Court: Court of Appeals of Oregon; March 2, 1983; Oregon; State Appellate Court
Salishan Hills, Inc. (plaintiff) appealed a summary judgment favoring defendants Kent and Sandra Jensen. The plaintiff sought to foreclose a trust deed associated with a note executed by Ronald Krieger and Dalton Hershey, which was later assumed by the Jensens. The Jensens argued that the plaintiff waived strict compliance with payment deadlines and failed to allow reasonable time to cure defaults. They counterclaimed for an injunction to credit their account retroactively for late payments and to ensure acceptance of future timely payments.
Both parties sought summary judgment, which was granted to the Jensens, resulting in the dismissal of the plaintiff's action and various orders benefiting the Jensens, including the return of payments made to the court. The plaintiff’s original note required monthly payments, with an acceleration clause for late payments. Evidence indicated a history of late payments by Krieger and Hershey, which the plaintiff accepted without strict enforcement. After the Jensens assumed the loan, they also failed to make timely payments, leading the plaintiff to issue two warning letters regarding overdue amounts. The plaintiff rejected a partial payment from the Jensens and declared the entire balance due, demanding payment by October 17, 1980. The appellate court ultimately reversed the summary judgment in favor of the Jensens.
Defendants issued a check for $472.74, the amount due by October 1, 1980, which the Plaintiff rejected, leading to a foreclosure action under ORS 86.710. Following a summary judgment hearing, the court ruled that: 1) the September 3rd letter did not restore the time provisions of their agreement; 2) the foreclosure attempt was premature due to insufficient time for the defendants to remedy the default; and 3) equitable considerations prevented foreclosure since defendants had made efforts to pay back owed amounts. Plaintiff argues against these conclusions, asserting that a trust deed functions similarly to a mortgage, that mortgage law applies, and that notifying of an acceleration clause is not a forfeiture but a contractual matter. Plaintiff also claims no reasonable time to cure is necessary post-default. The court acknowledged that ORS 86.710(1) allows foreclosure of trust deeds like mortgages but rejected Plaintiff's argument that land sale contract case law is irrelevant. The court noted that both agreements are based on contractual relationships secured by land interests. It found that an acceleration clause grants the same rights in both contexts and that the principles governing breaches apply similarly. Although Plaintiff argued no notice was needed to enforce compliance with payment terms, the court agreed with the defendants that the September 3 letter did not adequately restore the time-essence provision. However, it concluded that Plaintiff had waived its right to strict payment terms by accepting late payments and that the letter did sufficiently communicate an intention to enforce payment deadlines. The court ruled that the letter reinstated the time-essence provision, and while Plaintiff claimed to have provided a reasonable time to cure, the court disagreed with this assertion, finding that 27 days was insufficient under the circumstances.
Defendants' payment history and the receipt of demand letters are undisputed. The central issue is whether they were given a reasonable time to cure their default. On September 3, 1980, defendants were provided a week, minus delivery time, to pay $357 owed on the note. This deadline was later extended to October 1, 1980. The evidence indicates that defendants needed to pay a small amount to protect property valued at approximately $14,000 but chose to ignore the plaintiff's demands, remaining in default post-deadline. The cases cited by defendants involved larger arrears and inadequate notice, making them inapplicable here. The court found the time allowed to cure the default reasonable.
Additionally, the court ruled that it was inequitable to deny foreclosure despite defendants attempting to rectify their arrears by depositing funds into court. An acceleration clause does not constitute a penalty; it merely advances the debt's due date upon certain conditions. While a promisee must indicate an intent to accelerate, no formal notice is necessary; initiating foreclosure suffices. Once the debt is accelerated, merely paying the past due amount does not negate the default. To avoid foreclosure, the total mortgage debt must be tendered. Defendants' later payment attempts did not rectify their default or its consequences. Therefore, the court concluded that the trial court erred in granting defendants summary judgment, dismissing the foreclosure action, and awarding attorney fees and costs. The ruling is reversed and remanded.
Notes clarify that orders of default were previously entered against certain defendants, only the Jensens responded to the appeal, and the trust deed allowed the beneficiary to declare all sums due upon default. Additionally, the lack of notice sent to assignors regarding demand letters does not serve as a defense for the Jensens.
