Atkochunas v. Gustafson

• Decision Date: 13 April 1937
• Citation: 66 P.2d 1192,156 Or. 126
• Parties: ATKOCHUNAS et al. v. GUSTAFSON et ux.
• Court: Oregon Supreme Court

66 P.2d 1192

156 Or. 126

ATKOCHUNAS et al. v. GUSTAFSON et ux.

Supreme Court of Oregon

April 13, 1937

Department No. 2.

Appeal from Circuit Court, Multnomah County; James P. Stapleton Judge.

Suit by Paul Atkochunas and Antonia Atkochunas, his wife, against John A. Gustafson and Ruth M. Gustafson, his wife. From the decree, the defendants appeal.

Affirmed.

Lars R Bergsvik and Will H. Masters, both of Portland (Edwin Lindstedt, of Portland, on the brief), for appellants.

Oglesby Young, of Portland (Frederick S. Wilhelm, of Portland, on the brief), for respondents.

RAND Justice.

On February 27, 1926, the plaintiffs contracted to sell and the defendants to purchase a certain designated lot and the apartment house thereon, situated in the city of Portland; the price stipulated to be paid therefor was the sum of $7,700, of which $500 was paid in cash, the balance to bear interest at the rate of 6 per cent. per annum and to be paid in monthly installments of $45 each, plus the interest that had accrued at the time of such payments on the unpaid balance.

The contract further provided that the defendants should have possession of the property, keep the same insured against loss by fire, and pay all taxes and assessments levied against it. The contract further provided that time should be of the essence of the contract and that, in case of default in the payment of any said installments within the time specified in the contract, or of any of the conditions of the contract, all payments theretofore made to the plaintiffs should be forfeited and that the plaintiffs should have the right to repossess themselves of the property.

A few days prior to October 25, 1935, and while the defendants were in default under the contract, they surrendered possession of the property to a third party and gave notice to plaintiffs that they would make no further payments under the contract. At said time, in addition to the amounts that would later fall due under the contract, there was then due and owing to the plaintiffs from the defendants, under the contract, the sum of $2,987.26 with interest thereon from and after the 27th day of November, 1934, and the defendants had not paid certain of the taxes which they had contracted to pay.

Thereupon and on October 25, 1935, the plaintiffs brought this suit setting up the foregoing facts in their complaint and praying for strict foreclosure of the contract. The defendants answered, setting up as an affirmative defense the various sums of money which they had paid to the plaintiffs under the contract and certain expenditures claimed to have been made by them in the repair and improvement of the property and the amount of taxes paid, and alleging that, by reason of bringing the suit for strict foreclosure of the contract, the plaintiffs had rescinded the contract and that they had accepted such rescission upon their part and that they were entitled to have the aggregate of said amounts decreed to be a lien against the property.

There was no dispute in the pleadings or proof as to the amounts which the defendants had paid to the plaintiffs under the contract.

The cause was tried in the court below and a decree was entered, decreeing that the defendants pay to the plaintiffs the aggregate of the amounts then due and payable to the plaintiffs under the contract on or before ninety days from the date of the entry of the decree, and that, upon their failure so to do, the defendants' rights under the contract be terminated and that the plaintiffs be restored to their former estate in the premises. From this decree, the defendants have appealed.

It will thus be seen that the ultimate question presented upon this appeal is whether the bringing of this suit for strict foreclosure of the contract constitutes a rescission of the contract by the plaintiffs and entitles the defendants to treat the same as a rescission and to recover the moneys paid.

Defendants' argument in support of their contention is that, while the contract contains a time essence clause and gives to the plaintiffs for defendants's failure to perform the right to declare a forfeiture, these provisions were waived by plaintiffs' acceptance of payments long after they had become due under the contract and in lesser amounts than those specified in the contract, and that, because thereof, plaintiffs had no right to rescind the contract without having first given to the defendants a reasonable notice of their intention so to do and a reasonable opportunity to pay the amounts then due under the contract.

This contention would be tenable if the plaintiffs had elected to rescind the contract and to declare a forfeiture, or, under the circumstances stated, had commenced a suit for the cancellation or rescission of the contract, or had done any other act which in law would amount to a disaffirmance of the contract upon their part. But the plaintiffs have done none of these things and, hence, the doctrine which would have been applicable in a rescission suit has no application in a suit for strict foreclosure, which is an affirmance of the contract.

The relief sought by strict foreclosure is that the defendants be compelled to comply with the terms of the contract and, upon their failure so to do, that their rights under it be foreclosed and barred. The bringing of a suit for strict foreclosure of a contract is no more a disaffirmance of the contract than an ordinary mortgage foreclosure case, where the relief sought is a judicial sale, would be a disaffirmance of the mortgage sought to be foreclosed. The two cases are exactly parallel in that respect and both constitute an affirmance and not a disaffirmance of the contract which the parties are seeking to enforce. The distinction which exists between an action or suit brought to cancel or rescind a contract, or where the relief sought in the action or suit, if granted, would have the effect of terminating a contract, and a suit or action brought to enforce a contract right, which can only exist if the contract is still in force, is pointed out in 3 Black on Rescission (2d Ed.) § 576, in these words:

"The institution of a suit to rescind a contract or cancel a conveyance is in itself a sufficient notice of the plaintiff's election to rescind or disaffirm the transaction, and where this course is taken, no previous notice is required. Thus, where a party files a bill to rescind a contract for the exchange of lands on the ground of fraud, consisting in the concealment of the fact that there were judgments which were liens on the defendant's lands at the time, the discharge of such liens after the filing of the bill will not affect the complainant's rights. For the institution of the suit constitutes a rescission and an election to recover back the property given in exchange, and the one party could not after that revive the contract without the other's consent. On the same principle, bringing a suit to recover back the consideration money paid under a contract,...