Kammert Bros. Enterprises, Inc. v. Tanque Verde Plaza Co.

• Decision Date: 08 June 1967
• Docket Number: No. 8110--PR,8110--PR
• Citation: 102 Ariz. 301,428 P.2d 678
• Parties: KAMMERT BROTHERS ENTERPRISES, INC., a corporation, Appellant, v. TANQUE VERDE PLAZA COMPANY, a corporation, Appellee.
• Court: Arizona Supreme Court

Page 678

428 P.2d 678

102 Ariz. 301

KAMMERT BROTHERS ENTERPRISES, INC., a corporation, Appellant, v. TANQUE VERDE PLAZA COMPANY, a corporation, Appellee.

No. 8110--PR.

Supreme Court of Arizona, In Banc.

June 8, 1967.

Chandler, Tullar, Udall & Richmond, Lesher, Scruggs, Rucker, Kimble & Lindamood, Johnson, Darrow, D'Antonio, Hayes & Morales, Tucson, for appellant.

Boyle, Bilby, Thompson & Shoenhair, Tucson, Morris M. Grupp, San Francisco, Cal., for appellee.

LOCKWOOD, Justice:

This action is one for damages for breach of contract for sale of commercially zoned real estatenear Tucson, Arizona. The buyer of the property, Tanque Verde Plaza Company, a corporation, brought suit against the seller, Kammert Brothers Enterprises, Inc. Certain issues were submitted to the jury on special interrogatories, which were answered favorably for the plaintiff-buyer. By stipulation, the issue of damages was tried to the court, and a judgment entered in favor of the plaintiff for $244,399.14, on May 20, 1963. Upon defendant's appeal to the Court of Appeals, Division II, 4 Ariz.App. 349, 420 P.2d 592, the latter affirmed the judgment in favor of plaintiff, but reduced the amount of damages. The matter being before us on a writ of review, the opinion of the Court of Appeals is vacated.

The contract of sale was executed by the parties on April 12, 1960, calling for a total purchase price of.$390,000 with $60,000 payable at the time of execution, yearly installments starting March 1, 1961, and interest payable in quarterly installments, beginning June 15, 1960. An escrow agreement was signed and deposited with an escrow agent, along with a conveyance back to the seller in the event of the buyer's default. The escrow instructions provided that the balance of the purchase price would be paid to the escrow agent, and that upon payment in full of the purchase price, the deed from seller to buyer was to be recorded. Time was made of the essence in the contract. The contract also contained a provision that upon default of the buyer of any of the terms, the seller at his discretion, could either forfeit and terminate the contract, or treat the contract as continuing, and enforce it against the buyer.

The $60,000 down payment was made on time. The first two quarterly interest payments were paid and accepted after their respective due dates, one being accepted over a month late. The buyer had planned to build a shopping center on the subject property, and being unable to secure the necessary financing, asked for an extension of the March 1, 1961 payment on the principal of the contract. Two extensions of this payment were granted informally by the seller, through letters by its attorney to the buyer's attorney. The validity of these extensions is not in dispute, the extension to expire on October 4, 1961.

On September 30, 1961, officers of the seller and buyer met in Tucson, Arizona, together with buyer's attorney, a real estate agent connected with the transaction, and one Max Schmidt, in order to discuss the contract. The buyer had previously conferred with Schmidt on a proposed transaction in which Schmidt would exchange certain property in California, plus cash and his personal note, for the subject property. The buyer and his attorney testified that at this meeting an oral extension was given until January 1, 1962, in order to bring payments on the contract up to date. This was disputed by the seller, but its president, Gilbert J. Kammert, admitted that at least a forty-five day extension was given.

Thereafter, Damiano, the secretary of the buyer corporation, and its principal negotiator, made ten to fifteen trips to Los Angeles, California in an attempt to secure a mortgage commitment in connection with the Schmidt exchange proposal. Representatives of the seller went to California in October to look at the Schmidt properties, and told the buyer's attorney that if this proposed transaction went through, the seller would require $210,000 cash, plus a $180,000 note from Schmidt, and a note from Damiano for $15,000. The buyer's attorney was also informed that if the buyer was agreeable to these terms, the seller would grant an extension until November 15 to get a mortgage commitment, and if one was obtained, until February 1, 1962 to close the deal. The attorney said he would inform the buyer, but no agreement was ever drawn, and no exchange of property was ever made. A joint venture between the buying and selling corporation for development of the shopping center was discussed during the latter part of November, but on December 4, officers of the seller told the buyer they could not engage in the venture for tax reasons.

Various other conversations and meetings transpired between members of the two corporations and pertinent parts of these will be discussed hereafter. On December 19 and 21, 1961, Damiano informed Gilbert J. Kammert, the president of the seller corporation that the buyer had located parties willing to take over the contract of sale, and either pay the entire amount then due on the contract, or pay the principal payment then due plus interest, at the seller's option. This proposal was declined, Gilbert Kammert saying that an additional $50,000 would be required because the property had appreciated in value since the original contract had been executed. After another meeting on December 28, 1961 did not result in a written contract, the buyer on December 29, sent written notice to both the seller and the escrow agent that it considered the contract to be in default because of the seller's refusal to accept its offers. A final meeting was held on January 12, 1962, with members of the group of investors the buyer had interested in taking over the contract being present. The seller's representatives told them they would not proceed with the original contract, but required a new one for.$390,000 on a new contract. The investors were not interested in this offer and left.

On January 31, after giving the escrow agent a letter of indemnity, the seller obtained deeds from the agent, conveying the property back to it. No written notice was ever given buyer as to any definite date of forfeiture if the payments were not brought up to date.

One of the determinative issues of this appeal is whether a ninety day or extension of payment under the contract was granted by the seller to the buyer in their September 30, 1961 meeting, and if so, whether such extension was binding on the seller. In an answer to an interrogatory put to it, the jury found that the seller had agreed that the buyer had until January 1, 1962 to pay all sums due under the contract. The jury also found that the defendant by its actions led plaintiff to believe that it had such an extension to January 1, 1962, and that the plaintiff-buyer acted on such belief. Adequate testimony exists to support these findings as to the extension being granted.

Kammert Brothers contend that the oral extension was rendered invalid because it failed to meet the requirements of the statute of frauds, § 44--101 A.R.S. (that certain agreements be by written memorandum.) However, regardless of whether the extension agreement would be considered enforceable under the statute, its existence is evidence of the seller's intent to waive strict performance of the forfeiture provisions of the contract. Substantial authority exists in support of the view that such an oral extension of time of payment, followed by conduct of the vendor inconsistent with demanding strict compliance with the contract, results in a waiver of the forfeiture provisions of the contract. Stark v. Norton, 24 Ariz. 454, 211 P. 66 (1922); Di Giuseppe v. Di Giuseppe, 373 Pa. 556, 96 A.2d 874 (1953); Nelms v. Miller, 56 N.M. 132, 241 P.2d 333 (1952); Bugajski v. Siwka, 200 Mich. 415, 166 N.W. 863 (1918).

In addition to the oral extension given to the buyer, the vendor through its officers, explicitly assured the buyer on several occasions that no action toward forfeiture would be commenced before January 1, 1962, the last such statement being made in the latter part of December, 1961. It is not disputed that at least up until January 9, 1962, the seller had not exercised its discretion to terminate the buyer's interest in the property and therefore was continuing to hold the buyer to its obligation. On October 25, 1961, Kammert Brothers sent a tax bill on the property to the buyer's attorney. The buyer's secretary, Damiano, paid most of the taxes due on the property. The buyer also expended considerable amounts of time and money in reliance on the extension, with the seller's knowledge. The seller further discussed a possible joint venture with the buyer, and granted two informal written extensions, as previously stated. These actions by the seller are clearly inconsistent a demand for strict compliance of the contract.

Once strict performance of the contract has been waived as to timely payment, a clear and definite notice to buyer followed by allowance of a reasonable time to bring payments up to date would be necessary in order to reinstate the forfeiture clause of the contract. Arizona Title Guarantee & Trust Company v. Modern Homes, Inc., 84 Ariz. 399, 330 P.2d 113 (1958); Onekama Realty Company v. Carothers, 59 Ariz. 416, 219 P.2d 918 (1942); Moeller v. Good Hope Farms, Inc., 35 Wash.2d 777, 215 P.2d 425 (1950). As stated in Modern Homes, supra, the vendor by its waiver of strict performance is held to have waived any prior defaults, and the vendee is not in default until after it fails to comply with the required notice. Then pursuant to § 33--741 A.R.S., since less than 20% Of the purchase price had been paid, forfeiture of the interest of purchaser in the sales contract could not be accomplished until thirty days had passed from the time of default. Damiano, by his own admission recognized that the seller was insisting upon performance by the first of the year. Therefore, the period of...