Aldrich v. Forbes
| Decision Date | 29 April 1964 |
| Citation | 391 P.2d 748,237 Or. 559 |
| Parties | Frederich C. ALDRICH and Maudalene Aldrich, Respondents, v. Ben F. FORBES and Dorothy V. Forbes, Appellants. |
| Court | Oregon Supreme Court |
Charles Paulson, Portland, argued the cause for appellants. On the briefs were Peterson, Lent & Paulson and Nels Peterson, Portland.
David P. Templeton, Portland, argued the cause for respondents. With him on the brief were Dusenbery, Martin, Beatty & Parks and John C. Beatty, Jr., Portland.
Before McALLISTER, C. J., and ROSSMAN, PERRY, SLOAN, O'CONNELL, DENECKE and LUSK, JJ.
This is an appeal by defendants from a judgment for plaintiffs in a forcible entry and detainer action. Defendants contend that they hold the land in question as vendees under a land sale contract and not as tenants under a lease and that, therefore, a forcible entry and detainer action will not lie. 1
The pivotal question is whether the instruments signed by the parties created a lease or a land sale contract. The trial court interpreted the instruments as creating only a leasehold interest in defendants.
The first of these instruments is an earnest money receipt executed on June 1, 1962. The parties used a Stevens-Ness Publishing Co. form (Form No. 671E). In the earnest money receipt defendants and LeRoy F. Rebensdorf and his wife are designated as purchasers. The Rebensdorfs are not parties in this action. The purchase price was $23,500, of which $3,000 was paid. The time within which the balance of $20,500 was to be paid was not designated. In the blank space following the printed part of the form reading 'Balance of [$20,500] payable as follows' there was inserted in handwriting the provision 'Subject to purchaser securing satisfactory Loan.' The parties did not complete that part of the form providing for the date upon which the purchasers would be entitled to possession.
On July 1, 1962 the parties executed another instrument entitled 'Agreement Regarding Real Estate at 2555 N.W. Westover Road Portland, Oregon.' The preamble of this instrument recited that the parties 'have entered into an agreement for the purchase' of the premises and that 'it is the desire of purchasers to obtain an extension of time within which to pay the balance due on said purchase price.' The instrument also recites that 'this agreement shall be considered as supplemental to and not in lieu of the earnest money agreement' previously executed. It is further provided '[t]hat this is not a final agreement and upon the compliance with the terms and conditions hereinabove set forth a final agreement will be consumated (sic) providing for a warranty deed conveying a marketable title, title insurance and the adjustment between the parties of fire insurance, taxes and any other matters commonly set forth in final agreements for the purchase of real property.' The substance of the agreement is as follows:
'Therefore it is hereby mutually agreed between the parties hereto for and in consideration of the payment of the sum of $200.00 per month payable on the 1st day of July, 1962, and the 1st day of each month thereafter for the period hereinafter specified and (sic) an extension of time for the payment of the balance due on said contract is hereby granted on the following terms and conditions:
'That the purchasers shall negotiate and consumate (sic) a loan in the sum of $7,000.00 payable on or before the 15th day of September, 1962, and that said purchasers shall make application for a G.I. Loan in the sum of $13,500.00, which negoiation (sic) and consumation (sic) of said G.I. Loan shall be completed on or before the 1st day of October, 1962.
'That the purchasers shall on or before the 6th day of July, 1962, make the necessary repairs to the front porch and other repairs as may be deemed necessary, for the safety of persons painting said premises and that immediately upon making said repairs purchasers shall paint said house in a good workman-like manner pursuant to the requirements of the loan department and diligently pursue said painting until the completion thereof.
* * *
* * *
'That upon the compliance with the terms and conditions heretofore set forth provision herein for the payment of rent shall cease and be of no further force and effect and in case that the payments herein and above provided for are made on any part of a month the unused portion of time shall be pro rated between the parties.
'That in case purchasers fail and neglect to comply with the terms hereof and make said payments and do said repair work and painting with diligence, the payments theretofore made shall be forfeited to sellers, however, said forfeiture shall not be made until October 15, 1962.'
Inasmuch as the agreement of July 1, 1962 is by its terms merely supplemental and not 'in lieu of' the agreement contained in the earnest money receipt, we shall first examine the character of the legal relationship created by the execution of the earnest money receipt.
First it should be observed that an earnest money agreement may be sufficient to create the relationship of vendor and purchaser. We so held in Alpha Phi of Sigma Kappa v. Kincaid, 180 Or. 568, 178 P.2d 156 (1947). 2 In that case the earnest money receipt called for the later execution of a land sale contract embodying a provision for installment payments of the balance of the purchase price. The instrument contained the usual provision making the transaction contingent upon the seller's ability to furnish good title. There was, however, no condition, such as that in the instant case, making the balance of the purchase price payable subject to the purchaser securing a satisfactory loan.
Adopting the reasoning in the Alpha Phi case the earnest money agreement in the present case created a vendor-purchaser relationship unless the provision for the securing of a satisfactory loan converts the agreement into some other relationship. 3 If the condition that the purchaser secure necessary financing is interpreted as leaving performance optional with the purchaser, a contract for the sale of the land does not arise. 4 But if the agreement is interpreted to mean that the purchaser is obligated to make a reasonable effort to obtain financing that provision is not a condition precedent to the creation of a contract to purchase. 5
We interpret the language 'Subject to purchaser securing satisfactory Loan' as imposing an obligation to make a reasonable effort to secure a loan. 6 If the earnest money agreement of June 1, 1962 were the only instrument involved in the case at bar the parties would have created a land sale contract and an action of forcible entry and detainer would not be appropriate to regain possession.
We must inquire, then, whether the agreement of July 1, 1962 changed the relationship of the parties from that of vendor and purchaser under a land sale contract to that of landlord and tenant under a written lease. As we have already noted, the July 1 agreement is specifically designated as 'supplemental' and 'not in lieu of' the June 1 agreement, indicating an intention that the basic nature of the relationship first created was not to change. Any ambiguity which may have been created by the June 1 agreement with respect to the condition that the purchasers obtain financing is removed by the clear statement in the July 1 agreement of the purchasers' obligation to do so.
The July 1 agreement does, however, create an ambiguity by reference to the $200 monthly payments as 'the payment of rent.' The July 1 agreement provides that the purchasers are obligated to pay $200 during the period they were to seek a loan. The $200 payment, it will be noted, is described as the consideration for 'an extension of time for the payment of the balance due on said contract * * *.' The monthly payment is later referred to as rent in the clause providing '[t]hat upon the compliance with the terms and conditions heretofore set forth the provision herein for the payment of rent shall cease * * *.'
It appears, then that the $200 monthly payment could be regarded as the payment for the use of the property for a limited period or the consideration for the extension of time to secure a loan, or possibly as a payment for both of these purposes. If the July 1 agreement is construed to create a lease the entire transaction would then seem to be a lease with an option to purchase, the $3,000 payment being subject to forfeiture upon failure of the lessee to comply with the conditions.
But in view of the fact that the total purchase price of the property was only $23,500 it does not seem reasonable that the parties would regard a sum as large as $3,000 as the consideration for an option. Further, it will be noted that the July 1 agreement required the purchasers to make repairs and to paint the premises. This obligation imposed upon the purchasers with its concomitant expense would not be inconsistent with a lease if the lease were for a period long enough to enable the lessees to reap some benefit from the improvements during the tenancy. But the improvements which the purchasers here agreed to make would be of little use to them unless they could get a loan and continue to occupy the premises as purchasers of the property rather than as lessees.
It is our conclusion that the July 1 agreement was intended to continue the relationship of vendor and purchaser initially created by the earnest money agreement. This being so, an action of forcible entry and detainer does not lie.
Judgment reversed.
The majority states: 'The pivotal question is whether the instrument signed by the parties created a lease or a land sale contract.' I do not believe that that is the crucial question. It clearly is not the question which the plaintiff wishes answered. The pivotal question in my belief is this:
If a vendor does not...
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