Yu v. Paperchase Partnership

• Decision Date: 18 November 1992
• Docket Number: No. 19909,19909
• Citation: 1992 NMSC 64,845 P.2d 158,114 N.M. 635
• Parties: Daniel T. YU and Bernice L. Yu, Plaintiffs-Appellees, v. PAPERCHASE PARTNERSHIP, a general partnership, composed of Robert A. Buel, Victoria Buel, Robert J. Moon, and E. Blanche Moon, Defendants-Appellants.
• Court: New Mexico Supreme Court

Page 158

845 P.2d 158

114 N.M. 635

Daniel T. YU and Bernice L. Yu, Plaintiffs-Appellees, v. PAPERCHASE PARTNERSHIP, a general partnership, composed of

Robert A. Buel, Victoria Buel, Robert J. Moon, and

E. Blanche Moon, Defendants-Appellants.

No. 19909.

Supreme Court of New Mexico.

Nov. 18, 1992.

[114 N.M. 636] J.S. Campbell & Associates, John S. Campbell, Albuquerque, for defendants-appellants.

Sylvain Segal, Albuquerque, for plaintiffs-appellees.

OPINION

MONTGOMERY, Justice.

This is a "vendor and purchaser" case, involving the rights and liabilities, and other legal relations, between two of the parties interested in an installment land sale contract--the original vendor and a subvendee. The vendor is Paperchase Partnership ("Paperchase"); the subvendee is a married couple, Mr. and Mrs. Daniel T. Yu ("the Yus"). These parties, along with others interested in the contract, were before this Court on a previous occasion. In Paperchase Partnership v. Bruckner, 102 N.M. 221, 693 P.2d 587 (1985), we held that a subsequent contract between the original vendees, the Bruckners, and a later purchaser, as well as another contract between the later purchaser and the Yus, did not constitute "assignments" in violation of a clause in the original contract prohibiting assignment without the vendor's consent. The issue in the present case is whether the vendor (Paperchase) had the power to terminate the contract and forfeit the subvendee's (the Yus') interest when there was a default in the vendees' obligation to pay the real estate taxes on the property subject to the contract ("the Property") and the vendor did not notify the subvendee of the default or give it an opportunity to cure.

The trial court, in litigation instituted by the Yus to set aside the forfeiture, ruled that the vendor did not have such power under these circumstances and entered summary judgment in favor of the Yus. We agree with this ruling and affirm.

I.

Paperchase sold the Property to the Bruckners for $180,000 in March 1977, using a standard-form real estate contract containing the following clause:

It is mutually agreed that time is of the essence of this contract. Should the Purchaser fail to make any of the said payments [as required by the contract] ... or fail or refuse to repay any sums advanced by the Owner ... and continue in default for ten (10) [later amended to 15] days after written demand for such payments ... has been mailed to the Purchaser ... at 9108 Hannett N.E., Albuquerque, New Mexico, then the Owner may, at his option, either declare the whole amount remaining unpaid to be then due, and proceed to enforce the payment of the same; or he may terminate this contract and retain all sums theretofore paid hereunder as rental.

In 1979 the Bruckners sold the Property to A & O Investments for an undisclosed amount; in 1980 A & O Investments sold it to the Yus for $230,000; and in 1984 the Yus sold it to Maurice and Clara Strahl for $312,000. All of these sales were accomplished by standard-form real estate contracts, and each subpurchaser except the Strahls assumed the prior contracts and encumbrances.¹ Paperchase was not notified in writing of the sales, nor was its consent obtained. In 1981, however, Daniel Yu telephoned Robert Buel, one of Paperchase's partners, and advised him that he had purchased the Property. After the Yus purchased the Property, they expended more than $200,000 in principal payments and improvements.

In April 1982, Paperchase sued the Bruckners, A & O Investments, and the Yus for a declaratory judgment that Paperchase could either accelerate the balance due on the contract or forfeit the purchasers' interest in the Property. This was the litigation resolved in Paperchase Partnership v. Bruckner. Paperchase served the summons in that lawsuit on the Bruckners at their then current address, to which they had moved in December 1977, not at the address on Hannett stipulated in the contract. Additionally, Paperchase attached to its complaint a copy of the Yus' real estate contract with A & O Investments, which showed the Yus' address.

During the period May 1983 through November 1989, the original contract was in default on eleven different occasions. On each occasion, Paperchase sent a notice of default to the Bruckners' address as listed in the contract (the address on Hannett), not the address to which the Bruckners had moved in December 1977 and at which they had been served with process in April 1982. Paperchase did not send a notice of any of these defaults to either the Yus or the Strahls. Each notice to the Bruckners was returned unclaimed.

On November 3, 1989, Paperchase sent a notice of default to the Bruckners (at the address on Hannett) for failure to provide insurance on the property. On November 9, Mrs. Yu went to the offices of the escrow agent and discussed the insurance policy with someone on the escrow agent's staff. On the same day, Paperchase sent another default notice, to the same address on Hannett, notifying the Bruckners that they were in default for failing to pay the real estate taxes on the Property and that Paperchase had paid the taxes, demanding reimbursement within fifteen days, and threatening to terminate the contract and retain all sums previously paid if reimbursement was not made. No notice of default was sent to the Yus. On November 27, Paperchase elected to forfeit the purchasers' interest in the Property, and on the next day the escrow agent delivered a special warranty deed (restoring legal title in the vendor) and other escrowed documents to Paperchase. On November 29, the escrow agent wrote to the Yus and the Strahls, informing them of the forfeiture and, upon the Yus' inquiry, provided them with copies of the demand notices. At the time of the forfeiture, the unpaid balance on the Paperchase-Bruckner contract was $25,017.45. The estimated value of the Property ranged from less than $100,000 to more than $300,000.

The Yus brought this action to vacate the forfeiture. After some initial proceedings, the Yus moved for summary judgment, which, as stated above, the trial court granted. Paperchase appeals, insisting that it had no duty to notify the Yus of the default under the contract and that, accordingly, it was free to exercise its right to terminate the contract and forfeit the Bruckners' interests and those of any subpurchasers, without giving notice to anyone except as specified in its contract.

II.

Paperchase relies for its position primarily on these statements in Campbell v. Kerr, 95 N.M. 73, 618 P.2d 1237 (1980):

The Samuells-Kerr contract requires demand to be made at a specified address upon Kerr [the vendee]. This was done. We know of no affirmative duty placed upon a vendor in this situation to attempt to find the vendee, or to contact subpurchasers.... Stepnowski [successor to Samuells, the vendors] fulfilled his obligation under the contract to notify Kerr. If Kerr wished to insure notice, he should have notified his vendor or the escrow agent. Likewise, there is privity of estate, but not privity of contract between a vendor and subpurchasers. Stepnowski had no legal duty to notify Campbell [a subvendee] of his demand upon Kerr. A subpurchaser of land from a purchaser with notice of the terms of the contract between the original vendor and the purchaser takes the land subject to such terms. Campbell had notice of the terms of the Samuells-Kerr contract. She could have requested notice in the event of a demand from the vendor. She did not.

Id. at 79, 618 P.2d at 1243 (emphasis added; citations omitted).

Paperchase also relies heavily on our statements in the earlier litigation that:

Even though the vendee has assigned the contract without the vendor's consent, ... if the assignee fully performs the vendee's duties under the contract, the assignee may demand specific performance by the vendor. But until that time, the vendor is not required to recognize the assignee, nor to rely on him for payment of installments toward the purchase price.

Paperchase Partnership v. Bruckner, 102 N.M. at 223, 693 P.2d at 589 (emphasis added; citations omitted). Noting that we observed that "[t]he district court determined that the Bruckner/A & O and A & O/Yu contracts had no effect on the rights and duties of the parties to the original contract[,]" id., Paperchase contends that res judicata (or, presumably, collateral estoppel) precludes the Yus from asserting that Paperchase was required to recognize them for notice purposes or that their interest in the Property had any effect on Paperchase's rights and duties under the contract.

Paperchase's contentions concerning the preclusive effect of the prior litigation are easily disposed of. First, the defense of res judicata is only available if the previous suit was based on the same cause of action. Torres v. Village of Capitan, 92 N.M. 64, 67, 582 P.2d 1277, 1280 (1978). In this case, of course, it was not. The cause of action in the previous litigation was a claim by Paperchase that the vendees' rights could be terminated based on their alleged violation of the prohibition on assignment; the cause of action in the present case is the Yus' claim that the contract should be reinstated because of Paperchase's failure to notify them of a claimed default in payment of real estate taxes.

With respect to collateral estoppel, the doctrine requires identity of issues in the prior litigation and in the current lawsuit. City of Santa Fe v. Velarde, 90 N.M. 444, 446, 564 P.2d 1326, 1328 (1977). As Paperchase admits in its reply brief, "The question before the Court in the instant case is certainly different from the question before the Court in [Bruckner ], for that case did not deal with notice and notice requirements." The dictum in Bruckner that the vendor is not required to recognize the assignee (or the subvendee), nor to rely on him for payment of installments toward the purchase price (or payment of taxes), was ...