Abodeely v. Cavras

• Decision Date: 28 August 1974
• Docket Number: No. 56058,56058
• Parties: Alexander ABODEELY et al., Appellants, v. Paul CAVRAS, Appellee.
• Court: Iowa Supreme Court

Page 494

221 N.W.2d 494

Alexander ABODEELY et al., Appellants, v. Paul CAVRAS, Appellee.

No. 56058.

Supreme Court of Iowa.

Aug. 28, 1974.

Rehearing Denied Nov. 4, 1974.

Lloyd E. Humphreys of Nazette, Hendrickson, Marner & Humphreys, Cedar Rapids, for appellants.

J. E. Heiserman, Anamosa, and O. W. Lawrence, Cedar Rapids, for appellee.

Heard before MOORE, C.J., and MASON, LeGRAND, UHLENHOPP and REYNOLDSON, JJ.

MASON, Justice.

Alexander Abodeely, his wife Eleanor, his brother Edward J. and brother's wife Grace, vendors in an installment contract for sale of real estate in Cedar Rapids, brought an action in equity against vendee Paul Cavras after the monthly payments required by the contract were not made. In one division of their petition plaintiffs claimed they were entitled to specific performance with payment of back taxes, insurance and attorney fees. In the other division plaintiffs had asked judgment for the unpaid portion of the purchase price due on said contract, back taxes, insurance and attorney fees. Plaintiffs appeal from decree of trial court dismissing their petition in its entirety and at their cost.

June 25, 1964, defendant Cavras entered into a real estate contract with plaintiffs and their predecessors in interest for the purchase of premises described as 'Lot 3, Block 26, of Carpenter's Third Edition to the Town of Cedar Rapids' for the sum of $13,000 payable $500 at the time of the signing of the contract and the balance in monthly installments of $100 each commencing July 1. The execution of the contract by Cavras is undisputed.

Defendant himself paid all installments until December 1968 at which time he sold the property to one Oren Carter to whom he assigned the contract. From June 9, 1969, the regular monthly installments were in arrears.

June 15, 1970, notice of forfeiture of the contract signed by William O. Gray, attorney, was served on defendant. This fact is undisputed. After service of notice of forfeiture the matter was not further pursued by plaintiffs until the present action was instituted about a year later.

In answer defendant admitted execution of the contract, the terms thereof and failure to make the monthly payments in accordance with the provisions of the contract. He denied all other paragraphs of each division. In a separate division as an affirmative defense defendant alleged that on or about June 15, 1970, a notice of forfeiture of the contract was served upon him and that by reason thereof plaintiffs had elected to exercise their right of forfeiture as provided for in the contract and were barred and estopped from pursuing the purported actions asserted in divisions 1 and 2 of their petition. In reply plaintiffs denied the validity of the notice of forfeiture and denied causing it to be served on defendant.

I. In this equitable matter our review is de novo. Rule 334, Rules of Civil Procedure. As to the extent of our review in such matters see In Re Marriage of Jennerjohn, 203 N.W.2d 237, 240 (Iowa 1970).

Based on its findings of fact the trial court concluded, (1) the filing and recording provided by code section 656.5 relating to forfeiture of real estate contracts is not essential to complete the forfeiture as between the parties to the contract; such filing and recording is solely for the purpose of providing constructive notice of forfeiture to third parties; (2) plaintiffs are estopped to deny a complete forfeiture of the contract; and (3) this election of remedies by plaintiffs precludes specific performance or remedy of damages.

Plaintiffs' appeal presents two issues for review: (1) whether the trial court erred in finding plaintiffs had made an election of remedies and were estopped to deny a forfeiture of the real estate contract thereby precluding specific performance or recovery of damages and (2) whether the evidence supports the finding and judgment of the court.

Plaintiffs had alleged in their petition that after June 9, 1969, defendant failed to pay the installments due under the contract and had also failed to pay the insurance and taxes on the premises. As stated, defendant in answer both admitted and admitted and affirmatively alleged no payments were made under the contract after June 9, 1969, as the same fell due. It is not disputed defendant was in default from July 1, 1969.

Various appropriate remedies were open to plaintiffs as vendors when defendant defaulted. They had a right to elect whether (1) to keep good their tender of performance, demand the balance of the purchase price and sue for specific performance; (2) to terminate the contract because of vendee's breach, keep their land and sue for damages for the breach; (3) to rescind the contract in toto; or (4) to enforce a forfeiture under the statute. Waters v. Pearson, 163 Iowa 391, 399, 144 N.W. 1026, 1029-1030 and First Nat. Bank v. LeBarron, 201 Iowa 853, 856, 208 N.W. 364, 366. See also 8A Thompson on Real Property, (Replacement 1963), sections 4474-4475.

Basically, the remedies involve proceeding on the contract or terminating or cancelling it.

It was stipulated that notice of forfeiture of real estate identified in the record as exhibit B was signed by attorney William O. Gray and was served upon Paul Cavras June 15, 1970, according to the return of service endorsed on the notice.

When the vendee defaults in the performance of a contract for the purchase of real estate the vendor may elect which of the foregoing remedies he wishes to pursue. When he exercises the option given him under the contract to declare a forfeiture and thus terminate the contract, the vendor cannot, in respect to this same default, thereafter change his position and at the same time or at another time proceed on a theory based on affirmance by suing for damages for breach of the contract or for specific performance since one is precluded from pursuing inconsistent remedies. The remedy of the vendor by way of forfeiture of the contract and the continued liability of the purchaser for the purchase money are totally inconsistent and may not both be pursued.

The principle that if a vendor chooses not to be bound by the land contract he may not seek payment from the defaulting vendee for part of the purchase price by an action on the contract is demonstrated in Stephenson v. Neppel, 192 Iowa 246, 182 N.W. 369; First Nat. Bank v. LeBarron, 201 Iowa 853, 208 N.W. 364; Orzechowski v. Kolodziejski, 281 Mich. 657, 275 N.W. 722; Wayzata Enterprises, Inc. v. Herman, 268 Minn. 117, 128 N.W.2d 156. The same rule is stated in somewhat different language in 55 Am.Jur., Vendor and Purchaser, section 640 and 92 C.J.S. Vendor & Purchaser section 376a, and c.

The two causes of action asserted in plaintiffs' petition were based on the existence of the contract; yet plaintiffs previously elected to declare the contract at an end by service of notice of forfeiture on Cavras.

II. Plaintiffs concede the foregoing statements of law but attempt to circumvent them by contending there is one exception to the general principle. They argue that if the property has diminished in value the vendor may keep the premises and sue for damages. Waters v. Pearson, 163 Iowa at 398-399, 144 N.W. at 1029-1030 is cited for this principle. In that case defendant (vendor) and plaintiff (vendee) entered into a contract for the sale of real estate. Plaintiff made advance payments totaling $2000 prior to the time he was to receive possession but did not perform other obligations under the contract. On the appointed date for payment of the remainder of the purchase price plaintiff did not appear. Defendant, within a few days thereafter, deeming his tender good and plaintiff in default, leased the premises. Plaintiff then brought suit to recover the $2000 in advance payments.

The contract did not contain a forfeiture clause as required in Iowa before forfeiture is available. Lake v. Bernstein, 215 Iowa 777, 780, 246 N.W. 790, 792 and Schwab v. Roberts, 220 Iowa 958, 963, 263 N.W. 19, 21. Time was not made the essence of the contract although the circumstances justified the inference prompt performance was contemplated. The court held that even though plaintiff was the defaulting party if defendant elected to keep the land and terminate the contract because of plaintiff's default he could not keep the advance payments on the grounds of forfeiture or penalty. The case is factually distinguishable in that a forfeiture was not involved by reason of the contract. It does not support Abodeelys' contention.

III. In the other brief point asserted in connection with the first issue presented for review plaintiffs assert: 'The alleged forfeiture in this case was not proper and effective to operate as an election of remedies and abandonment of the contract by the Plaintiffs.' Essentially, they make two arguments: (1) the forfeiture was technically defective and (2) a forfeiture was not authorized by plaintiffs and their agent was acting outside his authority in undertaking such proceedings. In effect they insist there was no completed forfeiture between the parties.

The notice of forfeiture became part of the record through stipulation of the parties. Part of the stipulation was that attorney Gray has signed it and it was served on defendant. It was received in evidence subject to plaintiffs' objection to the 'effect and the validity of the Notice.'

We first consider those reasons advanced by plaintiffs as to why they contend the forfeiture was technically defective.

In reply to defendant's affirmative defense plaintiffs alleged: (1) the notice of forfeiture was not effective since none of the plaintiffs signed the same; (2) it was not caused to be served by plaintiffs; (3) the notice was not proper on its face; and (4) the affidavit necessary to complete the forfeiture involved was never filed and recorded as required by section 656.5, The Code.

Examination of the notice of forfeiture discloses it was signed 'Eli Abodeely,...