Weatherford v. Adams

• Decision Date: 13 December 1926
• Docket Number: Civil 2409
• Citation: 251 P. 453,31 Ariz. 187
• Parties: J. W. WEATHERFORD and MARGARET J. WEATHERFORD, His Wife, Appellants, v. E. C. ADAMS and BETTIE M. ADAMS, His Wife, Appellees
• Court: Arizona Supreme Court

251 P. 453

31 Ariz. 187

J. W. WEATHERFORD and MARGARET J. WEATHERFORD, His Wife, Appellants, v. E. C. ADAMS and BETTIE M. ADAMS, His Wife, Appellees

Civil No. 2409

Supreme Court of Arizona

December 13, 1926

APPEAL from a judgment of the Superior Court of the County of Maricopa. Dudley W. Windes, Judge. Judgment reversed, with instructions.

Mr Earl Anderson, Messrs. Ellinwood & Ross, Mr. Martin Le Boutillier and Mr. Maurice Blumenthal, for Appellants.

:Messrs Phillips & Phillips and Messrs. Cox & Carson, for Appellees.

:Mr Frank O. Smith, for Phoenix Realty Board, Amicus Curiae.

OPINION

LOCKWOOD, J.

July 17th, 1918, David O. Clark and wife contracted in writing to sell to E. C. Adams and Bettie M. Adams, his wife, hereinafter called plaintiffs, for $30,000 certain farming land situate in Maricopa county, the payments to be made as follows: $2,000 in cash, $2,000 per year on or before the seventeenth day of July of each year until, including the cash, the total sum of $14,000 had been paid, and the balance of $16,000 on or before July 17th, 1926, with interest at eight per cent on the deferred payments. This instrument, which we will refer to hereinafter as the Clark contract, contained, among other things, the following provision:

"In case the parties of the second part shall be in default in making any of the payments herein required of them, either principal, interest, assessments, or taxes, in such default shall have existed for a period of thirty days, then the parties of the first part may terminate this agreement, and, in such case, the parties of the second part shall, upon demand, surrender possession of the said one hundred ad twenty acres of land to the parties of the first part, and all payments thereto made by the parties of the second part shall be retained by the parties of the first part as liquidated damages, and parties of the first part may thereupon foreclose said mortgage for $12,000, as in said mortgage provided, and the parties of the first part shall be released from all liability in law or equity from making any conveyance of said one hundred and twenty acres of land."

As security for the $12,000, payable on or before July 17th, 1925, in annual installments, as above set out, plaintiffs gave Clark a first mortgage on other real estate owned by them, which mortgage, it is admitted, is the one for $12,000 referred to in the Clark contract, as quoted above. The various documents necessary to complete the deal were placed in escrow with the Phoenix National Bank, to be delivered to plaintiffs on their fulfillment of the contract, otherwise to the Clarks. Plaintiffs went into possession of the land and some eight months later contracted with J. W. Weatherford and Margaret J. Weatherford, his wife, hereinafter called defendants, to sell them the same property. We will hereafter call the last-named agreement the Weatherford contract. On its face, the purchase price was $42,000, plaintiffs acknowledging receipt of $14,000 cash on the execution of the agreement and the balance to be paid in the same installments and on the same dates as the deferred payments in the Clark contract, to wit, $2,000 per year on the seventeenth day of July of each year, up to and including 1925, and the remainder on or before July 17th, 1926. The Phoenix Title & Trust Company was made the escrow-holder of the papers necessary to the Weatherford-Adams deal. This agreement of sale contained, among others, the following clauses:

"It is further agreed that time is the essence of this contract, and, in the event of default in payment of any of the payments herein provided to be paid promptly when same become due and payable, or in the event of a failure of the parties of the second part promptly to comply with any of the terms hereof, then the said parties of the first part shall be relieved from all obligations in law or equity to convey said property, and, at the option of said parties of the first part, the said parties of the second part shall forfeit all right thereto, and all interest of the parties of the second part in and to said lands by reason of this agreement shall thereupon cease and determine, and all moneys therefore paid under the terms of this agreement to the parties of the first part shall be forfeited to and retained by said parties of the first part. . . .

"It is further mutually understood and agreed by and between the parties hereto, as follows: That the said parties of the second part shall enter into possession of the said premises immediately, and shall continue in such possession for and during the life of this agreement without the payment of any further rent; and, in case of default in the payments and conditions in said agreements, the said parties of the second part shall immediately surrender possession of said premises to the said parties of the first part on demand. That the covenants and conditions herein shall be binding upon the heirs, executors, and administrators and assigns of the parties here."

Defendants paid all installments provided in the Weatherford contract up to July 17th, 1922, but defaulted on the payment due that day, there remaining unpaid on the principal of the contract $22,000, and, later, under their instructions, the escrow papers were returned to plaintiffs. The latter in their turn made all payments due under the Clark contract up to the same date, but also defaulted at that time; and on November 20th, 1922, the Clarks declared a forfeiture of their contract with plaintiffs and on January 24th, 1923, took possession of the premises. The Clarks thereafter threatened to foreclose on the $12,000 mortgage above referred to, it being their contention there was still due and unpaid them, notwithstanding the forfeiture, the sum of $8,000 for which said mortgage was security. Negotiations for a compromise of this alleged indebtedness were then had between Clark and the plaintiffs, and it was finally settled for $4,000, plaintiffs giving the Clarks a note for that sum, properly secured. Thereafter plaintiffs brought suit against defendants to recover damages for the latter's breach of the Weatherford contract.

The complaint, on which the matter was tried, sets up the usual formal allegations, the execution of the two contracts, but that plaintiff received only $2,000 cash, instead of the $14,000 stated in the Weatherford contract as being paid at the time of its execution. It then reads as follows:

"viii. that, at the time of the execution of the said agreement between plaintiffs and defendants, defendants knew of the terms and conditions of the agreement theretofore executed between plaintiffs and the said Clarks, and the terms of the agreement between plaintiffs and defendants were, in the knowledge of the defendants, made to correspond with the terms of the agreement between plaintiffs and the said Clarks, and it was understood between plaintiffs and defendants that defendants should make payments as provided in said agreement to the escrow holder, the Phoenix Title and Trust Company, and the payments, when made, should by the said escrow holder be transferred to the Phoenix National Bank and paid to them as agents for the said Clarks, and as a credit on the said agreement between plaintiffs and the said Clarks, and defendants knew and realized that it was necessary for them to make the payments according to the terms of said agreement between plaintiffs and defendants, at the times therein provided; otherwise, plaintiffs' title and right to the premises would be subject to be forfeited by the said Clarks upon failure to receive the payments at the times and manner provided in said agreement between plaintiffs and defendants, and that the mortgage executed by plaintiffs to the said Clarks to secure the deferred payments, which defendants agreed to make, would be subject to foreclosure."

It is further stated that the Weatherford contract was duly fulfilled until the seventeenth day of July, 1922, when --

"with full knowledge of the facts hereinabove set out, and with full knowledge of the forfeiture likely to be declared by the said Clarks, and the probability of the said Clarks foreclosing the mortgage executed by plaintiffs to the said Clarks to secure the payment of the deferred payments to be made by defendants, the defendants breached their said agreement."

The complaint then sets up the declaration of forfeiture by the Clarks and the amount still due under the Weatherford contract, and that the reasonable value of the premises at the time of the breach was some $5,807.42 less than the sums still due under the Weatherford contract. It also alleges the threatened foreclosure of the Clark mortgage and that plaintiffs, to minimize the damages, finally compromised that matter for $4,000, with interest at eight per cent from December 4th, 1922. The prayer of the complaint was for judgment in the sum of $4,000, with interest and costs.

Defendants demurred to the complaint on the ground of misjoinder of causes of action, and that it did not state a cause of action, and moved to strike various portions thereof. By answer, as a special defense, they set up the portion of the Weatherford contract above quoted, and alleged that they, the defendants, had defaulted in their agreement to pay the purchase price, and that:

"Plaintiffs exercised the option in their favor contained in said agreement and declared a forfeiture of all of said defendant's rights under said agreement and all payments theretofore made thereunder, as well as all of said defendants' interest in and to said land, and plaintiffs thereupon rescinded, terminated and repudiated said agreement and kept and retained said payments so made by defendants and those claiming under them as liquidated...