Lea v. Blokland
257 P. 801
Or.
1927
Check Treatment
*237 BEAN, J.

The defendants Blokland submit in their brief the following:

“When a vendee of lands under a contract reserving- title in the vendor, and providing for periodic instalment payments of the purchase price, in good faith breaches that contract, he is entitled to the equitable doctrine of unjust enrichment by which the vendor is precluded from recovering more than the actual damages sustained by him as a result of the vendee’s breach.” Citing among other authorities, Prichard v. Mulhall, 127 Iowa, 545 (103 N. W. 774, 775, 4 Ann. Cas. 789); Mitchell v. Hughes, 80 Or. 574, 582, 583 (157 Pac. 965); Potter Realty Co. v. Derby, 75 Or. 573 (147 Pac. 548); 3 Williston on Contracts, pp. 2452, 2484, 2628, 2633, 1515.

It is conceded that the interveners have complied with all the terms of the contract for the sale of the real property to be performed on their part, and that the Bloklands have breached‘their contract by their failure to make the payments agreed. Upon these premises the Bloklands seek to annul or rescind the contract.

It needs no argument to the proposition that a party cannot take advantage of his own breach of a contract: 13 C. J., § 632, p. 607. The default of a party desiring to rescind or annul a contract is not a ground for such rescission, as found in any of the established rules governing the rights of a party to rescind. It is stated in 5 Pomeroy’s Equity Jurisprudence, Section 2169, thus:

“It is well settled, with scarcely any dissent, that specific performance is granted in favor of a vendo’r of land as freely as in favor of a vendee, though the relief actually obtained by him is usually only a recovery of money — the purchase price.”

*238 The defendants Blokland filed in the law action an equitable answer for the cancellation of the contract of sale. They caused the Reynolds to be brought in as parties as having some rights under the contract. Therefore, the interveners, the Reynolds, could counterclaim for the amount due them under the contract, and the Bloklands having failed to substantiate their equitable defense, equity having assumed jurisdiction in the cause, will retain it and determine all the issues where there are no issues at law to be tried: Hagman v. Webber, 117 Or. 350, 356 (243 Pac. 91, 244 Pac. 83).

In Mitchell v. Hughes, 80 Or. 574 (157 Pac. 965), the case relied upon by the Bloklands, plaintiff brought suit to recover back the payments made by her upon the land and to cancel the judgment obtained by defendants against her for the balance due upon a note given for the accrued interest upon the original purchase price. The trial court found for defendant and this court affirmed the judgment. In that case it was stipulated that if the vendee should fail to perform the contract and make the payments as agreed, in that event the vendors, or either of them, might themselves declare the contract canceled and any and all rights of the vendee should cease. In the event that the vendors should declare the contract canceled, all moneys paid to the vendors should be forfeited as rental and liquidated damages. Upon default of the vendee the vendors notified the vendee that the contract was terminated. The facts in the Mitehell-Hughes case differ from those in the case at bar and the case does not support the contention of the Bloklands. Bloklands, the vendees, can only rescind or cancel the contract of sale on account of some default of the vendors: Ontario Advancement Co. v. Stevens, 113 *239 Or. 564 (231 Pac. 127); Anderson v. Hurlbert, 109 Or. 284 (219 Pac. 1092); White v. Oregon Realty Exchange, 114 Or. 636 (236 Pac. 269).

Where parties are competent to contract with each other neither party can be relieved from his agreement for the reason that he did not use good business judgment, or that the contract has not been as profitable as expected, in the absence of fraud, undue influence, duress or mistake in making the agreement: 13 C. J., § 651, p. 610; Poe v. Urley, 233 Ill. 56 (84 N. E. 46).

It is competent and proper for parties to an executory contract for the sale and purchase of land to stipulate as to the damages in case of the failure of one of the parties to comply with the contract. A clear stipulation for a forfeiture will be enforced where not contrary to public policy: 13 C. J., § 642.

The contract in question provides that time is of the essence, and also provides, as shown above, that if the Bloklands should fail to make the stipulated payments, then the contract should “at the option of either of the parties of the first part (the Eeynolds) be null and void.” The contract which was deliberately made, and is unquestioned, did not give the purchasers the privilege of terminating the same. Herein the contract differs from the one considered in the case of Potter Realty Co. v. Derby, 75 Or. 566, 573 (147 Pac. 548), relied upon by defendants. In the latter case, the contract, which was construed to mean what its language implied, provided that in case the vendee should fail to make the agreed payments properly or violate the contract—

“then and in any such case, all payments which shall have been made by the party of the second part (purchaser) hereunder shall be absolutely and forever forfeited to the said party of the first part, and this *240 contract shall he null and void as to both parties hereto without notice, * * ”

It was there held that the parties having agreed upon their own remedy for a breach of the contract that remedy was exclusive. The opinion in that case has become the law of this state, for the guide of parties making such contracts, and for this court in construing them. In Maffit v. Oregon & C. R. Co., 46 Or. 443, 452 (80 Pac. 489), where a contract for the sale of land stipulated that if the vendee failed to make the payments as agreed, then the “contract so far as it may bind the first party, shall become utterly null and void” and the seller had the right upon default of the purchaser to enter the land and retain all payments made under the contract. It was said by Mr. Justice Wolverton in that case, as shown at page 452 of the Report:

“These stipulations were inserted wholly and solely for the benefit of the vendor. They could not serve the purchasers in any way, as the latter would be precluded from taking the least advantage of their own default. Being for the benefit of the vendor, it might, if it so desired, waive their strict and literal observance on the part of the purchasers, and this it could do in advance of the time of agreed performance. So it could, if it saw fit to, forego a forfeiture already incurred, and thereafter accept performance, and itself perform as if no default had taken place. The matter, therefore, of requiring exact performance on the part of the purchasers, lies wholly within the option or election of the vendor: Danna v. St. Paul Invest. Co., 42 Minn. 194 (44 N. W. 55); Chambers v. Anderson, 51 Kan. 385 (32 Pac. 1098); Cartwright v. Gardner, 5 Cush. (Mass.) 273, 281; Manning v. Brown, 10 Me. 49; Mason v. Caldwell, 5 Gilm. (Tenn.) 196 (48 Am. Dec. 330); Church v. Ayres, 5 Cow. (N. Y.) 272; Wilcoxson v. Stitt, 65 Cal. 596 (4 Pac. 629, 52 Am. Rep. 310).”

*241 In Anderson v. Hurlbert, 109 Or. 284 (219 Pac. 1092), the following syllabi show the ruling of this court. They read thus:

“A purchaser of land, having made part payments on the contract, is not entitled to a division of the property or some settlement by the vendor, whereby the purchaser shall obtain benefit of payments without completing the payments; thus involving the making of a new contract.”
“A purchaser, for years in default in making payments under a contract, providing that on her default for thirty days the contract should at vendor’s option become null and void, and all rights of purchaser thereunder cease, without right to return of payments made, held to get all she was entitled to by decree providing that she might in a limited time make the contract payments and receive a deed.”
“There can be no rescission by purchaser and recovery of payments made, where the vendors are able and willing to perform the contract on their part within the time limited by it.”

The case of Hogan v. Kyle, 7 Wash. 595, 597 (35 Pac. 399, 38 Am. St. Rep. 910), was a case where a contract for the sale of land provided for the cash payment of one third of the purchase price and the balance in two equal installments, time being the essence of the contract. The action was to recover a money judgment for the amount of the two deferred payments. It was instituted more than two years after the maturity of the last installment. The complaint alleged the making of the contract, the failure to pay, the ownership of the property and the tender of a good and sufficient deed prior to the commencement of the action. A demurrer to the complaint being overruled by the lower court, the defendant answered alleging possession of the land in plaintiff and denying his power to give title and *242 alleged that plaintiff had never demanded of defendant the contract price of the land at any time prior to the date of the commencement of the action and never tendered to defendant any deed or conveyance until that date, and never conveyed the premises. The appellate court reversed the judgment for the reason that under its terms the respondent would recover the full purchase price and be allowed to retain the land represented by the purchase price. That they were dependent obligations upon which the plaintiff was suing. The court states at page 597:

“When the first instalment became due, he (the plaintiff) could have recovered the amount then due as upon an independent contract, but having elected to wait until the last instalment became due, and upon the payment of which defendant would be entitled to a deed, the obligations become dependent * * . It is not enough that the deed was tendered at any particular time, but the tender must be kept good so that it may be taken into consideration in the entry of the judgment.”

In 3 Williston on Contracts, Section 1399, page 2486, it reads thus:

“Under the rule generally prevailing in the United States, * * and the only rule defensible on principle, allowing the purchaser the difference between so much of the contract price as is unpaid and the market price of the land, is applied in every case where the vendor breaks his contract without legal excuse.” Citing among other eases: Doty’s Adm. v. Doty’s Guardian, 118 Ky. 204 (80 S. W. 803, 4 Ann. Cas. 1064, 2 L. R. A. (N. S.) 713).

Mr. Blokland testified that the value of the land at the time of the contract was $26,000 and at the time of the trial his testimony indicated it was worth not less than $24,000. The Bloklands have shown *243 no equitable or legal reason why the contract should not be enforced. The Reynolds simply ask that the Bloklands carry out their contract.

There are some decisions holding that the buyer, though in default, may recover the installments which he has paid, less such an amount as will make the seller whole, but as said in 2 Williston on Contracts, Section 791:

“Nevertheless the great majority of American decisions deny the buyer relief. And it may be said that this is no more than the necessary result of default by a party who has previously partly performed his contract. Frequently there is an express provision for forfeiture.”

We are inclined to believe that the seeming conflict in the authorities is largely due to the variant facts of the different cases.

In the case of Pritchard v. Mulhall, 127 Iowa, 545 (103 N. W. 774, 4 Ann. Cas. 789), it was held in substance, that on breach by a vendee of an executory contract for the sale of land, a recovery of the contract price in a court of law could only be on a tender of a proper deed of conveyance and the production of such deed in court for the use of the vendee. There the payments for the land were all due under the contract. The vendor brought action for the purchase price and tendered to the defendant a warranty deed but failed to produce the same in court. The title to and possession of the land had at all times been in the vendor or his grantor. It was there said at page 775 of 103 N. W.:

“It goes without saying that appellee cannot compel payment of the full contract price and keep the property for which that price was to be paid.”

The instant case does not present circumstances like the case last referred to. The, time for the ten *244 der of a deed by tbe Reynolds, tbe vendors, had not arrived.

When the contract in question was made for tbe sale of tbe land tbe vendors were, in equity, immediately deemed trustees for tbe vendee of tbe real estate, and tbe vendee was deemed trustee for tbe vendors of tbe purchase money: Walker v. Goldsmith, 14 Or. 125, 137 (12 Pac. 537); 2 Story’s Equity Juris., § 1212; Sheehan v. McKinstry, 105 Or. 473, 483 (210 Pac. 167, 34 A. L. R. 1315, note, L. R. A. 19160, 461, 478).

Tbe contract in question provides that time is of its essence, and that no payments can be recovered by tbe vendee. Therefore, tbe Bloklands cannot, by counterclaim, recover anything from tbe Reynolds: Cornely v. Campbell, 95 Or. 345 (186 Pac. 563, 187 Pac. 1103); Anderson v. Morse, 110 Or. 39 (222 Pac. 1083).

Where a contract of sale is executory like tbe one in question, and the promises to pay tbe purchase money, except tbe last installment, are independent of tbe vendor’s agreement to convey, an action will lie for tbe unpaid and overdue installments of the purchase price: 27 R. C. L., § 365, p. 611; Loud v. Pomona Land etc. Co., 153 U. S. 564 (38 L. Ed. 822, 14 Sup. Ct. Rep. 928). Under tbe provision of such a contract of sale, where promissory notes are given for tbe purchase price they are independent promises: Walker v. Hewitt, 109 Or. 366, 374 (220 Pac. 147, 35 A. L. R. 100).

Where payments are to be made in installments, and conveyance is not to be made until after full payments, all, except tbe last installment, are independent promises: 27 R. C. L., §172, p. 460; Sheehan v. McKinstry, supra; Rose v. Rundall, 8 *245 Wash. 422 (150 Pac. 614; North Stockton Town Lot Co. v. Fischer, 138 Cal. 100 (70 Pac. 1082, 71 Pac. 438); Glock v. Howard & Wilson Co., 123 Cal. 1 (55 Pac. 713, 69 Am. St. Rep. 17, 43 L. R. A. 199).

The defendants Bloklands caused the matters involved in the action at law to he transferred to the equity side of the court, thereby selecting the forum in which the matter should be tried. The case was tried as a suit in equity and the issues are all disposed of. There is much said in the brief of appellants as to the equity jurisdiction but equity having assumed jurisdiction at the instigation of the appellants, it would be idle to say that equity did not have the power to grant full and complete relief. In other words, when the equity suit was determined, and the court correctly found that the Bloklands were not entitled to equitable relief, there were no issues remaining to be tried in an action at law. There was no other defense interposed by the Bloklands than that claimed as an equitable defense, and the trial court properly entered judgment for the installments due under the contract.

Where parties have solemnly entered into a written contract for the sale of land or personal property and the vendee has agreed to make payments therefor in installments at stated times, where time is of the essence of the contract, and the vendor has faithfully performed all the conditions of the contract to be performed on his part, and is ready, able and willing to further perform the conditions of the contract when the time is ripe for such performance, and the vendee is in default in making the stipulated payments, to hold that the vendor cannot collect the installments when due would be to unsettle business and practically nullify many contracts of sale: Bell *246 v. Spain, 110 Or. 114, 129 (222 Pac. 322, 223 Pac. 235).

Having carefully examined the record, we find that the decree rendered by the Circuit Court was correct and the same is affirmed.

Affirmed. Rehearing Denied.