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Roth Development Inc. v. A.R. John General Contractors Inc.

November 24, 1972

ROTH DEVELOPMENT, INC., APPELLANT,
v.
A.R. JOHN GENERAL CONTRACTORS, INC. ET AL, RESPONDENTS



Appeal from Circuit Court, Washington County. Albert R. Musick, Judge.

Lloyd B. Ericsson, Portland, argued the cause for appellant. With him on the briefs were Dusenbery, Martin, Bischoff & Templeton, and Robert E. Glasgow, Portland.

Donald H. Joyce, Portland, argued the cause and filed the brief for respondent A. R. John General Contractors, Inc.

In Banc. Tongue, J. McAllister, J., concurs in the result.

Tongue

This is a suit to quiet title in which plaintiff claims ownership of the interest of one defendant under a contract by which that defendant was the purchaser of real estate from the other defendants. The trial court entered a decree dismissing plaintiff's complaint with prejudice. Plaintiff appeals. We affirm.

In 1967 defendant A. R. John General Contractors, Inc. ("John") paid defendants J. E. Tapp and Bessie Tapp ("Tapp") $500 for an option to purchase 118 acres of land in Washington County for $125,000. Before that option expired plaintiff made

a contract with John for development of the Tapp property as a residential airport complex. By the terms of that contract plaintiff agreed to purchase from John 24 acres of that property, to include a runway, as well as other lots, for $36,000, with a down payment of $11,500. That down payment, in turn, provided John with most of the funds required by John to exercise the option and make the down payment of $12,000 as provided by his purchase contract with Tapp.

Subsequently, plaintiff also paid $24,605 as the balance due for purchase of the 24 acres. That payment was made by plaintiff directly to Tapp and plaintiff received a deed to that property.

The land sale contract between Tapp and John required John to pay annual installments of not less than $7,533.33, with interest in addition to the minimum annual payments, but with the privilege of additional prepayments. That contract also included a forfeiture provision, with a time-essence clause, to become operative if John remained in default in its annual payments for a period of 10 days after written notice of such default.

As a protection to plaintiff's interest that the entire 118 acre tract be developed in accordance with deed restrictions as provided in its contract with John, that contract also included the following "option-assignment" provision, in the event of a default by John in its contract with Tapp:

"In consideration of the mutual promises herein contained, A. R. JOHN grants to ROTH an option to assume A. R. JOHN'S purchaser's interest in the land retained by A. R. JOHN which is subject to the land sale contract from J. E. TAPP and BESSIE TAPP in the event A. R. JOHN defaults

in making the payments required by the terms of that contract. ROTH may notify TAPP of this option to the end that the ten day notice of default which the land sale contract requires TAPP to give to A. R. JOHN in the event of default shall also be given to ROTH. In the event such default occurs, and ROTH cures such default, it is agreed that such occurrences shall operate as an assignment to ROTH of A. R. JOHN'S then remaining interest as purchaser under the land sale contract, without further payment or obligation on the part of ROTH. Provided, however, that the option granted by this paragraph shall not apply to any portion of the land under the TAPP-A. R. JOHN contract as to which A. R. JOHN as secured deed releases from TAPP."

In 1968 and 1969 payments totaling $34,468.45 were made by John to Tapp (not including the $24,605 paid by plaintiff) and John received deed releases from Tapp to 23.588 acres as a result of such payments, as provided for in the Tapp-John contract. The 1970 payment in the amount of $10,751.18 (including $7,533.33 in principal and $3,217.85 in interest) was due from John to Tapp on December 27, 1970 and was not paid on that date. On December 29, 1970 Tapp sent a notice to John that the default must be cured within 10 days. A copy of that letter was sent to plaintiff.

On December 30, 1970 John sent Tapp a check for $2,217.85, claiming that to be the amount due as interest and that no principal payment was due in 1970, apparently by reason of the manner in which previous payments had been made and treated. Tapp then replied by letter to John disputing that contention and stating that John was "still in default," but that he was "holding the check without accepting or rejecting it until such time as our differences are resolved."

On January 8, 1971, the tenth day after the notice of default, and without prior notice to John of its intention to do so, plaintiff delivered to Tapp its check for the full amount of $10,751.18.

On January 22, 1971 John delivered to Tapp a check for $7,533.33, representing the principal payment due on December 27, 1970. All of such checks were held by Tapp, awaiting instructions from the court as to which to accept. Subsequently, and prior to trial, John also delivered to Tapp a check for the balance due on interest.

Under these facts the trial court held that although John was in default and had no right to place plaintiff's investment in the property in jeopardy, to adopt plaintiff's position would result in a forfeiture of John's rights and equity under its contract with Tapp; that "the present suit is in actuality a suit for strict foreclosure," and that since John had by then paid the amount due under its contract with Tapp the plaintiff was not entitled to strict foreclosure of its contract with John.

Plaintiff contends on this appeal that the trial court erred (1) in holding that the "option and assignment" provisions in its contract with Roth should be "construed as though they were provisions for strict foreclosure in a contract between buyer and seller"; (2) in holding that plaintiff "sought the aid of the court in declaring a forfeiture because (a) plaintiff sought only a declaration that events had operated to satisfy the option and assignment provisions and (b) no forfeiture was involved"; and (3) "in relieving John from its default when the consequences of the default were contracted by the parties in arms-length bargaining, no inequity was present and defendant

John failed to seek such relief and showed no facts which would warrant it."

This is a case in which the right of a party to a contract to enforce its provisions, as agreed upon, conflicts with the long-standing abhorance by courts of equity toward the enforcement of contract provisions which result in forfeitures.

As recognized by the trial judge, however, in County of Lincoln v Fischer et al, 216 Or 421, 433, 339 P2d 1084 (1959), this court in considering this problem, quoted with ...


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