Conley v. Poway Land & Inv. Co.

• Decision Date: 02 February 1965
• Citation: 42 Cal.Rptr. 636,232 Cal.App.2d 22
• Court: California Court of Appeals Court of Appeals
• Parties: Walter F. CONLEY et al., Plaintiffs and Respondents, v. POWAY LAND AND INVESTMENT COMPANY et al., Defendants and Appellants. Civ. 7427.

Page 636

42 Cal.Rptr. 636

232 Cal.App.2d 22

Walter F. CONLEY et al., Plaintiffs and Respondents, v. POWAY LAND AND INVESTMENT COMPANY et al., Defendants and Appellants.

Civ. 7427.

District Court of Appeal, Fourth District, California.

Feb. 2, 1965.

As Modified Feb. 24, 1965.

Hearing Denied April 21, 1965.

Shaw & Miller, Joseph M. Shaw and Simon Miller, Beverly Hills, for defendant and appellant.

Gray, Cary, Ames & Fyre, Sterling Hutcheson and John W. Poulos, San Diego, for plaintiffs and respondents.

FINLEY, Justice pro tem.

This is an appeal by defendant Poway Land and Investment Company, a limited partnership and the two general partners thereof, from a judgment ordering the partnership (hereinafter referred to as 'Poway') as trustor under a deed of trust to quitclaim back to Title Insurance and Trust Company, trustee, title to 38 acres of land claimed by the plaintiff-respondent beneficiaries under the deed of trust to have been illegally reconveyed by said trustee to the trustor, defendant-appellant Poway.

In 1959 respondents sold to Poway 1,150 acres of land in San Diego County for $1,305,250, of which $80,330 was paid into escrow to cover commissions and expenses. A purchase price trust deed secured note, at six percent interest payable semi-annually, was given for the balance of the purchase price. By agreement, Poway was to pay the interest, taxes and principal and was given the right to select, describe and demand reconveyance of the chosen acreage upon the payment of a release price of $1,149 per acre. On March 14, 1960, Poway paid $40,250 on the principal, of which only $38,632.50 was due, the overpayment being intended to entitled Poway to a reconveyance of an even 50 acres. No request for reconveyance of any land was made at that time. The subsequent transactions were as follows:

(a) 7-1-60: Poway paid interest, $36,811.59

(b) 11-10-60: Poway paid on account of taxes for the first half of the year, $13,000.

(c) 12-31-60: Poway requested and trustee reconveyed a designated 10 acres.

(d) 12-31-60: Poway requested and trustee reconveyed a designated 2.27 acres.

(e) 1-1-61: Poway paid interest, $35,307.47.

(f) 4-10-61: Poway defaulted on last half of taxes due 4-1-61.

(g) 6-8-61: Poway requested and trustee reconveyed a designated 38 acres which was .27 acres in excess of the 50 acres purportedly covered by the $40,250 paid by Poway on principal on March 14, 1960.

Poway admits a miscalculation and that at the time this 38-acre parcel was released the $40,250 payment was short $750 which, coupled with the .27 acre overconveyance, made a total shortage of $971.40 principal payment remaining unpaid.

One of the covenants by Poway was that it would pay the taxes before due. It therefore was not in default in this respect when the $40,250 payment was made, but it was in default when it requested reconveyance and when the reconveyance was made. The trial court found that the property had been wrongfully released, ordered Poway to quitclaim the property back to the trustee, removed the cloud on the title and quieted the title in the trustee.

Appellant argues that:

1. Poway obtained a vested right to a release of acreage upon payment of the $40,250, since it was not then in default. A later default cannot deprive it of its vested right, since the delay has not prejudiced the respondents in any manner.

2. There was no requirement that a demand, a specific description of the property desired, and an actual reconveyance must all occur before any default. Once the payment was made before any default, the remainder of the transaction was only a formality between Poway and the trustee.

3. Poway's letter accompanying the payment of $40,250, stating that the overpayment was to enable it to claim 50 acres, can be considered as constituting a demand.

4. The court of equity did not consider the equities in the case, since the court has caused a forfeiture, contrary to the California equity principle of relief from forfeiture whenever possible. Respondents could be made whole by ordering Poway to pay the shortage of $971.40 rather than cancelling its right to property 30 times more valuable than the amount of shortage.

Respondents argue that:

1. The primary and continuing condition upon which the release of any acreage depended was the absence of default. Once there was a default, the trustee was without power to release any acreage. Two conditions must occur before the trustee may execute a release: (a) the payment of the correct amount of money, and (b) a demand by the defendant on the trustee to convey acreage of a particular description. Since Poway had not made a demand which designated the acreage to be reconveyed before default occurred, one of the necessary conditions precedent to the accrual of its right to a partial reconveyance was not met; hence, it had no vested right.

2. Poway failed to make a payment of a sufficient sum, according to the trust deed, that would entitle it to the 38-acre parcel that was transferred.

3. The trial court did not divest Poway of any right, but simply reestablished the respondents' security on the note by imposing the lien of the trust deed upon the 38-acre parcel as set forth in the trust deed until the terms of that instrument are adhered to.

4. Poway seeks to invoke equity when it has not done equity. It chose not to make the requisite principal payment and demand under the terms of the partial release clause, and it was Poway which chose to default. The only conduct on respondents' part was to seek to have their security reinstated and the terms of the agreement complied with by Poway.

5. Where the contract sets up certain restrictions to preserve the security of the beneficiaries, the violation of those restrictions by the trustee and trustor should not cause the forfeiture of the beneficiaries' lien.

That this is an action calling upon the equity powers of the courts is admitted by all parties. On the other hand, it does involve interpretation of a contract in the form of a deed of trust, which is a matter of law. The deed of trust contains the following provision:

'So long as the trustor be not in default concerning any of the covenants contained herein or with respect to the payments due on the promissory note secured hereby, a partial reconveyance may be had and will be given from the lien or charge hereof of any portion of the property herein before described upon payment of an amount of apply on the principal of said note, based on a rate of $1,149.00 for each acre. * * * Trustor may at any time make a payment to Trustee, for the purpose of securing a partial reconveyance in which event Trustee shall, without the necessity of any approval by Beneficiary or Beneficiaries or the securing of any further documents, make a partial reconveyance of such portion or portions of the property hereinbefore described as Trustor may request provided only so much acreage shall be reconveyed as Trustor has paid for at the rate per acre mentioned in this paragraph * * *.'

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