Elsasser v. Wilcox

• Decision Date: 26 June 1979
• Docket Number: No. A,A
• Citation: 596 P.2d 974,286 Or. 775
• Parties: Fred ELSASSER, Appellant, v. Glen H. WILCOX and Joan M. Wilcox, husband and wife, Respondents. 7701-00402; SC 25572. . *
• Court: Oregon Supreme Court

Page 974

596 P.2d 974

286 Or. 775

Fred ELSASSER, Appellant, v. Glen H. WILCOX and Joan M. Wilcox, husband and wife, Respondents.

No. A 7701-00402; SC 25572.

Supreme Court of Oregon, In Banc. ^*

Argued and Submitted Dec. 6, 1978.

Reargued Feb. 6, 1979.

Decided June 26, 1979.

Harry R. Kraus, Portland, argued and reargued the cause and filed a brief for appellant.

Marshall C. Cheney, Portland, argued and reargued the cause for respondents. With him on the brief was Donald O. Costello, Portland.

HOWELLL, Justice.

Plaintiff filed a declaratory judgment proceeding to determine the rights of the parties under a contract for the sale of real property between plaintiff as purchaser and defendants as sellers. Defendants, by their answer, asked for a judgment declaring the contract to be null and void because of plaintiff's failure to make payments required of him. Plaintiff appeals from a judgment in favor of defendants.

The negotiations resulting in the contract under consideration began in 1971 when the parties executed an option wherein plaintiff was to purchase a portion of the property involved. Plaintiff made three payments of $7,500 each on the option. In 1974 the parties executed a contract of sale regarding the entire property. Plaintiff-purchaser did not make the first payment of $62,400 due in November 1975 and the parties terminated the contract by agreement. In November, 1975, the parties executed a new agreement and plaintiff paid $10,000 down. The total purchase price was $350,000, payable over six years, beginning with a payment of $62,400 plus interest on or before November 15, 1976. The contract provided for release of parcels of the property upon certain payments being made.

The contract also provided for certain remedies to be available to the vendors in the event of a default by plaintiff:

" * * * (I)n case the second party shall fail to make the payments aforesaid, or any of them, punctually and upon the strict terms and at the times above specified, or fail to keep any of the other terms or conditions of this agreement, time of payment and strict performance being declared to be of the essence of this agreement, then the first party shall have the following rights:

"1. To declare this contract null and void.

"2. To declare the whole unpaid principal balance of said purchase price with the interest thereon at once due and payable, and/or

"3. To foreclose this contract by suit in equity, and in any of such cases, all the rights and interest hereby created and then existing in favor of the second party derived under this agreement, shall utterly cease and determine, and the premises aforesaid shall revert and revest in the first party without any declaration of forfeiture or act of re-entry, or without any other act by first party to be performed and without any right of the second party of reclamation or compensation for money paid or for improvements made as absolutely, full and perfectly as if this agreement had never been made."

On October 20, 1976, plaintiff advised defendants by mail that he was having difficulty in securing a bank loan on lots being developed and "at this writing I don't feel I could make the payment" due on November 15, 1976. The payment was not made by November 15.

On November 22, 1976, defendants wrote to plaintiff stating that "we hereby declare this contract null and void, effective this date."

On or about December 28, 1976, by letter addressed to Title Insurance Company of Oregon, plaintiff delivered to it his personal uncertified check in the sum of $86,900 (representing the initial principal payment and accrued interest) payable to defendants, together with a description of certain real property, with the following instructions:

"You are instructed to deliver the check to Mr. and Mrs. Wilcox upon deposit for recording a Warranty Deed from Glenn H. and Joan M. Wilcox, husband and wife, to Fred Elsasser, Jr., covering the property described and referred to above."

It was stipulated by the parties that:

"The acreage designated for release by plaintiff has improvements located thereon having an appraised value for tax purposes of $39,140.00. The contract provides that the payment required for release of any designated acreage shall include, in addition to the land price computed by formula, the then appraised value for tax purposes of said improvements. No tender other than that described in (the letter dated December 28, 1976) has been made to defendants."

On January 3, 1977, defendants' counsel wrote to plaintiff, stating again that the contract is "hereby declared null and void effective this date." ¹

On these facts, the trial court entered a judgment declaring the contract to be terminated. Plaintiff appeals, contending that defendants' declaration of forfeiture was ineffective because defendants did not give plaintiff notice and an opportunity to cure the breach.

This court has held in numerous cases that where a contract gives a vendor alternative remedies upon default by the purchaser, notice and an opportunity to cure the default is required by law. Roth Develop. v. John Gen'l Contr., 263 Or. 561, 503 P.2d 493 (1972); Morrison v. Kandler, 215 Or. 489, 334 P.2d 459 (1959); Howard v. Jackson, 213 Or. 447, 324 P.2d 757 (1958); Zumstein v. Stockton et ux, 199 Or. 633, 264 P.2d 455 (1953); Grider v. Turnbow, 162 Or. 622, 94 P.2d 285 (1939); Epplett v. Empire Inv. Co., Inc., 99 Or. 533, 194 P. 461, 194 P. 700 (1921). The source of the rule requiring notice when the vendor has "options" was first stated in Epplett v. Empire Inv. Co., Inc., supra :

" * * * Since contracts like the one here are not self-executing, The law by implication introduces into such contracts a provision that the right of forfeiture should be exercised only after first giving notice for a reasonable period of time, * * * and, therefore, the right to forfeiture can not be fully exercised unless: (1) the vendor gives reasonable notice; and (2) the purchaser fails to pay within the time fixed by the notice. * * * ." 99 Or. at 541-42, 194 P. at 703 (emphasis added).

In Zumstein v. Stockton, supra, we considered a contractual provision quite similar to the present one. The contract in Zumstein gave the vendor alternative rights in the event of default by the purchaser, one of which was the "right to declare the agreement null and void." We said:

" * * * Under any contract which gives the vendor a right to declare a forfeiture, that is, a right which he may but need not exercise, the forfeiture can be effectuated only after reasonable notice given. This must be done whether or not the time-essence clause has been waived. Epplett v. Empire Investment Co., 99 Or. 533, 194 P. 461; Grider v. Turnbow, supra (162 Or. 622, 94 P.2d 285 (1939)). A forfeiture under a land contract such as the one at bar is not automatic on the occurrence of default. The contract gave the vendor the 'right to declare this agreement null and void or foreclose by strict foreclosure in equity.' Since the vendor had alternative rights the forfeiture could not be automatic. Some action by the vendor would be required to manifest his choice between the alternative rights, And this must be true regardless of the additional provision that in either of such cases 'all the right * * * of the second party * * * shall utterly cease * * * and the premises aforesaid shall revert and revest in the first party without any declaration of forfeiture or act of re-entry, or without any other act * * * .' * * * " 199 Or. at 642, 264 P.2d at 459. (Emphasis added.)

The defendant relies on Edwards v. Wirtz, 167 Or. 625, 118 P.2d 114 (1941), and Maffet v. Or. & Cal. R. Co., 46 Or. 443, 80 P. 489 (1905). It is questionable whether those cases actually stand for the proposition that a forfeiture provision may operate without notice to the defaulting vendor. ² We need not decide that matter, however, because those cases, unlike the present case, did not involve contracts in which the vendor had alternative remedies upon default, and therefore do not control the present case.

We hold that our decision in this case is controlled by our previous decisions in Zumstein and Roth, and that a declaration of forfeiture under the terms of a contract such as this is effective only if the vendor first gives the purchaser notice and an opportunity to cure the breach. ³ The defendants in the present case did not provide plaintiff with such notice, but instead wrote plaintiff on November 22, 1976, stating that the contract was "null and void, Effective this date." (Emphasis added.) We have held that such a notice declaring that a forfeiture is then effected rather than stating that a forfeiture will be effected in the future unless payment is made within a prescribed time is a breach of the implied stipulation to give reasonable notice and does not effect a forfeiture. Morrison v. Kandler, supra; Howard v. Jackson, supra; Epplett v. Empire Investment Co., Inc., supra.

Because the defendants did not give plaintiff notice that a forfeiture will be effected and an opportunity to correct the default during the period given in the notice before declaring a forfeiture, the defendants are not entitled to prevail.

Reversed. No costs to either party.

DENECKE, Chief Justice, specially concurring.

I concur in the decision of the majority that the purchaser is entitled to notice of default and a reasonable opportunity to cure the default. I concur specially to state that in my opinion the rule of nonforfeiture should apply whether the contract gives the seller alternative remedies or only the right to declare the contract null and void and that any interest of the purchaser be forfeited.

The rationale of our past cases and the present decision is that courts will not permit a purchaser to lose his interest in the property without requiring notice of the default and giving an opportunity to remedy the default. This rationale will not permit the...