Wickahoney Sheep Company v. Sewell

• Decision Date: 11 December 1959
• Docket Number: No. 16390.,16390.
• Citation: 273 F.2d 767
• Parties: WICKAHONEY SHEEP COMPANY, an Idaho corporation, and Bank of Idaho (formerly Continental State Bank), an Idaho corporation, Appellants, v. C. A. SEWELL, Orene H. Sewell and Orville R. Wilson, Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

273 F.2d 767 (1959)

WICKAHONEY SHEEP COMPANY, an Idaho corporation, and Bank of Idaho (formerly Continental State Bank), an Idaho corporation, Appellants, v. C. A. SEWELL, Orene H. Sewell and Orville R. Wilson, Appellees.

No. 16390.

United States Court of Appeals Ninth Circuit.

December 11, 1959.

Hawley & Hawley, Jess Hawley, Jr., Elam & Burke, Boise, Idaho, for appellant.

Langroise & Sullivan, Willis Sullivan, Boise, Idaho, for appellee.

Before POPE, HAMLEY and HAMLIN, Circuit Judges.

HAMLIN, Circuit Judge.

On December 15, 1955, appellees C. A. Sewell and Orene H. Sewell, as sellers, entered into a Purchase Agreement with appellant Wickahoney Sheep Company, as buyer, for the sale of certain personal property described in the agreement, including 4,087 sheep. The Sewells subsequently assigned their interest to appellee Orville R. Wilson.

The total purchase price was $121,700, payable $15,000 down at the time of execution of the agreement, and $15,000 on October 10 of each succeeding year until the purchase price, with interest was paid in full. All the property was delivered to Wickahoney on October 18, 1955, about two months prior to execution of the agreement, and the president of Wickahoney examined all the property prior to taking delivery. The Purchase Agreement and bills of sale were escrowed with appellant Bank of Idaho, to be delivered to Wickahoney upon payment of the full purchase price.

The Purchase Agreement provided that in the event of default the sellers should give written notice thereof by mailing notice of default to Wickahoney, upon which Wickahoney would have ninety days in which to remedy any default, but should they fail to do so within that period, the sellers could claim a forfeiture of the agreement and would have the right to retake possession of the property or its replacements and retain all payments as liquidated damages.

Wickahoney made the original down payment, but failed to make the payment due on October 10, 1956, and sellers mailed a notice of default which was received by Wickahoney on January 17, 1957. A copy of the notice was sent to the Bank and received by it on January 16, 1957. Wickahoney failed to remedy the default within the 90-day period and the sellers, about two weeks thereafter, filed this action and demanded judgment against Wickahoney for recovery of possession of the property, together with the lambs and increase born of the sheep, or the value thereof. Appellees also sought return of all documents held by the Bank as escrow holder, which documents the Bank deposited with the Court.

Appellants are Idaho corporations and appellees are citizens of Nevada. Jurisdiction in the District Court derived from diversity of citizenship and the rights of the parties are governed by State law. 28 U.S.C.A. § 1332; Angel v. Bullington, 1947, 330 U.S. 183, 67 S. Ct. 657, 91 L.Ed. 832.

After commencement of this action Wickahoney sold lambs and sheep for a total sales price of $86,082.50, and turned the money over to the Bank to apply on Wickahoney's indebtedness to the Bank. This indebtedness arose out of other transactions which are of no concern on this appeal.

On October 9, 1957, the District Court appointed a receiver who took possession of all the assets of Wickahoney, including 1,331 sheep. The receiver liquidated the property, receiving $62,370.18 for that portion of the property subject to the Purchase Agreement. A vehicle worth $1,000 was not accounted for or turned over to the receiver by Wickahoney.

Judgment was entered against Wickahoney for $149,452.68, the total of the above amounts, and against the Bank for $86,082.50, the amount derived from the sale of sheep and lambs and turned over to the Bank by Wickahoney. All monies paid by the Bank on the judgment against it were to be applied in partial satisfaction, pro tanto, of the judgment against Wickahoney. The judgment further ordered the clerk of the court to deliver the escrow documents to appellees and to pay to appellees $54,655.04, the balance turned over to the clerk by the receiver after deduction of all receivership costs and expenses, this amount also to be applied in satisfaction of the judgment against Wickahoney.

After the notice of default was given, Wickahoney sold wool and pelts from the sheep subject to the Purchase Agreement, and received wool and lamb subsidies, but the District Court did not include these amounts in the judgment and no claim is made therefor.

Appellants submit five major points on this appeal. They first contend that no forfeiture of the Purchase Agreement was accomplished, because notice of default was not properly given.

The same day the parties executed the Purchase Agreement they entered into an Escrow Agreement, to which the Bank, as escrow holder, was a party. The two agreements specify different procedures for giving notice of default. Under the Purchase Agreement notice of default was to be given directly by the seller to Wickahoney, but under the Escrow Agreement the seller was to deliver two copies of the notice of default to the Bank, with written instructions to the Bank to mail the original to Wickahoney.¹

The only provision in either agreement dealing with possible conflict between them is the following clause in the Escrow Agreement: "It is further agreed that if any part of the escrow agreement and this agreement are in conflict, then the provisions of this agreement shall govern." The ambiguity is apparent. If the term "escrow agreement" is literally read as such, and the term "this agreement" is taken to refer to the agreement in which it is found, the Escrow Agreement, then the provision in effect reads: "* * * if any part of the escrow agreement and the escrow agreement are in conflict, then the provisions of the escrow agreement shall govern." All parties agree that such a meaningless result is to be avoided, but differ as to the proper construction. The theory of appellees is that as the Escrow Agreement is clearly labeled as such, the term "escrow agreement" means just that, and the term "this agreement" must refer to the only other agreement involved, i. e., the Purchase Agreement, with the result that in the event of conflict the Purchase Agreement governs. Appellants, on the other hand, interpret "this agreement" as referring to the agreement in which the term is found, i. e., the Escrow Agreement, and thus the term "escrow agreement" must be taken to mean the agreement put in escrow, the "escrowed agreement," i. e., the Purchase Agreement. Under this construction, the Escrow Agreement would govern in the event of conflict.

Even accepting the interpretation advanced by appellants, we do not think appellees' admitted failure to literally comply with the notice provision of the escrow agreement affords appellants grounds for relief from the forfeiture. Appellants admit that appellees complied with the provisions of the Purchase Agreement, but urge that a party seeking to declare a forfeiture must literally comply with the terms of the contract and that the procedure specified in the Escrow Agreement was therefore mandatory.

It is true that forfeitures are regarded with disfavor and strict compliance with forfeiture provisions is traditionally required, Stockmen's Supply Co. v. Jenne, 1951, 72 Idaho 57, 237 P.2d 613; Marks v. Strohm, 1944, 65 Idaho 623, 150 P.2d 134; 12 Am.Jur. 1016 (Contracts § 436), but literal compliance in this case would have been a meaningless gesture.

The purpose of notice of default in the usual case is to give the party allegedly in default an opportunity to remedy the default and meet his obligator, Bintz Company v. Mueggler, 1944, 65 Idaho 760, 154 P.2d 513, and notice in the prescribed manner is not required where a party has actual notice and has not suffered prejudice. Quinn v. Hartford Accident & Indemnity Co., 71 Idaho 449, 232 P.2d 965. Conceding a somewhat stricter standard is applicable where a forfeiture is sought, we do not think appellees' failure to follow the circuitous procedure of the Escrow Agreement prejudiced appellants. Both Wickahoney and the Bank received notice of default directly from appellees by registered mail and there is no question of the adequacy of the notice itself. To have routed one copy through the Bank would have given Wickahoney nothing more than it received directly.²

We hold that notice of default was properly given and that appellee's failure to channel the notice of default through the Bank did not preclude their declaring a forfeiture at the expiration of the 90-day period.

During July and August of 1957 Wickahoney sold sheep and lambs for $86,082.50, and the property taken over by the receiver in October, 1957, was subsequently sold for $62,370.18. The District Court adopted these amounts and found they represented the fair and reasonable market value of the sheep, lambs and other property at the time of forfeiture of the Purchase Agreement. Appellants assert that the livestock and wool markets fluctuate a great deal, with substantial variations in market quotations over short periods of time. The factor of a fluctuating market is said to make the District Court's findings of value capricious and arbitrary, there being nothing to tie value at the time of the sales in July, August and October to the value at the time of the wrongful taking in April, some months before. Appellants do not question that these amounts represented the fair market value of the property when sold, but claim prejudice in that there is no evidence to sustain the District Court's findings as to the market value of the property at the time of the wrongful taking, which is calculated to be April 17, 1957, ninety days after Wickahoney's receipt of notice of default.

The parties agree that in an action of claim and delivery the general rule in Idaho is that property is to be valued as of the time of taking. Tannahill v. Lydon, 31 Idaho 608, 173 P. 1146; Unfried v. Libert, 20 Idaho 708, ...