The rule of decision is not to construe promises as independent unless the nature of the contract or the surrounding circumstances compel a contrary inference. In other words, interpretation favors the conclusion of an agreed exchange of performance as the true intent of the parties unless such a construction does violence to the language employed in the light of known facts and circumstances. Covenants are to be construed to be either dependent or independent of each other, according to the intention and understanding of the parties and the common sense of the case.
Defendant seller was a local agent for a land grant company at the time of the contract but without authority to execute a deed on its behalf. Plaintiff purchaser, desiring to purchase a small tract of land and to construct a building thereon in which to conduct business, negotiated with the seller. The contract in question resulted. It embodied mutual covenants and reflected the purchaser's plan for financing both the purchase of the site and the construction of the building. Upon defualt of defendant, the purchaser filed an action for damages and breach of contract. The trial court entered judgment in favor of the purchaser. On appeal, the court affirmed on condition that the purchaser entered a remittitur.
Are plaintiff's promise to give a mortgage to secure the promised loan and the defendant's promise to make the loan independent covenants of the contract?
When we apply it to the situation disclosed by the contract in question, interpreted in the light of the findings made, we are compelled to hold with the trial court that the mutual covenants are independent of each other. It was well known to both parties that the deed must go to Amsterdam in the Kingdom of the Netherlands for execution by proper officers of the corporate grantor and that a considerable period would "necessarily elapse before said deed could be delivered to the plaintiff". While it may be said to have been within the contemplation of the parties that by expedient passage and return, a delivery could occur before the defendant was called upon to perform by depositing the loan in the bank agreed upon; nevertheless, and necessarily, the parties must have known that the day for performance by defendant might arrive before the plaintiff would be in a position to give the promised mortgage following delivery of his deed upon its return from abroad.