Dorsey v. Tisby

• Decision Date: 06 July 1951
• Citation: 192 Or. 163,234 P.2d 557
• Parties: DORSEY et ux. v. TISBY et ux.
• Court: Oregon Supreme Court

Page 557

234 P.2d 557

192 Or. 163

DORSEY et ux. v. TISBY et ux.

Supreme Court of Oregon.

July 6, 1951.

John R. Latourette, Jr., of Portland, argued the cause for respondents. On the brief were Latourette & Latourette, of Portland.

John O. Sheldahl, of Oregon City, argued the cause for appellants. On the brief were Sheldahl & Misko, of Oregon City.

Before BRAND, C. J., and HAY, ROSSMAN, LUSK and WARNER, JJ.

ROSSMAN, Justice.

This is an appeal by the defendants, husband and wife, from a decree of the Circuit Court which granted to the plaintiffs, husband and wife, strict foreclosure of a real estate sales contract signed January 19, 1949, by the plaintiffs, as vendors, and by the defendants, as purchasers.

The defendants, as appellants, submit three assignments of error. The first claims that error was committed when the trial court refused to dismiss the complaint 'in that the said contract was void and unenforceable for want of consideration.' The second assigns error to the refusal to dismiss the complaint 'in that said contract if not found to be void for want of consideration, became a fully executed and completely extinguished contract when the respondents accomplished their forfeiture, and as such was no longer capable of supporting any kind of action.'

The third assignment says: 'The court below erred in dismissing the counterclaim of the appellants, and in failing and refusing to grant the relief therein prayed for on the ground that the void contract of January 19, 1949, rather than the contract of December 22, 1948, was the contract between the parties.'

The parcel of property, about 2 1/2 acres in extent, which is the subject matter of this suit, lies in a subdivision of Clackamas County known as Bryant Acres. Prior to December 22, 1948, the plaintiffs, as owners of the property, authorized a real estate agency known as Rogers & Vowels, to sell it. December 22, 1948, Rogers & Vowels signed a paper, entitled Earnest Money Receipt, which acknowledged that they had received from the defendants $1,000 as earnest money and part payment of the purchase price of the property. The receipt stated that the price was $8,750 and set forth the manner in which it should be discharged. Following the signature of the real estate firm was a statement over the signatures of the defendants in which they agreed to purchase the property at the price and upon the terms specified in the writing. The concluding part of the instrument was an acceptance and approval by the plaintiffs of the defendants' offer. January 19, 1949, the parties signed another instrument to which the defendants' brief refers as the 'formal contract.' It, too, was signed by the plaintiffs and the defendants. By the time of its execution the plaintiffs had received from Rogers & Vowels the initial payment of $1,000, and since that firm thereupon had no further interest in the transaction, they, of course, did not sign the new, that is, the formal, contract. The latter, as also the earnest money receipt, required the defendants to pay $2,000 of the purchase money immediately after they had sold an item of real property in Portland which they owned and which was described in the instruments. The formal contract added to that requirement these words: 'not later than Ninety (90) days from date of this contract.' April 21, 1949, when it developed that the defendants were unable to discharge the payment of $2,000, the parties signed another instrument which, after mentioning the formal contract, said that, in consideration of a payment of $500 made by the defendants to the plaintiffs on that day, the latter granted an extension of 30 days in which to discharge the remainder of the $2,000 installment. The concluding words of the extension agreement were:

'Except as above stated, all of the covenants, terms and provisions of the above referred to Contract of Sale shall remain in full force and effect and shall be binding upon all the parties hereto.'

The contract of sale mentioned in the quoted words was the formal contract signed by the parties January 19, 1949.

No part of the $1,500 payment was ever made and nothing further was paid upon the purchase price of the property after the payment of $500 on April 21, 1949. May 23, 1949, the plaintiffs notified the defendants that, due to their default, the plaintiffs declared the formal agreement 'null and void.' Thereupon the defendants recorded in the miscellaneous records of Clackamas County the formal agreement. August 25, 1949, the plaintiffs instituted this suit for its foreclosure.

We will now consider the first assignment of error which the defendants [appellants] term 'the principal question involved in this suit.' Abstractly, they paraphrase the issue submitted by this assignment of error, as follows:

'Where an original contract between the same parties covering the same subject matter is modified by a new contract, if the undertaking by one party is simply to perform the whole or part of what he promised in the original contract, it will not support a promise by the other party to perform what he had previously agreed to do and something more.'

It is seen therefrom that the defendants contend that under the formal contract [the one which the parties signed January 19, 1949] the plaintiffs agreed to do no more than the covenants of the earnest money receipt exacted of them, but that the formal contract imposed upon the defendants the duty 'to perform what he [the defendants] had previously agreed to do and something more.' In advancing their argument, the defendants direct attention particularly to the fact that, although the earnest money receipt did not require payment of the $2,000 installment until the defendants had sold their Portland property, the formal contract modified that provision by adding 'not later than Ninety days from date of this contract.' They claim that they received no quid pro quo for the purported surrender of the greater privilege. We add that the defendants concede that, under the provision as it was phrased in the earnest money receipt, payment was required within a reasonable time; see Branch v. Lambert, 103 Or. 423, 205 P. 995.

The defendants make no contention that they were induced to sign the formal contract by deceit, fraud, concealment, overreaching or other improper means. They do not claim that they were unfamiliar with the meaning of any part of the formal contract when they signed it, and they do not say that something was omitted from it which should have been written into it. Their sole claim is that the formal contract lacked consideration. Without intending any disrespect for the contention just mentioned, it appears clear that it is an afterthought which occurred to the defendants when the loss of this property confronted them. Being forced to concede that the contract was a true integration of their agreement, they sought to defeat its validity by asserting lack of consideration. It is conceded that if that claim it unfounded, the rights of the parties are governed by the formal contract. For example, the defendants' [appellants'] brief says:

'If the subsequent and modified contract of January 19, 1949, * * * was valid, then it must be conceded that the appellants are foreclosed from any relief at the hands of this Court.'

The two instruments were not counterparts of each other. Although both had as their subject matter the same property, some of the attendant circumstances had undergone change after the earnest money receipt was given. For instance, (1) After December 22, 1948, the plaintiffs executed a mortgage, as the earnest money receipt contemplated they should do, which secured a note executed by them in the sum of $4,000. The mortgage described the property mentioned in the two instruments. The formal contract contained provisions concerning the amount of the mortgage and its payment which were, of course, absent from the earnest money receipt. (2) December 22, 1948, the real estate agency was paid its commission and delivered to the plaintiffs the initial payment of $1,000 which the defendants had deposited with the firm as earnest money. Thereupon the firm had no further interest in the transaction and no occasion to be a party to any agreement pertaining to it. (3) The earnest money receipt, in delineating the reciprocal promises of the parties, was principally concerned with their rights in the event (a) the plaintiffs declined to approve the sale or their title to the property was defective, or (b) the plaintiffs had good title and approved the sale but the defendants thereafter neglected to meet the conditions of the earnest money receipt. The latter provided that if the first alternative occurred the earnest money should be returned to the defendants, but if the second alternative occurred the earnest money should be forfeited. After the plaintiffs had approved the offer made to them in the earnest money receipt, the provisions just mentioned were immaterial, but thereupon the parties had need for a contract which would delineate their rights in the event of a breach of the contract's covenants. The formal contract expressed those rights. The foregoing suffices to show that the two instruments were not confined to the same contractual domain.

The earnest money receipt expressly contemplated that it should be succeeded by a contract. For instance, one of its recitals, which is cast in prospective terms, refers to a 'delivery of contract' and another speaks of 'delivery of the deed or contract above mentioned.' Further, the earnest money receipt, as already indicated, was primarily an agreement of a provisional character which stated the rights of the parties during the negotiation period and deemed that at the conclusion of that period it would be succeeded, through novation, by a later agreement. Williston on Contracts, Rev.Ed., § 1865, prefers to limit the term 'novation' to 'a transaction in which the...