Grider v. Turnbow , 162 Or. 622 ( 1939 )

This is a suit to foreclose a contract by W.P. Grider against the defendant Hazel M. Turnbow, who contracted to buy a house and lots from the plaintiff for the sum of $2,300.

By this contract the vendor agreed to sell the premises for the sum mentioned, with a down payment of $300 and payments thereafter at the rate of $27.50, due and payable on the 16th of each month, until $1,500 should be paid, when the remaining $800 should be paid by the vendee, and the vendor should then give a good and sufficient warranty deed and abstract showing title. Defendant later paid $76.30 on the principal and $82.75 on the interest, and paid out the sum of $193 on painting and repairing the residence situated on the property.

After making the contract the defendant went into possession of the premises described in the contract and paid the plaintiff, to be applied on the contract as part of the purchase price of said land, as follows:

"Date of                             Paid Acct. Balance Due
payment          Int.          Paid to      Principal  $2000.00
Sept. 20, 1937  $9.44          Sept. 20, 1937  $18.06   1981.94
Oct.  16, 1937   7.16          Oct.  16, 1937   20.34   1961.60
Nov.  20, 1937   9.54          Nov.  20, 1937   17.96   1943.64
Dec.  20, 1937   7.54          Dec.  18, 1937   19.94   1923.70
Jan.  18, 1938   7.55          Jan.  18, 1938    None   1923.70
Mar.  15, 1938,  1/4 Taxes paid by W.T. Grider            17.41
                                    New Balance         1941.11

Mar.  23, 1938  16.17          Mar. 18, 1938     None   1941.11
Apr.  23, 1938   9.70 (36 da.) Apr. 23, 1938     None   1941.11
May   20, 1938   7.28 (27 da.) May  20, 1938     None   1941.11
June  27, 1938   8.37 (20 da.) June 20, 1938     None   1941.11"

The trial court found in effect that the parties had mutually rescinded the contract and the court awarded Hazel M. Turnbow, the defendant, judgment and decree against the plaintiff, W.T. Grider, in the sum of $404.55, together with costs, and ordered that the same be adjudged and decreed to be a lien against the real estate described in the contract. From this decree the plaintiff appeals.

The contract contained a time-essence clause and provided for forfeiture of all payments made in the event payments were not made as provided in the contract.

Plaintiff alleges in his original complaint, as follows:

"And plaintiff has and does by these presents declare that the said contract is at an end, and the payments thereon are rentals and stipulated damages as in said contract agreed, and that the said unpaid installments are due to this plaintiff."

The defendant pleads and contends that plaintiff not only expressly waived the time of payments in accordance with the terms of the contract but impliedly waived those provisions as a matter of law in accepting payments after they were due and in the manner in which they were accepted by him.

After the contract of sale was entered into the contract was held in escrow with the La Grande Branch of the First National Bank of Portland for a short time, and one payment was made while the contract was held at the bank. Mr. Grider testified that he then turned this entire matter over to Mr. B.A. Benham as his agent, and that Mr. Benham represented him in his entire transactions, including the arrangement with the Turnbows for the removal of the lien placed on the house. In regard to the lien that was filed on the building for the improvements that defendant made, the defendant testified that Mr. Benham told her that Mr. Grider would be satisfied if they raised the lien, that he (Grider) was mad about the lien being placed on the place, but if they could get that lien off, everything would be all right.

In the latter part of July or the forepart of August, Mr. Turnbow states that he had a conversation with Mr. Benham and that he told him when he received the money from his work he would pay the July and August interest and the principal payment for August, stating that he would receive his check about the 10th of August. He claims that Mr. Benham agreed with him that this would be satisfactory. He did not get to town until the 11th of August with his check, and, before the money could be delivered, suit was commenced. After the suit was commenced, on August 11, defendant offered to pay the interest for July and August, and the August principal, which the plaintiff refused.

Defendant paid the interest without any payment on the principal for six months, and paid three installments on the principal some time after the due date, and defendant was led to believe by Mr. Benham, the agent for plaintiff, that plaintiff was satisfied if she paid the interest.

It appears that Mr. Grider accepted partial and deferred payments without making any protest directly to defendant. Mr. Benham, the agent, made the usual endeavor to collect the payments. Soon after the plaintiff instituted this suit, the defendant served notice upon plaintiff that she

"hereby notifies you that she claims a mutual rescission of the same, and hereby offers to render possession to you of the said property. This rescission is claimed by reason of the illegal declaring of a forfeiture * * *."

Defendant contends that the plaintiff breached the contract by declaring the same at an end. On July 29, 1938, Mr. Benham wrote the defendant in part as follows:

"With the payment for the month of June, on which you just paid the interest, you owe $19.13 — for the month of July you owe your full payments, interest and principal $27.50 — these two added together makes a total of $46.63 which if not paid by August 5th, 1938, Mr. Grider will start proceedings against you."

When this suit was commenced Mr. Grider claimed there was $180.97 due him, besides a portion of the taxes for 1938. Mr. Benham's letter indicates that it was not a final notice, and perhaps that she could make a partial payment. It was not a request for payment in accordance with the contract.

The plaintiff, after giving oral consent to a postponement of the performance of the provisions of the contract in regard to payments, and waiving the strict performance of the contract and the defendant having acted on such consent and waiver, commenced suit to cancel the contract and recover the sums of $180.97 and $27.50 for each month, as rent, after August 16, 1938, together with taxes, without giving defendant any reasonable notice that if she failed to make the payments according to the contract he would declare the contract at an end and that the payments thereon would be declared as rentals and stipulated damages, or without notifying her that the time-essence clause was rehabilitated.

Plaintiff claims that this is a suit to foreclose and argues "that there is no requirement that you have to give a vendee notice that you are going to foreclose the contract."

A stipulation as to the time of payment in a contract for the sale of real property is for the benefit of the vendor and may be waived by him by accepting payments other than as specified in the contract or after they become due: Olson v. Pixler, 138 Or. 250, 6 P.2d 23; Hawkins v. Rodgers, 91 Or. 483, 179 P. 563,905; Epplett v. Empire Inv. Co., 99 Or. 533, 194 P. 461, 700.

The time-essence clause may be waived by the vendor by his conduct, and when once waived the vendor cannot have the benefit of such clause without reasonable notice to the purchaser that the time-essence clause of such contract is rehabilitated:Graham v. Merchant, 43 Or. 294, 72 P. 1088; Maffet v. Oregon Cal. R. Co., 46 Or. 443, 80 P. 489; Gray v. Pelton, 67 Or. 239, 135 P. 755.

The plaintiff vendor waived time as the essence of the contract and did not give a reasonable notice of time in which delinquencies were to be paid. He thereby breached the contract. The defendant vendee has the right to declare a mutual rescission and recover the purchase money paid under the contract and the reasonable value of permanent improvements made: Olson v.Pixler, supra; Mascall v. Erikson, 131 Or. 509, 283 P. 2;Johnson v. Feskens, 146 Or. 657, 31 P.2d 667, 107 A.L.R. 340.

Plaintiff contends, in effect, that the terms of a written contract cannot be varied by oral testimony. A party to a written contract for the sale of land, who knowingly gives an oral consent to a postponement of the performance of some material provision and accepts payments under the contract other than as specified in the contract after they become due, will not be permitted to insist, after the other party has acted on such consent and waiver, that such consent is void because not in writing, and to enforce the contract as originally made, even though time and the prompt performance of the deferred condition were made essential. The statute of frauds was not intended to aid in the perpetration of injustice:Neppach v. Oregon Cal. R. Co., 46 Or. 374, 80 P. 482, 7 Ann. Cas. 1035. As stated by Mr. Justice R.S. BEAN in that case, there is some conflict of authority as to whether a contract, required by statute to be in writing, can be altered as to the time or manner of performance by a subsequent parol executory agreement between the parties, but we think in this case, where there is an oral extension agreement and the parties acted upon such agreement by the defendant making payments after the time they were due under the contract and the plaintiff accepting the same, that the plaintiff should not be permitted to claim that the oral extension was invalid.

Plaintiff cites 4 Page on Contracts, § 2475. After a long discussion in that volume, we find at page 4379, § 2477, the following:

"* * * A written contract for the sale of land, which provides for the time of payment, may be modified by a subsequent oral contract, changing the time for making such payment."

The courts of Massachusetts make a distinction between the contract which the statute requires to be in writing and the time of performance, to which it is held the statute does not apply.

We think the stipulation in the contract as to the time of payment by the plaintiff was for his benefit and could be waived by him, and was waived by accepting several payments after the time specified in the contract. The plaintiff left all the matters pertaining to the collection of the amounts due under the contract with Mr. Benham and we think that the delay permitted by the agent Benham, and sanctioned by the plaintiff in accepting the deferred payments, had the effect of waiving strict compliance with the contract. As said by Mr. Justice MOORE inDurkee v. Carr, 38 Or. 189, 63 P. 117:

"The rule is elementary and universal that every grant of power by a principal to his agent, where no limitations are apparent, is to be construed as carrying with it, as an incident thereto, the authority to do all things proper, usual, necessary, and reasonable to carry into effect the objects and purposes sought to be accomplished by the authority conferred."

Plaintiff admits that he agreed to let the payment of January and February pass, but claims that he insisted the payments must be made up immediately afterwards.

Plaintiff contends that where the contract does not provide for improvements those placed upon the real premises without the leave or knowledge of the owner, belong to the vendor. Plaintiff cites Anderson v. Morse, 110 Or. 39, 222 P. 1083, as authority for this claim. In that case we find, at page 56 of the report, the following statement:

"In cases where a vendee in possession of the land is allowed improvements upon a strict foreclosure, the evidence must show that the land has increased in value by reason of the alleged improvements, or that the contract provided for an allowance for improvements."

In the case at bar the contract does not provide for an allowance for improvements, but the testimony shows that the land was increased in value by reason of the improvements made by defendant, so that the place could be rented for more than it could when it was sold to the defendant. Judge Knowles, the trial judge, examined the premises in question.

Plaintiff also cites Turnbow v. Keller, 142 Or. 200, 206,12 P.2d 558, 19 P.2d 1089, a suit to foreclose the vendee's rights under a contract, which plaintiffs and defendant had signed, wherein the defendant undertook to purchase from plaintiffs a parcel of real property. It was held that the testimony that Keller improved the property is fragmentary and fails to indicate that the value of the property was enhanced by anything which he did while in possession.

The case of Rynhart v. Welch, 156 Or. 48, 65 P.2d 1420, cited by plaintiff, was an appeal from a decree in favor of defendants in a suit wherein the plaintiff sought to recover for money paid and improvements made under a written contract for the purchase and sale of lands and to have the sums thus paid decreed to be a lien upon the land. Before terminating the contract the vendor wrote several letters to the plaintiff, calling her attention to her defaults and stating that unless the defaults were made good and future payments were more punctually made, she would be compelled to terminate the contract. On October 16, 1933, the vendor wrote a letter to plaintiff notifying plaintiff that she was in arrears on the payments on the contract and stated, "For these reasons, I will declare the contract null and void on November 1, 1933, unless full payments are made thereon, together with taxes." In that case plaintiff paid practically nothing during the last two prior years, and having previously been in default it was held that the plaintiff was not entitled to relief.

In the case of Atkochunas v. Gustafson, 156 Or. 126,66 P.2d 1192, also cited by plaintiff, which was a suit for a strict foreclosure of a land contract, there was no rescission of the contract as in the present case. Therefore the purchasers could not recover money paid under the contract. In that opinion, at page 127, we read:

"A few days prior to October 25, 1935, and while the defendants were in default under the contract, they surrendered possession of the property to a third party and gave notice to plaintiffs that they would make no further payments under the contract."

This, it seems, would preclude them from recovering payments they had made and was a direct repudiation of the contract. In the present case the plaintiff repudiated the contract by a written declaration that it was at an end.

In Johnson v. Feskens, supra, an opinion by Mr. Chief Justice RAND, we find, at page 662:

"It is clear from the record made in this case that in January, 1931, when defendants offered to pay plaintiffs the interest then due under the contract without at the same time offering to pay the installments then due on account of the principal, plaintiffs had the right to elect whether to rescind the contract for failure to pay the full amount then due under the contract and that, by accepting a partial payment, they elected to continue the contract in force. In making this choice of one of the two alternatives, they necessarily surrendered the other and when the later payments were made they elected to accept them rather than to rescind the contract. These payments were made and accepted up to and including July, 1932. In accepting such payments, plaintiffs surrendered the right to rescind on account of any default then or previously made. * * *"

We read further, at page 663:

"Because of the elections thus made, plaintiffs must base their right to rescind alone on defendants' failure to make any payment in October, 1932. Was this failure sufficient to entitle the plaintiffs to rescind in the absence of previous notice to defendants from the plaintiffs that the defendants would thereafter be required to strictly perform the contract? This question is answered in the negative by the decision of this court in Massey v. Becker, 90 Or. 461, 176 P. 425."

We find the following quotations on page 664:

"When the defendant wrongfully attempted to abrogate and rescind the contract, the plaintiff had the right to assent to such rescission, thereby accomplishing the same by mutual consent: 2 Parsons on Contracts, § 678; 13 C.J. § 624, p. 601; Woodard v. Willamette Valley Irri. Land Co. 89 Or. 10,173 P. 262."

"The plaintiff and defendant both having consented to a rescission of the contract, neither can base a claim thereon except in so far as is necessary to the restoration of thestatus quo. It is the rule that when a contract of sale has been rescinded by the mutual assent and agreement of the parties, the contract is at an end, and in the absence of an agreement to the contrary, the vendee not being at fault may recover back the money paid on his contract: 2 Black on Rescission, 535; 2 Warvelle on Vendors, § 826; 13 C.J. § 627, p. 602."

In the Johnson case, the court continues: "The case at bar is very similar to Olson v. Pixler, 138 Or. 250 (6 P.2d 23); * * *."

In Gray v. Pelton, 67 Or. 239, 135 P. 755, the syllabus reads:

"Where a vendor in a contract calling for payments on designated dates, and making time of the essence, clearly indicated that he intended to be lenient in the matter of payments, and did not require a strict compliance in making some of the payments, and thereby the purchaser and his assignee believed that future payments on the exact dates named in the contract would not be required, and the conduct of the vendor was consistent only with a purpose on his part to regard the contract as subsisting after the first default, he waived his right to declare a forfeiture, and to avail himself of the time clause he must give the purchaser a reasonable and specific notice to comply with his agreement and make payment."

See also Massey v. Becker, 90 Or. 461, 176 P. 425, where the syllabi read:

"4. When seller wrongfully attempted to rescind, having elected by acceptance of a payment after buyer's default to consider contract still in force, buyer had the right to assent to such rescission, thereby accomplishing it by mutual consent.

"5. Where buyer and seller both consented to rescission, neither can base claim thereon except in so far as it is necessary to restoration of the status quo; rescission by mutual agreement ending contract.

"6. Where sale contract is rescinded by mutual consent, the buyer may recover back what he has paid."

In Mascall v. Erikson, supra, we read at page 516:

"The doctrine is well supported that when the parties voluntarily agree to rescind a contract, there being no express stipulation with reference to payment or payments already made thereunder, the law will imply a promise on the part of the vendor to refund such payment or payments to the purchaser, and the latter may maintain an action to recover back the same. * * *"

And the court further holds that the vendee is accountable for reasonable rental value of the premises.

In the instant case, the contract of sale and purchase provided:

"It is further agreed that time is the essence of this contract, and in case of default of the party of the second part as to the payments herein mentioned, or as to any of the covenants contained therein, then this contract, at the option of the party of the first part, may declare this contract null and void, and in such case all the rights created or then existing in favor of the second party as against the first party shall utterly cease and determine and the right of possession of the premises and all other rights acquired by the second party hereunder shall revert and revest in the said first party * * *."

Notwithstanding that plaintiff had waived this provision of the contract, he is attempting in this suit to forfeit all payments made by the defendant and to enforce this provision of the contract which had been waived or suspended by plaintiff, and the contract is of the same force and effect as though that provision was not contained therein.

In Pomeroy on Contracts, § 396, in regard to a notice to repudiate a contract that had been waived by accepting payments after the due date, it is said:

"The notice cannot be an arbitrary and sudden termination of the transaction; it cannot put an immediate end to a pending dispute or negotiation as to the title; it must allow a reasonable length of time for the other party to perform, and if it fails in any of these respects, it may be disregarded, * * *. The notice, also, to be effectual in making the time allotted an essential element of the performance, must be express, clear, distinct and unequivocal."

We find in 2 Black on Rescission and Cancellation, (2d Ed.) 1127, § 440, as follows:

"* * * But to effect a rescission (as distinct from a forfeiture under a clause in the contract giving that right) the vendor must return to the vendee the amount of the purchase money which he has paid, plus the value of any permanent improvements which he may have placed upon the land, less the damages which have been occasioned to the vendor by the vendee's failure to perform the contract."

In 3 Black on Rescission and Cancellation, (2d Ed.) 1539, § 636, we find:

"In the accounting which should take place upon the rescission or cancellation of a contract for the sale of land, the vendee, having been in possession, will ordinarily be entitled to a proper allowance for the expense incurred by him in making valuable and permanent improvements. Or he may physically remove from the premises improvements which he has placed thereon, if this is practicable and if it can be done without injury to the freehold, * * *."

The contract having been terminated, the parties should be placed in status quo, as far as possible.

The court allowed plaintiff $15 per month rental for the occupancy of the house by defendant. We think this was a fair and equitable allowance.

The court's decree provided: "That upon payment of said sum by the plaintiff to the defendant, with her costs and disbursements as taxed herein, that she shall surrender immediately the possession of said premises to the plaintiff, * * *." The decree should be changed so as to require defendant to immediately surrender the possession of said premises to plaintiff. This slight change, however, should not vary the judgment in the matter of costs and disbursements, and the defendant is entitled to her costs and disbursements upon this appeal and in the trial court. Except for this slight modification, the decree of the circuit court should be affirmed.

KELLY, J., concurs in this dissent.