Glad Tidings Church of America v. Hinkley, 5182

• Decision Date: 29 January 1951
• Docket Number: No. 5182,5182
• Parties: GLAD TIDINGS CHURCH OF AMERICA v. HINKLEY.
• Court: Arizona Supreme Court

Page 1016

226 P.2d 1016

71 Ariz. 306

GLAD TIDINGS CHURCH OF AMERICA v. HINKLEY.

No. 5182.

Supreme Court of Arizona.

Jan. 29, 1951.

Fennemore, Craig, Allen & Bledsoe, of Phoenix, for appellant.

Gust, Rosenfeld, Divelbess, Robinette & Linton, of Phoenix, for appellee.

DE CONCINI, Justice.

Suit was commenced by Hermina Hinkley to quiet title to lot 12, block 10, City of Phoenix, against defendant Glad Tidings Church, hereinafter referred to as the Church. The Church answered and counterclaimed asking for specific performance of a contract to purchase real estate. From a judgment in favor of Mrs. Hinkley by the trial court sitting without a jury, the Church presents this appeal.

The facts giving rise to the controversy in this case are these. Phil R. Hinkley and Hermina Hinkley, husband and wife, owned as joint tenants certain property situated on the northeast corner of East Adams Street and Second Street in Phoenix, Arizona. On December 29, 1938 the Hinkleys entered into a contract with the Pentecostal Holiness Church, a corporation which later changed its name to Glad Tidings Church of America, for the sale of this property to the Church.

The contract provided for a purchase price of $20,000, payable $10 cash at the time of executing the contract, monthly payments of $45 which were to include 2 1/2% interest per annum on the unpaid balance of the purchase price, and that the entire balance was to be paid in cash on January 1, 1940. Time was declared of the essence and the Church went into immediate possession under the contract. The contract also provided to escrow the papers with the Arizona Title Guarantee and Trust Company which was never done.

The contract was recorded on December 30, 1938 and on the day the contract was executed, the Hinkleys executed a warranty deed in favor of the Church and the Church executed a quitclaim deed in favor of the Hinkleys and these documents were left in the latter's possession. After the contract took effect Mr. Hinkley died late in 1939 and Mrs. Hinkley took the property by sole survivorship.

About June 4, 1940 the Church having failed to pay the balance of the purchase price on January 1, 1940 as provided in the contract, but having continued to pay, and Mrs. Hinkley having continued to receive, the monthly payments of $45, Mrs. Hinkley sent a 'Notice of Cancellation' to the Church which was acknowledged on June 7 by Mr. John T. Sharrit, who occupied the dual position of secretary-treasurer and trustee of the Church and also of agent for the Hinkleys on income tax matters. The text and acknowledgment of the notice is as follows:

'You Are Hereby Notified: That by reason of your default in the payment of the balance purchase price of $19,990.00 on January 1, 1940 under your contract for the purchase of Lot 12, Block 10, Phoenix, Maricopa County, Arizona, as provided in agreement of sale dated December 29, 1938, and by reason of default in the performance of the other terms and conditions of said contract, the said contract and all your rights thereunder are hereby terminated.

'Dated this 4th day of June, A.D. 1940.

* * *

* * *

'I Hereby Acknowledge Receipt of the original of the above Notice of Cancellation this 7 day of June, A.D. 1940.

'Pentecostal Holiness Church,

'(a corporation)

'By: /s/ John T. Sharrit

'John T. Sharrit, Secretary.'

After service of this notice, the Church remained in possession and continued to pay and Mrs. Hinkley continued to receive $45 per month until October 1946.

On May 31, 1945 Mrs. Hinkley had her attorney draw up and present to the Church a proposed new contract for the purchase and sale of the property in question at the same price and terms as in the initial contract but which extended the final payment until 1960, and further conditioned that the premises were to be used by the Church for twenty years and that the then pastor, Dr. Sutton, and the secretary, Mr. Sharrit, were to remain active in connection with the Church's affairs. The Church officials executed and delivered this document to Mrs. Hinkley, who never signed it. It was therefore never effective as a contract. Subsequent thereto the Church changed its trustees, pastor and a high percentage of its membership.

On October 1, 1946 Mrs. Hinkley sent to the Church a notice of termination of tenancy directing the vacating of the tremises within 30 days. On October 21, 1946 the Church deposited the usual $45 payment to Mrs. Hinkley's bank account. After returning from a vacation trip, Mrs. Hinkley closed the account upon discovering this deposit and had her check for $45 made out and returned to the Church. The Church never cashed this check.

On November 4, 1946 the Church placed $20,000 on deposit with the Phoenix Title and Trust Company and a letter was sent Mrs. Hinkley asking her to deliver the deed and advise them of the correct amount due her under the contract. She refused to deliver the deed or to furnish the requested information. This deposit was withdrawn by the Church in October 1947, approximately a year later.

The Church assigns 2 errors of the lower court that may be summarized as follows: (1) Neither of the notices delivered to the Church was effective to accomplish a forfeiture of the contract since the plaintiff failed to give the required 10 day notice as provided in the contract or to tender a deed with them; (2) That the parties by their conduct have shown that there was a valid subsisting agreement between them throughout this period and the Church is therefore entitled to specific performance of the contract. Other facts will be related as they become necessary in deciding the questions presented herein.

The first question to be answered is in two parts (a) Was the notice of cancellation of June 4, 1940 effective without giving the 10 day grace period provided for in the contract? and (b) Was the same notice effective without a tender of deed by Mrs. Hinkley to show her willingness to perform? Unless otherwise specified the word 'notice' will refer to the notice of cancellation of June 4, 1940.

The notice was given to take effect summarily upon receipt thereof on June 7, 1940. The contract provided that in order for the sellers to terminate the contract they would have to give the buyer 10 days notice; to quote the contract, '(the seller may) upon ten days notice * * * and a failure to correct such default within said 10-days period, declare this contract at an end, * * *' The buyer was in default in the payment of the purchase price six months before the notice was given. Under section 71-126, ACA 1939, a buyer purchasing real property under contract and in default has 30 days in which to bring his payments up to date if his equity is less than 20% of the purchase price. The commencement of the grace period dates back to the time of the default and not from the date of termination of notice. Alger v. Brighter Days Mining Corporation, 63 Ariz. 135, 160 P.2d 346.

We will now consider whether the notice of cancellation without providing the 10 day grace period was sufficient and effective. The notice of termination was intended to have a summary effect. But the law does not favor forfeitures and if a party would avail himself of a contractual provision providing for such a forfeiture, he must comply strictly with all the requirements of the contract. In this case Mrs. Hinkley's notice did not so comply and therefore the notice was ineffective for that purpose.

As for the second part of the question, the Church relies on the rule laid down in the case of Boone v. Templeman, 158 Cal. 290, 110 P. 947, 950, that '* * * The vendor must tender a deed as a condition to demanding payment of the price, and he cannot, without such tender, declare a forfeiture, or maintain a suit either for the whole price, or for an intermediate installment.' While there is some authority to the contrary, the above appears to be the general rule. However, we believe that an offer of tender is sufficient in a notice of forfeiture if there is an expression by the vendor in his notice of forfeiture that upon payment by the vendee, the vendor is ready, willing and able to tender and deliver a deed upon receipt of payment. We believe the general rule as modified by the conditional tender as...