Wingets, Inc. v. Bitters, 12578

• Citation: 28 Utah 2d 231,500 P.2d 1007
• Decision Date: 28 August 1972
• Docket Number: No. 12578,12578
• Parties: d 231 WINGETS, INCORPORATED, a Utah corporation, Plaintiff and Respondent, v. Franklin BITTERS, a widower, et al., Defendants and Appellants.
• Court: Supreme Court of Utah

Page 1007

500 P.2d 1007

28 Utah 2d 231

WINGETS, INCORPORATED, a Utah corporation, Plaintiff and Respondent, v. Franklin BITTERS, a widower, et al., Defendants and Appellants.

No. 12578.

Supreme Court of Utah.

Aug. 28, 1972.

Walter G. Mann and Reed W. Hadfield, of Mann & Hadfield, Brigham City, for defendants and appellants.

L. Brent Hoggan, Logan; for plaintiff and respondent.

CROCKETT, Justice:

Plaintiff Wingets, Inc., as seller of business property on North Main Street in Logan Utah, was granted a motion for summary judgment against defendants Bitters, buyers, for the sum of $92,392.21, as the balance due on the contract price of $130,000, which the seller had declared 'immediately due and payable' on the ground that the buyers were in default. The latter appeal, contending that there are genuine issues of fact which if resolved in their favor would constitute a defense.

The contract was entered into on April 13, 1964. The payments specified were $20,000 down and $643.06 per month on the principal and interest at 5 per cent, which would pay out the $130,000 in 25 years. After there had been performance for a period of seven years, on February 22, 1971, the plaintiff served a written notice on defendants: setting out that three payments were due; the last being due February 15, 1971, totaling $1,929.24, and that as a consequence the plaintiff declared the total remaining balance immediately due and owing, in the amount of $94,443.14. It demanded that said amount be paid by March 5, 1971. The stated delinquency of $1,929.24 was delivered to the Bank, escrow holder, on March 1, 1971. In round figures defendants had paid about $36,000 on the principal, and $36,000 in interest, a total of about $72,000 on the contract.

The issue in controversy is whether the plaintiff had a right under the contract to so declare the entire balance due without giving defendants a 30-day notice and opportunity to remedy their default.

The provision of the contract upon which the dispute devolves is:

In case of the failure of the parties of the second part to pay all payments promptly when due, whether of principal, interest, taxes or insurance, it being agreed that time is of the essence of this agreement, * * * then at the option of the party of the first part, they may rescind this agreement and be released from all obligations hereunder, whereupon all payments made, and all improvements erected thereon, shall be forfeited to the party of the first part as and for liquidated damages and as rental for said premises and it may retake possession of said property, or at the option of the party of the first part it may specifically enforce the provisions of this agreement by an appropriate action, or it may sue for the purchase price in any competent court, and for this purpose may declare all unpaid payments immediately due and payable, provided however, that before rescinding this agreement the party of the first part shall serve on the parties of the second part by registered mail at the address set forth above 30 days written notice of its intention so to do during which time the parties of the second part may perform and be purged from said default. (Emphasis added.)

The plaintiff urges that the emphasized language, which requires the seller to give the buyers 30 days' notice, applies only to a 'rescinding' of the agreement in the technical sense, but that for the optional remedy it chose, of 'declare(ing) all unpaid payments immediately due and payable . . .' no such notice was required. It is on this basis that it seeks to justify its declaration that the entire remaining balance of $94,443.14 was due and must be paid within 11 days.

The position of the defendants is to the contrary. They urge that from the nature of the transaction and the context of the contract, the fair and reasonable interpretation of the provision requiring the seller to give the buyers a 30-day notice was to afford the latter some protection against an arbitrary action by the seller and allow a reasonable opportunity to remedy a default. They set forth in an affidavit, which stands uncontradicted, that this was their understanding; that after preliminary negotiations, and after the contract had been drawn up by the plaintiff's attorney, at a meeting of the parties in his office, the attorney stated that the said provision gave the buyers the benefit of a notice of 30 days in which they would have an opportunity to remedy any default that might occur. Inasmuch as there has been no denial of the affidavit the averment is taken as true.

Defendants urge that this explanation which plaintiff's attorney made is the reasonable and practical interpretation which persons of ordinary intelligence and experience would place upon the language of the contract, as opposed to the strained and technical interpretation contended for by the plaintiff. They contend alternatively, that if the plaintiff intended as it now asserts, it falsely and fraudulently induced them to enter into the contract with an unduly harsh penalty in the event of default, without allowing any opportunity to remedy it. It is as a consequence of the foregoing that the defendants argue that they should be allowed a trial and given an opportunity to present evidence as to the true intention of the parties in signing the contract.

There are some foundational rules which should be stated as a preface to our analysis of the problem thus presented. The primary one is that if the language of the contract is such that the intention of the parties is clearly and unequivocally expressed, it must be enforced according to its terms. ¹ But conversely, if there is a basis in its language upon which the parties reasonably could have a misunderstanding with respect to its intent, then extraneous evidence can be received and considered to ascertain it. ² Moreover, in making that determination, the court is not bound by any single provision or expression, but should look to the whole contract and its purpose. ³ It is further to be observed that the so numerous controversies which are constantly arising over the meaning of contracts, and even over such formal writings as statutes and treaties, compel recognition of the fact that many words and terms have, and are interpreted as having, various and differing meanings. This often is more accentuated in the retrospect when 'the chips are down' after a dispute has developed. In looking more specifically at the instant controversy there are several further observations which have a bearing thereon.

If the plaintiff is correct in asserting that the 30-day notice requirement does not apply to the other options, each of which would in effect forfeit out the defendants, then there is no notice requirement whatsoever as to those other two options. In other words, the plaintiff seller could unilaterally choose one of the abrupt remedies, and without giving any notice to the defendant buyers, except only to inform them that they had been forfeited out, insist upon carrying out the option it had chosen, without allowing the buyers any opportunity whatsoever to remedy the default.

These thoughts arise with respect thereto: If the buyers were to be given any notice at all with respect to any of the remedies allowed the seller in the event of default, one wonders why there should be a 30-day notice required as to one such remedy, and no provision for notice for the other two. It would seem quite reasonable for the defendants to believe in accordance with the advice which they assert the plaintiff's attorney gave them, that they would be given the 30-day notice and an opportunity to remedy default as to any method of forfeiture chosen by the seller (plaintif...