Citation. 22 Ill.128 F. Supp. 709 (N.D. Cal. 1955)
Law Students: Don’t know your Studybuddy Pro login? Register here Brief Fact Summary.
The Plaintiffs paid $585,000.00 toward the purchase of timberlands from Defendant, but had defaulted on the terms of payment for more than 60 days. The contract provided a default of more than 60 days, entitled the Defendant to resume possession of the property, retain all payments and cancel the contract.
Synopsis of Rule of Law.
The court found that the proper relief would be to enter a decree allowing Plaintiffs to complete the contract within a specified time by paying the entire purchase price together with Defendant’s damages resulting from the delay in performance.
Facts.
In this federal diversity jurisdiction case, the Plaintiffs, vendees of an installment contract for the purchase of timberlands from Defendant, vendor, for the price of $750,000.00, filed suit for a declaratory judgment and for specific performance. The Plaintiffs paid $585,000.00 toward the purchase, but had defaulted on the terms of payment for more than 60 days. The Defendant had notified the Plaintiffs of the default and then notified Plaintiffs that the contract was cancelled. The contract provided that in the event vendee should continue default for more than 60 days after written demand by the vendor for performance, the vendor was entitled to resume possession of the property, retain all payments and cancel the contract, which provided that time was of the essence.
Issue.
Because California law provides relief from forfeiture, what form should the Plaintiffs’ relief take?
Held.
Plaintiffs may pay the entire unpaid balance within 60 days of the court’s order and the court will hear evidence on the Defendant’s damages from the breach, and that if Plaintiffs do not pay the entire purchase price within 60 days, the Defendant will have title.
The court found that California law was somewhat unclear on the type of relief to be afforded to Plaintiffs. The court cited a rule that established that a defaulting vendee, who meets certain statutory requirements (shielding a defaulting vendee from forfeiture except in cases involving grossly negligent, willful or fraudulent breaches) can be relieved from forfeiture even though the vendee has breached a condition precedent and there has been no waiver of provisions of the contract making time of the essence. In this case the court found that the Plaintiffs breach had been willful.
The relief under the rule set out above would be relief from forfeiture by restoring the breaching vendee to his rights under the contract, or as subsequent cases established, by awarding the breaching vendee restitution of payments made in excess of the vendor’s damage.
In another case, in which the breach of the vendee was willful, the court noted the rule was established that the defaulting vendee was entitled to restitution of payments made in excess of the vendor’s damage. Relief in the form of specific performance was necessarily denied the vendee, however, because the trial court in that case found that the vendee had, apart from default, rescinded the contract, and that the vendor had sold the property to another.
The court found the Plaintiffs, even though in willful default, were entitled to relief in the form of restitution of payments made in excess of the Defendant’s damage. Because the California court ruling in subsection c. above had before it a vendee who had rescinded the contract, unlike this case, the court determined that the question remained whether the Plaintiffs should be allowed to complete the contract.
The court found that the proper relief would be to enter a decree allowing Plaintiffs to complete the contract within a specified time by paying the entire purchase price together with Defendant’s damages resulting from the delay in performance.
Discussion.
The result of this case is quite similar to the mechanics of a foreclosure, though the court did not name the relief as such. The breaching party’s equity in the land will be honored, even though their breach was willful, and they will be accorded an opportunity to redeem their interest by payment of the entire remainder due plus the incidental damages resulting from their willful breach.
