Tidd v. Stauffer

• Decision Date: 20 March 1974
• Docket Number: No. 1--873A142,1--873A142
• Citation: 308 N.E.2d 415,159 Ind.App. 570
• Parties: Edwin L. TIDD and Patricia Tidd, Plaintiffs-Appellants, v. Eugene E. STAUFFER and Mary Alice Stauffer, Defendants-Appellees.
• Court: Indiana Appellate Court

Page 415

308 N.E.2d 415

159 Ind.App. 570

Edwin L. TIDD and Patricia Tidd, Plaintiffs-Appellants, v. Eugene E. STAUFFER and Mary Alice Stauffer, Defendants-Appellees.

No. 1--873A142.

Court of Appeals of Indiana, First District.

March 20, 1974.

Hollingsworth, Martin & Buchanan, Lebanon, for plaintiffs-appellants.

Parr, Richey, Obremskey, Pedersen & Morton, Lebanon, for defendants-appellees.

LOWDERMILK, Judge.

Plaintiffs-appellants (Tidds) commenced this action for a judgment ordering defendants-appellees (Stauffers) to convey to appellants a warranty deed to real estate purchased by appellants under a conditional sales contract for land upon appellants paying to appellees the balance due under the contract, pursuant to a prepayment clause.

Stauffers responded by filing an answer and cross complaint which alleged that the conditional sales contract had been terminated as a result of certain breaches by Tidds. These alleged breaches were the failure to pay taxes in the years 1968, 1969, and 1970, failure to properly insure the property, and a prohibited assignment, all of which were contrary to the terms of the conditional sales contract. Stauffers asked that the contract be terminated and that the monies paid thereunder be set off as liquidated damages. Damages were also asked for breach of contract and found under subsequent paragraphs.

Trial was had to the court, with the court finding against Tidds and for Stauffers. The court declared the contract to be terminated as the result of the breaches alleged by Stauffers in their cross complaint and adjudged that all monies paid under the contract would be treated as liquidated damages. The court found against Stauffers on their paragraphs alleging breach of contract and fraud.

A motion to correct errors was timely filed and overruled by the court.

On October 24, 1963, Stauffers sold the real estate in question (101.3 acres) to Tidds on a conditional sales contract with a purchase price of $39,000. The contract contained certain provisions, including a provision that the purchaser, Tidds, was to assume all real estate taxes payable in 1964 and thereafter, Tidds was to keep the property properly insured, and Tidds could not assign or sell, pledge or mortgage or transfer any interest in the property without the written consent of Stauffers. Under paragraph 8 of the contract, entitled 'Vendors' Remedies on Purchasers' Default' it was stated that in the event of a Stauffers could remove Tidds from the Stauffers could remove Tidds from the property and at their option, cancel or terminate the agreement. The contract stated that said remedy may be invoked without notice or demand, and notice and demand were expressly waived by the purchasers. A warranty deed and copy of the contract were placed in escrow with the Boone County State Bank.

In 1967 Tidds agreed to sell to Barrickmans a portion of the property. No notice was given to Stauffers of this arrangement and no written permission was given by the Stauffers. Barrickmans agreed to pay $56,000 for the portion which they were buying (87 acres.)

In April, 1971, the Stauffers became aware of a delinquent tax liability on the property, representing taxes unpaid for the years 1968, 1969, and 1970. The Stauffers contacted Tidds by letter and demanded that they make proper payment of these back taxes. Time was extended through various letters until June 10, 1971, at which point Stauffers considered the contract terminated. On June 30, 1971, a letter was sent to the Boone County State Bank wherein it was stated that due to certain defaults discussed therein the Stauffers were terminating the contract and asking that the contract and deed be returned to them from escrow. The bank returned the warranty deed immediately. On July 14, 1971, a letter, which included a copy of the letter that was sent to the bank setting out the reasons for the termination, was sent to the Tidds by the Stauffers, informing them of the defaults and of the cancellation and termination of the contract. On July 15, 1971, the Tidds cancelled the insurance that they had taken out on the property. In August of 1971 the Stauffers paid certain back taxes of about $70.00. However, they also were credited over $90.00 for a mistake that had been made in the valuation of the land in the earlier years.

In May of 1971 the Tidds offered to prepay the entire balance of principal and interest due under the contract pursuant to a prepayment clause. However, Stauffers declined the arrangement due to tax reasons. In November of 1971 the Tidds tendered to the Stauffers about $1,396 as an installment on the principal and interest then due under the contract. This tender was refused by the Stauffers, as they were treating the contract as having been terminated. On January 13, 1972, the Tidds again tendered a sum, $24,214.06, in full payment of the contract, and demanded a warranty deed. This tender was also refused for the reason that the contract had been deemed terminated by the Stauffers.

In their brief Tidds present four issues upon which they rely as errors. We shall combine and review the same as hereinafter set out in this opinion.

Tidds first point out that forfeiture of a contract is considered a harsh remedy and is not favored in equity. Construction of a contract to work a forfeiture is not a favorite of the law and the principles of compensation where fair dealing and good conscience seem to demand must be followed. See, Rembold Motors, Inc. v. Bonfield (1973), Ind.App., 293 N.E.2d 210. Tidds contend that the Stauffers waived their right to terminate the contract when they accepted late, overdue payments of the taxes on June 15, 1971. The approximate $2,000 in delinquent and overdue real estate taxes was discovered prior to this time but no forfeiture was declared upon this discovery. It is Tidds' position that by accepting late payments Stauffers could not declare a forfeiture for default which they discovered after the June 15th date without giving notice to the Tidds of their intention to insist upon a forfeiture if the defaults were not cured within a reasonable time.

Stauffers contend that the failure of consideration by not paying the taxes in question created a breach from which forfeiture can lie. Stauffers point out that they corresponded with the Tidds, made several demands that the taxes be paid and asked for proof of payment no later than June 10, 1971, and that there would be no extension after that date, and if payment was not made by that time, then the contract would be cancelled; that this contract expressly stated that time was of the essence in the agreement.

Tidds insist that Stauffers have not been injured in any way by the alleged breaches of the contract. Tidds point out that Stauffers have in fact agreed to let Barrickmans continue buying the property, thus indicating that the Stauffers did not feel that their contract and the security thereunder was in any danger as a result of this re-sale. The real problem seems to be that the Stauffers were not informed of the second transaction by Tidds. Tidds point out that the compensation asked here was really a mere payment of money and a court of equity will not cancel a contract under that type of a situation, but will relieve the debtor upon his payment of the principal and interest; that they have offered on two different occasions to pay the principal and interest due on the contract of purchase.

Tidds urgently contend that the case of Skendzel v. Marshall (1973), Ind., 301 N.E.2d 641 controls and is determinative of the case at bar. Skendzel, supra, holds, basically, that a conditional land contract creates a vendor's lien to secure the unpaid balance under the contract. This lien is quite analogous to a mortgage. The court, in Skendezel, held further that any enforcement by the lienholder should be through foreclosure proceedings rather than through the cancellation or forfeiture of a contract. It must be remembered the Skendzel decision does not rule out a forfeiture in a land contract sale, but limits such forfeiture to cases of absconding or abandoning vendees, or where a minimum amount had been paid, or where the vendor seeks to retain possession to pay the taxes, insurance, and insure that the property is kept up properly. Tidds urge that they do not fall under any of the exceptions noted above in that they are not abandoning, are not absconding, and that they have paid over $16,000 on the principal and that any breaches they may have made cannot be said to endanger the security of the sellers (Stauffers.)

Tidds point out that the result of the trial court's decision granting forfeiture creates an unconscionable result on the Tidds. They point out that Stauffers now regain possession of the entire property, 101 acres, are entitled to keep the $16,000 which the Tidds had paid on the principal, and are, in effect, being able to take over a more beneficial contract wherein they will continue selling to the Barrickmans 87 acres for about $56,000 and retain 14 acres of the original tract contracted to be sold to Tidds. If this be permitted the Stauffers will receive appreciation in value on the real estate which Tidds contend in improper under Skendzel, supra. Tidds further contend that he liquidated damages--the amount paid under the contract by Tidds--is disproportionate to the loss actually...