Keyworth v. Wiechers

ON REHEARING. ON REHEARING. Upon re-examination of the case on re-hearing, I find myself unable to agree fully with any of the other opinions. The facts appear in the original report of the case, Keyworth v.Wiechers, 269 Mich. 687, but certain specific and undisputed facts properly may be called to mind:

1. An essential modification of the original Wiechers contract was to release him from personal liability for the purchase price and give him the option to make payment or not, as he pleased.

2. Plaintiff claims the benefit only of such payments as Wiechers and the Moraine Land Company made before default and forfeiture. She offers, and must pay, the balance of her contract with the bank, now owned by the Moraine Land Company. The benefit she seeks is only the same which accrues to all vendors when they forfeit land contracts.

3. The Moraine Land Company paid $500 and interest on the payment of $1,000 and interest due in November, 1931, and obtained extension of time to pay the balance to January 15, 1932. The notice of forfeiture was served December 18th. The contracted 90-day period of grace to cure the default expired March 18th. Defendants' attorney wrote plaintiff's attorney on December 24th stating that the balance of principal would be paid January 15th. It was not paid then nor later. On March 9th defendants' attorney wrote plaintiff's attorney asking for statement of the amount necessary to adjust the contract. Plaintiff's attorney replied March 14th. No adjustment was had nor payments made either to plaintiff or the bank before March 18th.

4. There is no testimony that before March 18th the Moraine Land Company had any negotiations with the bank to pay the contract in full or purchase its title. The earliest dates appearing in the record indicating such negotiations are April 15, 1932, the date of a draft, and April 8th, the date of the deed from the bank to William E. Schauppner. There is no testimony of prior negotiations. The deed was not paid for nor delivered until November 30, 1932, after this suit was commenced. The title was later conveyed to the Moraine Land Company.

5. There is no testimony of a cloud having appeared on the title or been suggested until June, 1932. The claimed cloud was the Freeman oil lease, given by an ancient owner of the land but then a stranger to the title. There is no evidence that the lease was mentioned or taken into consideration between the bank and the purchaser of the original vendor title, or that it delayed or affected negotiations except the isolated fact that $50 was paid the Freemans and they gave a quitclaim deed to Schauppner, dated December 1, 1932, but not acknowledged until January 24, 1933.

6. The negotiations between the bank and the Moraine Land Company for deed were not disclosed to plaintiff, nor did she know of them until after the deed had been delivered. Plaintiff never consented to the negotiations nor transfer. The deed from the bank to Schauppner was made subject to plaintiff's contract and the taxes.

7. There are two vendors involved who must not be confused, the bank in the contract to plaintiff and the plaintiff in the contract to Wiechers.

8. There is no testimony that in purchasing the original title from the bank in the name of a third party the Moraine Land Company purported or pretended to the bank, to plaintiff, or in its own mind, to purchase in fulfillment of or under the authority of the Wiechers contract.

9. There is no evidence of waiver of strict time of payment under the modified contract. On the contrary, plaintiff gave notice of forfeiture at once after she discovered the first default in payment.

10. After the default and before the period of grace expired, plaintiff made contract with others to finance her contract with the bank, subject to the default not being cured, and in February, 1933, completed the arrangement, by new contract, and obtained the money to make tender of the purchase price to the bank and Moraine Land Company.

I cannot view the contract between plaintiff and Wiechers as an option because, under the original contract, Wiechers took a vested vendee interest in real estate (gas, oil and minerals), which was continued and confirmed, not divested, by the amended agreement; by the express terms of the supplemental contract, Wiechers had "an interest in said property" which would remain in him until "forfeited" by election and affirmative action of plaintiff; and there can be no doubt that the parties intended that, had any gas, oil or minerals been produced from the land while the contract was in force, Wiechers would have been entitled to one-half of such production as would have accrued to plaintiff, under her outstanding oil lease or otherwise. These positive incidents of conveyance of real estate are wholly inconsistent with the effect of an option and must preponderate, in establishing the character of the contract, over the personal privilege of Wiechers to pay or not at his pleasure. The agreement was something more than an option.

However, specific designation of the agreement as an option or land contract is unnecessary to decision, may confuse the issue, as it already has done, and might afford a vexatious precedent. The point of the case is whether the forfeiture of the contract was valid and effective. The procedure for forfeiture was set up in the contract. The law of options is immaterial to the point in issue unless it would justify us in brushing aside the contract provisions as to notice of forfeiture and grace to cure default and in holding that forfeiture automatically followed failure to pay on the due date regardless of such provisions. No one does, or could, so contend. The law of land contracts is immaterial to the point unless it would afford Wiechers or his assignee greater rights or privileges against forfeiture than the contract provides. The most liberal protection against forfeiture which the law of land contracts affords a vendee is that, where time is not of the essence of the contract and where the vendor has waived strict performance, the vendor, in order to terminate the contract, must give the vendee notice of forfeiture and accord him a reasonable time thereafter to perform. The contract at bar is more liberal to the vendee than the law of land contracts would be because, in view of the small amount of the default and the want of showing of excuse for failure to pay it, 90 days of grace after notice was a longer time than a court would have been justified in holding reasonable; and, moreover, the record contains no evidence of waiver of strict performance of the final agreement by plaintiff.

Consequently, the issue must be determined upon the contract as made, regardless of the name by which it is called.

Two suits, commenced by plaintiff, consolidated on stipulation, are involved. The first bill, filed against Wiechers and the Moraine Land Company before the latter had obtained the deed from the bank, in substance prayed for decree enforcing the forfeiture. The second, against the bank and the Moraine Land Company, prayed conveyance to plaintiff of the original bank vendor title, upon payment of the balance of her contract with the bank. Obviously, plaintiff is entitled to decree for such conveyance, subject to any rights of the Moraine Land Company under the Wiechers contract. Giving the broadest construction possible to the pleadings and allowing all imaginable amendments, the status of the contract depends upon (1) whether the forfeiture was valid, and (2) whether, if valid, the Moraine Land Company has made out an equitable case for relief from the forfeiture.

Ordinarily, a court of equity will not aid in enforcing a forfeiture but will dismiss the bill and leave the party to his remedy at law. However, the rule is not hard and fast but, in some cases, equity will recognize a valid forfeiture and grant appropriate relief. Negaunee Iron Co. v. Iron Cliffs Co., 134 Mich. 264; or it will inquire whether or not a forfeiture has occurred, declare the fact, and, thereafter, proceed in the particular case as the fact is found. Miller v. Steele,146 Mich. 123; Pendill v. Union Mining Co., 64 Mich. 172; Lozon v.McKay, 203 Mich. 364.

"It is true equity dislikes to adjudge a forfeiture and as a rule will do so only when no other adequate remedy is at hand, but where parties have, by lawful contract, expressly provided for a forfeiture, equity is not squeamish about granting what they have agreed to." Village of Grandville v. Railway Co.,225 Mich. 587, 594 (34 A.L.R. 1408).

On the other hand, the jurisdiction of equity to relieve from a forfeiture on equitable grounds is undoubted. But relief will be denied when the default was the result of gross negligence or wilfulness. 21 C. J. p. 104.

The record discloses no equities running to defendants to justify decree setting aside the forfeiture or relieving from it.

The project was an ordinary and common oil speculation. The parties were sui juris and dealt at arm's length. If there was any inequality, Wiechers was dominant because he furnished the money, dictated the terms of the transaction and had the greater experience in oil speculations.

Wiechers defaulted in the original contract. The supplemental agreement was drafted by his attorney and was all to his advantage. It relieved him of personal liability, afforded him extraordinary security against forfeiture and was imposed upon plaintiff without giving her an opportunity to submit it to her own counsel, as she desired to do.

The record admits of no other inference than that the failure of the Moraine Land Company to pay the $500 balance at the due date in November, 1931, or within the 90-day period of grace after notice of forfeiture, was intentional. The Moraine Land Company offered no excuse for the nonpayment, either to plaintiff or the court, made no claim in the evidence that the failure was due to ignorance, inadvertence, misunderstanding as to time, place or amount of payment, inability to pay, or other reasons ever recognized by the courts as raising equities justifying relief from forfeiture.

Of course, the negotiations of the Moraine Land Company, after the forfeiture became effective (if it did), to purchase the original vendor title from the bank, could not affect the validity of the forfeiture nor reinstate the contract. The deed merely put the Moraine Land Company into the shoes of the bank. Nor did such negotiations nor the acquisition of title raise equities in defendant company. At no time before February, 1933 (after plaintiff had obtained the money elsewhere to pay the balance of her bank contract price, had pledged her oil rights therefor and had made tender to the bank and Moraine Land Company and demanded deed), did the company notify her of the negotiations, intimate to her that it was taking title for their mutual benefit, recognize any obligation to her in connection with the deed, nor claim to her that it had any rights under its contract with her. Nor did any representative of the bank or Moraine Land Company or any other person testify that the purchase had been made in pursuance of the Wiechers contract with plaintiff or for the latter's benefit or otherwise than the inferences indicate, i. e., to give the Moraine Land Company an advantage over plaintiff. Nor, to briefly exclude other claims now made, was there any testimony that the Moraine Land Company began the negotiations with the bank before the 90-day grace period had expired; nor that the negotiations were delayed by the Freeman lease, which in fact did not appear until June, 1932, and was a mere interloper conveyance. The assertion of such reason for delay in a letter from the Moraine Land Company to plaintiff in February, 1933, is not evidence of the fact.

The claim of defendant for special consideration on the ground that Wiechers and the Moraine Land Company had provided plaintiff with substantially all the payments she had made on her contract with the bank is not sound in fact nor tenable in law. Plaintiff had paid taxes of about $1,650 from the proceeds of the Wilford and Carey loan and the payment of $1,501.67 in 1930, while negotiated for her by Wiechers, was an advance from the Pure Oil Company to plaintiff and was charged against the rents and royalties under her lease with it. So her total payments were about $3,150. Wiechers and the Moraine Land Company paid on principal and interest $3,214. Under the final contract, the total purchase price Wiechers was to pay (at his option) was $8,600, being $6,600 of the bank contract price and $2,000 to Wilford and Carey. He and the Moraine Land Company paid $2,500 on principal. The payment of art of the purchase price confers no right to default on the balance; nor raises equities in the vendee when he offers no excuse for the default.

This leaves as the sole issue of the case whether defendant Moraine Land Company was in default when the notice of forfeiture was served. It is purely a question of law, resting upon a single fact. I so thought on original presentation of the case. But (and not without embarrassment), I find on closer study of the record that the single fact upon which defendant denies default is not supported by legal evidence but rests upon assertions and inadmissible inferences and implications. The essential fact is whether, when the Moraine Land Company obtained the extension to January 15, 1932, to pay the $500 balance, it unequivocally agreed with the bank to assume personal liability for the amount and pay it and the bank so accepted its promise. In my opinion, then and now, such promise and acceptance would have released plaintiff and her land from the obligation.

While the motion for rehearing was pending, this court made special request of counsel to point out the record references to the assumption by the Moraine Land Company of the $500 payment. In answer thereto, defendants' attorneys cited the pleadings and certain correspondence. Such references failing to show a direct and unequivocal promise and acceptance, counsel urge that they may be implied therefrom.

In the pleadings defendants alleged in general terms that the Moraine Land Company had made certain payments on principal and interest and had made arrangements to finance the balance of the contract, which arrangements had been agreed to by the bank. The allegations were traversed by plaintiff and required proof. The Moraine Land Company repeated the general statement in a letter to plaintiff in February, 1933.

In December, 1931, after service of notice of forfeiture, defendants' attorney wrote plaintiff that there had been no default, that defendants had paid $500 on principal and had secured an extension in writing of the balance of the principal to January 15, 1932, "at which time such balance will be paid." The letter is not proof of the facts stated therein.

In conversation with the banker, before serving notice of forfeiture, plaintiff was told that the Moraine Land Company's attorney had paid $500 and interest and would be in in a few days to pay the balance, but she was not told that he had agreed to pay the balance nor that a written extension had been granted. Her testimony is undisputed.

Even if accepted as evidence, such record references fail to show promise by the Moraine Land Company to pay the bank and acceptance by the latter. Proof of them would not have afforded plaintiff a defense against collection of the $500 balance from her or her land by the bank. The record would afford no basis for a prosecution for perjury, upon proof that there had been no promise to pay and acceptance, so known to the pleader and letter writers. Nor may implications or inferences of such promise and acceptance be drawn from the testimony, first, because they are not the natural and logical result thereof; and second, because plaintiff, with proof of the fact available, if it were the fact, failed to produce it. Neither the banker nor defendants' attorney, who handled the transaction, nor any other person, took the stand and testified to such promise and acceptance. Upon the record it must be held that there was no novation of the $500 balance.

This eliminates the question of release of a surety by extension of time to the principal without the surety's consent. Any relation of suretyship between Wiechers and plaintiff under the original contract was destroyed by the supplemental agreement which released him from obligation to pay. The assignment from Wiechers to the Moraine Land Company was by way of quitclaim deed and the company did not assume or agree to make the payments. Consequently, when the extension was granted and notice of forfeiture served, plaintiff was the only person indebted to the bank in relation to the transaction or who had agreed to pay the bank. She was the principal and there was no surety for her.

The fact, if it be the fact, that by the extension receipt the bank estopped itself from foreclosing its contract during the extension period, could have no effect upon plaintiff's contract with the Moraine Land Company. The bank and company could not, without her consent, modify or alter her contract with the company; otherwise they, without her acquiescence, could have extended the period indefinitely and given the company unlimited time to speculate with the property without paying or agreeing to pay any part of the purchase price. Only a complete discharge of the $500 obligation of plaintiff and her land to the bank could have satisfied the Wiechers contract and prevented default. Wiechers was a subpurchaser of the premises.

"So, also, in the case of a vendor's lien by reason of a retained title, an agreement by the vendor and a subpurchaser for an extension of time does not affect the vendor's right to the lien." 66 C. J. p. 1273.

Consequently, the Moraine Land Company was in default in its contract with plaintiff when the notice of forfeiture was served. This renders it unnecessary to determine whether it also was in default with reference to the $1,501 transaction.

The forfeiture was in accordance with the contract and was valid. No equitable reasons have been presented to justify the court in relieving from the forfeiture.

If the rule were applied that equity will not aid in enforcing forfeiture, the proper decree would be to compel transfer of the original title from the Moraine Land Company to plaintiff on payment of the balance due on her original contract with the bank and to dismiss the bill seeking forfeiture of the contract, leaving plaintiff to her remedy at law. However, in their pleadings, defendants did not urge the rule but, on the contrary, asked that the two suits be consolidated and the whole controversy be determined. Moreover, the remedy at law would be inadequate and the matter should be disposed of in one decree.

The decree must be reversed and one entered for plaintiff, with costs.

EDWARD M. SHARPE, J., concurred with FEAD, J.

BUTZEL, J. I concur in the result for reasons stated in my opinion on the first hearing.

BUSHNELL, J., concurred with BUTZEL, J.