ARKANSAS COURT OF APPEALS

NOT DESIGNATED FOR PUBLICATION

PRIOLA BROTHERS ENTERPRISES,

L.P., MARVIN H. PRIOLA, JOHN M.

PRIOLA, THE LIMITED PARTNERS

OF PRIOLA BROTHERS

ENTERPRISES, L.P., and GLENDA

PRIOLA

APPELLANTS

JAMES HAWKINS and PATTI S. COX

APPELLEES

CA 03-225

OCTOBER 29, 2003

APPEAL FROM THE BAXTER

COUNTY CIRCUIT COURT

[NO. CV-2001-173-4]

HONORABLE CHRISTOPHER

O’HARA CARTER, JUDGE

AFFIRMED

John B. Robbins, Judge

On October 16, 1994, appellant Priola Brothers Enterprises entered into an escrow agreement with appellees James Hawkins and Patti S. Cox. Appellant agreed to sell Mr. Hawkins and Ms. Cox an unimproved lot on the White River for $15,000.00. The appellees paid $1000.00 down and were obligated to pay $170.00 per month at nine-percent interest until the balance was paid. The escrow agent was First National Bank and Trust Company of Mountain Home. It is undisputed that by June 2001 the appellees had failed to make any payments for at least twelve months.

On December 17, 2001, First National Bank filed a complaint in interpleader tendering all sums paid by the appellees to the county clerk and requesting that it be discharged from liability. On February 12, 2002, appellees filed a cross-complaint for declaratory judgment, requesting specific performance on the contract and asking that the trial court not enter an order of forfeiture in favor of Priola Brothers. In their cross-complaint, appellees asserted that they completed their obligation under the escrow agreement by tendering $6544.22 into the registry of the court. Priola Brothers responded, praying that the appellees cross-complaint for declaratory judgment be dismissed.

On March 5, 2002, the trial court discharged First National Bank from the proceedings. Thereafter, the appellees made an offer of judgment to Priola Brothers in the amount of $11,808.10, which was refused. The matter proceeded to trial, and on October 15, 2002, the trial court entered an order denying appellants’ request for a forfeiture. The trial court instead ordered payment from appellees to Priola Brothers that included all funds appellees deposited with the clerk, as well as $2720.00 the appellees previously tendered to First National Bank. The appellees were also ordered to pay both appellants’ and the bank’s attorneys’ fees.

Priola Brothers now appeals, arguing that the trial court erred in failing to grant its request for forfeiture based on the appellees’ default and the terms of the escrow agreement. We affirm.

Marvin H. Priola testified on behalf of the appellants. He stated that he mailed a letter to First National Bank on June 27, 2001, informing the bank that the escrow account would be closed based on the following provision of the escrow agreement:

Buyers acknowledge they have signed a quitclaim deed to be held in escrow in the event they are delinquent for more than 60 days on the payments called for herein. In said event, the escrow agent is instructed to release to Seller, upon Seller’s written request, the quitclaim deed and to close the escrow account.

However, according to Mr. Priola the bank refused and told him he had to send appellees a thirty-day letter.

Although not required by the escrow agreement, Mr. Priola testified that he wrote a letter to Mr. Hawkins on June 1, 2001, informing Mr. Hawkins that he was delinquent. The letter stated that if payments were not brought current within thirty days of receipt of the letter, appellants would exercise their rights under the escrow agreement. Mr. Priola admitted that he did not personally mail the letter, but gave it to his secretary who told him she mailed it. He could not state that a copy of the letter was in fact sent, and the original letter was admitted as an exhibit.

Another letter, dated July 3, 2001, was written by Kent Smith, the real estate broker who had sold the property for appellants. The letter was addressed to both appellees and stated:

Mr. Priola called me and informed me that you have not been paying your payments due on the escrow account at First National Bank for the river property that you purchased from him.

You are currently 443 days delinquent as of 7/2/2001. Your last payment that the bank received was 4/15/2000. To bring this current you will need to pay $2,715.00 plus a daily accrual of $2.24041 from 7/2/2001. To get it correct I recommend that you call Myrna at First National Bank Escrow Department and ask her to figure the exact payment for the date you will be paying.

I urge you to bring this current immediately!!! If this is not completed within 30 days from the date of receiving this letter your file will be presented to Mr. Priola and he will record the Quit Claim Deed that is in this file which will transfer title to the property from you back to him. You will no longer have an interest in this property. I urge you “time is of the essence!!!”

In a letter addressed to the appellees and dated July 5, 2001, the escrow clerk for the bank wrote:

Your escrow account is past due and Kent Smith, acting on behalf of Mr. Priola, has notified us that unless your escrow account is current within thirty (30) days of the date of this letter they will be closing this account. If it is not current within thirty (30) days we will turn over the quitclaim deed to the seller. This will transfer title back Mr. Priola.

Contrary to the representation in the letter from the bank, Mr. Priola testified that Mr. Smith was not acting on his behalf. Mr. Priola stated, “I do not know why Kent Smith mailed a letter to Mr. Hawkins dated July 3 giving him thirty days to correct the deficiency.”

Mr. Hawkins testified for the appellees, and he stated that the only letter he received was the July 3, 2001, letter from Mr. Smith. He stated that pursuant to the advice in the letter, he called the bank’s escrow clerk and was told he needed to pay the delinquent funds to the bank within thirty days. Mr. Hawkins stated that he paid the $2720.00 delinquency by July 15, 2001. Mr. Hawkins acknowledged being behind on the escrow payments, but stated he had been working out of town and assumed Ms. Cox had been paying them.

Mr. Hawkins testified that when he bought the property it was unimproved, but that since then he built a two-story cabin that he estimated to be worth $25,000.00. He stated that the cabin cannot be moved. Mr. Hawkins testified that while this case was pending he deposited $6544.22 with the county clerk, which represents the balance of what was owed to appellants under the escrow agreement.

In the trial court’s order awarding judgment to appellants, but denying appellants’ request for forfeiture, the trial court made the following findings:

That there is testimony by Marvin Priola that he sent the letter to James E. Hawkins and Patti S. Cox. That the Court believes that Priola sent the letter but he put the wrong date on there and that the actual date that he sent the letter was July 1, 2001, and this was caused by secretarial screw-up.

That the Court feels that a logical reading of the evidence presented was that on June 27, 2001, that Priola faxed to First National Bank a request for forfeiture. That First National Bank did not agree and informed Priola et al that James E. Hawkins and Patti S. Cox had thirty (30) days to cure. At that point, Marvin Priola drafted on July 1, 2001, a letter. Further that the Court believes that the evidence shows that Marvin Priola contacted Kent Smith and Kent Smith wrote James E. Hawkins and Patti S. Cox on July 3, 2001. That the Court finds that Smith sent a copy of this letter to the bank and that on July 5, 2001, First National Bank sent a letter to James E. Hawkins and Patti S. Cox. The Court finds that the Respondents, James E. Hawkins and Patti S. Cox were given thirty (30) days to bring the account up to date but they cured the deficiency within that time limit. They have made payments in addition [to] money to the clerk.

The Court therefore finds that it does not have the authority to forfeit the contract and to return to the property to Priola. The Court therefore denies relief to Priola et al on the forfeiture.

The appellants now argue that the trial court erred in refusing to grant a forfeiture. They cite Riley v. Warner, 217 Ark. 901, 233 S.W.2d 626 (1950), where the supreme court held that forfeiture for delay in performance under a contract for sale of land will not be enforced unless the contract inescapably calls for its enforcement and the party in default shows no sufficient excuse for non-performance at the time specified by the contract, or the contract provisions show that performance within the time specified is essential to the effective carrying out of the contract as a whole. Appellants submit that the contract at issue clearly called for a forfeiture in this case given the provision instructing the escrow agent to release the quitclaim deed to the seller and close the escrow account in the event the buyer is more than sixty days delinquent. Appellants also rely on the following provision of the escrow agreement:

RE-ENTRY. If the Buyer fails to pay any installment when due, or fails to perform any of the promises and covenants herein, this agreement shall, at Seller’s option, be forfeited and determined. Buyer, however, shall have ten (10) days grace in which to pay such delinquent installments. The records of the escrow agent shall be prima facie evidence of the payment or non-payment of any installment. TIME IS OF THE ESSENCE. The failure of Seller to exercise the rights of termination set out, immediately upon the accrual of such right, shall not constitute a waiver of any of the rights hereunder.

Appellants note that the above provision permits only a ten-day grace period, and further provides that time is of the essence. Parties may enter into a valid contract relative to the sale of land whereby they may provide that time of payment shall be of the essence of the contract, so that the failure to promptly pay will work a forfeiture. White v. Page, 216 Ark. 632, 226 S.W.2d 973 (1950) (citing Friar v. Baldridge, 91 Ark. 133, 120 S.W. 989 (1909)).

Appellants argue that the trial court clearly erred in its finding that the appellees cured their deficiency within the thirty days’ notice given by appellant. Appellants contend that there were no facts to support the trial court’s finding that the thirty-day letter written by appellants and dated June 1, 2001, was actually sent on July 1, 2001. Appellants further note that in Mr. Priola’s testimony he specifically stated that Mr. Smith was not acting as appellant’s agent. The only letter Mr. Hawkins acknowledged receiving was the one sent by Mr. Smith. However, appellants argue that this letter did not constitute a waiver of their right to forfeiture under the escrow agreement because Mr. Smith was not acting on their behalf.

In bench trials, the standard of review is whether the trial court’s findings were clearly erroneous. Ark. R. Civ. P. 52(a); Pre-Paid Solutions, Inc. v. City of Little Rock, 343 Ark. 317, 34 S.W.3d 360 (2001). A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed. Arkansas Transit Homes, Inc. v. Aetna Life & Cas., 341 Ark. 317, 16 S.W.3d 545 (2000). We are not convinced that the trial court made a mistake in this case.

In Meers v. Tommy’s Men’s Store, Inc., 230 Ark. 49, 320 S.W.2d 770 (1959), the supreme court held that every effort should be made to interpret contracts favorably to their enforcement and to prevent forfeitures, because forfeitures are not favored in the law, and in order to be enforced they must be plainly and unambiguously provided in the contract. In the case at bar, the written terms of the contract clearly provide for a forfeiture.

However, in such cases the conduct of the parties is relevant in deciding whether or not a forfeiture should be enforced. In White v. Page, supra, the supreme court discussed the effect of land-sale contracts providing for forfeitures as follows:

But the final effect of such an agreement will depend on the actual intention of the parties, as evinced by their acts and conduct; and such a breach of the contract as would work a forfeiture may be waived or acquiesced in. The law will strictly enforce the agreement of the parties as they have made it; but, in order to find out the scope and true effect of such agreement, it will not only look into the written contract which is the evidence of their agreement, but it will also look into their acts and conduct in the carrying out of the agreement, in order to fully determine their true intent.

Id. at 636, 226 S.W.2d at 976 (quoting Friar v. Baldridge, supra)). Moreover, in Taylor v. Eagle Ridge Developers, LLC, 71 Ark. App. 309, 29 S.W.3d 767 (2000), this court held that equity abhors a forfeiture and will seize upon the slightest circumstances indicating a waiver to avoid or prevent it.

Regardless of whether Mr. Smith was authorized to act as an agent on appellants' behalf, we hold that the trial court did not clearly err in finding that appellants' conduct in this case amounted to a waiver of their rights to a forfeiture as contemplated by the escrow agreement. While it is arguable as to whether the letter was signed by Mr. Priola on June 1 or July 1, the trial court found that it was actually signed on July 1, and only by a typographical error was it dated June 1. We cannot conclude that this was clearly erroneous. Mr. Priola testified that he had mailed a letter to the bank on June 27 asserting his intention to declare a forfeiture, but that the bank refused and told him he had to send appellees a thirty-day-notice letter. The only letter he signed that indicated compliance with the bank's directive was the letter bearing the date of June 1. Inasmuch as the evidence further revealed that appellees indeed tendered the delinquent payments on July 15, within the thirty-day period, we hold that there was evidence of at least the slightest circumstances of a waiver on the part of appellants, and the trial court committed no error in refusing to grant a forfeiture.

Affirmed.

Gladwin and Bird, JJ., agree.