## Facts

- In May 1946, the parties’ predecessors entered a timber-land purchase contract for \$750,000, largely payable from timber-cut proceeds, with specified minimum payments.
- The contract stated that time was of the essence.
- The contract provided that if the vendee remained in default for more than 60 days after written demand, the vendor could retake possession, retain payments made, and cancel the contract by notice.
- Union Bond & Trust Co. became the assignee of the vendee’s interest; Blue Creek Redwood Co., Inc. and others became assignees of the vendor’s interest.
- Before the dispute, the vendee’s side had paid \$585,000 toward the \$750,000 price.
- The vendee committed payment defaults that the court found were willful.
- Defendants gave written notice of default; the default continued more than 60 days after notice.
- On May 12, 1954, defendants sent a letter canceling the contract in the manner described in the forfeiture-and-cancellation clause.
- Union Bond filed a federal diversity action seeking a declaration that the contract remained in force and seeking specific performance by the vendor’s assignees; defendants sought a declaration of default, damages, and quiet title.
- The contract selected California law, and California law governed in the diversity action.

## Issues

1. Under California law governing relief from forfeiture, may a court of equity grant any relief to a vendee’s assignee after a willful default under a time-is-of-the-essence land contract that the vendor’s assignees have cancelled under a forfeiture clause?
2. If relief is available, what decree should be entered to avoid an excessive forfeiture while ensuring the vendor’s assignees receive full compensation for the breach and delay?

## Decision

- The court concluded that California law entitled the defaulting vendee’s assignee to some form of relief from forfeiture, even though the contract made time of the essence and authorized cancellation after notice and a 60-day uncured default.
- The court declined to enforce a result that would allow defendants to keep both the timberlands and the \$585,000 already paid without an equitable adjustment.
- The court did not restore the contract on its prior installment terms; instead, it entered a conditional decree.
- The decree allowed Union Bond a final opportunity to complete the purchase by paying the entire unpaid balance of the \$750,000 purchase price within a fixed period (60 days).
- The court set further proceedings to take evidence and determine the damages suffered by defendants from the delay and breach; Union Bond was required to pay those damages in addition to the remaining contract balance.
- If Union Bond failed to pay the entire unpaid balance within the 60-day period, defendants would be entitled to have title quieted in their favor, consistent with the cancellation notice and their cross-complaint.

## Legal Principles

- California law disfavors contractual forfeitures and permits equitable relief from forfeiture in installment land-sale contracts, even when time is made of the essence and the contract provides for cancellation after notice and a cure period.
- Relief from forfeiture is not automatic; the form of relief may be limited when the breach is willful, and the court may require strict, prompt, complete performance.
- A court may condition relief on payment of the full remaining purchase price within a short, definite period, plus compensation for the nonbreaching party’s provable damages caused by delay and default.
- When equitable relief is conditioned on timely cure, failure to meet the conditions permits enforcement of the vendor’s remedies, including a judgment quieting title.

## Conclusion

In this diversity case applying California law, the court granted limited relief from forfeiture after a willful default in a timberland purchase contract: Union Bond could avoid forfeiture only by paying the entire unpaid balance within 60 days and paying defendants’ damages from the delay; otherwise, defendants would have title quieted in them and the contract cancellation would stand.


Union Bond & Trust Co. v. Blue Creek Redwood Co., 128 F.Supp. 709 (1955)