Melfi v. Goodman

• Decision Date: 30 December 1963
• Docket Number: No. 7316,7316
• Citation: 1963 NMSC 224,388 P.2d 50,73 N.M. 320
• Parties: James J. MELFI, Plaintiff-Appellant, v. I. Reuben GOODMAN, Defendant-Appellee.
• Court: New Mexico Supreme Court

Page 50

388 P.2d 50

73 N.M. 320

James J. MELFI, Plaintiff-Appellant, v. I. Reuben GOODMAN, Defendant-Appellee.

No. 7316.

Supreme Court of New Mexico.

Dec. 30, 1963.

Schall, Sceresse, Underwood & Brown Norman Thayer, Albuquerque, for appellant.

Sanders & Bivins, Las Cruces, John W. Thompson, Ruidoso, for appellee.

MOISE, Justice.

This is a second appeal of this case. The first was disposed of by our opinion in Melfi v. Goodman, 69 N.M. 488, 368 P.2d 582.

The litigation arose out of the dealings of the parties is connection with the New Mexico Copper Corporation, both of them being stockholders therein.

On March 3, 1959, the appellee (defendant) held a judgment against the corporation, which together with court costs and interest amounted to $36,000.00, and on said date the assets of the corporation were to be sold by the sheriff of Lincoln County, New Mexico, pursuant to notice of execution sale.

At the same time, appellant (plaintiff) had advanced the corporation $8,000.00, and had agreed to advance an additional $24,000.00 within the next year. A mortgage from the corporation was given on its property to secure the entire $32,000.00.

On that date, after considerable negotiating, the parties entered into a written agreement by the terms of which appellee agreed to sell his judgment to appellant for

36,000.00, payable $10,000.00 in cash and the balance in four equal installments of $6,500.00 each, without interest, payable at six months' intervals thereafter. As 'additional security' the appellant agreed to assign his $32,000.00 mortgage mentioned above to appellee and to see that the corporation's mill and equipment was insured for not less than $25,000.00 with loss payable endorsement in favor of appellee. It was further agreed that there would be deposited in escrow with the Lincoln County Agency of the Citizens State Bank of Vaughn, New Mexico, the transcript of appellee's judgment, together with a duly executed assignment of it to appellant, an installment promissory note for $26,000.00, payable to appellee, and a reassignment of mortgage held by appellant, which was to be assigned to appellee as 'additional security.' In return, appellee agreed to forego execution of the judgment 'provided the purchaser [appellant] makes all payments due him [appellee] according to the terms of this agreement.' The contract further provided:

'After all payments have been made according to the terms of this agreement the Escrow Agent is instructed to deliver all of the papers herein to the Purchaser. Should the purchaser make default in any of these payments and remain in default for at least 30 days the Escrow Agent is instructed to deliver all papers to the Seller.'

The mortgage was assigned to appellee, and the assignment duly recorded. The papers, as provided in the contract, were placed in escrow with the bank. The $10,000.00 payment was made on the date of the agreement and thereafter an additional $3,500.00 was paid on the installment maturing on September 3, 1959, and a $3,000.00 check delivered, but never collected because of insufficient funds to the credit of appellant in the bank.

After appellant was in default on the March, 1960 installment, in addition to the $3,000.00 for which payment had not been received on the September, 1959 installment, and was also in default on the agreement to provide insurance, appellee withdrew the escrow papers from the bank, executed on his judgment and purchased the corporation's property at sheriff's sale. It does not appear that any kind of notice was ever given by appellee to appellant of his intention to do so. Admittedly, appellee had not acted promptly on appellant's failure to pay according to the terms of the agreement, but in reliance on appellant's promises and importuning had long delayed in withdrawing the papers from escrow.

In December, 1960, appellant filed this suit claiming that appellee breached the escrow agreement by withdrawing the documents from the bank and attempting sale of the property under the execution, and asserting that the contract contained no forfeiture clause; that appellee had made no tender back of the $13,500.00 paid by appellant; and that because of default by the corporation in payments on the mortgage, appellee was about to foreclose the same. Appellant prayed that appellee be restrained from proceeding with the execution sale, or from entering the corporate property or removing anything therefrom; for return of the $13,500.00 paid by appellant and the mortgage reassignment. Appellee answered denying the material allegations of the complaint and asserted that the corporate property was owned by him through having executed the judgment. After trial, the court found the issues in favor of appellee and dismissed appellant's complaint. This appeal followed.

At the outset of the trial, counsel for appellant stated that his action was an equitable one for restitution by virtue of rescission on the part of appellee. Appellant's evidence at the trial and arguments here seem to be based on a theory of equity in that appellee should not be allowed to retain both the consideration paid by appellant, and the corporate property.

Appellant's first point, which he describes as the 'crux of the case,' is addressed to claimed error in the court's finding No. 9 which reads:

'That said agreement is vague and ambiguous as to the forefeiture of any payments made by plaintiff in the event of his breach of the agreement; that the unrefuted testimony reflects that both plaintiff and defendant intended that should plaintiff default at any time he would forfeit his rights under the agreement, including all monies and payments made by him at the time of such default and also the security given at the time of the execution of the agreement; and that both parties intended and regarded time to be of the essence in the making of the payments, and such was essential and material to the agreement.'

and the court's conclusion of law No. 3:

'That the said contract was breached; that he who seeks equity must come into court with clean hands and that there is no excusable or equitable reason for the nonperformance of this agreement by the plaintiff; that by the actions of the parties and their representation by attorneys and their understanding at the time the agreement was entered into, the plaintiff understood that should the agreement be breached, that he would forfeit all his rights thereunder; therefore, the plaintiff is not entitled to the relief he has prayed for in his Complaint and said Complaint is hereby dismissed and the writ of attachment hereby dissolved.'

Further error and inconsistency is urged between the finding of no 'express forfeiture,' or 'express time is of the essence' clauses and conclusion No. 3 quoted above to the effect that appellant understood that if he defaulted all of his rights under the contract would be forfeited.

The record discloses a situation where appellant took the position that the contract contained no forfeiture clause, and that parol evidence was not admissible to vary the terms of the agreement in this regard by showing the intention of the parties. Evidence was offered by appellee to establish the understanding of the parties, but upon objection being made thereto, some of the evidence was restricted. However, our examination discloses proof which is to our minds adequate and substantial to support the court's finding of intention, assuming the correctness of the court's conclusion that the contract was ambiguous. Compare Wester v. Trailmobile Co., 59 N.M. 73, 279 P.2d 526; Strickland v. Johnson, 21 N.M. 599, 157 P. 142. We would add, however, that in so holding we do not consider that the clause quoted above is in any sense ambiguous. The language of the contract requires the same result. Quinlan v. St. John, 28 Wyo. 91, 201 P. 149, rehearing denied, 28 Wyo. 91, 203 P. 1088; also cases in note, 31 A.L.R.2d 8, 45.

Although we are in accord with appellant that forfeitures are not favored, Stamm v. Buchanan, 55 N.M. 127, 227 P.2d 633; Patten v. Santa Fe Nat. Life Ins. Co., 47 N.M. 202, 138 P.2d 1019; Martin v. New York Life Ins. Co., 30 N.M. 400, 234 P. 673, 40 A.L.R. 406, the position of appellant would result in effectively nullifying the specific agreement of the parties.

Appellant cites and places great reliance on the decision of this court in Morgan v. Thompson, 46 N.M. 282, 127 P.2d 1037, and particularly the statement quoted therefrom that 'A mere breach of contract, without provision therein for its termination on such breach, does not authorize its cancellation.' The case was one for cancellation of deeds for lack of consideration and because made by the grantor while mentally incompetent. The trial court ordered the deeds cancelled on the grounds stated. This court reversed, finding both consideration and that the grantor was not so incompetent as to justify cancellation of the deeds executed by him. The court made the statement quoted above in the course of discussing whether or not an absence or failure of consideration had been proved. No such issue is here present, nor does the agreement here fall under the rule. The contract clearly states that upon the continuing of a default for 30 days, all escrow papers were to be delivered to appellee. What more needed to be said--'and a forfeiture will ensue' or 'and the contract will be thereby terminated' or 'and Seller (appellee) shall have full right to proceed to enforce the same'? We think such a result is implicit in the provision for delivery of the papers to appellee. To hold otherwise would be to make a new contract for the parties. The language used is not susceptible of any meaning except that found by the court.

None of the New Mexico decisions cited supra are of any assistance to appellant. They all announce as the rule that forfeitures are not favored, but determine nothing beyond the applicability of this rule to the facts of...