U.S. Hertz, Inc. v. Niobrara Farms

• Decision Date: 15 July 1974
• Citation: 41 Cal.App.3d 68,116 Cal.Rptr. 44
• Court: California Court of Appeals Court of Appeals
• Parties: U.S. HERTZ, INC., a California corporation, Plaintiff and Appellant, v. NIOBRARA FARMS, a California corporation, et al., Defendants and Respondents. Civ. 13662.

Page 44

116 Cal.Rptr. 44

41 Cal.App.3d 68

U.S. HERTZ, INC., a California corporation, Plaintiff and Appellant, v. NIOBRARA FARMS, a California corporation, et al., Defendants and Respondents.

Civ. 13662.

Court of Appeal, Third District, California.

July 15, 1974.

Arata, Misuraca, Clement & Haley by Malcolm A. Misuraca, Santa Rosa, and John R. Hetland, Berkeley, for plaintiff and appellant.

Landels, Ripley & Diamond by Edgar B. Washburn, San Francisco, for defendant and respondent Title Ins.

Crowe, Mitchell & Crowe by J. Thomas Crowe, Visalia, for defendant and respondent Niobrara Farms.

Laughlin, Craig & Christensen, Chico, for other defendants and respondents.

GOLDSTEIN, ^* Associate Justice (Assigned).

Plaintiff U.S. Hertz, Inc. (herein 'Hertz') appeals from an order dissolving a temporary restraining order and denying its motion for a preliminary injunction. Such an order is appealable. (Code Civ.Proc., § 904.1, subd. (f).)

Facts

On July 1, 1971, plaintiff submitted to defendants an offer in writing entitled 'Real Estate Purchase Contract and Receipt for Deposit' wherein it offered to purchase from defendant Niobrara Farms (herein 'Niobrara') 1150 acres of improved agricultural land located in Butte and Tehama Counties. The greater part of the land was owned by Niobrara, the remainder by defendants Dobson who were relatives of the owner of Niobrara. Included in the purchase price of $3,115,000 were farming equipment and an irrigation system and certain interests in Sunsweet Dryers and an almond hulling association. The purchase price of all the foregoing assets was to be paid as follows: Cash--$2,815,000; a promissory note in the sum of $300,000 secured by a deed of trust on the real property. The offer was accepted in writing by Niobrara.

Performance of the contract was Contingent on the obtaining by Hertz of acceptable financing within 45 days after the acceptance of the offer by Niobrara. The time within which Hertz was required to obtain the financing was extended in writing to September 15, 1971.

Hertz was unable to obtain sufficient financing to make the cash payment of $2,815,000 on September 15, 1971. The agreed closing date for the transaction, namely September 30, 1971, expired without its consummation.

In October 1971, Armand Monlux, a real estate broker with offices in Chico, California, several representatives of Niobrara, a representative of Midland Title Company and Niobrara's attorney Thomas Crowe, met at Crowe's office in Visalia, California. Hertz was not represented at the meeting. After a discussion, Crowe prepared escrow instructions to be delivered to Midland Title Company for the sale of the real property described in the original contract. The escrow instructions differed materially and substantially from the provisions in the original contract.

Thereafter, negotiations were resumed between Hertz and Niobrara and defendants Dobson for the sale of the property. On November 9, 1971, the parties agreed on the final terms of an escrow agreement specifying in detail the terms and conditions under which title to the real property and specifically described items of personal property would be transferred by Niobrara and the Dobsons to Hertz. The escrow was closed on November 19, 1971, at which time duplicate originals of the deeds and deeds of trust hereinafter described were recorded in both Butte and Tehama Counties.

Dissimilarities Between The Original Contract (Herein 'Contract') And The Escrow Agreement (Herein 'Escrow')

The base purchase price of the real property and personal property, to-wit $3,115,000, remained unchanged. However, as a result of prorations, modifications, adjustments and compromise, the total consideration was increased to the sum of $3,287,275.88, including title and recording costs.

The material differences were as follows:

1. (a) The contract contemplated a sale to Hertz of all the real and personal property for $3,115,000 as a single unit. (b) Under the escrow Niobrara sold all real property in Butte County and a portion of the real property in Tehama County together with all personal property, particularly described in a bill of sale deposited in escrow for $2,565,000. The Dobsons sold the remaining real property in Tehama County for $550,000.

2. (a) The contract provided for a cash payment of $2,815,000 and a promissory note payable to Niobrara in the sum of $300,000 secured by a deed of trust on the real property. (b) The escrow provided for delivery to Niobrara of a promissory note for $602,000, an additional promissory note to the Dobsons ¹ for $163,000, each secured by individual deeds of trust subordinate to a first deed of trust in favor of Prudential Life Insurance Company (herein 'Prudential'), securing a promissory note in the sum of $2,150,000. The balance of the purchase price was payable in cash.

3. (a) The contract provided that 1,000 shares of Sunsweet Drying rights and Niobrara's interest in a hulling association were to be transferred to Hertz. (b) Under the escrow, Hertz was to receive 2,000 shares of Sunsweet rights, but was required to assume an indebtedness thereon, evidenced by two promissory notes in favor of Sunsweet in the sum of $60,000. Niobrara was to retain the interest in the North State Hulling rights subject to a credit to Hertz on the purchase price of $4,050.

4. (a) The contract provided that Niobrara was to be reimbursed by Hertz at the close of escrow for all its cultivating and harvesting expenses incurred by Niobrara after the acceptance of the contract by Hertz. The actual amount of the reimbursement was left for future determination. (b) The escrow provided that Hertz would pay to Niobrara for its accrued cultivating costs the agreed sum of $150,000.

5. (a) The contract provided that all crops growing or to be grown on the property were included in the sale and that, upon the acceptance of the contract, the parties would agree on the method of harvesting said crops. (b) The escrow provided that the crops, As of July 1, 1971, were included in the sale to Hertz and were included in the sales price, and that Hertz was to receive the crops or the proceeds of the marketing thereof; and that Hertz was to reimburse Niobrara the aforesaid agreed sum of $150,000 for its cultivating costs incurred in the care of such crops. The provision in the contract that the parties would thereafter agree on the method of harvesting does not appear in the escrow.

6. (a) The contract provided that all equipment on the property was included in the sale, and that a detailed inventory of said equipment would be provided to Hertz upon acceptance of the contract. (b) The escrow provided that a detailed bill of sale specifying all items of personal property included in the sale and to be transferred to Hertz was deposited with the escrowee by Niobrara concurrently with Niobrara's signed escrow instructions.

7. (a) The contract described Hertz as a real estate broker buying for its own account. (b) The escrow refers to Hertz as the buyer, without any additional designation. Undisputed evidence at the hearings revealed, however, that Hertz received from the broker who negotiated the sale one-fourth of the latter's total commission of $150,000.

The first installment of $244,200 in principal, together with accrued interest on the Niobrara note, became due on December 20, 1971. On March 20, 1972, a second installment in the same sum with accrued interest became due. Neither of the installments or the accrued interest thereon has been paid. The record shows that the payments due on the note secured by the first deed of trust to Prudential Insurance Company and on the Dobsons' note are not in default.

On Feburary 8, 1972, Niobrara recorded concurrently in the offices of the county recorders of Tehama and Butte Counties notices of default and election to sell the trust property to satisfy the indebtedness secured by Niobrara's deed of trust. Such notices alleged that Hertz had failed to make the payments of principal and interest due on December 21, 1972, on the note executed by Hertz.

Proceedings In The Trial Court And This Court

On May 2, 1972, plaintiff filed the within action. (Hereinafter we discuss in extenso the allegations in the complaint.) Hertz in its complaint sought a permanent injunction restraining all defendants from proceeding with the foreclosure of the trust property. Concurrently with the filing of the complaing Hertz filed a petition for a preliminary injunction restraining defendants from proceeding with the foreclosure pending the determination of the injunction action. On May 5, 1972, a preliminary restraining order was issued by the trial court.

Hearings were held on the motion for a preliminary injunction on June 16, 1972, and August 7, 1972. On the latter date, the trial court denied plaintiff's motion for such injunction, said order to become effective on August 18, 1972. The prior temporary stay of the foreclosure proceedings was later extended to August 31, 1972, on condition that an additional surety bond be filed by plaintiff. The bond was filed.

On August 30, 1972, plaintiff applied to this court for a further stay of the foreclosure proceedings. We granted a stay pending the filing by defendants of their points and authorities in opposition to plaintiff's petition for such stay of the foreclosure pending the determination of plaintiff's appeal from the order of denial of the trial court, on condition that a surety bond, cash or certificate of deposit in the sum of ,250,000 be filed with the County Clerk of Tehama County. In compliance with such order, a certificate of deposit in that sum was deposited by plaintiff. On September 7, 1972, we extended the stay until the determination of this appeal on condition that the security in said bond be increased to $500,000. Plaintiff has complied with the foregoing order by filing an additional certificate of deposit in the sum of $250,000 with...