbal arrangement made between the
Owens executors and Berryman on or about September 10th for an
allowance of time within which to procure the court order was an
attempt to vary the written contract, and that this could not be
done without writing, because of the statute of frauds.
22 How. 28, 63 U. S. 42
9 Wall. 254, 76 U. S.
Without stopping to inquire as to the bearing of the statute, a
sufficient answer to this point is that the verbal arrangement of
September 10th was not variant from, and therefore did not have the
effect of modifying, the written agreement of August 21st. That
agreement did not call for the passing of title on or before
September 10th unless the abstract showed a good title; if it did
not, and objections were pointed out by the purchaser, the vendors
were to have at least ten days in which to cure his objections, and
if the title could not be made good "within such reasonable time"
(evidently referring to the ten days),
"then it shall be the duty of the party of the first part to
perfect said title at their expense, promptly, in accordance with
the requirements of the party of the second part, within the time
stated, and if the party of the first part fails, etc., to perfect
said title in accordance with the requirements of the party of the
second part, then the party of the second part shall have the right
to perfect said title at the expense of the party of the first
part, who shall repay,"
Page 229 U. S. 225
The contract did not fix any specified time upon the expiration
of which Berryman was entitled to treat it as being at an end. It
foresaw possible delays respecting the perfection of the title, and
contemplated a verbal agreement allowing to the vendors a
reasonable time for this purpose. The verbal arrangement, allowing
to the executors "thirty or forty days' time in which to procure an
order of court," was in effect a "stating of time" by Berryman
within which his "requirements" should be complied with, as
provided by the sixth paragraph of the written agreement.
That instrument stated what should be deemed sufficient ground
for an annulment of the sale, and a return to Berryman of the
$10,000, paid on account of the purchase money, and did not set any
time limit, the language being:
"And if, upon examination of said title, it shall be shown that
the title to the said property is not good and cannot be made good,
then, in such event, this sale shall be annulled, and the said
$10,000 paid as purchase money hereinbefore provided for shall be
returned by the party of the first part to the party of the second
Berryman, having himself repudiated the contract before any
default was made by the vendors, thereby dispensed with a tender or
further performance on their part, and forfeited to them the money
The bank, with fair notice of this and in violation of its duty
of acting impartially between the parties, paid the money over to
Berryman, and thereby became liable to respond to the executors, in
whose behalf the contract was made by Mrs. Owens and who were
represented by her in this action.
It follows that the facts fairly sustain the judgment of the
court below. Upon this appeal, no controversy is raised as between
Davisson and the executors.