Swanson v. Madsen

Carter, J.

This is an action for the strict foreclosure of a real estate contract dated September 15, 1934. The defendants cross-petitioned for the specific performance of an alleged subsequent contract for the sale of the real estate to them at a lower price. The trial court denied plaintiff’s claim to a strict foreclosure and sustained defendants’ claim for specific performance. The plaintiff appeals.

The record shows that on August 29, 1928, Elina Swanson and John A. Swanson contracted in writing to sell the real estate in question, together with certain personal property not particularly described in this suit, to Alfred Mad-sen, who will hereinafter be referred to as the defendant, for the sum of $42,000, $10,000 of which was paid in cash and the balance to be paid in installments as provided in the contract. The installments provided for in this contract became delinquent and on September 15, 1934, a new contract was executed by Elina Swanson, then a widow, and Alfred Madsen. The amount remaining unpaid at that time under the original contract was $29,520. By the new agreement defendant agreed to pay $720 in cash and $250 a month for two years, $350 a month for the following two years and $450 a month thereafter until the amount due was paid.. The defendant made payments totaling $2,767.26 on this contract, after which he was continuously in default.

On June 22, 1938, a further agreement was entered into in writing purporting to modify the agreement of September 15, 1934, in which it was agreed that all payments due were to be suspended until March 1, 1940. The contract then provided that if defendant desired to complete the purchase on March 1, 1940, he should notify Elina Swanson not less than 30 days prior thereto and upon receipt of the notice three appraisers were to be appointed to determine the value of the property, which amount thus determined, Elina Swanson agreed to accept as a full payment under the contract. In case of failure tO' make payment by March 1, 1940, in the manner agreed upon, defendant was to yield possession of the premises and execute a quitclaim deed to Elina Swanson as of that date. The defendant failed to give any notice more than 30 days prior to' March 1, 1940, of any intention on his part to acquire the property in the manner prescribed in the supplemental agreement of June 22, 1938.

Defendant testifies that a few days before March 1, 1940, he went to the office of the plaintiff’s attorney and offered $10,000 in full satisfaction of the remainder of the purchase price. Plaintiff’s attorney agreed to submit the offer to his client. Defendant was notified about a month later that the amount was not acceptable. On April 18, 1940, plaintiff’s attorney inquired of defendant by mail as to his intentions in the matter. A day or two later defendant went to the attorney’s office and offered $11,000 in full settlement. This amount was not accepted. Defendant requested that legal proceedings be held up pending another offer on his part. On or about August 15, 1940, defendant offered $12,000 to plaintiff’s attorney in full settlement. On January 21, 1941, plaintiff’s attorney advised defendant that Elina Swanson would accept $12,000 cash in full settlement under the contract, provided it was paid by February 15, 1941, and that unless it was paid on or before that date defendant would be expected to vacate the property in accordance with the 1934 contract. Defendant testifies that he took the matter up with two loan agencies and received promises for the money to pay the $12,000. On February 12, 1941, he went to the attorney’s office to inform him of the arrangements made and to secure the abstract of title, but found the attorney out of town. He again called the attorney’s office on February 15, 1941, but the attorney had not returned. On February 17, 1941, defendant found the attorney in his office and was informed by the attorney at that time that Elina Swanson was dissatisfied in that she had advanced $2,000 to defendant which had not been paid and that she wanted it returned in addition to the $12,000. On March 8, 1941, it was ascertained to the satisfaction of the parties that the $2,000 had been repaid to Elina Swanson and that item was withdrawn from the negotiations. Nothing further was done until March 20, 1941, when defendant was informed that Elina Swanson would accept nothing less than $15,000 as full settlement of the contract. It is the contention of the defendant that he is entitled to the specific performance of the alleged agreement of Elina Swanson to accept $12,000' in full settlement of the amounts due under the contract dated September 15, 1934. The trial court so held and plaintiff, the assignee of Elina Swanson’s interest in the contract, appeals from the, district court’s decree requiring plaintiff to accept $12,000 as full settlement of the amount due under the contract.

The record is clear that on January 21, 1941, the date Elina Swanson offered to accept $12,000 as a full settlement, defendant had breached his contract by failing to comply with the supplemental agreement,of June 22, 1938, or to make the payments required by the agreement of September 15, 1934. Defendant’s offer to pay $12,000 in full settlement of the amounts due under the contract was nothing more than an offer of settlement which Elina Swanson accepted provided it was paid by February 15, 1941. It was not paid or tendered by that date. It appears that plaintiff’s attorney was absent from his office on February 15, 1941, and for a few days prior thereto, but we fail to see how this can avail the defendant anything in view of the fact that he did not pay or tender the $12,000 after the'attorney’s return. It seems clear, therefore, that defendant’s offer was conditionally accepted by Elina Swanson and defendant, having failed to meet the condition imposed, can claim no rights under it. We conclude that the offer of settlement was never complied with by the defendant and consequently no rights can grow out of it. The modification agreement of June 22, 1938, was not complied with by defendant, with the result that the liability of defendant under the terms of the modification agreement itself was again fixed by the .contract of September 15, 1934.

Defendant contends that a contract required to be in writing by the statute of frauds can be altered or modified by parol agreement and that the consideration for the original agreement is sufficient to sustain the new. We think this is true where there has been no breach of an executory contract, but where, as here, the contract had been breached at the time of the modification, a new consideration must be shown. Bowman v. Wright, 65 Neb. 661, 91 N. W. 580; Prime v. Squier, 113 Neb. 507, 203 N. W. 582; Personal Finance Co. v. Hynes, 130 Neb. 547, 265 N. W. 541. The rule is also clear that a contract required to be in writing by the statute of frauds can be modified by a new agreement only when such new agreement is supported by a new consideration, or where it has been fully executed. Bowman v. Wright, supra; Hylton v. Krueger, 138 Neb. 691, 294 N. W. 485. The evidence is clear that no new consideration existed for the agreement to accept $12,000' in full settlement of the amount due under the contract. The rule is that an agreement to pay a smaller sum in discharge of a larger matured obligation does not constitute any consideration for an agreement to forego the residue. Fitzgerald v. Fitzgerald & Mallory Construction Co., 44 Neb. 463, 62 N. W. 899; Canadian Fish Co. v. McShane, 80 Neb. 551, 114 N. W. 594. The evidence further shows that such new agreement was never performed. It further shows that defendant had breached his contract and that he was in default at the time of the purported settlement agreement. Under such circumstances, under the authorities cited, the agreement evidenced by plaintiff’s letter of conditional acceptance dated January 21, 1941, is not enforceable and creates no new rights of which the defendant can avail himself.- Consequently, the trial court erred in granting- specific performance of such agreement.

The question next presented is whether plaintiff is entitled to a strict foreclosure of the contract dated September 15, 1934. The record shows that at the time the contract was made the sum of $29,520 was due thereon. The total amounts paid thereon amount to $2,767.26. After crediting this amount there was due on the contract at the time of the trial in August, 1943, the sum of $38,282.74. The evidence indicates that the property was not worth to exceed $24,000 at the time of the trial. The rental value of the property from 1933 to 1943 inclusive was approximated at $9,453.33. It is quite evident that the defendant has no equity in this property under the record made. In our opinion, the failure of defendant to make any payment thereon since June 1, 1938, or to comply with the supplemental agreement of June 22, 1938, constitutes an abandonment of the contract. His attempts to purchase the property at a reduced price after such abandonment are not in conflict with this view. They in fact indicate an attempt to negotiate a new contract after an abandonment of the old.

We think the rule is that a contract for the purchase of real estate may be strictly foreclosed where it is clear that the property is of less value than the contract price and that it would not bring a surplus over and above the amount due if a sale were ordered, and where such procedure would not offend against justice and equity. Courts of equity will decree a strict foreclosure' only under special circumstances where it would be inequitable and unjust to refuse them. Whether or not such a decree will be granted is 'dependent upon the facts of the particular case being considered and is necessarily addressed to the sound judicial discretion of the court. Harrington v. Birdsall, 38 Neb. 176, 56 N. W. 961. But where such a decree is entered, the defaulting party is entitled to a reasonable time to avoid its consequences by performing the contract. Patterson v. Mikkelson, 86 Neb. 512, 125 N. W. 1104. The evidence shows that the present case falls within this rule and that plaintiff is entitled to have the contract of sale strictly foreclosed. It is the order of this court, therefore, that unless the defendants pay the amounts due under the contract of September 15, 1934, within 60 days from the issuance of the mandate of this court, the defendants, and .each of them, be decreed to have no right, title or interest in and to the real estate herein involved by virtue of any or all of the contracts contained or referred to in the pleadings of the parties to this suit.

Reversed.