# Johnson v. Berns > Oregon Supreme Court · April 1, 1924 · 111 Or. 165 URL: https://www.frixlaw.com/law-library/cases/6908182 ## Case - **Full name:** JOHNSON v. BERNS - **Court:** Oregon Supreme Court - **Decided:** April 1, 1924 - **Citations:** 111 Or. 165; 209 P. 94; 1924 Ore. LEXIS 124 - **Precedential status:** Published - **Opinion:** On the merits by Burnett - **Judges:** Burnett, Coshow, Harris, McBride, Rand - **Cited by:** 26 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/6908182 ## Opinion text On the Merits. Reversed. BURNETT, J. The defendant, John Berns, owned a tract of land in Tillamook County upon which there was a mortgage to the State School Fund securing a note then overdue, and another mortgage to his father, Frank Berns, upon which the interest was due and payable semi-annually June 28th and December 28th of each year. On August 9, 1920, John Berns and Huida, his wife, as parties of the first part, and the plaintiffs herein as parties of the second part, entered into a contract for the sale by the first parties and the purchase by the second parties of the tract of land already mentioned. The salient parts of this agreement are as follows: “This Indenture made and entered into on this the 9th day of August, 1920, by and between John J'. *169 Berns and Huida Berns, husband and -wife, hereinafter styled first parties, and E. D. Johnson and Harry Johnson, hereinafter styled second parties, all being of Tillamook County, Oregon, Witnesseth, “For and in consideration of the terms and the conditions to be kept by the second parties and payment of money to be made by them as hereinafter provided, the first parties agree to sell and convey and the second parties agree to purchase from the first parties the following described real property situated in Tillamook County, Oregon, to-wit: “(Here follows description of real and personal property.) “To Have and to Hold unto second parties, subject to conditions hereinafter named and upon their doing and performing the covenants and agreements hereinafter set forth. “The total consideration paid and to be paid by the second parties to the first parties for the said real and personal property is $39,500.00 of which $5000.00 is paid upon the execution of this instrument, receipt whereof is hereby acknowledged. “The balance of the said consideration is to be paid by the assumption on the part of the second parties of two certain mortgages upon the premises above mentioned, one being in favor of the State Land Board of Oregon, for the sum of $5000.00, and the other in. favor of Frank Berns, of Tillamook County, Oregon, for the sum of $14,000.00, and the balance of the cash consideration of $15,500.00 shall be paid in the manner hereinafter provided. The said balance of the cash owing herein of $15,500.00 shall bear interest at the rate of 6 per cent per annum, interest payable monthly on or before the 15th day of each month hereafter. “It is understood between the parties that second parties shall take possession of the said premises on the-day of August, 1920, and shall take charge of the said personal property and shall conduct and use the same as a first class dairy ranch in Tillamook County, Oregon, and shall at all times keep on the *170 said premises at least the same number of milk cows .and of as good quality as now are on said premises. “All the milk produced on the said premises shall be delivered to the Maple Leaf Creamery, so long as said Creamery receives milk, during the first two. years hereafter, and 50 per cent of the said milk shall be deposited at said Creamery to the order of John J. Berns. * * “Now time is of the essence of this contract and in case the second parties fail or refuse to perform the covenants and agreements herein contained, or fail to perform any one of said covenants or agreements then in that event this contract shall be null and void as to both parties, and the first parties shall have the right to take possession of the said real and personal property, and the whole thereof, and the second parties shall thereupon deliver up to the first parties the said property and vacate the said premises after reasonable notice. “And in event of said failure to perform the covenants and agreements on the part of the second parties or either of them, all payments theretofore made on the part of second parties under this contract shall be absolutely forfeited to the first parties as rental for the use of the said premises by the second parties as damages because of such failure on the part of the second parties. This contract shall be binding upon the heirs, assigns and legal representatives to all the parties.” The plaintiffs paid $5000 in cash on the purchase price at the date of the contract and made other payments later out of milk sales, but did not pay. the interest on the Frank Berns mortgage due December 28th following the execution of the contract, until-some days afterwards; neither did they pay the mortgage to the school fund. The parties of the first part in the contract made no protest or objection against the delay in making these payments. Neither did they at any time afterwards notify the plaintiffs *171 here of any purpose to insist thereafter on strict payment at the time when due of any of the amounts to be paid on the contract by the parties of the second part thereto. From time to time 50 per cent of the proceeds of the sale of milk from the ranch was paid to and received by the defendant, John J. Berns, even after the 28th of June, 1921. The defendant Berns continued to recognize the contract as being in force and gave no notice of forfeiture until July 19, 1921, when he began an action of ejectment against the plaintiffs here to regain possession of the land and likewise an action in replevin to recover the personal property included in the contract for the sale of the land. The plaintiffs here count upon those actions as a breach of contract by the parties of the first part therein and have brought this suit, the object of which is to recover the amounts paid by them toward the purchase price of the land and to impress the sum as a lien upon the real property described in the contract. The defendants, William Berns and Martin Berns, are made parties defendant because, as alleged in the complaint, they took from John J. Berns and his wife on July 26, 1921, a chattel mortgage upon all the personal property described in the contract although they knew of the situation concerning the same and of the previous rights of the plaintiffs here. The attitude of the defendants is that on account of the clause making time the essence of the contract, they had the right at any time on or after a default in the payments required of the plaintiffs to begin at once to oust them from possession of the property and to recover the same to the use of John J. Berns, forfeiting all the payments made prior to that time. The Circuit *172 Court found in favor of the defendants and dismissed the suit, from which decree the plaintiffs appeal. It is not pretended that the plaintiffs have fully performed the contract in all respects required of them; hut their position is that by the indulgence of the defendants, contracting parties, the provision about time being the essence of the contract was waived so that the law works out a modification of the contract in that feature, eliminating that clause for the time being, which situation must persist until the seller gives reasonable notice that in the future he will insist strictly upon punctual payment at the time when due, of all amounts required. In Graham v. Merchant, 43 Or. 294 ( 72 Pac. 1088 ), there was an executory contract for the sale of land in which the question was whether the contract was to be considered still in force, although the payments had not been made promptly as required, time being of the essence of contract. The court said: “If the money so received as stumpage was accepted on the purchase price of the land after the maturity of the final payment, the defendant must have elected to consider the contract in force.” Further on in the opinion it was held that— “where time is stated to be of the essence of a contract to convey land, if both parties, by a mutual course of conduct, treat the time clause as waived or suspended, one of them cannot suddenly insist upon forfeiture, but must, in order then to avail himself of the time clause, give reasonable, definite, and specific notice of his changed intention. "When a vendor waives the stipulation of a contract prescribing the time of its performance, he cannot rescind without giving the vendee reasonable notice to comply with his part of the agreement”: citing many authorities. *173 It was likewise said in Gray v. Pelton, 67 Or. 239 ( 135 Pac. 755 ), speaking of the clause about time being the essence of contract: “The conduct of such vendor will operate as a waiver when it is consistent only with a purpose on his part to regard the contract as still subsisting: §394; 2 Warvell, Vendors, §819; Boone v. Templeman, 158 Cal. 290, 295 ( 110 Pac. 947 , 139 Am. St. Rep. 126 ); Smiley v. Barker, 83 Fed. 684 ( 28 C. C. A. 9 ). After a vendor waives a stipulation that time is of the essence of the contract, such stipulation cannot be insisted upon without notice and opportunity of compliance.” The principle is that all the terms of the contract are binding upon all the parties thereto and that if the vendor, for whose benefit the stipulation about time being of the essence of the contract is made, would insist upon it, he must act promptly upon that provision so that any indulgence upon his part will amount to a nullification of that feature of the covenant. In effect, by operation of law upon his indulgence, a new contract is brought into existence for the time being, from which that clause is absent, and it so remains in this modified form until by reasonable notice to the opposite party that it will thereafter be insisted upon, the agreement between the parties is restored to its original form. Until thus reinstated by reasonable notice, the seller cannot suddenly and without fair notice, pounce upon the purchaser, oust him from possession, and cancel his rights under the contract. The record is utterly devoid of any evidence whatever that after the delay in paying the December interest and the June interest following, and the default in payment of the mortgage to the school fund, the seller ever gave any notice to the buyer that the clause making time of the *174 essence of the contract would he afterwards insisted upon. The metamorphosis of the contract being still in force and existence, it was a clear breach thereof for Berns to bring ejectment for the land and replevin for the personal property. The contract gave the Johnsons both those forms of property to be used and employed by them in carrying out its terms. They were entitled, therefore, to count upon the breach of the modified contract by Berns as a rescission thereof. The situation then became one of this fashion: The Johnsons had paid considerable of the purchase price of the property, amounting to $5,000 cash payment, $2,410.68 of the creamery profits, $376 interest on the Frank Berns mortgage, and $150 and $175 as taxes upon the property, besides making permanent improvements amounting to $500 totaling $8,611.68. To this extent the plaintiffs are the equitable owners of the land. Under such circumstances equity gives to the purchaser a lien upon the land to reimburse him for his expenditures under the contract. In Whitbread & Co., Ltd., v. Watt, L. R. 1 Ch. D. 835, where was drawn in question the right of the purchaser to recover what he paid, it was said: “And, if we look at that which is really the foundation of the doctrine, namely, the desire to do justice as between vendor and purchaser, it appears to me that that reason applies no less forcibly in the present case than in the ordinary case in which the rescission of the contract takes place by reason of some default on the part of the vendor. In a case in which the vendor had rescinded under a power reserved to him, it would, I think, be absolute injustice if the purchaser were not allowed to have a lien for the purchase money which he had paid, and which was the security on his part for the performance by bim of the contract. I think, also, the justice of the case *175 requires that the purchaser should have a lien when the contract reserves to him a power to rescind.” See also: First Savings Bank v. Linnhaven Orchard Co., 89 Or. 354 ( 174 Pac. 614 ); Green v. Linnhaven Orchard Co., 89 Or. 513 ( 174 Pac. 620 ); Epplett v. Empire Investment Co., 99 Or. 533 ( 194 Pac. 461, 700 ). It is manifestly unfair and inequitable for the defendants to retain upwards of $8,000 of the plaintiff’s money for the occupation of the land for less than one year. Under the contract, as modified by the waiver of the defendants as shown above, of the clause making time the essence of the contract, they had no right to commit the breach thereof manifested in the actions of ejectment and replevin. Only by giving the buyers a reasonable notice that in the future, strict and punctual performance would be required, could the vendor restore the contract to its original terms. The natural justice of the situation requires that relief should be given to the plaintiffs according to the prayer of their complaint; that a lien in their favor should be impressed upon the land; that the same be strictly foreclosed, giving to the defendants the right within sixty days after the entry of the mandate of this court in the Circuit Court, to repay to the plaintiffs the sum of $8,611.68, with interest thereon from December 9,1921, the date of the Circuit Court decree, at 6 per cent per annum; and in default thereof', 'that the lands be sold in the manner prescribed by law subject to the prior mortgage to the school fund and to Prank Berns, and the proceeds applied first to the payment of the decree including costs and disbursements and expenses of sale, and the remainder, if any, to be paid to John J. Berns. *176 The decree of the Circuit Court is reversed and one here entered in accordance with the principles enunciated in this opinion. Reversed and Decree Entered. Motion for Modification of Decree Denied. McBride, C. J., and Coshow, J., concur. Rand, J., concurs in the result. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/6908182. Public record. Not legal advice.