Swanson v. Madsen
| Decision Date | 06 April 1945 |
| Docket Number | 31824. |
| Citation | 18 N.W.2d 217,145 Neb. 815 |
| Parties | SWANSON v. MADSEN et ux. |
| Court | Nebraska Supreme Court |
Syllabus by the Court.
1. The terms of a written executory contract may be changed by a subsequent parol agreement before a breach thereof and the consideration for the original agreement is sufficient to sustain the new agreement.
2. Where a written contract has been breached, a subsequent parol agreement purporting to modify or change such contract requires a new consideration to be enforceable as a valid agreement.
3. A subsequent parol agreement purporting to modify or change a contract required to be in writing by the statute of frauds is not enforceable unless there is a new consideration or unless the new agreement has been fully executed.
4. Where a vendee of a contract for the sale of real estate is in default, an agreement to pay less than the amount due under the contract is unenforceable when no new consideration for such agreement exists and it has not been fully performed.
5. A court of equity will grant a strict foreclosure of a real estate contract where in the exercise of a sound judicial discretion it would be inequitable or unjust to refuse to do so.
6. In granting a strict foreclosure, a court of equity should give the party in default a reasonable time to avoid its consequences by performing the contract.
Ritchie & Swenson, of Omaha, for appellant.
Smith & Schall, Edward G. Garvey, and R. E. Robinson, all of Omaha, for appellees.
Heard before SIMMONS, C.J., and PAINE, CARTER, MESSMORE, YEAGER, CHAPPELL and WENKE, JJ.
This is an action for the strict foreclosure of a real estate contract dated September 15, 1934. The defendants cross-petitioned for the specific performance of an alleged subsequent contract for the sale of the real estate to them at a lower price. The trial court denied plaintiff's claim to a strict foreclosure and sustained defendants' claim for specific performance. The plaintiff appeals.
The record shows that on August 29, 1928, Ellna Swanson and John A Swanson contracted in writing to sell the real estate in question, together with certain personal property not particularly described in this suit, to Alfred Madsen, who will hereinafter be referred to as the defendant, for the sum of $42,000, $10,000 of which was paid in cash and the balance to be paid in installments as provided in the contract. The installments provided for in this contract became delinquent and on September 15, 1934, a new contract was executed by Ellna Swanson, then a widow, and Alfred Madsen. The amount remaining unpaid at that time under the original contract was $29,520. By the new agreement defendant agreed to pay $720 in cash and $250 a month for two years, $350 a month for the following two years and $450 a month thereafter until the amount due was paid. The defendant made payments totaling $2,767.26 on this contract, after which he was continuously in default.
On June 22 1938, a further agreement was entered into in writing purporting to modify the agreement of September 15, 1934, in which it was agreed that all payments due were to be suspended until March 1, 1940. The contract then provided that if defendant desired to complete the purchase on March 1, 1940, he should notify Ellna Swanson not less than 30 days prior thereto and upon receipt of the notice three appraisers were to be appointed to determine the value of the property, which amount thus determined, Ellna Swanson agreed to accept as a full payment under the contract. In case of failure to make payment by March 1, 1940, in the manner agreed upon, defendant was to yield possession of the premises and execute a quitclaim deed to Ellna Swanson as of that date. The defendant failed to give any notice more than 30 days prior to March 1, 1940, of any intention on his part to acquire the property in the manner prescribed in the supplemental agreement of June 22, 1938.
Defendant testifies that a few days before March 1, 1940, he went to the office of the plaintiff's attorney and offered $10,000 in full satisfaction of the remainder of the purchase price. Plaintiff's attorney agreed to submit the offer to his client. Defendant was notified about a month later that the amount was not acceptable. On April 18, 1940, plaintiff's attorney inquired of defendant by mail as to his intentions in the matter. A day or two later defendant went to the attorney's office and offered $11,000 in full settlement. This amount was not accepted. Defendant requested that legal proceedings be held up pending another offer on his part. On or about August 15, 1940, defendant offered $12,000 to plaintiff's attorney in full settlement. On January 21, 1941, plaintiff's attorney advised defendant that Ellna Swanson would accept $12,000 cash in full settlement under the contract, provided it was paid by February 15, 1941, and that unless it was paid on or before that date defendant would be expected to vacate the property in accordance with the 1934 contract. Defendant testifies that he took the matter up with two loan agencies and received promises for the money to pay the $12,000. On February 12, 1941, he went to the attorney's office to inform him of the arrangements made and to secure the abstract of title, but found the attorney out of town. He again called the attorney's office on February 15, 1941, but the attorney had not returned. On February 17, 1941, defendant found the attorney in his office and was informed by the attorney at that time that Ellna Swanson was dissatisfied in that she had advanced $2,000 to defendant which had not been paid and that she wanted it returned in addition to the $12,000. On March 8, 1941, it was ascertained to the satisfaction of the parties that the $2,000 had been repaid to Ellna Swanson and that item was withdrawn from the negotiations. Nothing further was done until March 20, 1941, when defendant was informed that Ellna Swanson would accept nothing less than $15,000 as full settlement of the contract. It is the contention of the defendant that he is entitled to the specific performance of the alleged agreement of Ellna Swanson to accept $12,000 in full settlement of the amounts due under the contract dated September 15, 1934. The trial court so held and plaintiff, the assignee of Ellna Swanson's interest in the contract, appeals from the district court's decree requiring plaintiff to accept $12,000 as full settlement of the amount due under the contract.
The record is clear that on January 21, 1941, the date Ellna Swanson offered to accept $12,000 as a full settlement, defendant had breached his contract by failing to comply with the supplemental agreement of June 22, 1938, or to make the payments required by the agreement of September 15, 1934. Defendant's offer to pay $12,000 in full settlement of the amounts due under the contract was nothing more than an offer of settlement which Ellna Swanson accepted provided it was paid by February 15, 1941. It was not paid or tendered by that date. It appears that plaintiff's attorney was absent from his office on February 15, 1941, and for a few-days prior thereto, but we fail to see how this can avail the defendant anything in view of the fact that he did not pay or tender the $12,000 after the attorney's return. It seems clear, therefore, that defendant's offer was conditionally accepted by Ellna Swanson and defendant, having failed to meet the condition imposed, can claim no rights under it. We conclude that the offer of settlement was never complied with by the defendant and consequently no rights can grow out of it. The modification agreement of June 22, 1938, was not complied with by defendant, with the result that the liability of defendant under the terms of the modification agreement itself was again fixed by the contract of September 15, 1934.
Defendant contends that a contract required to be in writing by the statute of frauds can be altered or modified by parol agreement and that the consideration for the original agreement is sufficient to sustain the new. We think this is true where there has been no breach of an executory contract but where, as here, the contract had been breached at the time of the modification, a new consideration must be shown. Bowman v. Wright, 65 Neb. 661, 91 N.W. 580, 92 N.W. 580; Prime v. Squier, 113 Neb. 507, 203 N.W. 582; Personal Finance Co. v. Hynes, 130 Neb. 547, 265 N.W. 541. The rule is also clear that a contract required to be in writing by the statute of frauds can be modified by a new agreement only when such new agreement is supported by a new consideration, or where it has been fully executed. Bowman v. Wright, supra; Hylton v. Krueger, 138 Neb. 691, 294 N.W. 485. The evidence is clear that no new consideration existed for the agreement to accept $12,000 in full settlement of the amount due under the contract. The rule is that an agreement to pay a smaller sum in discharge of a larger matured obligation does not constitute any consideration for an agreement to forego the residue. Fitzgerald v. Fitzgerald & Mallory Construction Co., 44 Neb. 463, 62 N.W. 899; Canadian Fish Co. v. McShane, 80 Neb. 551, 114 N.W. 594, 14 L.R.A.,N.S., 443, 127 Am.St.Rep. 791. The evidence further shows that such new agreement was never performed. It further shows that defendant had breached his contract and that he was in default at the time of the purported settlement agreement. Under such circumstances, under the authorities cited, the agreement evidenced by plaintiff's letter of conditional acceptance dated January 21, 1941, is not enforceable and creates no new rights of which the defendant can avail himself. Consequently, the trial court erred in granting specific performance of such...
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