Title: Alderman v. Davidson

State: oregon

Issuer: Oregon Supreme Court

Document:

Filed:  March 12, 1998

IN THE SUPREME COURT OF THE STATE OF OREGON

MARLYS V. ALDERMAN, now
known as VICKI ALDERMAN
FORELL,

	Respondent on Review,

	v.

CHRISTINE A. DAVIDSON AND
SHARON MALLORY,

	Petitioners on Review.

(CC 94-00184CV; CA A91510; SC S44089)

	On review from the Court of Appeals.*

	Argued and submitted September 9, 1997.

	Paul B. Heatherman, of Ray A. Babb & Associates, Bend,
argued the cause and filed the petition for petitioners on
review.

	Donald R. Crane, Klamath Falls, argued the cause and filed
the brief for respondent on review.

	Before Carson, Chief Justice, and Gillette, Van Hoomissen,
Graber, Durham, and Kulongoski, Justices.**

	GILLETTE, J.

	The decision of the Court of Appeals is affirmed in part and
reversed in part.  The judgment of the circuit court is affirmed.

	*Appeal from Lake County Circuit Court,
Lane W. Simpson, Judge pro tempore.
146 Or App 282, 933 P2d 365 (1997).

    **Fadeley, J., retired January 31, 1998, and did not
participate in this decision.

		GILLETTE, J.

		In this action to foreclose real property, the issue
presented is whether seller's repeated acceptance of late
installment payments on the principal of a note constitutes a
waiver of seller's right to insist on buyer's timely payment of
taxes on the property to the local taxing authority.  The trial
court held that such repeated acceptance of late payments does
constitute a waiver; it therefore dismissed the foreclosure
action.  On an appeal by seller, the Court of Appeals reversed,
holding that, because seller did not accept late payments after
becoming aware of the default in the payment of taxes, she did
not waive that default.  The Court of Appeals remanded with
instructions to enter a judgment of foreclosure.  Alderman v.
Davidson, 146 Or App 282, 933 P2d 365 (1997).  Although we accept
the legal propositions on which the Court of Appeals based its
ruling, we conclude that the Court of Appeals failed to give due
consideration to the legal import of all the undisputed facts
relevant to a determination of waiver.  Giving those facts that
consideration, we reverse the decision of the Court of Appeals in
part and affirm the judgment of the circuit court.

		Pursuant to ORS 19.415(3), the Court of Appeals
reviewed the facts of this case de novo.  This court also may
review the facts de novo, or we may limit our review to questions
of law.  ORS 19.415(4).  Because the facts relevant to the
resolution of the issue before us are not in dispute, we decline
to review the facts de novo.  The following facts are taken from
the findings of the Court of Appeals and from additional
undisputed facts in the record.  

		Buyer purchased 120 acres of land in Lake County,
Oregon, from seller in 1989.  Buyer signed a note for the $24,000
purchase price, under which she agreed to pay $200 on the ninth
of each month, and an additional $500 every other month on the
twentieth of that month, until the purchase price was paid in
full.  In addition, to secure performance under the note, buyer
entered into a trust agreement pursuant to which she agreed, as
pertinent here, timely to pay the sums set forth in the note to
an escrow agent and "to pay all taxes, assessments and other
charges that may be levied or assessed upon or against said
property before any part of such taxes, assessments and other
charges become past due or delinquent and promptly deliver
receipts therefor to [seller]."  The trust agreement further
provided that time was of the essence with respect to all
payments and performances required of the buyer under the
agreement.  It granted seller the right to accelerate the balance
due under the note and to initiate foreclosure proceedings in the
event of a default by buyer in the payment of any indebtedness
secured by the trust agreement or in the performance of any other
agreement required in that document.  Additionally, and
specifically with respect to a default in the obligation to pay
taxes, seller had the right under the trust agreement to elect to
pay the taxes herself and to add that amount to the balance due
under the note.  Payment of an amount equal to the overdue taxes
then would be due and payable immediately without notice and, at
seller's option, buyer's failure to pay immediately could itself
be considered a default and would be grounds for accelerating the
entire balance due under the note.

		Virtually from the outset, buyer established a pattern
of late installment payments.  Seller sent buyer several letters
over the years complaining about the practice, but continued to
accept the late payments.  Buyer also neglected to pay taxes on
the property for the years 1990, 1991, 1992, and 1993 and,
obviously, could not have sent seller receipts for the payment of
taxes for any of those years, as required under the trust
agreement.  

		On January 28, 1994, seller sent a letter to buyer
notifying buyer that she was in arrears on the installment
payments and in the payment of taxes, both arrearages
constituting defaults under the trust agreement, and declaring
that all principal and interest payments due and owing under the
note, as well as the delinquent taxes, must be paid by March 1,
1994, or she would commence foreclosure proceedings.  Seller sent
the letter by both certified and regular mail to buyer at a post-office box in Silver Lake, near where the property was located. 
It is undisputed that buyer never received that letter.  

		Seller contacted a lawyer in Lake County to represent
her in the foreclosure action.  In April 1994, she met with a
lawyer there, who advised her to pay the back taxes on the
property.  She made a partial payment at that time.  Seller filed
a complaint for judicial foreclosure on May 16, 1994, alleging
default in the payment of installments on the note.  On May 23,
1994, seller amended the complaint to include an allegation of
default in the nonpayment of taxes.  Seller made an additional
payment on the taxes on May 25, 1994, which brought the taxes
current. 

		Meanwhile, buyer sent four installment payments to the
escrow agent in April and early May 1994 and actually brought the
account current on May 9, 1994, a few days before the original
complaint was filed.  Seller had not notified the escrow agent
that she had declared buyer in default or directed the escrow
agent to stop accepting installment payments.(1)  The escrow agent
promptly negotiated buyer's checks, subtracted its fees, and
forwarded the balance to seller.  For her part, seller did not
negotiate immediately the checks that she received from the
escrow agent. Instead, she sent them to her lawyer, who held them
until approximately a month after the complaint was served on
buyer, and then returned them to seller with instructions that
she safely could cash them.  Seller then cashed those checks. 

		Buyer also eventually sent a payment for the tax
arrearage to the tax assessor, but not until about two months
after being served with the complaint.  The tax assessor informed
buyer that seller already had brought the taxes current and asked
her what to do with the excess payment.  At buyer's direction,
the assessor issued a refund check to seller, which seller then
cashed.  

		At the conclusion of the trial in the matter, the trial
court held, simply, that, "[b]y accepting payments after the
notice of foreclosure, [seller] waived her right to foreclose." 
It also denied buyer's request for an award of attorney fees,
which she claimed were due her as the prevailing party.  Buyer
appealed on the attorney fees issue, and seller cross-appealed,
assigning as error the trial court's failure to order foreclosure
under the trust agreement.  

		The Court of Appeals held that seller had waived the
"time is of the essence" clause with regard to buyer's obligation
to make timely installment payments on the note by accepting late
payments over the years and, therefore, was obligated to give
buyer a reasonable time to cure the default.  Alderman, 146 Or
App at 286.  That court held that seller's January 28, 1994,
letter to buyer was ineffective under the circumstances to
declare a default and accelerate the balance due.  Ibid.  The
court further held, however, that the seller's acceptance of late
installment payments did not constitute a waiver of the
requirement that buyer make timely tax payments, because seller
never accepted late installment payments with knowledge of that
other default.  Id. at 289.  The court held that the trust
agreement treats the timely payment of installments under the
note and the payment of taxes as distinct obligations, to each of
which the "time is of the essence" provision applies separately. 
According to the Court of Appeals, seller never waived the time-essence provision as to the obligation to pay taxes promptly and,
therefore, she had the right to initiate the foreclosure action
when she did.  Id. at 289-90.  

		It is axiomatic that waiver is the voluntary
relinquishment of a known right.  As the court stated as long ago
as Mitchell v. Hughes, 80 Or 574, 580-81, 157 P 965 (1916), 

	"'Waiver involves both knowledge and intention; an
estoppel may arise when there is no intention to
mislead.  Waiver depends upon what one himself intends
to do; estoppel depends upon what he caused his
adversary to do[.]'  In other words, waiver is a
voluntary act or declaration, whereby the waiver
surrenders some privilege or right."

(Citation omitted.)  It follows that, as the Court of Appeals
correctly held, waiver of the right to enforce one provision of a
contract does not automatically waive the right to enforce
another.  Only if the waiver intends such a consequence will a
court conclude that the right to enforce the second provision is
waived.  

		In this case, seller clearly waived the right to
require the prompt payment of installments under the note by her
repeated acceptance of late installment payments.  Her conduct
demonstrated an intention to waive.  Moreover, seller is estopped
from enforcing her right to prompt payments because buyer
reasonably relied, to her detriment, on seller's failure to
enforce the time-essence clause with regard to that obligation. 
In order to reinstate that clause with respect to buyer's
obligation to make timely installment payments, seller was
required to give buyer notice of her intention to insist on
strict compliance with the terms of the contract in the future,
and to allow a reasonable opportunity to cure past delinquencies. 
Soltis v. Liles, 275 Or 537, 542, 551 P2d 1297 (1976); Fisher v.
Tiffin, 275 Or 437, 440, 551 P2d 1061 (1976).  Seller did not do
that and, therefore, she is precluded from declaring a default
based on late payment of installments under the note.

		Whether seller also lost her right to foreclose, based
on buyer's failure to pay taxes timely, is a separate question. 
Seller waived that right if, by accepting late installment
payments, she intended to waive that other default.  Furthermore,
and even if she did not so intend, seller would be estopped if
buyer was induced thereby into reasonably believing that strict
compliance with the timely tax payment obligation was not
necessary.  Conduct on the part of the seller that is
inconsistent with her exercise of the right to insist on strict
performance would be pertinent to both inquiries.  

		Before the Court of Appeals and the trial court, buyer
relied on the fact that seller accepted four late installment
payments after she wrote the January 1994 letter to buyer
purporting to invoke her right to accelerate and foreclose based,
in part, on the nonpayment of taxes, and before she filed the
foreclosure action in May 1994.  Buyer argued that such
acceptance demonstrates seller's intent to waive the "time is of
the essence" provision with respect to the buyer's obligation to
pay the taxes.  As noted, the trial court accepted that argument. 
The Court of Appeals disagreed, holding, without explanation,
that, 

	"so far as the record shows, [seller] did not know of
[buyer's] failure to pay taxes when she accepted late
payments.  After learning of that default, [seller] did
not accept any further payments until after she filed
this lawsuit, in which she formally accelerated the
full amount owed.  She did not act inconsistently with
her right to foreclose."  

Alderman, 146 Or App at 289.  We do not agree with the legal
conclusions that the Court of Appeals drew from the undisputed
facts of this case in order to reach that result.  

		As a preliminary matter, it is undisputed that the
escrow agent accepted four installment payments on seller's
behalf between the time of the purported notice of default, in
which seller plainly acknowledged her awareness of buyer's
nonpayment of taxes, and the filing of the complaint for judicial
foreclosure.  It is a fundamental tenet of agency law that
payment to an agent authorized to receive it is payment to the
principal.  U.S. Pipe v. Northwestern Agencies, 284 Or 167, 171,
585 P2d 691 (1978); Schmidt et ux. v. Fitzsimmons et ux., 190 Or
415, 420-21, 226 P2d 304 (1951).  Therefore, as a matter of law,
acceptance by the escrow agent (who was seller's agent) of
buyer's checks in April and May 1994 amounted to seller's
acceptance of those payments at a time when she had knowledge of
the default.  That is true regardless of when, or even whether,
seller cashed the checks she received from the escrow agent. 

		We are, however, unwilling to hold that seller's
acceptance through her agent of four checks in April and May
1994, standing alone, demonstrates her intent to waive the "time
is of the essence" provision with respect to buyer's obligation
to pay the taxes promptly, or otherwise amounted to conduct
inconsistent with her right to enforce that obligation.  After
sending the default letter, seller immediately began the process
of hiring a lawyer to handle the foreclosure action.  Moreover, a
three-month delay in filing the complaint for judicial
foreclosure in the circumstances of this case -- where seller
lives several hours' drive from the area where the property is
located -- does not seem unreasonable.  

		Nor can we conclude that seller is estopped from
insisting on the prompt payment of taxes simply by virtue of her
acceptance of the late installment payments during that three-month period.  It is undisputed that buyer never received
seller's January 1994 letter declaring a default for nonpayment
of taxes.  She therefore was unaware of seller's heightened
concern about the delinquent taxes.  Under the circumstances,
buyer was not somehow lulled into a false sense of security
regarding seller's failure to enforce the timely tax payment
obligation when the escrow agent cashed her installment checks in
April and May 1994.  

		Nevertheless, we are persuaded that seller did, by her
conduct over the years, waive the "time is of the essence"
provision in the trust agreement as it applies to buyer's
obligation to pay the taxes promptly when due and, further, that
seller is estopped from declaring a default on that basis without
providing buyer with both notice of her intention to insist on
strict compliance with the terms of the contract in the future
and a reasonable opportunity to cure the delinquency.  The clause
in the trust agreement requiring buyer to pay the taxes on the
property also requires buyer "promptly [to] deliver receipts
therefor" to seller.  It is undisputed that buyer never paid the
taxes on the property for the years 1990, 1991, 1992, and 1993.
It follows that buyer did not -- because she could not -- deliver
any tax receipts to seller during that time.  

		The only conceivable purpose behind a clause requiring
buyer to deliver tax receipts to seller is to notify seller that
the taxes have been paid.  Because seller did not receive tax
receipts from as early as 1990, she had (at least) constructive
knowledge of the nonpayment, dating from that year and continuing
until January 28, 1994, at which time she demonstrated actual
knowledge of the default.  During that entire four-year period,
seller accepted late installment payments from buyer with hardly
a complaint.  That conduct collectively is inconsistent with
seller's insistence on strict performance of the terms of the
trust agreement and constitutes waiver of her right to foreclose
on the basis of nonpayment of taxes.  Moreover, because buyer
reasonably relied to her detriment on seller's inaction over the
years, seller now is estopped from foreclosing on the basis of
that default without first giving buyer notice and a reasonable
opportunity to cure.  

		The decision of the Court of Appeals is affirmed in
part and reversed in part.  The judgment of the circuit court is
affirmed.

1. 	Seller suggested in her brief before the Court of
Appeals that she did, indeed, attempt to cancel the escrow
account, albeit not until after the account was brought current
by buyer.  She also suggested that the she did not have authority
under the escrow agreement to cancel the escrow account for any
reason other than default in the payment of installments under
the trust agreement.  However, neither of the foregoing
propositions is supported by any documentation in the record. 
Because seller did not designate any of the trial court exhibits
as part of the record on appeal (as it was her obligation to do)
or attach pertinent documents to any of her appellate briefs, any
factual arguments that rely on documentary support must be
resolved against her.