Albuquerque Nat. Bank v. Albuquerque Ranch Estates, Inc.

• Decision Date: 23 November 1982
• Docket Number: No. 13957,13957
• Citation: 99 N.M. 95,654 P.2d 548,1982 NMSC 142
• Parties: ALBUQUERQUE NATIONAL BANK, Plaintiff, v. ALBUQUERQUE RANCH ESTATES, INC., Defendant-Appellee, v. KAC, INC. and Tract C, a partnership, Defendants-Appellants.
• Court: New Mexico Supreme Court

Page 548

654 P.2d 548

99 N.M. 95

ALBUQUERQUE NATIONAL BANK, Plaintiff, v. ALBUQUERQUE RANCH ESTATES, INC., Defendant-Appellee, v. KAC, INC. and Tract C, a partnership, Defendants-Appellants.

No. 13957.

Supreme Court of New Mexico.

Nov. 23, 1982.

[99 N.M. 98] Ruth Schifani, Modrall, Sperling, Roehl, Harris & Sisk, Albuquerque, for appellee.

George Foster Hannett, Hannett, Hannett & Cornish, P.A., James T. Paulantis, Albuquerque, for defendant-appellee Albuquerque Ranch Estates, Inc.

Charles Crider, Mathews & Crider, P.A., Albuquerque, for defendant-appellant KAC, Inc.

Patrick Villella, Sullivan, Villella, Skarsgard & Noya, Albuquerque, for defendant-appellant Tract C, a partnership.

OPINION

DONNELLY, Judge

Defendants, KAC, Inc. (KAC), and Tract C, a partnership, have each filed separate appeals from a judgment issued in an interpleader action brought by Albuquerque National Bank. The trial court held that KAC and Tract C had forfeited their rights under a real estate contract and adjudicated that the realty covered by the agreement had revested in Albuquerque Ranch Estates, Inc. (ARE).

The seven issues raised by KAC on appeal are subsumed into three principal points. They are (1) failure to adopt its equitable and affirmative defenses; (2) invalidity of the notice of default; and (3) abuse of discretion in denying its motion for continuance. In its appeal, Tract C, claims that the court erred (1) in determining that an assignment of the contract from it to KAC released Tract C from further obligation under the agreement or to right to notice of default; (2) in determining that forfeiture was proper; and (3) for each of the reasons and grounds asserted by KAC in its appeal. We affirm.

THE FACTS

In April 1974, ARE sold to Tract C approximately 7.5 acres of unimproved land in the northeast heights of Albuquerque. The sale was made pursuant to a written real estate contract for a purchase price of $224,398.50. The contract was placed in escrow with Albuquerque National Bank. Under the terms of the contract, the parties agreed that in the event of any default, the purchaser had 90 days in which to cure the defect after being given notice of such defect. On February 15, 1979, while the original real estate contract with ARE was still outstanding, Tract C sold the property to KAC and assigned its rights under the contract to KAC.

Tract C, in February 1979, requested ARE to approve an assignment of its rights under the purchase contract to KAC. ARE approved a written assignment of all of Tract C's rights and interests in the agreement to KAC and consented to the assignment. On March 19, 1979, KAC accepted the assignment and agreed to be bound to all other terms and conditions of the original agreement. Tract C also entered into a separate contract with KAC, selling its interests in the property. It is disputed as to whether ARE was aware of the latter sale agreement.

The original contract contained the following clause:

8. It is mutually agreed that time is the essence of this contract. Should the Purchaser fail to make any of the ... payments at the respective times herein specified ... and continue in default for ninety (90) days after written demand for such payments ... has been mailed to the Purchaser ... then the Owner may, at his option, either declare the whole amount remaining unpaid to be then due and proceed to enforce the payment of the same; or he may terminate this contract and retain all sums theretofore paid hereunder as rental to that date for the use of said premises, and all rights of the Purchaser in the premises herein described shall thereupon cease and terminate....

The first payment on principal under the contract in the sum of $32,672.42 was due on April 15, 1980. On April 11, 1980, an agent for KAC contacted Horace McKay, a vice-president of ARE, and orally requested an extension of time within which to make the required payment and offered to pay for the right to an extension. McKay advised the agent for KAC that ARE would consider the request if it were put in writing. On April 15, 1980, KAC had neither made the required installment payment nor sent to ARE a written offer requesting the extension. Two weeks after the payment was overdue, an agent for KAC, phoned McKay and inquired if an extension of time to make the payment would be agreeable. McKay again advised KAC that ARE would only consider and act upon a written request for an extension. On May 14, 1980, KAC belatedly sent to ARE a written request seeking an extension and offering to pay 15% interest on the $32,672.42 installment due in April, in return for consent to defer the required installment payment until July 31, 1980.

ARE responded by letter dated May 19, 1980, stating that it understood Tract C's initial written request concerning the proposed extension to have offered 15% of $32,672.42 or the sum of $4,900.00. ARE stated that it would agree to grant the extension based upon the payment of the amount spelled out in the letter of May 14, 1980, and only if the money was paid immediately. ARE's letter also stated:

This letter is not to be considered as an extension of the time within which the contract payments are required to be made. Further, this letter is to be considered as a written demand for such payment and failure to pay the same within the time required by the contract will result in either a declaration that the whole amount remaining shall be due or a termination of this contract at the option of [ARE].

ARE's letter of May 19, 1980, was sent by certified mail to the return address shown on the envelope in which KAC's letter of May 14, 1980, had been mailed. KAC received the letter on May 23, 1980, but did not send any money in consideration for the requested extension. By letter dated May 27, 1980, Douglas Allyn, an agent for KAC, wrote to McKay and advised him that KAC had not meant to indicate it would pay the amount of $4,900.00 for the requested extension. Instead, Allyn stated KAC had meant to offer $1,437.01, but now offered to pay $3,132.00 for the extension and tendered a check in that amount. The letter from Allyn on behalf of KAC, addressed to McKay, also stated that the enclosed check was delivered subject to several conditions:

1. Collection of this check constitutes your agreement that the purchase documents shall be amended so that the 1980 installment is due on July 31, 1980 rather than April 15th.

2. K.A.C., Inc. is relieved of any default by not having made the April 15, 1980 payment and any notice of default is withdrawn.

After receipt of the May 27th letter of tender, ARE never approved any extension of time within which KAC could make the payment of the past due installment. ARE did not deposit the tendered check for collection or withdraw its May 19, 1980, notice of default.

In mid-June of 1980, James Hall, the managing agent of Tract C, called ARE and was told that ARE had sent KAC a notice of default and had not authorized any delay in payment of the past due installment under the contract. On behalf of Tract C, Hall then sent a demand letter to KAC, informing it that unless it brought current within thirty days all payments due under the purchase contract Tract C would exercise its thirty day option under paragraph 8 of the real estate contract between Tract C and KAC.

KAC received Tract C's demand letter but did not reply to it, nor did KAC make any payment to ARE within thirty days. KAC also failed to contact ARE after receiving Hall's letter.

On July 31, 1980, the date to which KAC had requested an extension of time for making payment, KAC again failed to pay the 1980 installment. On August 19, 1980, after the installment payment was past due and 93 days after ARE had mailed its notice of default, ARE notified the escrow agent, Albuquerque National Bank, that it was electing to exercise its rights of forfeiture under the real estate contract. ARE declared the agreement between the parties to be terminated, asked that all escrowed documents be released to ARE and instructed the bank not to accept any further payments under the contract.

Upon learning of ARE's action declaring the contract terminated KAC on August 20, 1980, tendered to Albuquerque National Bank a check for $32,472.42. The Bank notified ARE of its receipt of the tendered payment; however, ARE notified the Bank that it would refuse to accept any further payments under the contract due to the default.

Thereafter, Albuquerque National Bank filed this action in interpleader pursuant to N.M.R.Civ.P. 22, N.M.S.A. 1978 (1980 Repl. Pamp.), requesting that the court adjudicate the rights of each of the parties under the contract. Following trial, the court found that ARE had never agreed to an extension of time for making the April 15, 1980, installment payment by KAC. The court also concluded that ARE's notice of default was proper and valid and that KAC had failed to make timely payment as required by the contract in order to cure the notice of default. The trial court entered judgment in favor of ARE, determining that it was entitled to the benefit of the forfeiture provisions and was entitled to an order declaring the contract terminated as to KAC and Tract C.

I. KAC'S APPEAL

A. Claim of Equitable and Affirmative Defenses.

KAC has asserted numerous challenges to the trial court's findings and the court's ruling that ARE was entitled to forfeiture of the contract.

1) We address first KAC's claim that the retention of its tendered check for $3,132.00 amounted to an acceptance of the terms and conditions of its letter requesting an extension of time for making the first installment payment. KAC points out that although ARE did not cash the check, it did not return it and continued to retain the instrument.

KAC relies upon Warren v. New York Life Ins. Co., 40 N.M. 253, 58 P.2d 1175 (1936) and Miller v. Montgomery, 77 N.M. 766, 427 P.2d 275 (1967), for the principle that under the doctrine of...