Court Opinion

ID: 9844999
Source: CourtListenerOpinion
Date Created: 2023-09-24 03:13:23.087421+00
Date Added: 2024-06-11T09:15:49.384913
License: Public Domain

BISTLINE, Justice,
concurring in the result and dissenting.
For the reasons stated in my dissent in Ellis v. Butterfield, 98 Idaho 644, 570 P.2d 1334 (1977), a case essentially indistinguishable from the one at bar, I concur in the Court’s opinion today and applaud the recognition it accords to Walker v. Nunnenkamp, 84 Idaho 485, 373 P.2d 559 (1962). However, I do not subscribe at all to the statement that the decision announced today is in conformity with the Ellis decision which decreed the judicial enforcement of a forfeiture. Mr. and Mrs. Ellis, probably by now dispossessed, for certain will be the first to recognize that the dispositions of the two cases are poles apart.
The bench and bar are bound to be confused by today’s majority opinion which denies forfeiture, directs a judicial sale, and at the same time insists that it is in conformity with Ellis. The close factual similarity of the two cases needs to be noted. In Ellis, at the time of default, the vendees had paid $8,124.00 of principal on a total contract of $17,232.00, approximately 47% of the total price. In addition, they had paid the vendors almost $7,000.00 of interest and a good share of the real property taxes. The default in Thomas occurred on a larger scale, but in similar proportions. There, $97,000.00 had been paid on a purchase price of $160,000.00, approximately 60% of the total principal. Interest payments were near $60,000.00. In both cases, the record, as could be expected, indicated that the property in question had appreciated significantly over the years of the contract payments, either because of improvements made by the vendees or because of inflationary factors at work in the contemporary real estate market. Indeed, the Ellis case presented yet stronger equities in favor of the vendees. There, the vendees were six days late in complying with the demand of the default notice, but the fact is they did comply. When their tender of back payments was refused, they sought out and secured financing with which they tendered the full contract balance. That, too, was refused. Here, by contrast, the vendees never did tender the arrearages, nor did they at any time tender the full contract balance.
In both cases, the vendors asked for judicial enforcement of forfeiture, based upon a violation of the familiar contract provision making time of the essence in curing a default. In both cases, the vendees pleaded that such a forfeiture would be unjust, inequitable and unconscionable. The net result of the judicial process is that the Ellis vendors are awarded a judicial forfeiture *110which allows them to keep all back payments and obtain clear title to the property at its present market value. The Thomas vendors by contrast are awarded the remedy of judicial sale which allows them no more than that for which they bargained, namely, the total purchase price for which the property was originally sold. Ironically, it was exactly such a remedy that the Ellis vendees offered to their vendors without all the delay and expense of a lawsuit and an appeal. How are the members of the trial bench and bar to understand such highly disparate results?1
I.
Perhaps the answer is to be found in the following language from today’s majority opinion:
Actions to forfeit contractual rights of the defaulting party, pursuant to a forfeiture clause, are addressed to the court’s equitable discretion. Graves v. Cupic, 75 Idaho 451, 272 P.2d 1020 (1954).
The actual language from Graves v. Cupic, however, is significantly different:
Equity will not grant specific performance of a forfeiture unless the failure to do so would lead to an unconscionable result.2
The difference is all-important. In this jurisdiction, by virtue of the doctrine of Graves v. Cupic, the exercise of judicial discretion to enforce contractual forfeiture provisions is presumptively impermissible. In neither Thomas nor Ellis did the vendors attempt to show that failure to enforce the forfeiture provision would lead to an “unconscionable result.”
The unanimous Court in Graves v. Cupic made this further statement, supported by 1 Restatement of the Law, Contracts, § 339:
Generally speaking, parties to a contract may agree upon liquidated damages in anticipation of a breach, in any case where the circumstances are such that accurate determination of the damages would be difficult or impossible, and provided that the liquidated damages fixed by the contract bear a reasonable relation to the actual damages. But, where the forfeiture or damage fixed by the contract is arbitrary and bears no reasonable relation to the anticipated damage, and is exorbitant and unconscionable, it is regarded as a “penalty”, and the contractual provision therefor is void and unenforceable.
Id. 75 Idaho at 456, 272 P.2d at 1023. With this admonition in mind, the Court examined the contract in that case, and held as a matter of law that
Here the damages stipulated for by the parties is clearly unconscionable, and exorbitant. It is arbitrary and bears no reasonable relation to the damages which *111the parties could have anticipated from the breach which occurred. Hence, the provision is for a penalty and is unenforceable.
Id. at 459, 272 P.2d at 1025. Having concluded that the stipulation for damages resulted in an unenforceable penalty, the other proposition was self-proving, /. e., obviously the vendors could not show that a failure to grant forfeiture would be unconscionable.
What must be kept in mind in reviewing these cases is that even though the contractual provision is not as a matter of law invalid on its face, that is to say, even though the provision is allowed to remain a part of the contract, equity will still refuse to grant forfeiture unless and until it is established that failure to do so produces an unconscionable result. That, I say, is the plain, clear, succinct, and unequivocal holding of Graves v. Cupic. I am pleased that the majority has apparently embraced it once again.
II.
Unfortunately, the majority’s own understanding of what it accomplishes in today’s opinion is limited to “the particular facts of this case.” Following on the heels of Ellis v. Butterfield, such a ruling, I submit, gives zero guidance to the trial bench as to what the law is in Idaho, and leaves practitioners in an untenable and unenviable position while advising clients.
The trial judge in this case was obviously trying to award actual damages, in conformity with his understanding of the remedy applied in Graves v. Cupic. The majority opinion, in essence, holds that such a remedy is not proper given the particular facts of this case. The reason why it is not proper is not made clear. When a trial court is reversed, it is the responsibility of this Court to provide guidance for dealing with future cases.
As noted above, Graves v. Cupic laid down the general rules that, in Idaho, equity will not generally enforce a contractual provision for forfeiture and that even when such a provision is robed as “liquidated damages,” it will not be enforced where it is in reality a penalty.3 What is frequently misunderstood, however, is that these general rules do not dictate a single remedy for every situation. The harness must be made to fit each particular horse. In Graves v. Cupic itself only the original vendor and vendee were parties to the suit. The vendee had made a $14,500.00 down payment on a $50,000.00 contract only to find out shortly thereafter that she did not qualify for a liquor license which was necessary in running the operation. Since only the original vendor and vendee were involved, since the default occurred only months after the contract was formed, since the vendee’s down payment was grossly disproportionate to the vendor’s damages, and since the vendee had no desire or resources with which to redeem her equity in the property, the proper equitable remedy was restitution. The Court therefore decreed a return of the vendee’s down payment, less actual damages (rental and costs) to the vendors.
It was soon seen that the result can only be confusion if a court of equity mechanically fashions the identical remedy for completely different cases. The lesson of Walker v. Nunnenkamp, supra, is that a court of equity has many different remedies at its disposal in applying the general equitable principles of Graves v. Cupic to particular situations. Unfortunately, that lesson has not always been remembered or uniformly applied by this Court.4
*112The opinion of the Court today alludes briefly to the “multiplicity of assignments of vendees’ interests,” and the fact that “the original vendors are not involved,” and suggests that judicial sale is therefore the “most equitable resolution.” I concur. Judicial sale is equitable and it is a solution, for this and all cases where multiple assignments of the contract have occurred, where substantial equity has been built up or where the property has changed radically in value since the time of purchase.
In short, the Court cannot in this case, or any case like this, give the restitutionary relief which was directed in Graves v. Cu-pic. The simple reason is that the original vendors who here received the down payment of over $40,000.00 are not parties to the action. Those vendors sold their paper and are entirely out of the present litigation. In that posture, it would certainly be a-, remarkable proposition of law or equity for a court to hold the Thomases, assignees of the original vendors, accountable for monies which they never received, i. e., the $40,000.00 down payment and four years’ worth of interest and principal payments which were paid into the hands of the original vendors. Nonetheless, such a result would follow from blind application of the Graves v. Cupic restitutionary formula to the facts of this case. Any such result would quickly put an end to the practice of making real estate time transactions an affair of contracts.
The trial judge did his best to apply the restitutionary remedy of Graves v. Cupic, but such is simply unworkable where the original vendors have taken a sizable down payment from the vendees and are now long gone. Many of the vendees in turn became intermediate vendors — selling to new purchasers.5 The only remedy which can and should be applied — not just in this case but in all such cases — is to treat a seasoned contract as that which it really is, a security device. And, just as mortgages are foreclosed and the property sold, so be it with a contract vendee’s interest. Such was the approach I advocated in Ellis in language strikingly similar to that now adopted by the Court in this case:
Primarily, though, I have always been of the view that in nearly all of these contract cases, where there has been performance over a number of years, and in many instances assignments by both the original vendors and vendees, and second and third assignments, the only practical solution, and a just one, is that equity settle the matter by a judicial sale. Walker v. Nunnenkamp, supra, is not only sound authority for those propositions for which I previously cited it, but in recognizing these contract-forfeiture cases as being “controlled entirely by equitable principles,” went on to hold that “the court in its wisdom may deem it proper and equitable to direct a judicial sale of the property involved.” Walker, 84 Idaho at 498-9, 373 P.2d at 568. Generally, when fairness and the equities of a case so dictate, courts have the inherent power to order that property subject to an installment land sale contract be sold by judicial sale. Ill American Law of Property, § 11.74 (1952); Blondell v. Beam, 243 Or. 293, 413 P.2d 397 (1966) (significant appreciation in value and *113small unpaid contract balance remaining on contract indebtedness); Henderson v. Morey, 241 Or. 164, 405 P.2d 359 (1965) (sale proceeds will exceed unpaid contract balance). Time still remains for the Court to instruct the trial court that if it be found that, because of insufficient or inconclusive evidence, it is unable to accurately determine damages or for any other equitable reason find judicial sale more appropriate, a judicial sale should be ordered. (Emphasis in original.)
Ellis v. Butterfield, 98 Idaho 663, 572 P.2d 509, 510 (1978).
III.
Justice Bakes wrote for the majority in Ellis:
An installment land sale contract is . in essence, a hybrid composed of property law concepts on the one hand and contract law on the other.
98 Idaho at 646, 570 P.2d at 1336. The proposition is correct. A real estate transaction, notwithstanding its embodiment in an executory contract, remains a transaction in which a buyer acquires an equity in real property. With a degree of assurance which flows from having been involved in Graves v. Cupic, and having assiduously followed all such cases since then, and being of counsel in some of those, I conclude by emphasizing the evolution of the case law in this “hybrid” field. For many years prior to Graves v. Cupic, the district courts of this state more times than not brought down the gavel against defaulting purchasers with the same litany which the Court used in Ellis: “A contract is a contract. Miss your payment, fail to comply with the default, and your contract, by the very language therein, which you signed, is forfeited, along with any equity in the property, and improvements you may have made.”
Some district courts, however, were familiar with the principle that: “Equity abhors a forfeiture.” Accordingly there were some property contract cases where forfeitures, called forfeitures, were not enforced. This brought vendors to avoid using such terminology, and forfeitures were disguised as “contractual provisions for liquidated damages.” Buyers in default of such cleverly worded documents were regularly turned out because such provisions were part of the contracts which they had signed. After all, “a contract is a contract.”
This Court changed all that in Graves v. Cupic. In doing so, it took a two-fisted stance against forfeitures, as a matter of contract (but not yet property) law. In essence, the Court plainly said: “Put in your contracts provisions for forfeitures. But, the rule remains that forfeiture is a remedy allowable not at law, but in equity, and equity will not specifically enforce a forfeiture unless the failure to do so would lead to an unconscionable result. Call forfeiture provisions by a different name if you will. No matter. The courts will examine such a contractual provision and, where they see that what the parties have denominated ‘liquidated damages’ are not such in reality, and fail to bear a reasonable relation to damages which the parties on entering into the contract might have anticipated, such contractual provision will be treated as a penalty, i. e., the forfeiture which it really is. The court, in equity, will not specifically enforce such a provision.” That is the teaching of Graves v. Cupic. As the same Court was to remark a year later in Raff v. Baird, supra,
In Graves v. Cupic, 75 Idaho 451, 272 P.2d 1020, this court aligned itself with those referred to by the annotator, 31 A.L.R.2d 19, as follows:
“In a majority of American jurisdictions the right of the vendor, in case of default by the vendee, to retain as forfeited money paid on the contract in excess of damages sustained from the breach has been denied. In California, Connecticut, and Utah, a firm rule against forfeiture seems now to be established, supported by opinions which are among the best to be found on the subject and prompted no doubt by the ‘Instinctive revolt against making the vendor more than whole.’ ”
76 Idaho at 427, 283 P.2d at 930.
What has not been generally noted is that the Graves v. Cupic principle of piercing the “liquidated damages” contractual provision *114required no evidence of actual damages. None was produced in that case. Rather, the determination that the contractual provision was in fact a penalty was made on the face of the contract, i. e., the amount of the $14,500.00 down payment compared to the $50,000.00 purchase price. The Court there noted various other proportions which had been so held to be a penalty, in cases mainly from Utah and California.
Then, 7 years later in Walker v. Nunnenkamp, in denying the petition for rehearing, the Court expanded the concept so that defaulting buyers could show that a contractual provision calling for retention as “liquidated damages” of all sums paid, plus improvements, plus appreciated values may also constitute a “penalty”:
The rule that equity will not enforce a penalty is applicable to any action upon a real estate contract where the ultimate results involves the enforcement of a penalty. (Emphasis added.)
84 Idaho at 492, 373 P.2d at 563.
Where the Court in Walker v. Nunnenkamp at first merely expanded the protections for a defaulting purchaser on the contract law side of this “hybrid,” it then in the closing opinion declared for the first time that real estate transactions should be treated as real property transactions, and proper relief, of different types, accorded much the same as prevails in the law of real estate mortgages.
In Ellis, the Court focused solely upon contractual form while blinding itself to substantive real estate rights and the realities of the world in which they exist. I concur in the result of today’s majority opinion because it once again recognizes those rights and those realities. I cannot concur in the majority’s attempt to distinguish Ellis. That case should be overruled.6

. Justice Bakes, in his concurring opinion, finds today’s case distinguishable from Ellis because here “the trial court awarded restitutionary relief to the vendees" on the grounds that enforcement of the forfeiture clause would have been an “impermissible penalty,” whereas in Ellis the trial court enforced the forfeiture because he found it was not a penalty. I would have thought that when two trial courts, on essentially indistinguishable facts, reach opposite conclusions as to equitable relief granted or withheld, it is precisely the role of an appellate court to resolve the resulting conflict. Far from manifesting a desire to retry the facts of cases decided below, such a practice serves to give badly needed guidance to bench and bar alike in what has suddenly become a very unsettled area of the law in Idaho.

. The Court in Graves v. Cupic reaffirmed what it had stated 25 years earlier in Sullivan v. Burcaw, 35 Idaho 755, 208 P. 841 (1922), where it approved the general rule, as stated in Pomeroy’s Equity Jurisprudence:
“[Tjhat a court of equity will not interfere on behalf of the party entitled thereto, and enforce a forfeiture, but will leave him to his legal remedies, if any, even though the case might be one in which no equitable relief would be given to the defaulting party against the forfeiture.’ (1 Pomeroy’s Equity Jurisprudence, 4th ed., sec. 459, pp. 870, 871.)”
Sullivan v. Burcaw. Id. at 762, 208 P. at 843. As the exception to the general rule, the Court also stated, from the language of Mr. Justice Van Devanter in Brewster v. Lanyon Zinc Co., 8 Cir., 140 F. 801, 72 C.C.A. 213 (1905), that, “there is no insuperable objection to the enforcement of a forfeiture when that is more consonant with the principles of right, justice, and morality than to withhold equitable relief.” Id. 35 Idaho at 762, 208 P. at 843.

. Less than one year after Graves v. Cupic was handed down, this Court quoted approvingly from 31 A.L.R.2d, Annot., § 1, at 9-10, for the proposition that Idaho had not aligned itself with those jurisdictions which hold that a “vendee, by defaulting, had become an outlaw without rights in respect of the contract or anything done under it.” Raff v. Baird, 76 Idaho 422, 427, 283 P.2d 927, 930 (1955).

. A prime example of improper application of a restitutionary remedy is to be found in Howard v. Bar Bell Land & Cattle Co., 81 Idaho 189, 340 P.2d 103 (1959). That case was relied upon heavily by the majority in Ellis v. Butterfield *112despite the fact that the cases were completely dissimilar on their own facts and despite the fact that Howard had been superseded by the far more extensive treatment in Walker v. Nunnenkamp, supra. Unlike Ellis, the Court in Howard was faced with a situation involving multiple assignments of the contract, a far more extended period of default, a tender by one who was not a party to any of the contracts at all, and a dispute with the interloping party over timber rights. As the Court in Ellis acknowledged but declined to follow, the Howard Court imposed a restitutionary remedy on the complex fact pattern of that case. For the reasons given in the text, a restitutionary remedy will almost never be appropriate under such circumstances and such cases should be disapproved.

. The multiple assignments involved in this case resulted in an apparent anomaly. As Judge Kramer so nicely put it:
“Among the fascinating problems in this lawsuit is the fact that each of the parties asks the Court to award it more money than they have invested or would have received if the contracts had been performed.” Obviously, the parties cannot be so accommodated.

. The Ellis decision has already been accorded some of the distinction to which it is rightfully destined. In an article in the October, 1977, issue of the Brigham Young University Law Review, published by the J. Reuben Clark Law School, entitled The Installment Land Contract — A National Viewpoint, Ellis was the only contemporary case cited as supportive of the statement that, “forfeitures are still occasionally judicially enforced, . . . ” I submit that that article fully bears out my earlier forecast that Ellis was indeed a giant step backwards.