Nelson v. Cannon
| Decision Date | 18 March 1980 |
| Docket Number | CA-CIV,No. 1,1 |
| Citation | 616 P.2d 56,126 Ariz. 381 |
| Parties | Ted D. NELSON, Plaintiff-Appellant, v. M. Dalton CANNON, Jr., and Jane Doe Cannon, his wife; J. P. K., Inc., an Arizona Corporation; and Margaritis Enterprises, a limited partnership, Defendants-Appellees. 4906. |
| Court | Arizona Court of Appeals |
Killian, Legg, Nicholas & Fischer by Charles W. Wirken, Mesa, and Stradling, Yocca, Carlson & Rauth by M. Stephen Coontz, Newport Beach, Cal., for plaintiff-appellant.
Roush, Mori & Welch by Foster G. Mori, Joseph T. Tadano, Phoenix, and Lewis & Roca by Paul G. Ulrich, Patricia K. Norris, Phoenix, for defendants-appellees.
This lawsuit is for specific performance of a contract to convey an apartment complex in Phoenix, Arizona. The decision on review is the order of the trial court granting summary judgment in favor of the seller and against the buyer on the ground that there exists no triable issue of fact and the seller is entitled to judgment as a matter of law. We find the trial court erred in this determination and reverse the judgment.
By reason of the basis of our resolution of the appeal, it is necessary to recite only an outline of the facts appearing in the record. Margaritis Enterprises, a limited partnership, (referred to hereafter as "seller") entered into a written contract on April 3, 1978, with Ted D. Nelson (referred to hereafter as "buyer") for the sale of the apartment complex, which provided, among other things, for a purchase price of $6,500,000 payable as follows:
(1) $1,000,000 cash;
(2) $4,200,000 by assumption of existing note payable to Philadelphia Savings Fund Society secured by a first mortgage;
(3) $1,100,000 (approximately) payable to seller over 30 years under a promissory note secured by a deed of trust;
(4) $200,000 payable to two brokers by promissory note to each in the amount of $100,000.
The contract set forth certain time limitations within which the transaction was required to close. For purposes of this appeal, the earliest date on which seller could have required buyer's full compliance with the contract and thus insisted upon close of escrow was on July 16, 1978.
Sometime prior to June 15, 1978, both the seller and buyer learned that the first mortgage prohibited seller from creating or permitting to be created "against the property subject to this mortgage any lien or liens inferior or superior to the lien of this mortgage ...." With the possibility of secondary financing in question, the parties then engaged in various communications, the nature, force or effect of which may be the subject of trial later but are not in contention in this appeal. There followed, on June 15, 1978, a letter from seller to buyer stating, among other things, that there was no longer a binding agreement between them for the sale of the apartment complex. For purposes of this appeal, we treat this letter as an anticipatory repudiation by the seller of the contract to sell the apartment complex.
The buyer filed a complaint for specific performance of the contract on July 3, 1978. In it he alleged, among other things, that he "has tendered and does hereby tender full performance pursuant to the terms of said contract and stands ready, willing and able to so perform." The motion which led to summary judgment was filed by seller on January 25, 1979. It stated: 1
The buyer responded to the motion by asserting (1) there is a genuine issue of fact as to whether Philadelphia could and would consent to secondary financing, and (2) even if Philadelphia would not consent, buyer waives the provision of the contract relating to secondary financing and stands ready, willing and able to pay cash to the existing first mortgage.
The seller replied that (1) there is no genuine issue of fact that Philadelphia would not consent to secondary financing, and (2) buyer could not, as a matter of law, waive the secondary financing provision of the contract and, even if he could, buyer has failed to tender the sum involved.
The trial court granted the motion. In its accompanying "memorandum decision", the court agreed with seller's position regarding the first issue (previously set forth) and stated, as to the second issue:
The plaintiff now alleges that he is willing to waive the requirements of a note secured by deed of trust and to pay cash to the mortgage. Had he done this before the action was commenced to demonstrate that he was indeed "ready, willing and able to so perform", the waiver would have been enforceable. However, the seller cannot equitably be required to wait for an indeterminate period of time to determine whether the buyer will ultimately be successful in effecting a purchase.
On appeal, the parties argue the merits of both issues, but we find that the buyer's position on the second issue is meritorious and defeats the summary judgment. As a consequence, it is unnecessary to discuss the question of whether Philadelphia would consent to secondary financing. 2
We turn, then, to the controlling issue. The threshold question is a matter of law: Could the buyer legally comply with the contract by tendering cash down to the first mortgage instead of tendering a note secured by a second lien deed of trust? If he could, we then must deal with the question of whether the seller has yet put the buyer to proof that he is ready, willing and able to tender cash.
The terms of the contract, noted previously, entitle buyer to pay $1,100,000 of the purchase price to seller by means of installments over a period of years. Seller argues that this provision is not solely for the benefit of buyer; that it is also for the benefit of the seller; that buyer cannot unilaterally waive it; that to allow him to do so is in effect the creation of a new contract. The trial court disagreed as to this and so do we.
A contracting party may waive provisions in a contract which are solely for his benefit. Lanna v. Greene, 175 Conn. 453, 399 A.2d 837 (1978); Doryon v. Salant, 75 Cal.App.3d 706, 142 Cal.Rptr. 378 (1977); Spellman v. Dixon, 256 Cal.App.2d 1, 63 Cal.Rptr. 668 (1967); Wesley N. Taylor Co. v. Russell, 194 Cal.App.2d 816, 15 Cal.Rptr. 357 (1961); 17 Am.Jur.2d Contracts § 390.
For example, in Wesley N. Taylor Co. v. Russell, supra, the agreement between the seller and buyers was contingent upon the buyers being able to obtain a 15-year mortgage. The buyers were able to obtain only a 12-year mortgage, but this was agreeable to them. Nevertheless, the seller refused to perform. The court held the mortgage contingency was for the benefit of the buyers and waivable by them, stating:
(T)hat the vendor's interest is in securing the purchase price; that the paramount obligation of the respective parties is the payment of the cash and the delivery of title to the property, and that the method of financing is incidental and not of the essence of the contract to convey. 194 Cal.App.2d at 828-829, 15 Cal.Rptr. at 365.
Likewise, in Doryon v. Salant, supra, the parties agreed to a purchase price and terms "subject to buyer obtaining a 1st trust deed and note for $52,000 ...." The buyers obtained a loan commitment for only $51,000 but signed a supplemental escrow instruction deleting the contingency. The sellers refused to perform and purchasers brought an action for specific performance. Again, the $52,000 loan contingency was held to be solely for the buyers' benefit and was therefore waivable by them by agreeing to accept a loan in a lesser amount. The court stated:
Defendants would have had no complaint if plaintiffs had elected to forego financing altogether and to pay the purchase price with their own cash. 75 Cal.App.3d at 712, 142 Cal.Rptr. at 381.
Returning to the present case, the only contention raised by seller that the financing provision in question was for its benefit, and thus not waivable by the buyer, relates to income taxation under the Internal Revenue Code. It points to the provision of the code regarding installment sales of real property and to a postulated adverse tax effect of receiving in excess of thirty percent of the purchase price in a given tax year. We recognize that in another situation, such might be the case. However, under the contract here, buyer was entitled to pay "$8071.80 per month or more . . . " (emphasis added). Thus under the contract as written, seller was not entitled to limit buyer's payment to that which would satisfy the Internal Revenue Code provision.
Seller next raises two questions which we deal with together. Seller argues that the buyer cannot rely on performance of the contract by paying cash instead of secondary financing because he has not tendered the cash and in any event the offer to tender cash made in the motion proceedings was untimely. The latter point was found controlling by the trial court.
It is here that a clear focus must be placed upon these motion proceedings. The thrust of seller's motion was to persuade the court that a trial would be in vain because buyer would be unable to prove that he was ready, willing and able to comply with the terms of the contract. The seller thus created for itself the duty of showing this in the motion and convincing the court that no facts on this question were in dispute.
When the seller repudiated the contract by its...
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