Mohr v. Lear

• Decision Date: 10 September 1964
• Citation: 395 P.2d 117,239 Or. 41
• Parties: William MOHR and Louise Rose Mohr, husband and wife, Respondents, v. Theodore Dewey LEAR, Iris Violet Lear, William Ranger III, Betty Mae Ranger, Lonnie J. R. Russom and Elaine Jean Russom, Appellants.
• Court: Oregon Supreme Court

Page 117

395 P.2d 117

239 Or. 41

William MOHR and Louise Rose Mohr, husband and wife, Respondents, v. Theodore Dewey LEAR, Iris Violet Lear, William Ranger III, Betty Mae Ranger, Lonnie J. R. Russom and Elaine

Jean Russom, Appellants.

Supreme Court of Oregon, Department 1.

Argued and Submitted July 1, 1964.

Decided Sept. 10, 1964.

Norman K. Winslow, Salem, argued the cause and submitted the brief for appellants.

Otto R. Skopil, Jr., Salem, argued the cause for respondents. On the brief were Williams & Skopil, Salem.

Before McALLISTER, C. J., and ROSSMAN, SLOAN, GOODWIN and LUSK, JJ.

ROSSMAN, Justice.

This is an appeal by the defendants, six in number, from a decree of the circuit court which canceled a contract and awarded restitution in the amount of $21,421 to the plaintiffs. The latter are Mr. and Mrs. William Mohr. The defendants are three couples whose family names are Lear, Ranger and Russom.

The defendants present these five assignments of error:

'The trial court erred in holding that the plaintiffs were not in default under the terms of their contract with the defendants.'

'The trial court erred in holding that the defendants had repudiated their contract with the plaintiffs.'

'The procedural insufficiencies of plaintiffs' case with reference to notice of suit.'

'Plaintiffs utter failure to plead, prove, or in fact be willing that the status quo be restored in their suit for rescission.'

'The defendants' conduct did not represent a 'total breach' of the agreement, if any, within the rules of rescission and restitution.'

The plaintiffs instituted this suit to secure the cancellation of a contract whereby the plaintiffs undertook to purchase from the defendants all of the shares of stock of a corporation entitled Woodburn Lanes, Inc., which operated a bowling alley in Woodburn. The principal issue presented by the appeal is whether the defendants' conduct was of such a character that it can justify a decree of cancellation.

The contract of sale was signed by the parties August 3, 1961. The total price of the shares of stock was $88,000; of that sum $24,000 was rendered payable with the signing of the contract and the remainder of the purchase money was payable in monthly payments of not less than $650 each. The agreement provided that a concern entitled American Escrow, Inc., should (1) act as escrow agent, (2) hold the stock certificates and other documents, (3) collect the money payable to the escrow agent and make the stipulated disbursements. The contract contained the following provision concerning the sellers' (defendants') rights in case of the buyers' (plaintiffs') default:

'In the event that the Buyers fail to make the payments as required in said agreement and shall continue in default for a period of ten (10) days after such payments are due and payable, then and thereupon, upon the happening of such event, it is agreed that the American Escrow, Inc. shall forthwith return and deliver the certificates of stock, theretofore deposited with it by the Sellers and at the same time pay them all sums remaining in the account set up to handle this agreement. It being specifically agreed that all sums previously paid thereon shall be forfeit to Sellers as and for liquidated damages and payment for the use and depreciation of the corporate assets. Thereafter Sellers shall not be liable to Buyers under the terms of the said agreement in any manner whatsoever.'

The plaintiffs assumed operation of Woodburn Lanes on August 5, 1961, and continued to operate the alley until January 26, 1962. The relationship between the parties prior to the commencement of this suit was cordial. In September of 1961 William Ranger, one of the defendants, loaned the plaintiffs $1,000 'to carry him through the summer months.' The gross receipts of the business were between $2500 and $3000 per month, yet, as of January 26, 1962, the corporation owed approximately $7000 in current operating expenses.

Sometime prior to January 24, 1962, the defendants became aware that Woodburn Lanes was delinquent in paying its current charges to a concern entitled A.M.F. Pinspotters, Inc., which was the lessor of the machines that Woodburn Lanes used to reset the bowling pins after a patron had played. January 25, the defendants went to Woodburn and discussed with the plaintiffs the status of the A.M.F. account. In the morning of January 25, the plaintiffs had received a letter from A.M.F. demanding the immediate payment of all delinquencies, namely $3583.10 in rental arrearages, and $74.56 on open account. The letter stated that the account had been transferred to the collection division and that A.M.F. was prepared to resort to its attorney for legal action on the following Monday, January 29. On that day, January 25, the plaintiff, Mr. Mohr, had attempted without success to borrow money in order to meet the A.M.F. charges.

Upon defendants' arrival in Woodburn Lanes Mr. Mohr showed them the letter just mentioned and asked Mr. Ranger and Mr. Lear whether they could lend him the needed money. Mr. Ranger and Mr. Lear were unable to do so. Mr. Mohr then assured the defendants that he would make the necessary arrangements with A.M.F.'s regional representative, and the conference ended on that basis.

That evening the defendants consulted with an attorney in an attempt to ascertain their rights and obligations. The next day, January 26, three of the defendants, Mr. and Mrs. Lear and Mrs. Russom, obtained from Mrs. Hazel Altig, the president of American Escrow, Inc., the copy of the contract of sale, the corporate stock certificates, minute book, and seal which had been lodged with the escrow agent. Then the defendants Lear and Ranger drove to the bowling alley and brought the above instruments with them. Again the A.M.F. delinquency was discussed with Mr. Mohr. The latter related to the defendants the continued frustration of his efforts to borrow money and his inability to obtain from A.M.F. anything more than an assurance that it would not take any action until Monday, January 29, or on a day beyond then.

At the termination of the conference just described, the defendants resumed operation of the bowling alley and Mr. Mohr made an announcement to that effect over the public address system within the building. The keys to the premises, one of which Mr. Mohr had, were turned over to the defendants on the evening of the 26th. An employee of Mr. Mohr delivered the other key. The following morning the defendants began an inventory, and sometime the following week had negotiated an understanding with A.M.F. whereby the delinquency of the corporation would be liquidated in eight equal installments. A trust account was opened by the defendants in which they deposited the daily receipts from the bowling operations.

During the week following the take over, Mr. Mohr continued to attempt to borrow money with which to refinance the operations. He conferred with A.M.F. by telephone and apparently made an arrangement of his own about the account whereby he could again take over the alley if he secured adequate financing. The plaintiffs also sought legal advice and on February 1, 1962, filed this suit.

Plaintiffs' complaint alleged the making of the contract and incorporated it into the pleading. It averred payment of the down payment and the first five monthly installments. As a basis for relief the plaintiffs alleged that the defendants' repossession of the stock from the escrow agent and their assumption of possession of the premises occurred at a time when the plaintiffs were not in default. The plaintiffs termed the defendants' act a wrongful repudiation of the contract. The plaintiffs then set forth their election to treat the conduct as a rescission and prayed for cancellation as well as restitution.

The defendants' answer admitted the making of the contract and also the payments, $27,250. It denied all other allegations of the complaint and set forth affirmative defenses. In the first of the latter the defendants alleged that plaintiffs had abandoned the contract and had voluntarily surrendered possession of the premises to the defendants. In their second affirmative defense they alleged that the plaintiffs breached the contract by defaulting in the installment payment due February 1, 1962.

The trial judge found that

'* * * the defendants obtained possession in violation of the terms of the agreement at a time when the plaintiffs were not in default * * *.'

and

'* * * there is ample evidence of the breach of the contract by the defendants and that said breach is of the 'total breach' type of conduct giving the plaintiffs their election of remedies. It would be difficult for the Court to imagine a more total breach than the unlawful acquisition of the very subject matter of the contract, i. e., the corporate stocks, plus physical control of the assets and all of the plaintiffs' money. * * *'

Defendants' second and fifth assignments of error raise the controlling issue on this appeal: Whether the defendants' conduct in obtaining the stock certificates, the subject matter of the agreement, and in resuming operation of the bowling alley January 26, 1962, amounted in law to a wrongful repudiation or total breach of the contract.

This being an equity proceeding, 'This court tries the case de novo and is not bound by the trial court's findings of fact and conclusions of law nor by the legal theory which that court adopted.' Vermeer v. Hickman, 229 Or. 569, 368 P.2d 77. On appeal of an equity case the trial judge's findings are entitled to consideration as he had the advantage of being present at the trial and of observing the demeanor of the witnesses; but his findings are not conclusive upon us. ORS 17.440.

Both parties to this appeal are in agreement as to the general rules to be applied in determining the consequences to follow from defendants' conduct. Any voluntary affirmative act of a party which renders...