Kendrick v. Davis
| Decision Date | 06 March 1969 |
| Docket Number | No. 39405,39405 |
| Citation | 452 P.2d 222,75 Wn.2d 456 |
| Court | Washington Supreme Court |
| Parties | Phillip N. KENDRICK, Executor of the Estate of R. H. Kendrick, Appellant, v. Millard C. DAVIS and Agnes Davis, his wife, and the marital community composed thereof; Harold C. Ullery and Lavera Ullery, doing business as Seattle Heights Realty; Lee James Finance Company, Inc., a Washington corporation; Lee James Finance Plan, Inc., a Washington corporation, Respondents. |
Abbott & Curtis, James V. Abbott, Seattle, for appellant.
Kadish & Kane, Richard E. Kane, Seattle, for respondents.
Robert G. Schimanski, Spokane, amicus curiae.
Plaintiff, the personal representative of the estate of a deceased vendor under a forfeitable real-estate contract, seeks to quiet title to the premises covered by the contract and to recover possession thereof. Plaintiff's motion for summary judgment was entered against defendants Davis. However, the court refused to enter summary judgment against defendants Lee James Finance Company, Inc. and Lee James Finance Plan, Inc. Instead, an order was entered adjudging the two corporate defendants to be the purchasers and reinstating the contract as to such defendants. Plaintiff appeals. The two corporate defendants are the only respondents appearing in this court. For convenience we will refer to them as the defendants.
The chronology of significant events is:
September 26, 1961, a real-estate contract for the sale of two houses and lots for $18,500, with a down payment of $1,100 and monthly payments of $120 was executed by R. H. Kendrick and wife as vendors and Millard C. Davis and wife as purchasers. Recorded October 4, 1961.
October 27, 1961, the purchasers assigned 1 their interest to Lee James Finance Company, Inc., to secure a loan of $1,000. Recorded October 30, 1961.
October 28, 1964, the purchasers assigned 2 their interest to Lee James Finance Plan, Inc., to secure a loan of $3,951. Recorded November 5, 1964.
August 2, 1965, last payment made by the purchasers.
January 6, 1966, plaintiff sent a notice by registered mail to the purchasers that unless delinquent payments were made by January 31, 1966, the contract would be forfeited.
February 1, 1966, no payments having been made in response to the notice, plaintiff sent a Notice of Declaration of Forfeiture and Cancellation of Contract to the purchasers. This was received by purchasers. on February 3, 1966, and recorded March 21, 1966.
April 21, 1966, Lis Pendens recorded in an action against the purchasers to quiet title to the property covered by the contract.
May 31, 1966, Amended Notice of Lis Pendens recorded which indicated that an amended complaint had been filed, making the assignees--Lee James Finance Company, Inc., and Lee James Finance Plan, Inc.--defendants. In the amended complaint plaintiff asked that the contract be terminated; that possession of the property be restored to him; and that title be quieted against all of the defendants.
June 24, 1966, answer of the two assignees was filed, claiming an interest in the property 'by virtue of a purchasers assignment of conract and deed for security.'
July 1, 1966, answer of purchasers filed (a general denial).
July 8, 1966, motion by plaintiff for summary judgment against all defendants.
September 7, 1966, the two assignees of the purchasers' interest tendered into court $16,113, which constituted the entire balance due under the contract, together with costs and attorneys' fees.
October 7, 1966, a summary judgment was entered, the decretal portions of which are as follows:
by which plaintiff herein is contract vendor, and defendant Lee James Finance Co., Inc. and Lee James Finance Plan, Inc. are vendees herein by virtue of that purchaser's assignment of contract and deed dated October 27, 1961, between Millard and Agnes Davis and defendants Lee James Finance Plan, Inc. and Lee James Finance Co., Inc., and that deed and purchaser's assignment of real estate contract dated October 28, 1964, between Millard and Agnes Davis, as grantors, and Lee James Finance Co., Inc. and Lee James Finance Plan, Inc., as grantees, is hereby reinstated; and
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that defendants Lee James Finance Co., Inc. and Lee James Finance Plan, Inc. will pay a total of $500.00 to plaintiff for the reinstatement of said contract and will continue to make monthly payments, per the terms of said contract; and
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the Clerk of the Court for Snohomish County will pay to plaintiff or his attorney the sum of $3,539.82, which sum will be deducted from the amount of $16,113.00 which has been heretofore tendered into the Registry of the Court under this cause number, and that the remaining amount, more specifically, $12,572.18, will be returned to defendant Lee James Finance Co., Inc. and Lee James Finance Plan, Inc., or their attorneys.
Plaintiff appeals from this judgment.
Although the court had, by its summary judgment, reinstated the contract with the two corporations as vendees, and a notice of appeal had been given on November 3, it nevertheless entered an order on November 25 giving plaintiff possession of the premises 'pending the appeal,' with directions to plaintiff to account to the corporate defendants for the rentals received from the property if the corporations should prevail on this appeal, but not otherwise. This order is seemingly based on our statement in Norlin v. Montgomery, 59 Wash.2d 268, 272, 367 P.2d 621, 624 (1961) 'Under the statutes and the facts of this case, Norlin, as mortgagee, has no right to possession until he is the successful bidder at an execution sale, and a sheriff's deed to the equity in the property has been received by him.'
We have heretofore held that the purchaser in an executory real-estate contract has an interest which he can mortgage. Sigman v. Stevens-Norton, Inc., 70 Wash.2d 915, 425 P.2d 891 (1967); Norlin v. Montgomery, supra; Nelson v. Bailey, 54 Wash.2d 161, 338 P.2d 757, 73 A.L.R.2d 1400 (1959).
The quitclaim deeds and assignments of contract interest from the purchasers to the corporate defendants were not accompanied by any change of possession. Each stated that it was given to secure the payment of a loan.
It is unnecessary to labor the proposition that these instruments were mortgages and not quitclaim deeds and assignments as they purport to be, since on their face they carry the label of security transactions. An instrument may in form be a deed or an assignment, but, if the intent is to use the property as security, it will be a mortgage. Mittlesteadt v. Johnson, 75 Wash. 550, 553, 135 P. 214 (1913).
Plaintiff does not dispute the proposition that the corporate defendants are mortgagees of the contract purchasers, but urges that he was entitled to rely on the contract forfeiture provision. He contends that he was obligated to give notice of intent to forfeit only to the purchasers, since he had no knowledge, actual or constructive, of the rights of those who had loaned money to the purchasers on the security of their contract interest. He argues that the rights of the purchasers having been forfeited, their assignees or mortgagees have no rights which the plaintiff-vendor must recognize.
It should be pointed out that this is not an action to judicially declare the forfeiture of a contract--the contract was terminated, at least as to the purchasers, by exercise of the vendor's forfeiture rights. Rather, we are here concerned with the question of whether that forfeiture is effective as to the mortgagees of the purchasers' interest under the contract. In this connection, cases such as Dill v. Zielke, 26 Wash.2d 246, 173 P.2d 977 (1946), and Moeller v. Good Hope Farms, Inc., 35 Wash.2d 777, 783, 215 P.2d 425 (1950), are to be distinguished. In that line of decisions, we were concerned with a balancing of the equities between the original contracting parties or between parties who had acted with full knowledge and notice of the claims of others.
It is clear that the plaintiff vendor's declaration of forfeiture would have been fully effective except for the existence of recorded mortgages on the purchasers' interest under the forfeitable real-estate contract. It is also clear that the mortgagees had a lien only on the rights of the original contract purchaser and, consequently, if that contract had been effectively terminated by the proper exercise of the vendor's right of forfeiture there would have been no interest remaining upon which the mortgagees' liens could operate. The question presented, therefore, is whether the existence of such mortgages will render ineffective the vendor's declaration of forfeiture given to the purchasers alone.
If the plaintiff vendor had received actual notice of the interests of the mortgagees of the purchasers, he would be required to recognize their interests and give them notice of any intent to forfeit the contract. Scott v. Farnam, 55 Wash. 336, 104 P. 639 (1909). Further, under such circumstances, the mortgagees would have the right to make or tender the payments to the vendors necessary to protect their security, I.e., to keep the contract in effect. Scott v. Farnam, Supra. However, the...
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