Title: City of Reedsport v. HUBBARD ET UX.

State: oregon

Issuer: Oregon Supreme Court

Document:

Reversed September 22, 1954.
Petition for rehearing denied October 20, 1954.
*372 Edward M. Murphy argued the cause for appellants. On the brief were Yates, Murphy & Carlson, of Roseburg.
*373 Carl M. Felker argued the cause for respondent. On the brief were Geddes & Felker, of Roseburg.
Before ROSSMAN, Presiding, and LUSK, BRAND, TOOZE and PERRY, Justices.
REVERSED.
TOOZE, J.
This is a suit for strict foreclosure of a contract for the sale of real property, brought by the city of Reedsport, a municipal corporation, as plaintiff, against Russell J. Hubbard and Eva K. Hubbard, his wife, as defendants. Decree was entered in favor of plaintiff; defendants appeal.
On May 6, 1941, plaintiff entered into a written contract to convey certain river frontage and sawmill site property within the city limits of Reedsport, in Douglas county, Oregon, to the defendant Russell J. Hubbard. The city had acquired title to this property by virtue of a conveyance from the county of Douglas, the county having acquired its title through delinquent tax foreclosure proceedings.
In addition to a cash consideration of $150 to be paid by defendant Hubbard to plaintiff, the contract provided that the defendant should construct on the property and put in operation a sawmill having a capacity of not less than 50,000 feet of lumber for an eight-hour shift. The contract recited that the title to the lands was defective and provided that the defendant should, at his own expense, institute in the name of the city of Reedsport, as plaintiff, and diligently prosecute to final determination, a suit to quiet the title to the property. It was provided that such suit should be commenced within thirty days from the date of the contract. The agreement also provided that the defendant should be entitled to the exclusive possession of the property from and after the date of *374 the commencement of the suit and so long as he kept and performed the obligations on his part to be performed, subject to certain rights of Kern & Kibbe.
The contract contained the following specific provisions:
Defendant paid the $150 cash consideration, within the thirty day limitation caused the suit to quiet title to be commenced, and immediately went into possession of the property. As soon as defendant took possession of the property, he began to make extensive plans for the construction of a sawmill. He repaired an old mill building on the premises, cleaned up the debris, and built an assorting chain and planer shed, expending from $10,000 to $12,000 therefor. He also employed a mill designer, acquired sawmill machinery of the approximate value of $54,000, and arranged for a loan of $75,000 as operating capital.
At the outset, it was anticipated that the decree in the suit to quiet title would be obtained by default. However, two of the defendants filed answers to the complaint, and a taxpayer moved to intervene in the suit. As an affirmative defense and by way of cross complaint, one of the defendants, Umpqua Mills and Timber Company, a corporation, attacked the validity of the contract between plaintiff and defendant. A similar attack was made by the proposed complaint in intervention.
On December 19, 1941, an order was entered sustaining a demurrer to the cross complaint of defendant Umpqua Mills and Timber Company, and also denying the motion of the taxpayer to intervene. On February *376 17, 1942, the taxpayer, Umpqua River Navigation Company, a corporation, gave notice of appeal to the Supreme Court from the order denying intervention. However, the appeal was not perfected and was eventually dismissed. But O.H. Hinsdale, secretary-treasurer of Umpqua River Navigation Company, who had verified the proposed complaint in intervention, and after the motion to intervene had been denied, told defendant that his company intended to commence an independent suit based upon the same grounds as set forth in the complaint in intervention.
A reasonable fear upon the part of defendant that such threat of independent litigation would be carried into execution was justified by a consideration of some of the language used in the written memorandum of the trial judge respecting the demurrer to the cross complaint of defendant Umpqua Mills and Timber Company, and the motion to intervene. The trial judge wrote as follows:
*378 The proceedings in the suit to quiet title having taken the turn which they did, defendant became fearful that the litigation in the suit would be prolonged, and that he might never acquire title to the property. As a result, in December, 1941, he entered into negotiations for the transfer of the mill machinery to a partnership (he owned a fifth interest therein) located at Sutherlin, in Douglas county. The sale was made, and the machinery and other equipment were moved to Sutherlin in February, 1942. This country was then at war, and defendant explained that it was his desire to get the machinery and equipment into operation before it was seized by others possessing a government priority.
Eventually defendant made a settlement with the two answering defendants in the quiet title suit, paying one defendant the sum of $500 for its alleged interest in the property, and thereupon, on June 19, 1942, a final decree quieting title was entered. Under this decree and pursuant to the terms of a settlement between defendant and Kern & Kibbe, defendant acquired title to the following described personal property: The spur railroad tracks leading from the Southern Pacific main spur to the dock, including all rails, stringers, ties, switches, fastenings, etc.; one cylinder oil storage tank with equipment, water tank, all water and oil pipes and power lines; one Shay locomotive, built by Lima Locomotive Company; and one derrick, complete with lines and equipment.
At the time the final decree was entered in the suit to quiet title, there was in effect order L-41, issued by the War Production Board of the United States Government. Under the order, all new sawmill construction required the approval of the War Production Board. Immediately after the decree was entered, *379 defendant undertook proceedings to obtain the approval of the War Production Board for the construction of a sawmill upon the property in question at Reedsport. His application was denied. He made a trip to Washington, D.C., in an endeavor to secure such approval. Moreover, he frequently conferred with Mr. Frederick Herbert Brundage, of Portland, who had been appointed Western Log and Lumber Administrator in the office of the War Production Board, in an endeavor to secure a removal of the ban on the proposed construction at Reedsport. There is but little doubt that defendant acted in good faith. However, all his efforts to secure approval of the War Production Board failed. The wartime restrictions were not removed until some time in October, 1945.
However, on September 9, 1943, the city of Reedsport commenced this suit for strict foreclosure of the contract, alleging that defendant had failed to construct a sawmill on the property. In its original and amended complaints the city prayed for a decree declaring defendants to be in default in the contract and requiring them to put into operation a sawmill of the capacity provided for in the contract "within sixty days of the date of said decree or such other time as to the court may seem just and equitable in the premises". A general demurrer was sustained to the original complaint, and the amended complaint was filed on October 5, 1943. On October 22, 1943, defendants filed their answer to the amended complaint, in which it was alleged that portion of the contract which provided that the time for final completion of the mill might be extended in the event of delays occasioned by Government priorities or any other act or thing "occurring over which the Second Party, Hubbard, has no control". The defendants then alleged *380 that the delay in constructing the mill was occasioned by Hubbard's inability to obtain government priorities and also by reason of the difficulties encountered in the quiet title suit.
On November 18, 1943, plaintiff filed a motion to make the answer of defendants more definite and certain in some respects, and to strike certain portions thereof. On June 22, 1944, an order was entered sustaining the motion in part, and denying it in others, but not requiring the filing by defendants of an amended pleading.
On July 11, 1944, plaintiff filed a reply, being a general denial of the new matter alleged in the answer. Therefore, on July 11, 1944, the case was at issue and ready for a trial date. However, no further action whatever was taken in the case until October 22, 1946, when plaintiff took defendant Hubbard's deposition.
Thereafter, and on March 13, 1947, an amended reply was filed by plaintiff. In this reply, plaintiff affirmatively alleged the following:
On April 21, 1947, the matter was tried to the court. The evidence disclosed the facts as hereinabove stated. Upon the trial, the gist of plaintiff's contention was that because defendant had in his possession the necessary equipment to complete the construction of a sawmill in 1941 and early 1942, some several months before he was required to perform under the contract, his inability to secure approval of the War Production Board when time for performance arrived offered no excuse for his delay and established a default on his part.
Upon the trial it developed from the evidence that while defendant had been in possession of the property, he had received substantial income from rentals, particularly from the use of the personal property he had acquired from Kern & Kibbe.
On May 1, 1947, plaintiff moved for permission to file a supplemental complaint. The gist of this proposed complaint was that defendant had not constructed a sawmill since the commencement of the suit. On December 16, 1947, the motion to file supplemental complaint was denied. Plaintiff, on March 16, 1948, filed a second motion for permission to file a supplemental complaint. An order was entered denying the motion on July 22, 1949.
On November 21, 1951, the trial court entered of record its findings of fact and conclusions of law. We quote the following portions thereof:
On the same day, November 21, 1951, and based upon the findings of fact and conclusions of law, the court entered an interlocutory decree, a portion of which reads as follows:
*384 The defendant having failed to construct and place in operation the sawmill as provided in the interlocutory decree, a final decree was entered August 26, 1952, foreclosing the contract and directing that immediate possession of the premises be delivered to plaintiff. Paragraph five of this decree provides:
Defendants first contend that the suit should have been dismissed because it was prematurely commenced, and that the trial court erred in not dismissing it.
1. It is elementary that if at the time a suit is commenced, a cause of suit has not accrued and does not exist, the suit should be dismissed. The defect cannot be cured by the filing of a supplemental complaint for a cause of suit arising thereafter. The rule is stated in 1 CJS 1391, Actions, § 125d, as follows:
In Clark v. Morrison, 80 Or 240, 245, 156 P 429, it is stated:
See also May Stores, Inc. v. Bishop et al., 131 Or 670, 672, 282 P 1080; Bergin v. Temple, 111 Mont 539, 111 P2d 286, 133 ALR 1115; American Agricultural Chem. Co. v. Thomas, 206 SC 355, 34 SE2d 592, 160 ALR 594, 598.
If defendant was not in default in the performance of the contract on his part to be performed on September 9, 1943, when the instant suit was commenced, then no cause of suit existed in favor of plaintiff. Subsequent events giving rise to a cause of suit in favor of plaintiff could be of no avail in the present proceeding. If at the time this suit was commenced, no cause of suit had accrued, then the suit was prematurely commenced and should have been dismissed.
2. The plaintiff and defendant entered into an agreement in writing which specifically prescribed their respective rights and obligations. The provisions of the contract are definite, certain, and wholly unambiguous. It is axiomatic that such a contract must be construed according to its plain terms.
3-5. Whether at the time this suit was commenced, the defendant was in default must be determined in the light of the express contract provisions. The court has no authority to read into said contract a provision which does not appear therein, nor to read out of it any portion thereof. And this is true, even though the result may appear to be harsh and unjust. The contracts of parties sui juris are solemn undertakings, and in the absence of any recognized ground for denying enforcement, they must be enforced strictly according to their terms. It is not the province of the court to rewrite a contract for the purpose of accomplishing *386 that which, in the court's opinion, might appear proper. ORS 174.010, 174.020; Fendall v. Miller, 99 Or 610, 196 P 381; Sinnott v. Interstate Contract Co., 86 Or 189, 168 P. 81.
In 17 CJS 702, Contracts, § 296, it is said:
6. Under the express provisions of the contract, defendant was not required to commence construction of a sawmill until within 45 days after the final decree in the quiet title suit was entered. That is the time expressly set for performance on his part. What he may have done before that time is wholly immaterial. It also is immaterial that what he did prior to his sale and removal of sawmill machinery may have been done in preparation for carrying out the provisions of the contract when it came time for him to perform. All that activity was voluntary on his part and was in no way required by the contract. There is nothing whatever in the contract that would deny him the right to construct another sawmill and operate it elsewhere than in the city of Reedsport; insofar as the contract was concerned, he had a right to construct and operate *387 as many sawmills as he desired, and to construct and dismantle as many as he cared. Whether he defaulted in his contract with plaintiff is to be determined from the situation that existed at the time he was required to perform according to his agreement, and not as it had existed at some time prior thereto.
7. The record on the trial conclusively established the proposition that when the time for performance by defendant arrived, as provided in the contract, he could not perform because of inability to secure the approval of the War Production Board. Under the contract, that constituted an absolute excuse for the delay in performance. Defendant could not be in default for failure to perform so long as the ban of the War Production Board remained in effect. That ban was continuously in existence from the summer of 1942 until the fall of 1945.
The trial court adopted the theory of plaintiff that because at a time prior to the date for performance on his part the defendant had secured enough equipment to complete the construction of a sawmill, and had he retained it, could have performed when time for performance arrived, his inability to secure approval by the War Production Board for the purchase of the machinery and equipment necessary was no excuse for nonperformance. In this the trial court erred. By adopting that theory of plaintiff, the court, in effect, rewrote the contract of the parties; it read into it a new condition. That it could not do.
8. When the instant suit was commenced in September, 1943, defendant was not in default under his contract, and no cause of suit had accrued in favor of plaintiff. The suit should have been dismissed.
9. In October, 1945, all government bans against new sawmill construction were removed. Had the instant *388 litigation not been pending, it would have been the obligation of defendant to then perform his contract. However, the pendency of this suit was just cause for further delay in performance  a cause over which defendant had no control. Until it was finally determined whether his contract was to be strictly foreclosed, he was not required to perform.
10. Although on the merits this cause should have been dismissed, it also is true that it could and should have been dismissed for lack of prosecution not later than early in 1945. § 6-203, OCLA: Reed v. First Nat. Bank of Gardiner, 194 Or 45, 55, 241 P2d 109. It was the duty of plaintiff to prosecute the case with diligence. As the record shows, it was woefully neglectful in that respect in this case. Any inconvenience or loss it has suffered because of the delay in the prosecution of this suit is due to its own laches. In Reed v. First Nat. Bank of Gardiner, supra, we said:
In fairness to counsel who appeared for the plaintiff on this appeal, it should be stated that they did not appear as attorneys for plaintiff until after the trial and are in no way responsible for the lack of diligence in prosecution.
11, 12. Based upon the final decree entered in this suit, the plaintiff on September 25, 1952, filed in this cause a supplemental complaint in which it alleged that while in possession of the premises involved in this *389 litigation, the defendant received as rentals from the Umpqua River Navigation Company the sum of $34,924.30, up to March, 1947, and since March, 1947, has received additional rentals and profits from the use of said property, the amount of which is to the plaintiff unknown; plaintiff prays for an accounting for such rentals and profits, and for a decree that it be declared the owner thereof, and that defendant be ordered to pay the same to plaintiff.
Proceedings upon said supplemental complaint await the final disposal of this cause upon this appeal.
The greater portion of the several sums of money received by defendant came from the rental of the personal property which defendant had purchased from Kern & Kibbe, and in which property plaintiff had no interest.
Under the law of this state, plaintiff is not entitled to the rents and profits in the use of said premises while defendant was lawfully entitled to and was in possession thereof under his contract. They belonged to defendant. In a suit for strict foreclosure of a land purchase contract the plaintiff vendor is not entitled to the rents and profits received by the vendee from the property during the time he is in default. Grider v. Turnbow, 162 Or 622, 646, 94 P2d 285. In this case Mr. Justice BAILEY, speaking for the court, said:
13. It is a well-established rule of law in Oregon that the institution of a suit for strict foreclosure of an *390 executory contract for the sale and purchase of land does not effect a cancellation of the contract, but rather is a recognition of its continued existence. The rights of the parties under the contract that are incident to ownership and possession are not affected until the court has entered its decree. The bringing of a suit for strict foreclosure is an affirmance of the contract. Gulick v. Copeland, 186 Or 640, 648, 207 P2d 1042; McCracken v. Walnut Park Garage, Inc., 156 Or 697, 703, 68 P2d 123.
Commencing in June, 1941, when the suit to quiet title was begun, defendant was entitled to and did go into possession of the property and continued in possession thereof until final decree was entered in this suit. His possession was lawful, exclusive, and strictly in accordance with the provisions of the contract of sale and purchase.
14. Under an executory contract for the sale and purchase of land the vendee is treated in all respects as the owner of the property, although he has an equitable estate only. Until the contract is fully performed and the vendee is entitled to a conveyance of the legal title, the vendor retains the legal title simply as security for performance by the vendee.
In Harder et ux. v. City of Springfield et al., 192 Or 676, 686, 236 P2d 432, Mr. Justice WARNER, in speaking for the court, quoted with approval the following from 2 Pomeroy, Equity Jurisprudence 5th ed, 21, § 368, respecting the relationship between a vendor and vendee under an executory contract for the sale of land:
Also see Sheenhan v. McKinstry et al., 105 Or 473, 483, 210 P 167, 34 ALR 1315.
15. In its brief, plaintiff devotes considerable space to a discussion of the jurisdiction of a court of equity in support of its contention that defendant should be required to account to it for the several sums of money received by him as rentals and profits for the use of the real and personal property while he was in possession. It says as to the jurisdiction of a court of equity:
It is true that the arms of equity are long and far-reaching in a proper case, but before an equity court is authorized to do the things suggested by plaintiff, *392 a cause of suit must not only be alleged, but also must be established by the evidence. In the instant case a cause of suit was alleged, but the evidence failed to establish its existence. As a consequence, the court had no authority other than to dismiss the suit. Moreover, as before stated, no accounting was due the plaintiff. For a discussion regarding the jurisdiction of a court of equity see Walker v. Mackey et al., 197 Or 197, 207, 251 P2d 118, 253 P2d 280; Powell v. Sheets, 196 Or 682, 696, 251 P2d 108.
The decree is reversed and this cause is remanded to the trial court with directions to dismiss the suit. Neither party shall recover costs.