Thomas v. Klein

577 P.2d 1153, 99 Idaho 105, 1978 Ida. LEXIS 380

• Court: Idaho Supreme Court
• Decided: April 17, 1978
• Docket: 12137
• Status: Published

Opinions

McFADDEN, Justice.

This appeal involves determining the relative rights of vendors and defaulting vendees under an installment land sale contract. Appellants, successors to the vendors’ interests, appeal from a judgment of the Fifth Judicial District Court quieting title to the property in the appellants, but subjecting their interests to restitutionary liens totalling $103,423.80 in favor of respondents, successors to the vendees’ interests. Reversed and remanded.

The controversy concerns an installment land sale contract, executed in 1957 and modified in 1960, for the purchase of a resort motel complex located near Ketchum, Idaho. The agreement provided for monthly installment payments and for forfeiture of all payments and improvements if the vendees failed to cure defaults of payments within 60 days of notification of the default. The original vendees’ interests have been assigned several times, culminating in the assignment to defendants-respondents, John and Peggy Swank. Respondents Swank have been in possession of the property since November, 1969, and in default of payments since July 1, 1972.

In July, 1973, appellants served written notification of the default and in March, 1974, instituted the present action because the default had not been cured. Appellants sought judgment forfeiting the contract, quieting title and transferring possession of the property to them as against all successors to the original vendees’ intereste. All of these named defendants, except respondents Swank, respondent Hiller and respondent Johnson, have defaulted or have stipulated they do not possess any interest in the property.

After finding that the vendees’ default had not been cured within 60 days the trial court forfeited the contract and quieted title in appellants. The trial court however concluded that enforcement of the forfeiture clause would constitute a penalty. To avoid this result, appellants were ordered to pay $103,423.80 to respondents Swank, respondent Hiller and respondent Johnson. These restitutionary judgments were secured by liens against the property. The effect of the trial court’s judgment, therefore, was that appellants were restored to possession of the property, but subjected to liens totaling in excess of $100,000.00. No mention was made as to their order of priority. Appellants appeal from this judgment.

Actions to forfeit contractual rights of the defaulting party, pursuant to a forfeiture clause, are addressed to the court’s equitable discretion. Graves v. Cupic, 75 Idaho 451, 272 P.2d 1020 (1954). In such actions, it is within the court’s equitable power to decree that the property be sold by judicial sale. Walker v. Nunnenkamp, 84 Idaho 485, 373 P.2d 559 (1962).

Because of the particular facts of this case, it is the conclusion of this court that it was not a proper situation for the trial court to attempt to apply Graves v. Cupic, supra, and that a proper exercise of equitable discretion requires that the contract be foreclosed and the property be sold by judicial sale. This result is consistent with the relief requested by appellants in their post-trial brief submitted to the trial court and reiterated by appellants during oral arguments before this court.¹ Such relief is appropriate in light of the uncertainties concerning the property’s fair market value and the reasonable rental value of the premises during the period that the vendees were in possession of the property. Additionally, the long length of time lapsed since execution of this contract and the multiplicity of assignments of the vendees’ interests, some of which involved installment land sale contracts with similar forfeiture provisions, suggest that judicial sale of the property may be the most equitable resolution of the various competing claims. Significantly, the original vendors are not involved in this action so that the normal situation in forfeiture actions is not here present. Also, the fact that each of the various successors to the original vendees’ interests have assigned their interests pursuant to subsidiary contracts makes the normal comparison of actual damages and liquidated damages difficult if not impossible. These factors, combined with the uncertainty of the testimony below, suggest that judicial sale of the property is the equitable course to follow.

This decision is in conformity with our earlier opinion in Ellis v. Butterfield, 98 Idaho 644, 570 P.2d 1334 (1977), aff’d on reh., 98 Idaho 663, 572 P.2d 509 (1978), although the remedy here decreed is different. In Ellis v. Butterfield, supra, we enforced the parties’ contractual forfeiture provision because we found substantial evidence on appeal to support the trial court’s finding that retention of payments made under the contract as liquidated damages was not unreasonable or inequitable. However, in the instant case the trial court found that the forfeiture provision was, in effect, an unenforceable penalty. The trial court thus held that the vendees were not bound by the remedy provided by contract, and thus we conclude that judicial sale of the property is the most equitable remedy in this case. The judgment of the trial court is reversed and the cause remanded for judicial sale of the property. The parties shall be allowed to participate in the bidding of the property at the sale, which shall be free and clear of any lien or claim of the parties.

The trial court shall direct that the proceeds of such sale be first applied toward the costs and expenses of the sale and then to satisfy the amount owed appellants, including unpaid principal indebtedness, accrued interest to date, attorney fees and costs of action including this appeal. The balance remaining after payment of these amounts, if any, shall be apportioned among respondents Swank, respondent Hiller and respondent Johnson as the trial court shall find them to be entitled. The trial court shall enter appropriate findings of fact, conclusions of law and judgment in accordance with the resolution of this issue and may hear such additional evidence as any of the respondents may properly offer.

The judgment of the district court is reversed with directions that the district court fix attorney fees on appeal, and the cause is remanded for further proceedings consistent with this opinion. Costs to appellants.

SHEPARD, C. J., and DONALDSON and BAKES, JJ., concur. BISTLINE, J., concurs in the result.

1 . Respondent Hiller and Respondent Johnson, of the property. in their pleadings, also requested judicial sale