Chapter § 64.3 WASTE AS TO PROPERTY SOLD ON CONTRACT

• Jurisdiction: Oregon

§ 64.3 WASTE AS TO PROPERTY SOLD ON CONTRACT

§ 64.3-1 Introduction

As a general concept the contract purchaser is regarded as the owner of the real property, even though having only an equitable estate, while the contract seller holds the naked legal title in trust as security for payment of the purchase price. Bedortha v. Sunridge Land Co., Inc., 312 Or 307, 311, 822 P2d 694 (1991); Sec. State Bank v. Luebke, 303 Or 418, 423, 737 P2d 586 (1987); Roth-Zachry Heating, Inc. v. Price, 77 Or App 382, 386, 713 P2d 634 (1986); Lincoln Cnty. v. Fischer, 216 Or 421, 436, 339 P2d 1084 (1959); City of Reedsport v. Hubbard, 202 Or 370, 390, 274 P2d 248 (1954); Hill v. Doerfler, 150 Or 628, 638, 47 P2d 260 (1935). This concept coincides with Oregon's lien theory of mortgages; although the mortgagee has, ostensibly, been conveyed the title as security for the debt, the mortgagor is really the owner while the mortgagee only holds a lien. Marx v. La Rocque, 27 Or 45, 47, 39 P 401 (1895); Christy v. Campbell, 57 Or App 491, 495, 645 P2d 573, rev den, 293 Or 483 (1982).

The mortgage analogy is essential. A land sale contract, like a mortgage, is a security interest. Thus, the rationale behind the rule imposing a duty on the purchaser not to commit waste is to ensure that the seller will be restored to property that has retained its value in the event of forfeiture. See Whistler v. Hyder, 129 Or App 344, 348, 879 P2d 214, rev den, 320 Or 453 (1994); Thienes v. Francis, 69 Or 171, 179, 134 P 1195, 138 P 845 (1914) (analogizing a land sale contract to waste cases involving mortgages to determine rights and duties of seller and purchaser). In addition, the contractually implied duty of good faith and fair dealing is considered in conjunction with the duty not to permit any waste or removal of the improvements. Because the duty of good faith and fair dealing invokes the concept of reasonableness, these duties not to permit waste or removal will be enforced to the extent that it is reasonable under the circumstances. See Whistler, 129 Or App at 348-49.

NOTE: Land sale contracts are creatures of equity courts. The case law is often elusive. The judgments rendered depend more on the factual setting of the case than on the general legal principles on which the court relies. See generally chapter 25.

§ 64.3-2 Waste by Purchaser

§ 64.3-2(a) General Considerations

Activities usually thought to be waste, when committed by tenants and other traditional interest holders in land, might not be considered waste in the seller-purchaser context. Severance of timber or removal of a building, for example, might not be actionable when committed by the purchaser even though it would be actionable if committed by some other interest holder. See § 64.3-2(b). This is because the activity (1) might not be waste, and (2) even if it is waste, the seller's security might not be impaired.

The purchaser includes assignees, regardless of whether or not they assume the contract. An assignee with at least constructive possession owes the seller the same duty to prevent waste as the original purchaser. Jowdy v....