Lake v. Bernstein

• Decision Date: 14 February 1933
• Docket Number: No. 41103.,41103.
• Parties: LAKE v. BERNSTEIN.
• Court: Iowa Supreme Court

215 Iowa 777

246 N.W. 790

LAKE

v.BERNSTEIN.

No. 41103.

Supreme Court of Iowa.

Feb. 14, 1933.

Appeal from District Court, Mahaska County; Frank Bechly, Judge.

This is an action at law by the plaintiff to recover from the defendant $1,200, alleged to have been paid on the purchase of some real estate. It is claimed by the plaintiff that the defendant put himself in a position where he was unable to perform the contract, and consequently the former rescinded the agreement. There was a trial to the district court, and judgment was entered for the plaintiff. Consequently the defendant appeals.

Reversed.

Superseding opinion 239 N. W. 19.

McCoy & McCoy, of Oskaloosa, for appellant.

John E. Lake, of Oskaloosa, for appellee.

KINDIG, Chief Justice.

On July 5, 1928, the defendant-appellant, William Bernstein, agreed to sell to D. S. Shute, and the latter agreed to buy from the former, lot 7 of a certain subdivision in or near Oskaloosa. The consideration agreed upon for this property was $3,500. Of this sum Shute paid the appellant $1,200 in cash, and the remaining $2,300 was to be paid on August 1st thereafter. A deed conveying the land to Shute was duly executed by Bernstein and delivered in escrow to the Mahaska County State Bank, in Oskaloosa. Apparently the only written agreement relating to the transaction up to this time was a memorandum executed by the appellant and Shute, reading as follows:

“Oskaloosa, Iowa, July 5, 1928.

Deed left in escrow by Wm. Bernstein (appellant) to be given to Mr. D. S. Shute (the purchaser) on payment of the sum of $2300 to be paid on or before the 1st day of August, 1928.”

When August 1st arrived, Shute found that he could not pay the balance due on the purchase price of the real estate, and consequently demanded further time. To this the appellant agreed, and the following notation was indorsed upon the paper containing the above-named memorandum, and signed by the appellant and Shute: “Time extended on property for deed and now agreed to be taken up and paid for with interest at rate of 7% on or before November 1, 1928.” But when November 1, 1928, arrived, Shute could or would not pay the $2,300. According to the appellant, Shute abandoned the contract, and on November 2, 1928, the appellant served upon Shute a notice of forfeiture. Shute made no claim to the property after November 1, 1928, nor did he demand from the appellant the initial payment of $1,200 made by him on the contract. At no time did Shute demand the deed or offer to pay the balance due on the purchase contract.

So, on March 30, 1929, the appellant sold the real estate to Pearl May Hamilton, and conveyed the same to her by a warranty deed. Thus the matter rested until November 24, 1930, when Shute assigned his alleged interest in the foregoing contract of purchase to the plaintiff-appellee, John E. Lake, an attorney at Oskaloosa.

On November 26, 1930, the appellee commenced the present action to recover from the appellant the $1,200 originally paid by Shute as the initial payment on the above-named contract of purchase.

The appellant defended the suit on the theory that Shute abandoned the contract of purchase. Because of such abandonment by Shute, without any fault on appellant's part, the appellant contends that Shute's assignee cannot now recover the initial payment made under the contract. It is said by the appellant that he at no time was in default, but was always ready and willing to perform the contract. Default arose, the appellant declares, on Shute's part because he did not pay the deferred amount of the consideration. Consequently, the appellant concludes that after Shute abandoned the contract he had a right to retain the initial payment above mentioned and resell the real estate to another purchaser.

In reply to the appellant's contention, the appellee urges that the contract was not one that could be forfeited under the statute, because there is no provision therein for forfeiture and time is not made the essence of the contract. So the appellee maintains that it was necessary for the appellant to terminate the contract in some way other than by serving the notice of forfeiture. A mere nonpayment of the deferred consideration, the appellee argues, did not terminate the agreement. While the contract was thus in existence,the appellee declares that the appellant, by reconveying the property, put himself in a position where he could not perform said agreement with Shute, the original purchaser. The appellee says that he could, and did, rescind the contract because the appellant thus put himself into the position where he could not fulfill the agreement. Therefore, the appellee asserts that he can recover the initial payment made by Shute, as before explained.

When determining the case, the district court found that the purchaser, D. S. Shute, “made default, and, under the testimony, abandoned his contract.” Nevertheless the district court found for the appellee and entered judgment against the appellant for $1,200 and interest, on the theory that as a matter of law the above-mentioned notice of forfeiture did not terminate the contract, that the same remained at all times in full force and effect, that the appellant, through the resale, put it beyond his power to convey to the original purchaser Shute the real estate named in the contract, and therefore Shute had a right to rescind the agreement. Because of the rescission, the district court further found, as a matter of law, that the appellee could recover the $1,200 paid by Shute to the appellant on the initial payment under the contract.

[1] I. Sections 12389 and 12390 of the 1931 Code provide for the forfeiture of real estate contracts. These sections were the same in the 1924 and 1927 Codes. If the contract to convey real estate provides for a forfeiture or makes time the essence of the agreement, and the vendee is in default, the forfeiture of the vendee's interest in the contract may be obtained by the vendor by serving the notice required under the foregoing statutes. Westerman v. Raid, 203 Iowa, 1270, 212 N. W. 134.

In the case at bar, however, there was no provision in the real estate contract for a forfeiture, nor was there a stipulation therein making time the essence of the contract. Consequently the appellant could not procure a forfeiture of Shute's interest in the real estate by serving notice of forfeiture. Frederick v. Davis et al., 133 Iowa, 362, 110 N. W. 611;Cody v. Wiltse et al., 130 Iowa, 139, 106 N. W. 510;Converse v. Elliott et al., 200 Iowa, 1023, 205 N. W. 867.

Obviously, then, unless Shute's interests in the contract were terminated by abandonment, the district court's judgment is correct.

[2] II. Where the vendor has in all respects performed his part of a contract, and the vendee is in inexcusable default in failing to make further payment, as required by the contract, the latter cannot recover, from the former, money paid as an initial or a prior payment. This is true even though the contract does not provide for a forfeiture. Downey v. Riggs, 102 Iowa, 88, 70 N. W. 1091;Mintle v. Sylvester, 202 Iowa, 1128, 211 N. W. 367;Dimon v. Wright, 206 Iowa, 693, 214 N. W. 673. Concerning this question, it was said in Dimon v. Wright, just cited, reading on pages 697 and 698 of 206 Iowa, 214 N. W. 673, 675: “A court of equity will not permit a person to profit by his own breach of contract and to benefit by his own wrong. See Downey v. Riggs, 102 Iowa, 88, 70 N. W. 1091. The vendees in the instant case held the land in subordination to their vendors until there was a compliance of the conditions of the contract by the vendees. There was no mutual rescission of the contract in suit. There was no default on the part of the vendors, nor were the vendors incapable or unwilling to perform the contract. There was no fraud. This lawsuit is the consequence of the unexcused default of the vendees in making payments as called for by the contract, and to permit the vendees to recover the initial payment would be the placing of a premium on the violation of contracts. It is clear that the defendant vendees refused to proceed further with the contract, and thereby waived further performance by the vendor.”

In the case at bar, it is claimed by the appellant that the appellee is not entitled to recover in the present suit because of the bar arising under the above principles of law. As before said, the appellee, in reply to the appellant's contention in this regard, says that because of the appellant's default there is no bar to his right to recover in this case. This is true, the appellee declares, because the appellant, in making the resale, put himself in a position where he could not perform. Therefore a situation arose where the appellee could rescind the contract. Of course, if the contract was legally rescinded, the appellee can recover the initial payment thereunder, as he was allowed to do by the district court. Frederick v. Davis et al. (133 Iowa, 362, 110 N. W. 611), supra; Converse v. Elliott et al. (200 Iowa, 1023, 205 N. W. 867), supra.

[3] But, as before said, the district court in the case at bar found that the purchaser, D. S. Shute “made default, and, under the testimony, abandoned his contract.” Under the evidence, this finding of the district court is fully supported. There are at least four items in the record that support this finding of the district court:

First, the appellant testified that after November 1st he had a talk with Mr. Shute, the purchaser, in regard to the latter's default. During this conversation, according to the appellant, Shute said that he could, and would, not perform the contract. Shute's reason for this nonperformance, the appellant explains, was a divorce proceeding between the former and his wife. In that divorce proceeding the wife was seeking alimony. Fearing that she would obtain the property in question as alimony, Shute, the appellant says, indicated that he would not...