Armstrong v. Irwin

• Citation: 26 Ariz. 1,221 P. 222
• Decision Date: 22 December 1923
• Docket Number: Civil 2071
• Parties: W. T. ARMSTRONG and W. M. SCOTT, Appellants, v. WILLIAM IRWIN and ANNA IRWIN, Appellees
• Court: Supreme Court of Arizona

221 P. 222

26 Ariz. 1

W. T. ARMSTRONG and W. M. SCOTT, Appellants, v. WILLIAM IRWIN and ANNA IRWIN, Appellees

Civil No. 2071

Supreme Court of Arizona

December 22, 1923

APPEAL from a judgment of the Superior Court of the County of Maricopa. R. C. Stanford, Judge. Reversed.

Messrs Alexander & Christy, for Appellants.

Messrs Dougherty & Dougherty and Mr. G. A. Rodgers, for Appellees.

OPINION

McALISTER, C. J.

On September 25, 1919, William Irwin and Anna Irwin, as parties of the first part, and W. T. Armstrong and W. M. Scott, as parties of the second part, entered into a written contract by which the former agreed to sell and the latter to buy under the conditions therein expressed, a quarter-section of land situated in Maricopa county, Arizona, for a consideration of $59,100, to be paid as follows: $6,500 on January 1, 1920, which was evidenced by a promissory note and $5,000 on or before the first day of each January thereafter until January 1, 1930, when the final payment of $7,600 would become due; all deferred installments to bear interest at the rate of seven per cent, payable semi-annually. The complaint which was filed May 17, 1921, alleges that the $5,000 due January 1, 1921, together with the interest upon all deferred payments from September 25, 1919, is unpaid, and prays judgment therefor.

Attached to the complaint is a copy of the contract, which by proper allegation is made a part thereof, and under it the purchasers were given possession of the land on October 1, 1919, and upon payment of one-half of the purchase price, together with the interest due on all deferred payments up to that time, the vendors were required to execute and deliver to them a warranty deed conveying the premises, and at the same time and as a part of the same transaction the latter, with their wives, were obligated to execute and deliver to the vendors a realty mortgage on said premises to secure the payment of the balance of the purchase price which it provides should be evidenced by the promissory notes of the vendees to be payable at the times and bear the interest provided for under the contract, and until such time as the vendees receive such deed they were required to farm the land in a thorough and proper manner and in accordance with the rules of good husbandry. Time was made the essence of the agreement, which further provides that --

"In the event that the second parties shall default in the payment of any sum of principal or interest at the times herein mentioned, and such default shall continue for a period of fifteen days after written notice thereof, then and in that event the second parties shall lose all rights under this contract and the first parties shall not be obligated either in law or equity to convey said premises to the second parties and the second parties shall forfeit to the first parties all moneys that shall have been paid on account of this contract as liquidated damages and as compensation for the use and occupation of said premises."

The defendants demurred to the complaint, and, their demurrer being overruled, answered October 14th, alleging, among other things, a verbal modification of the contract both as to the amount and time of payment of the various installments, and a readiness and willingness on their part at all times since January, 1921, to carry out and perform the terms and conditions thereunder.

On November 9th following plaintiffs filed what they denominated an "acceptance of tender and demand of performance," in which they accepted defendants' offer to perform, and moved the court for an order requiring them to execute the contract in its modified form, and pay to plaintiffs the sums due thereunder, and, in event of their failure to do so, that plaintiffs be given judgment for $5,458.20, the amount due under its terms, and the clerk directed to execute the modification of the contract in behalf of defendants. At the same time they filed, to be executed by defendants, what they designated an "agreement tender," containing, as they saw it, the modifications alleged by defendants, and on November 15th another paper of practically the same import, designated an "agreement of sale tender," executed by them the previous day, was filed for the same purpose. Defendants, however, did not make the payment demanded nor execute the modified agreement, so on December 17th following the court granted plaintiffs' motion, and gave defendants until the 21st of the same month to comply with it; but the day before this period expired the defendants filed a motion to set aside and vacate this order, giving several reasons therefor, among them being the alleged fact that the plaintiffs tendered and offered for execution by them a modification of the agreement different from that really entered into, and the further fact that the answer admits to be due only $1,000, with interest from February 28, 1921, whereas the order of the court contemplates entering judgment against the defendants for other and further sums not due under the modified agreement at the times of the filing of plaintiffs' complaint or the defendants' answer without any supplemental pleading by plaintiffs to include them. This motion was granted February 7, 1922, whereupon plaintiff's original motion for judgment on the pleadings made November 9, 1921, was allowed to the extent of $1,000, and it is from this judgment the defendants appeal.

A jury was impaneled to try the case November 4, 1921, but before any testimony was introduced the trial order was vacated upon motion of appellees, who say in their brief that this action was taken upon the statement of appellants in open court that they would make good their offer to execute the modified agreement and pay the amount due thereunder. The order in favor of appellees is designated by appellants as a judgment on the pleadings, though the former say it is more in the nature of a judgment upon admissions and tender, and is therefore a judgment by agreement between the parties upon a settlement or compromise.

Only two errors are assigned: The first, the overruling of the demurrer; and the second, the rendering of judgment for $1,000 upon the pleadings. The demurrer is based upon the ground that it appears upon the face of the complaint that the plaintiffs are seeking to recover from the defendants a deferred installment of $5,000 which became due under the contract on January 1, 1921, as part of the purchase price, together with the interest on all deferred payments from September 25, 1919, when the contract itself, as disclosed in the provision quoted above, measures and limits their right of recovery upon default of the purchasers to a forfeiture of the amount paid as liquidated damages and as compensation for the use and occupation of the premises. The sum of $6,500 due January 1, 1920, it appears, was paid, and the written notice of default relied on by defendants given May 17, 1921. This was the filing of the complaint and the service of summons, both of which happened more than fifteen days previous to the interposing of the demurrer on June 4th.

May the vendors recover under this contract a past due installment of principal or interest? According to its provisions, appellants in effect contend, they agreed to sell and the vendees to buy "at the price and under the terms and conditions" stated therein, and one of these conditions is that, in the event the vendees "default in the payment of any sums of principal or interest at the times herein mentioned, and such default continues for a period of fifteen days after written notice thereof," the vendees shall lose all rights thereunder and forfeit to the vendors all amounts paid on account thereof as liquidated damages and as compensation for the use and occupation of the premises, and the vendors shall be released from the obligation to convey and permitted to retain what the vendees have paid and forfeited for the specific purpose of compensating them for the use of their property while in possession of the vendees and for any damages they may have suffered on account of the failure of the latter to continue the payments. Appellees insist, upon the other hand, that this provision was placed in the contract for the sole benefit of the vendors, and that, in consequence of this fact, they have the right, in case of default in the payment of any installment of principal or interest to elect whether they will waive the conditions of forfeiture, treat the contract as still binding, and insist upon performance, or declare it forfeited, retain what has been paid on the purchase price, and retake possession of the property. In overruling the demurrer the trial court evidently took this view; and it is true that --

"In the common case where the contract provides that, in case of default in the payment of any installment, the agreement shall be null and void, and the rights of the purchaser thereunder shall be forfeited, this provision is held to be for the exclusive benefit of the vendor, and he is not bound to terminate the contract on the vendee's default." 1 Black on Rescission and Cancellation, p. 567.

Counsel for appellees have cited a number of cases to this effect among them being the following: Wilcoxson v. Stitt, 65 Cal. 596, 52 Am. Rep. 310, 4 P. 629; North Stockton Town Lot Co. v. Fischer, 138 Cal. 100, 70 P. 1082, 71 P. 438; Westervelt v. Huiskamp, 101 Iowa 196, 70 N.W. 125; Stewart v. Griffith, 217 U.S. 323, 19 Ann. Cas. 639, 54 L.Ed. 782, 30 S.Ct. 528 (see, also, Rose's U.S. Notes); Maffet v. Oregon & C. R. Co., 46 Or. 443, 80 P. 489; Chambers et al. v. Anderson, 51 Kan. 385, 32 P. 1098; New Richmond Land Co. v. Ivanovich, 52 Cal.App. 222, 198 P. 221; Fouts v. Foudray, 31 Okl. 221, Ann. Cas. 1913E, 301, 38...