Davis v. C. E. Downie Investment Co.

38 P.2d 215, 179 Wash. 470, 1934 Wash. LEXIS 775

• Court: Washington Supreme Court
• Decided: December 3, 1934
• Docket: No. 25138. En Banc.
• Status: Published

Opinions

Tolman, J.

On March 25,1927, respondent, as vendor, entered into an executory contract with the appellant, as vendee, for the sale and purchase of certain real estate in King county. The written contract provided for the payment of the purchase price in installments, and for the delivery of a deed to the ven-dee upon payment of the last installment. Time was made of the essence of the contract, and it was further provided therein that the contract might he cancelled and the vendee’s rights forfeited in the event that any of the terms of the contract were breached by it.

The final payment became due by lapse of time according to the terms of the contract on March 25,1932; and in addition to the principal sum, there was also interest due, and two years taxes, which the contract required the vendee to pay, remained unpaid, past due and delinquent. The contract thus being fully matured by lapse of time, on May 2, 1932, the vendor in writing notified the vendee of an election to forfeit unless the amounts due were paid on or before May 12, 1932. The terms of the notice, so far as here important, are:

“You are hereby notified that you are in default . . . in that you have failed to pay the taxes, interest, and the principal payment due March 25, 1932.

“You are further notified that unless you pay said sums on or before May 12, 1932, the seller will elect and does hereby elect to declare a forfeiture and cancellation of said contract and of all of your rights thereunder.”

Nothing was done by either party following the service of this notice. The vendor took no steps to regain possession of the property or to exclude the vendee therefrom, nor did she attempt to exercise any dominion over it, and the vendee took no steps to cure its default or to comply with the terms of the contract in any way, or at all. No deed from the vendor to the vendee was tendered on May 12, 1932, or at any time prior to August 5, 1932. On the last mentioned date, the vendor tendered to the vendee a good and sufficient deed, and demanded the payment of the balance due under the contract. Again nothing was done by the vendee, and in a few days time this action was instituted. In the complaint, the contract was pleaded, the so-called notice of forfeiture was pleaded, and, in addition, it was alleged:

11 That plaintiff has offered and tendered conveyance of said property to defendant as in said contract provided and has demanded of the defendant payment of the balance due under said contract.”

The prayer was that the contract be cancelled and terminated, that defendant be decreed to have no right, title or interest in or to the real property, and for general relief.

To this complaint, the appellant answered, admitting the service of the so-called notice of forfeiture on May 2, 1932, and

“Admits that thereafter plaintiff demanded of defendant payment of the balance due under said contract and tendered a deed to the defendant.”

All other allegations of the complaint were denied, and it was affirmatively pleaded as a defense: (1) That the time had been extended for the payments due under the contract; (2) that the vendor did not tender to the defendant any deed to said premises on or prior to May 12, 1932; and (3) it was pleaded:

“The plaintiff waived the notice of forfeiture which had been given to this defendant on May 2, 1932, and on or about said August 5, 1932, demanded from the defendant the balance due under said contract, notwithstanding that said sums were not then due, and tendered a conveyance of said property to this defendant in the form of a deed from the First National Bank of Seattle; that such demand constituted an election on the part of the plaintiff to waive said notice of forfeiture, and the same has been waived by the said plaintiff. ’ ’

An alternative cross-complaint was also interposed, which pleaded that, if the plaintiff by making the demand for the balance of the purchase price on August 5, 1932, and then tendering a deed, did not thereby waive the notice of forfeiture theretofore given,

“ . . . then the defendant hereby elects to treat the said contract as mutually rescinded by reason of the acts of the plaintiff set forth in the first and second affirmative defenses of this answer, all of which allegations are hereby made a part hereof as though set forth at length herein. ’ ’

The affirmative defenses and the cross-complaint were attacked by motion to strike, and in due course the cross-complaint was ordered stricken; but, as we shall see, the ruling is not now of vital importance, because it failed to state a cause of action.

A trial was had on the merits, and a judgment followed terminating the contract and divesting the defendant of all right, title or interest in the property, forfeiting all payments theretofore made by the ven-dee, and quieting title to the property in the plaintiff. From that judgment, this appeal is prosecuted.

Stated as briefly as possible, it thus appears and must be constantly kept in mind that the contract here in issue was fully matured by lapse of time, and that time was expressly made of the essence of the contract; and further, that the contract, by its terms, gave to the vendor the privilege of electing to forfeit all installments paid in the event of default in making any payment when due.

It is well settled, of course, that, under such conditions, when all payments have matured, the vendor is under the duty of tendering a deed, or performance on his part, before the vendee can be put in default. Stein v. Waddell, 37 Wash. 634, 80 Pac. 184; Bruggemann v. Converse, 47 Wash. 581, 92 Pac. 429; Tacoma Water Supply Co. v. Dumermuth, 51 Wash. 609, 99 Pac. 741; Christy v. Baiocchi, 53 Wash. 644, 102 Pac. 752; Reese v. Westfield, 56 Wash. 415, 105 Pac. 837, 28 L. R. A. (N. S.) 956; Gottschalk v. Meisenheimer, 62 Wash. 299, 113 Pac. 765, 115 Pac. 79; Gibson v. Rouse, 81 Wash. 102, 142 Pac. 464.

Consequently, it follows that the so-called notice of forfeiture served on May 2, 1932, without the tender of a deed by the vendor at the time fixed therein for the payment, became ineffectual as a notice of forfeiture, and ineffectual for any purpose unless acted upon in some way by one or the other of the parties to be affected thereby. It does not appear from this record that either party acted upon the notice referred to.

It is quite plain from the issues tendered by the appellant in the court below that it did not tender payment, nor did it tender back the right to possession, the title insurance which it held, or in any wise acquiesce in the notice or recognize it in any way. As appears from the record, it kept absolute silence with respect to this notice, did not change its position because thereof, and awaited further action on the part of the vendor. Nor did the vendor do any act under the notice of May 2, 1932. She did not seize possession of the property, oust the vendee therefrom, take possession of escrow documents, or make any move whatever to change her position on account of, or because of, the giving of the notice. It would seem, therefore, that the notice of May 2, 1932, was wholly abortive; that the contract was left in full force and effect; that the vendee might thereafter at any time have cured its default by tendering payment; and that the vendor might thereafter at any time proceed to put the vendee in default by tendering a deed and demanding- the payments which were overdue.

Our previous decisions do not appear to have dealt very clearly, if at all, with a situation such as is here presented. In the case of Lea v. Young, 168 Wash. 496,12 P. (2d) 601, this court dealt with the distinction between a forfeiture and a rescission. As that case defines rescission, it seems quite clear that there is no element of rescission in this case. Nor do we see anything in the ease of Gibson v. Rouse, 81 Wash. 102, 142 Pac. 464, which can he taken as authority against our present views. There, the vendor, after having placed three mortgages upon the property to secure his own obligations, took affirmative action by withdrawing documents from escrow without right, at a time when he was in no position to convey. What is said in that case could only be applicable here if the vendor, following the notice of May 2,1932, had seized possession, ousted the vendee, or performed some other like act evidencing a clear intention to arbitrarily end the rights of the vendee in the property.

In other states, the distinction between an abortive attempt to forfeit and a rescission is made very clear, and the rule is not in doubt.

Boone v. Templeman, 158 Cal. 290, 110 Pac. 947, deals with a situation similar to the one which we have here. There, there was an invalid attempt made to declare a forfeiture without the tender of a deed. The California court, in passing upon the effect of such an attempt, said:

“Templeman did not declare a forfeiture, nor take any steps toward doing so until July, 1906, more than a year after the last payment became due. He could not at that time, put Boone in default as to any of the payments so as to work a forfeiture, without tendering a conveyance of the land. Until Boone was in default there was no right of forfeiture. He attempted to declare a forfeiture without tendering a deed. Having, by his conduct, waived the right of forfeiture for nonpayment of the installments at the precise date of maturity, he could not, after the whole became due, revive or renew it without previous notice accompanied by a tender of a deed. Upon the face of the complaint we hold that the contract is still subsisting. ’ ’

This is a direct holding that the attempted forfeiture was wholly abortive, leaving the contract in exactly the same condition as though nothing had been done or attempted to be done. This rule was followed in Bank of America of California v. Ries, 128 Cal. App. 75, 16 P. (2d) 1018.

Tbe Boone case, supra, cites with approval the case of Milwaukee Land Co. v. Ruesink, 50 Mont. 489, 148 Pac. 396, in which case the Montana court said:

‘ ‘ The attempt by the plaintiff to declare a forfeiture was abortive. Conceding that it might have done so upon failure of Way & Eachford on demand to pay the first deferred installment when it fell due, after extending to the firm indulgence until the last installment was due, it could not terminate the contract without tendering a conveyance or at least accompanying the demand for payment with an offer to convey. ’ ’

Perhaps the case which comes closest upon the facts is that of McLain v. Smith, 201 Iowa 89, 202 N. W. 239; the main distinction being that, in that case, the vendor was unable to perform at the time of his attempt at forfeiture, while in this case, so far as appears, the vendor was amply able to perform and simply failed to tender performance. Also, in the Iowa case, it would appear that the vendee promptly demanded a return of the purchase money and promptly brought its action claiming a rescission. The supreme court of Iowa held that the attempted forfeiture was not a rescission, saying:

“The fact that vender gave notice of forfeiture herein cannot be looked upon or treated as an act of rescission, or any declaration or election to rescind; as there is a wide difference between forfeiture and rescission.”

The McLain case was followed in Mintle v. Sylvester, 202 Iowa 1128, 211 N. W. 367. There, the court said:

“The defendants did not, by the notice of intention to declare forfeiture, or by their petition in the suit to quiet title, evince an intention not to be bound by the contract. They were not putting it out of their power to perform. They were not repudiating the contract. They were affirming it, and demanding performance by plaintiff. Their claim to possession was based ostensibly on the terms of the contract, and was not in hostility to it. The existence and validity of the contract were not denied. The defendants’ right to give the notice and to proceed under the statute and to declare a forfeiture was not denied until the commencement of this action, and after the decree was rendered in the suit to quiet title. A breach or an unauthorized demand not amounting to an intimation of intention to be no longer bound does not of itself free the other party from his obligation, or authorize him to rescind. ’ ’

Still later, the same rule was followed in the Iowa court in Golly v. Grinnell College Foundation, 204 Iowa 319, 213 N. W. 252. See, also, Shupe v. Thede, 205 Iowa 1019, 218 N. W. 611.

The question has also been passed upon by the supreme court of Arizona in United Farmers’ City Market v. Donofrio, 29 P. (2d) (Ariz.) 144, where a somewhat exhaustive review is made of the authorities. In that case, the Arizona court said:

“Under these circumstances we think the complaint wholly fails to show any attempt or intention on the part of plaintiffs up to the time of filing this action to rescind the contract, but rather an intention to stand thereon, unless it be held the mere giving of a notice of forfeiture where time is not specifically made of the essence of the contract, regardless of the circumstances of the- case, is as a matter of law a rescission by the vendor. We have examined the cases cited on this point by counsel for defendant, such as Gaume v. Sheets, 181 Cal. 119, 183 P. 535; Epplett v. Empire Inv. Co., 99 Or. 533,194 P. 461, 700; Cornelly v. Campbell, 95 Or. 345, 186 P. 563, 187 P. 1103, and while in some of them the bald statement is made that an unauthorized declaration of forfeiture is in effect an attempt to rescind which, if accepted by the vendee, con- statutes a mutual rescission, the facts in each case show the rule .as stated is broader than required for the decision of the particular case. We think the true rule is more correctly stated in the cases such as Pinkerton v. Morton, 63 Cal. App. 471, 218 P. 770; McLain v. Smith, 201 Iowa 89, 202 N. W. 239; Rea v. Security Trust & Savings Bank, 129 Cal. App. 663, 19 P. (2d) 267; and Oursler v. Thacher, 152 Cal. 739, 93 P. 1007, 1009, to the effect that the test is the intention of the parties, to be determined by all their acts, and that an attempt to act in pursuance of a contract, even though the actor has mistaken its true meaning, is an affirmance rather than a rejection thereof. As was said in Oursler v. Thacher, supra:

“ ‘The stipulated facts here warrant no inference but the one that plaintiffs have done no more than to insist that, under the terms of the contract, defendants had no further rights under such contract, but had forfeited all such rights. Their notice of forfeiture and demand for possession of the mining property were strictly in line with this claim, and were in no sense a repudiation or abandonment of the contract or a consent to a rescission thereof, any more than was the refusal of the vendor to convey in Glock v. Howard, supra, an abandonment or a consent to a rescission. The bringing of the action to quiet title was an act of the same character. Practically it amounted to no more than the calling of the defaulting vendees into court to show why it should not be decreed that under the terms of the contract all their rights thereunder were at an end. In the absence of some sufficient equitable showing to excuse their failure to comply with the terms of the contract, plaintiffs, while standing on their contract, were entitled to such a decree, so as to cut off the possibility of any future claim by the vendee to equitable relief, which might embarrass or cloud his title. Glock v. Howard & W. Colony Co., 123 Cal. 1, 55 P. 713, 43 L. R. A. 199, 69 Am. St. Rep. 17.’”

Upon reason, then, as well as upon authority, we have no hesitancy in adopting' the rule that an insufficient or invalid attempt to declare a forfeiture does not amount to an election or an offer to rescind, but that such ineffectual attempt is wholly abortive, leaving- the contract in all respects as it was before. Under the facts of this case, we disregard all such ineffectual and invalid efforts to forfeit; and therefore find that, on August 5, 1932, the contract was a subsisting one, and the vendee’s interest, because of its defaults, was then liable to forfeiture by a demand for payment accompanied by the tender of a good and sufficient deed. That a demand was then made, accompanied by a sufficient tender of deed, is admitted by the pleadings, as well as established by the evidence.

The trial court failed to find that there had been any extension of time, and no error is assigned with respect thereto. It follows that the judgment appealed from is right, and it is therefore affirmed.

Beals, C. J., Steinert, Blake, and G-eraghty, JJ., concur.