Wyrsch v. Milke

• Decision Date: 15 August 1978
• Docket Number: No. 3022,3022
• Citation: 585 P.2d 1098,92 N.M. 217,1978 NMCA 85
• Parties: Rudi WYRSCH, Plaintiff-Appellee, v. Rolf MILKE and Kenneth Blair, and Helen Moncreiff-Adams, Defendants-Appellants, Helen Moncreiff-Adams, Defendant-Appellee.
• Court: Court of Appeals of New Mexico

Page 1098

585 P.2d 1098

92 N.M. 217

Rudi WYRSCH, Plaintiff-Appellee, v. Rolf MILKE and Kenneth Blair, and Helen Moncreiff-Adams Defendants-Appellants Helen Moncreiff-Adams, Defendant-Appellee.

No. 3022.

Court of Appeals of New Mexico.

Aug. 15, 1978.

On Motion For Rehearing Sept. 28, 1978.

Eliu E. Romero, Taos, for defendants-appellants.

Bruce D. Black, Campbell, Bingaman & Black, P. A., Santa Fe, for appellee Helen Moncreiff-Adams.

Morton S. Simon, Friedland, Simon, Lopez & Vigil, Santa Fe, and Jacob Rabinowitz, New York, N.Y., for appellee Wyrsch.

OPINION

SUTIN, Judge.

Defendants Milke and Blair (M & B) appeal from a judgment in favor of plaintiff, Wyrsch, and from a judgment in favor of cross-claimant, Adams. We affirm.

The trial court made extensive findings of fact, none of which are challenged by M & B. Therefore, these findings are binding on this Court on appeal. State ex rel. Newsome v. Alarid, 90 N.M. 790, 568 P.2d 1236 (1977). In fact, M & B in their brief do not attack any of the findings of the court.

A. Wyrsch v. M & B is affirmed.

The pertinent findings are summarized as follows:

On July 3, 1974, Milke entered into a written contract with Adams for the purchase of a business in Taos, New Mexico, one paragraph of which provided that Milke shall not convey the property without the prior written consent of Adams. At the time Milke entered into the contract, he had an undisclosed partner, Blair. M & B took possession of and operated the business.

On April 1, 1976, M & B entered into a written contract with Wyrsch, one paragraph of which provided that the contract was contingent upon M & B obtaining the written consent of Adams.

The total purchase price was $140,000 payable $34,000 on April 1, 1976, and monthly payments thereafter. The balance was due and payable on May 1, 1979.

The parties delayed closing the sale until April 15, 1976 due to M & B's failure to obtain the written consent of Adams. To protect Wyrsch's down payment of $34,000, M & B signed a promissory note in the sum of $34,000 payable to Wyrsch 60 days from April 15, 1976, or upon delivery to Wyrsch of a signed consent from Adams.

Wyrsch and M & B orally agreed that if M & B obtained the written consent of Adams to the sale within 60 days from April 15, 1976, then the $34,000 was to be kept by M & B as the down payment under the contract. If M & B could not obtain the consent within the 60 days allotted, then M & B would repay the $34,000 to Wyrsch and the contract would not be consumated. Paragraph 7 of the contract stated that the agreement was contingent upon Adams' consent to the sale. After M & B executed the promissory note Wyrsch took possession of and operated the business.

At the end of the 60 days, on or about June 15, 1976, M & B had not succeeded in obtaining the consent.

M & B urged Wyrsch to remain in possession; that M & B would obtain the necessary consent from Adams within a reasonable period of time. Wyrsch remained in possession until October 2, 1976.

Adams had demanded from M & B a conditional consent under which M & B could convey the business to Wyrsch. Adams' consent that was withheld was not unreasonable. M & B told Adams that any conditional consent would be unacceptable. M & B continued to make payments on the Milke-Adams escrow until October 1, 1976, but failed to tender any payments for the months of October or November, 1976. Wyrsch tendered Adams a payment for October which Adams refused since it would indicate her unconditional consent to the M & B-Wyrsch contract.

On October 2, 1976, Adams gave notice to M & B and Wyrsch of M & B's default on the contract, which notices were received.

On October 2, 1976, Wyrsch advised M & B that due to the failure of Adams to give written consent to the transfer and sale of the business to him he considered the contract to be invalid due to M & B's failure to fulfill a material condition precedent within a reasonable time.

Wyrsch fulfilled all conditions required of him under the contract until such time as it became evident that M & B would not be able to comply with the condition precedent in the contract, i. e., obtaining the consent of Adams.

On November 22, 1976, Wyrsch instituted two separate lawsuits, one on the promissory note and the other for recision of the contract, damages for breach of contract, and other relief. These claims were consolidated for trial.

M & B appear to contend that they had a "reasonable time" in which to obtain consent of Adams; that Wyrsch knew consent had not been acquired at the inception of, or at the time of entering into, the contract; that at this time, there was no evidence that M & B refused to comply with the requirement of obtaining Adams' consent; and that Wyrsch was in default at the time of filing his complaint. Therefore, M & B say the trial court erred in allowing a recision of the contract.

We are unable to follow the syllogistic reasoning of M & B. M & B had six months from April 1, 1976 to October 2, 1976 to obtain the written consent of Adams. Certainly, this was a "reasonable time." No default of Wyrsch occurred during this period of time. Wyrsch fulfilled all conditions required of him under the contract until he declared the contract invalid.

The agreement between M & B and Wyrsch was contingent upon M & B obtaining Adams' consent to the attempted transfer of interest.

"If an agreement is made subject to the consent of an additional party, it must be viewed as conditional and if the consent is not given, the agreement is not binding." Watts v. Hogan, 111 Ariz. 536, 534 P.2d 741, 743 (1975); Coe v. State Farm Mut. Auto. Ins. Co., 66 Cal.App.3d 981, 136 Cal.Rptr. 331 (1977). "When, as in the present situation, two parties execute a contract with the understanding that the approval of a third party is necessary for the agreement to take effect, the contract is not complete until the third party has approved. Until that happens neither party is bound by the agreement." Santa Clara-San Ben. Chap., Etc. v. Local U. No. 332, Etc., 40 Cal.App.3d 431, 114 Cal.Rptr. 909, 912 (1974).

M & B failed to perform a condition precedent and allowed the Adams' contract to reach a point of default. M & B knew that if the Adams' contract failed, their contract with Wyrsch also failed. It was too late in the day for M & B to cast any blame on Wyrsch for the wrong committed by M & B.

M & B rely on Keleher v. Ash, 37 N.M. 263, 21 P.2d 94 (1933). This case holds that a purchaser of real property may not take advantage of his own default to claim a recision. We agree with that statement but find it inapplicable here; Wyrsch was not in default.

M & B also rely on cases which protect the vendor of real property. Mountain View Corporation v. Horne, 74 N.M. 540, 395 P.2d 676 (1964); Montgomery v. First Mortgage Co., 38 N.M. 148, 29 P.2d 331 (1934); Clark v. Ingle, 58 N.M. 136, 266 P.2d 672 (1954). These cases hold that a purchaser cannot rescind a contract when the vendor can correct defects in title or otherwise make the title marketable Before the date set for performance. As long as the vendor is not in default the purchaser cannot rescind because the purchaser can show no breach of contract. To construe the contract otherwise would unquestionably be harsh against a vendor.

The above mentioned cases do not support M & B's position. M & B did not perform in time and therefore breached the contract. They did not obtain Adams' consent within a reasonable time to fulfill the condition precedent which would have given rise to a binding contract.

M & B are precluded from invoking equitable considerations because they have sullied the circumstances with their own "unclean hands." M & B sold the Taos business to Wyrsch without the consent of Adams, and, with knowledge that this was wrong, intentionally defaulted in payments. They obtained $34,000 from Wyrsch as a down payment, relied upon Wyrsch's tender as an excuse for their delinquency, failed to repay Wyrsch, and caused extensive litigation. This conduct does not fall within any equitable maxim or concept. Equity encourages courts to amend wrongs of this nature. On general principles, equity will prevent a party having knowledge of the just rights of another from defeating such rights. Equity does not create a fetish of exactitude or technical niceties. It is concerned with ultimate consequences. The trial court correctly declared the M & B-Wyrsch contract null and void.

B. Adams v. M & B is affirmed.

M & B made Adams a third party defendant. Adams "cross-claimed" against M & B to terminate their interest in the property.

The trial court found that on October 11, 1976, Adams sent a second Notice of Breach and Default to M & B which was received; that they had 60 days to cure the default. On December 14, 1976, Adams notified M & B of her intention to terminate the contract and filed an affidavit of M & B's default with the County Clerk of Taos County. Adams did not unreasonably withhold her consent; that the conditions she requested were fair and reasonable inasmuch as Adams, if she granted her unconditional consent, could personally be liable for liens and encumbrances incurred by Wyrsch in the event of default. Adams did not waive the provision of the contract requiring her consent, and M & B were not current at any time after October 1, 1976, on the monthly installments due under the Adams' contract.

M & B argue that Adams caused the default of M & B by refusing to accept Wyrsch's tender of payment of the October, 1976 installment due and owing from M & B; that Adams' notice of cancellation was premature. Relying on these claims, M & B argue the principle that equity disfavors forfeiture; that the trial court could not deprive M & B of its equitable ownership of the property. This argument is contrary to the findings of the trial court, without merit and without the citation of any authority.

M & B have ignored both an essential fact of the...