Dill v. Zielke

Steinert, J. Plaintiff, Nina E. Dill, brought suit to recover possession of certain real property which had formerly been sold by her under a forfeitable conditional sales contract. Mary Zielke, who was a subsequent contract purchaser of the same property from plaintiffs vendee, was made the principal defendant in the case. Defendant Zielke appeared in the action by answer and cross-complaint which put in issue the material allegations of plaintiff’s pleading with reference to forfeiture and further sought, by the cross-action, to have the defendant declared to be the owner, and entitled to the possession, of the real property in question. Upon joinder of issues, the cause was tried to the court without a jury. At the conclusion of the trial, the court took the cause under advisement and later rendered a memorandum opinion concluding with a decision in favor of the litigant defendant. Findings, conclusions, and a decree were entered accordingly, and plaintiff appealed. On August 22, 1941, appellant, Nina E. Dill, entered into a written contract with Roy M. Mulberry and Marian Mulberry, husband and wife, wherein Mrs. Dill agreed to sell and the Mulberrys agreed to purchase a certain lot, with the appurtenances, situated in the city of Spokane. The contract recited that the purchase price of the property was sixteen hundred dollars, of which the sum of five hundred dollars was acknowledged as having been paid at *248 the time, and that the balance of fifteen hundred dollars was to be paid in monthly installments of not less than eighteen dollars, inclusive of interest at the rate of six per cent per annum, the first installment to be paid on October 22, 1941, and the purchasers to have the right at any time to pay as much of the balance of the purchase price as they might desire, without payment of unearned interest or penalty. The agreement also contained time and forfeiture provisions reading as follows: “Time is of the essence of this contract. In case the purchasers shall fail to make any payment at the time the same shall fall due as hereinbefore specified, or to perform any covenant or agreement before said date, seller at her option may declare such a forfeiture and cancellation by written notice to the purchasers and at the expiration of thirty (30) days this agreement shall be at an end and null and void, if in the meantime the terms of this agreement have not been complied with by the purchasers.” - Pursuant to the terms of the contract, a copy of that instrument and a warranty deed from the seller to the purchasers were placed in escrow, under a written agreement authorizing the First National Bank of Spokane, as escrow agent, to receive the monthly installments, issue receipts therefor, and, upon final payment, to deliver the escrow papers to the purchasers. The escrow agreement further provided that, if the purchasers failed to make promptly any of the payments when due, as required by the contract of sale, the escrow holder should return the deed and contract to the appellant seller after thirty days’ notice in writing by registered mail to the last-known address of the purchasers. A policy of title insurance was also, at or about the same time, deposited with the escrow agent. The purchasers, Mr. and Mrs. Mulberry, went into possession of the real property and made payments to the bank on their contract from the date of its execution until August 3, 1944, in amounts totaling $712, of which the sum of $232.86 represented accrued interest. On the date last mentioned, they made the payment which had come due on *249 July 22nd, at which time a balance of $1,120.86 was still owing, but not yet due, on the contract. In making their monthly payments the purchasers were usually late, the overtime ranging from periods of two days to three weeks. The installment of $18, inclusive of $5.61 interest, coming due on August 22, 1944, was, for reasons which will subsequently appear, never paid by the purchasers. Up to that time, the respondent Mary Zielke was in no way involved in the conditional sales contract or concerned with the property therein described. Sometime in August, 1944, the Mulberrys concluded to sell the property and, for that purpose, listed it with one C. A. Hines, a realtor in Spokane. Mr. Hines succeeded in interesting respondent Mary Zielke, a widow, in the purchase of the property, and on September 1,1944, Mrs. Zielke and the above-mentioned Roy Mulberry entered into a written agreement wherein Mrs. Zielke obligated herself to purchase, and Mr. Mulberry obligated himself to sell, the real property here involved at a price of twenty-five hundred dollars, of which the sum of five hundred dollars was then and there paid in cash, and the balance of two thousand dollars was to be paid on the consummation of the transaction. That agreement made no mention of the Dill contract or of Mrs. Dill’s interest in the property, although it obligated Roy Mulberry, as the immediate seller, to furnish an acceptable policy of title insurance and to execute a good and sufficient deed to Mrs. Zielke, as purchaser. On or about the same day that this agreement was executed, Mr. Hines notified the bank, as escrow holder, that the property was being sold and at the same time procured from the bank the title insurance policy then in its possession, for the purpose of having it brought down to date. A few days thereafter, Mrs. Zielke paid to Hines a sum sufficient to satisfy the balance owing, and to be owed, to Mrs. Dill, amounting approximately to $1,142, inclusive of accruing interest, and, on September 17, 1944, Mrs. Zielke, with her daughter, went into possession of the property. Due to the delay encountered in having the policy of title insurance brought down to date and to the further fact that *250 Mrs. Zielke was procuring, through another real estate transaction then in process of completion, the funds with which to pay to the Mulberrys the balance of the amount coming to them, Mr. Hines retained the funds already in his possession until both transactions could be concluded. In the meantime, Mrs. Dill, the appellant herein, learned of the negotiations between the Mulberrys and Mrs. Zielke, and apparently did not approve of them. On several occasions during the period between September 17 and October 15, 1944, she visited the premises then being occupied by Mrs. Zielke and her daughter and stated to them that they were “trespassers.” Learning also that the policy of title insurance had been temporarily relinquished by the bank to Mr. Hines for the purpose of having it brought down to date, Mrs. Dill voiced her positive objection to that procedure. During this time, the situation with respect to the transaction between the Mulberrys and Mrs. Zielke had progressed to the point where it was about to be fully consummated. On October 16, 1944, Mr. Hines wrote a letter to Mrs. Dill, advising her that the property had been sold to Mrs. Zielke, and that in a few days he would have the money to pay her, Mrs. Dill, the full amount owing on her contract of sale. The evidence reveals that at that time Mr. Hines actually had in his possession sufficient moneys to pay the full amount of that balance, but was waiting for the additional amount necessary to satisfy the balance owing to the Mulberrys on their contract with Mrs. Zielke. That amount was virtually assured, however, through the kindred transaction then pending between Mrs. Zielke and other persons. The letter from Mr. Hines to Mrs. Dill precipitated the subsequent action taken by Mrs. Dill, leading to this litigation. On October 17, 1944, the day on which Mrs. Dill received Mr. Hines’ communication, she wrote and sent, by registered mail, to Mr. Mulberry, a letter advising him that she was canceling his contract of purchase because of his failure to make the monthly payments according to the terms of the contract, and notifying him that she was then *251 giving him “the required thirty day notice” at the expiration of which she would demand possession of the premises. A copy of this notice was also mailed to the bank, but none was sent to Mrs. Zielke, and, so far as the record herein discloses, Mrs. Zielke never knew of the intended forfeiture until about the time this action was commenced. As stated by the trial court in its memorandum opinion, “Unquestionably, this letter of Mr. Hines is what inspired the notice of forfeiture.” At the time the notice of forfeiture was given, the Mulberrys were in arrears on their August 22nd and September 22nd installments, amounting in all to thirty-six dollars. The time fixed in the notice of forfeiture expired on November 17, 1944. The delinquent installments were not paid within the specified time, as concededly they should have been. However, on November 20th, which was but three days after the expiration date, Mr. Hines paid to the bank, the escrow holder, the sum of $1,142.91, which was the full amount owing to Mrs. Dill on her conditional sales contract with the Mulberrys. Mr. Hines also at that time demanded from the bank the surrender of the escrow papers, including the warranty deed from Mrs. Dill to the Mulberrys. The bank refused, however, to surrender the papers, for the reason that, a few hours before the payment of the $1,142.91, Mrs. Dill had notified the bank that all of the escrow papers were to be returned to her. In consequence of the situation thus confronting it, the bank refused to deliver the papers to either party until it had received legal advice as to what it should do. It still has possession of the papers and of the final payment of $1,142.91. As a result of the creation and continuance of this impasse, appellant instituted the present action against Mrs. Zielke and the bank, and in her amended complaint, filed April 24, 1945, prayed for a writ of restitution to put appellant in possession of the property, for an order directing the bank to deliver to her the escrow papers, and for such other relief as to the court should seem proper. Respondent asked for contrary relief, in her favor, against appellant *252 and the bank. In its memorandum opinion, the trial court expressed two reasons for refusing to give effect to the notice of forfeiture as requested by appellant: (1) the fact that no notice of forfeiture was served upon Mrs. Zielke, who to the knowledge of the appellant was in possession of the property at the time, and (2) because forfeiture, under the existing circumstances, would be abhorrent to a court of equity. We prefer to rest our decision upon the second ground suggested by the trial court. We are cognizant of the well-established rule in this state that, where time is made of the essence of a contract of sale, the vendor may declare a forfeiture of the contract for the nonpayment of the purchase price or any installment thereof. Douglas v. Hanbury, 56 Wash. 63, 104 Pac. 1110, 134 Am. St. 1096; Reard v. Ephrata Orchard Homes Co., 78 Wash. 180, 138 Pac. 678; Huston v. Dodge, 140 Wash. 66, 248 Pac. 63; Cowley v. Foster, 143 Wash. 302, 255 Pac. 129; Barrett v. Bartlett, 189 Wash. 482, 65 P. (2d) 1279. It is equally well established, however, that forfeitures are not favored in law and are never enforced in equity unless the right thereto is so clear as to permit of no denial. Walker v. McMurchie, 61 Wash. 489, 112 Pac. 500; Harlan v. McGraw, 107 Wash. 286, 181 Pac. 882; Wallis v. Elliott, 154 Wash. 625, 282 Pac. 928; Grosgebauer v. Schneider, 177 Wash. 282, 31 P. (2d) 901; Mayflower Realty Co. v. Security Sav. & Loan Society, 192 Wash. 129, 72 P. (2d) 1038, 75 P. (2d) 579. Recognizing the hardship that often attends a strict enforcement of a forfeiture provision, and confronted with a situation where such enforcement would do violence to the principle of substantial justice between the parties concerned, under the particular facts of a case, the courts of this state have frequently relieved a party from default of payment on an executory contract involving real estate by extending to such person a “period of grace” within which to make such payments. Rohlinger v. Coletta Land & Orchard Co., 64 Wash. 348, 116 Pac. 1095; Zane v. Hinds, 136 Wash. 352, 240 Pac. 6; Wallis v. Elliott, supra; Great Western Inv. Co. v. Anderson, 162 Wash. 58, 297 Pac. 1087; Grosge *253 bauer v. Schneider, supra; Central Life Assurance Soc. v. Impelmans, 13 Wn. (2d) 632, 126 P. (2d) 757. In our opinion, the facts in this case call for the application of this.principle and the extension of such relief. It will be remembered that the full amount of the balance owing to appellant was paid to her escrow agent three days after the expiration of the time designated in the notice of forfeiture. If appellant had commenced her action before such payment, instead of afterwards, the trial court would have been fully warranted, under the existing circumstances, in granting to the Mulberrys an extension of three days, and even more, in which to pay the amount owing by them. The action having been commenced after that amount had been paid by Mrs. Zielke, a bona fide purchaser of the property from the Mulberrys, without knowledge of the forfeiture, much greater reason exists for refusing to permit strict enforcement of such forfeiture. The equities of the case are prominent. Payments under appellant’s contract had been made by the Mulberrys over a period of three years and a substantial amount had been realized thereon by the appellant. The amount of delinquency at the time the notice of forfeiture was given was but thirty-six dollars. Although those payments should have been made, the reason they were not made promptly was that an assured sale to Mrs. Zielke was in progress, and it was a matter of only a short time when the transaction would be completed. Appellant has not lost one cent upon her contract but is in a position to receive every dollar to which she is entitled under her agreement. On the other hand, should she now be allowed to prevail, she will have been permitted to retain all that was paid to her during the three years and, in addition, recover the real property, which, in the meantime, has become enhanced in value to the extent of nine hundred dollars. An equivalent loss would correspondingly fall either upon the Mulberrys or Mrs. Zielke, or both. It appears to us that, in bringing this action, appellant was inspired more by the desire to secure for herself the profit that the Mulberrys now stand to make, than by an intention to enforce performance of the principal *254 terms of her contract with the Mulberrys. But whatever may have been her object, we do not believe that, under the facts presented, she is entitled to prevail by strict enforcement of the forfeiture provision. The decree is affirmed. Robinson, Jeffers, and Connelly, JJ., concur. Mallery, J., dissents.