Title: Prince v. Dierks

State: oregon

Issuer: Oregon Supreme Court

Document:

Affirmed as modified June 29, 1966.
*147 Howard R. Lonergan, Portland, argued the cause and submitted a brief for appellant Roland Barker.
George P. Winslow, Tillamook, argued the cause for appellants M.L. Schmidt and Beatrice Schmidt. On the briefs were Winslow & Winslow, Tillamook.
Douglas E. Kaufman, Tillamook, argued the cause for respondents. On the brief were McMinimee & Kaufman, Tillamook.
Before McALLISTER, Chief Justice, and PERRY, DENECKE, SCHWAB and HAMMOND, Justices.
AFFIRMED AS MODIFIED.
SCHWAB, J. (Pro Tempore).
This is a suit for strict foreclosure of a contract for the purchase of a dairy farm. Plaintiffs sold to Mr. and Mrs. Dierks who in turn assigned to Mr. and Mrs. Thompson. The Thompsons assigned to Barker who took possession. Barker, as security for a loan of money, assigned to the defendants, Mr. and Mrs. Schmidt. The contract contained a provision forbidding assignments without written consent of the sellers. Plaintiffs contend that the assignment from the Thompsons to Barker and the subsequent assignment from Barker to the Schmidts was without their oral or written consent.
The court entered an interlocutory decree which purportedly was a decree of strict foreclosure as to all defendants, allowing a 15-day redemption period. The final decree of the court, which was entered 18 *148 days later, provided that all the right, title and interest of all of the defendants to the real and personal property covered by the contract was strictly and finally foreclosed and granted judgment against the defendants Thompson and against the defendant Barker for $5,000 attorney's fees.
The defendants Schmidt make numerous assignments of error which resolve themselves into three categories:
On appeal the defendants Thompson join with defendants Schmidt in their first assignment of error. Defendant Barker appeals solely on the grounds that the provision of the contract providing for an award of reasonable attorney's fees in the event of a default was not applicable to him.
1. We turn to the first assignment of error, the overruling of the demurrer. Defendants Schmidt argue that the demurrer to the complaint should have been sustained because the complaint did not state grounds for strict foreclosure. The defendants Thompson did not file a separate brief, filing only a statement that they joined with the defendants Schmidt in their assignments of error and supporting arguments relative to the demurrer.
We need not consider whether the defendants *149 Schmidt have any standing to raise this assignment of error, for defendants Thompson do have such standing.
2. At the time of trial plaintiffs filed a supplemental complaint alleging default in payment of taxes and principal and interest occurring between the filing of the first complaint and the filing of the supplemental complaint. The original complaint did not contain such allegations. The defendants Thompson and Schmidt argue that a supplemental complaint cannot be used to remedy the deficiencies of a complaint. We do not reach this question because we find that the original complaint did state a cause of suit for strict foreclosure.
The contract was for the purchase of real and personal property comprising an operating dairy farm. The complaint alleged numerous defaults by the vendees consisting of breach of covenants relating to repairs, painting, maintenance and operation of the dairy farm and covenants dealing with the maintenance at certain minimum levels of the inventory of cattle and equipment. The contract provided that time was of the essence and further provided, "but if the purchasers shall fail to make the payments or to perform any other condition or undertaking by them to be performed by the terms of this agreement, * * * the vendors may elect to declare this agreement ended and repossess * * * and all sums paid by the purchasers * * * shall be retained by the vendors * * *." (Emphasis supplied.)
Defendants argue that a vendor may not maintain a suit to strictly foreclose a contract except for failure of the vendees to make payments as required by the contract, citing Conners v. Winans, 122 Misc 824, 204 *150 NYS 142, 146 (1924). In the Conners case the court said:
While there are no Oregon cases considering whether strict foreclosure can be decreed in the absence of default in the payment of principal or interest or taxes, there is language in several cases indicating that there is no valid distinction between failure to pay interest, insurance or taxes as called for by the contract and the failure to comply with any other covenant materially affecting the security of the vendor.
In Williams v. Barbee, 165 Or 260, 106 P2d 1033, a vendor brought suit to quiet title to timber lands. The vendee had agreed to log eight million feet during each of the first two years of the contract and failed to do so. Time was made the essence of the agreement, which stipulated that in event of a default by the purchaser the sellers could terminate the agreement. This court, speaking through Mr. Justice LUSK, stated:
*151 The situation in Williams v. Barbee is distinguishable from the case at bar in that the purchase price was to be paid as the timber was sold so that failure to cut resulted in late payments. Nevertheless, the opinion points out that the parties have the right to contract as they see fit and having bound themselves to material covenants free from ambiguity or uncertainty, those covenants will be binding in equity as well as in law.
3. Here the complaint alleged that the contract purchasers, by violation of material covenants dealing with maintenance, repairs, operation and inventory, were destroying the vendors' security. It stated a cause of suit and it was for the trial judge upon hearing and weighing the evidence to determine whether there was a breach justifying strict foreclosure.
4. The next issue raised by the defendants Schmidt charges the court with error in striking portions of their second amended answer. The portions stricken fall into two general categories; (1) allegations of fraudulent conspiracy on the part of plaintiffs and the defendant Barker, and (2) allegations charging that the plaintiffs did not come into a court of equity with clean hands.
The defendants Schmidt's second amended answer was a 13-page document containing a general denial and eight affirmative defenses. The sixth separate answer and defense began, "Defendants are informed and believe and based upon information and belief, now allege that plaintiffs and defendant * * *." The answer then goes on to allege fraudulent conspiracy. This method of pleading falls within the proscription of North v. Union Savings & Loan Assn., 59 Or 483, 492-93, 117 P 822, where the court stated:
The court properly struck this defense  it alleged no facts in support of the allegation of information and belief.
5, 6. The remainder of the stricken material consisted of allegations designed to show that the plaintiffs did not come into court with clean hands. This court has declared that the "clean hands" maxim is not strictly a matter of defense, but is invoked on the grounds of public policy and for the protection of the integrity of the court. Taylor et ux v. Grant et al, 204 Or 10, 279 P2d 479, 1037, 281 P2d 704. In Dickerson v. Murfield, 173 Or 662, 147 P2d 194 we held that since one must do equity as a condition to obtaining relief, the defendant in an equity case need not plead plaintiff's failure to do equity in order to present evidence of plaintiff's lack of "clean hands." In Hubbard v. *153 Olsen-Roe Transfer Co., 110 Or 618, 224 P 636 we held that matters specially pleaded should be stricken as redundant if admissible under a general denial. It follows that while it is not necessarily reversible error to fail to strike such material, no prejudice can result from the order striking.
7. We next consider the charge that the trial court exceeded its powers in striking all of the defendants Schmidt's answers and in entering an order of default against them. The plaintiffs, with leave of court, filed a supplemental complaint. Next, the demurrer to the plaintiffs' complaint and supplemental complaint was overruled. Then the Schmidts filed an answer to the complaint and supplemental complaint which they denominated as a "SECOND AMENDED ANSWER * * *." The motion against the second answer was in 36 separate parts, 19 of which were allowed by the trial court. The order of the trial court entered on December 14, 1964, provided:
On December 28, 1964, the Schmidts filed a "THIRD AMENDED ANSWER." The opening paragraph of the third amended answer contained reference to the ruling of the court as to the second amended answer and also contained the following:
At a hearing discussing motions against the third amended answer on January 18, 1965, Judge Musick stated:
In a hearing conducted on February 8, 1965, to rule on plaintiffs' motion to strike defendants' entire amended answer and counterclaim, Judge Musick summarized the actions of the defendants as follows:
The statute authorizing the Judge's actions, ORS 16.400 (2) provides:
*156 8. Defendants Schmidt, without citing any authority, argue:
This is not a correct statement of the law. The statute does not differentiate between jury and non-jury proceedings. There is no valid reason why court and counsel are not just as entitled to an understandable pleading as is a jury.
9. Defendants Schmidt argue that even if the court properly struck the third amended answer, it had no power to enter an order of default. The second amended answer was in actuality the only document filed in answer to the complaint and supplemental complaint. It was properly stricken. It follows that if the order of the court striking the third amended answer was proper, the Schmidts, by failing to plead further, were in the position of offering no defense to plaintiffs' contentions.
In Mack v. Hendricks, 126 Or 400, 270 P 476, the defendant filed an amended answer which included the same averments contained in the stricken answer. The second answer was stricken from the file on motion of the plaintiff as being in violation of the order of the court and a decree was then entered against the defendant. The language we used in affirming the trial court in that case has equal application in the case at bar.
We need not consider whether the allegations under the sixth and eighth affirmative defenses of the third amended answer were, in effect, a repleading of matter previously ordered stricken. Even if this is technically not the case, the allegations should have been stricken as frivolous, if not as impertinent.
The trial court displayed great patience in giving the Schmidts an opportunity to comply with its orders. If the court had been wrong on its rulings on the motions, the last sentence of ORS 16.400 (2) adequately protected Schmidts' rights to appeal from those rulings at the proper stage of the proceedings. By disobeying the court's orders they chose  perhaps for want of a better defense  to risk all on their position that the trial court's rulings on the motions against the pleadings were incorrect. The court's rulings were proper, consequently the order of default and decree entered pursuant thereto must stand.
With regard to the appeal of the defendant Barker, he is correct in his contention that the court erred in assessing attorney's fees against him. The only basis for the award of attorney's fees was the contract provision that the purchasers would pay to the vendors reasonable attorney's fees incurred by the vendors in enforcing any of the covenants of the contract.
10. Plaintiffs alleged that the contract was breached when the vendees' interest was assigned to Barker without vendors' consent being first obtained *158 in accordance with contractual provisions. The prayer of the complaint did not ask for strict foreclosure against Barker, but asked that he be barred from asserting any rights under the contract. A suit for strict foreclosure is a suit to enforce a contractual obligation. Atkochunas v. Gustafson, 156 Or 126, 66 P2d 1192. The plaintiffs cannot enforce the provision of a contract against a defendant not privy to the contract. Since this was not a suit to enforce the contract as against the defendant Barker, there is no legal basis on which to require him to pay attorney's fees.
Except as to the provision awarding attorney's fees against defendant Barker, the decree is affirmed in all respects.
Affirmed as modified.