Goodman v. Community Sav. & Loan Ass'n

• Decision Date: 28 October 1966
• Citation: 246 Cal.App.2d 13,54 Cal.Rptr. 456
• Court: California Court of Appeals Court of Appeals
• Parties: James GOODMAN and Joseph J. Goodman, Plaintiffs and Respondents, v. COMMUNITY SAVINGS AND LOAN ASSOCIATION, a California corporation, Defendant and Appellant. Civ. 8032.

Page 456

54 Cal.Rptr. 456

246 Cal.App.2d 13

James GOODMAN and Joseph J. Goodman, Plaintiffs and Respondents, v. COMMUNITY SAVINGS AND LOAN ASSOCIATION, a California corporation, Defendant and Appellant.

Civ. 8032.

District Court of Appeal, Fourth District Division 2, California.

Oct. 28, 1966.

Austin & Austin, Irving P. Austin, and Nathan Mudge, Long Beach, for defendant and appellant.

Fred D. Johnston, Rimel, Harvey & Helsing, and Jack J. Rimel, Santa Ana for plaintiffs and respondents.

OPINION

TAMURA, Justice.

Plaintiffs, purchasers of an apartment house complex consisting of 32 8-unit buildings in the City of Orange, brought an action against defendant, the vendor, seeking a declaration of rights under the contract of sale, damages for defendant's failure to complete the buildings for occupancy and failure to complete off-site improvements, and for an injunction against a threatened foreclosure. The trial court found that defendant breached the agreement, awarded plaintiffs damages in the sum of $40,000.00 and decreed that defendant hold plaintiffs harmless from all materialmen's and mechanics' liens arising out of any unpaid on-site or off-site work which defendant had agreed to complete. Since the nature and extent of the liens could not then be determined, the court retained jurisdiction to make such further orders respecting such liens as may be necessary to carry out its decree. Defendant appeals from the judgment.

In June 1963 when plaintiff James Goodman first became interested in the property, the unpaved streets, dirt piled along the windows and the presence of debris and rubble gave it the appearance of being distressed property. Upon inquiry he ascertained that the property had recently been foreclosed by defendant Community Savings and Loan Association and was directed to Mr. Joseph, an assistant vice president of defendant. Mr. Joseph informed plaintiff that defendant would consider a sales price of one million five hundred and twenty thousand dollars, and would probably carry back a substantial portion of that amount. Mr. Joseph stated that the off-site improvements would be completed as soon as possible.

Immediately following the meeting, plaintiffs transmitted to defendant a deposit receipt dated June 25, 1963, executed by both plaintiffs, together with a certified check for $10,000.00. The document provided in relevant part as follows: 'Received from James Goodman, herein called Buyer, the sum of Ten Thousand and no/100 Dollars ($10,000.00) evidenced by personal check, as deposit on account of purchase price of $1,520,000.00 ($47,500.00 each 8 Unit Building) for the purchase of property, situated in Collins and Newport Freeway, County of Orange, California, described as follows: 32 8 Unit buildings consisting of 4--1 Bedroom and 4--2 Bedroom each building. (Total--256 Apartments). Buyer will deposit in escrow with Community Savings & Loan the balance of the purchase price within 10 days from date of acceptance hereof by Seller, as follows: $40,000.00 Cash plus $39,500.00 1st T.D. each building payable $270.00 month including interest at 6.6% For 25 years and seller to carry 2nd T.D. each building of $6,347.50 payable $65.00 month inc. interest at 7% For 3 years, Seller to complete buildings, ready for occupancy with notice of completion, streets, sidewalks, lawns and landscaping, carpets, drapes, range and oven, garbage disposal, fire extinguishers as required. No payments for 3 months after notice of completion and interest only for following nine months. Buyer to receive possession upon satisfaction of completion. Buyer to receive letter authorizing rental committments, advertising and bill boards prior to completion.'

Within a few days, plaintiff James Goodman received a call from Mr. Joseph informing him that the term of the second trust deeds should be shortened from three years to eighteen months. Plaintiffs thereupon transmitted a letter dated July 1, 1963, to defendant, which read: 'This is your authority to amend the subject offer, pertaining to the period of the 2nd Trust Deed from three (3) years to eighteen (18) months.'

Shortly thereafter plaintiffs received a further call from Mr. Joseph informing them that defendant would not agree to a three months' period without any payments and with interest only for the following nine months but would compromise if plaintiffs would agree to payments of principal and interest commencing on the fifth month. Pursuant to this call, plaintiffs transmitted to defendant a letter dated July 5, 1963, which read: 'This is your authority to amend the subject offer, pertaining to the payment schedule as follows: NO payments or interest for five (5) months, with regular amortization payments to start six (6) months from possession of property (after filing of Notice of Completion). Inasmuch as the due date for the 2nd Trust Deeds has been advanced to 18 months instead of 36 months, we must request that NO pre-payment penalty be imposed, if property is refinanced within this 18 month period.'

The language of the deposit receipt and the two letters was suggested by Mr. Joseph.

On July 17, 1963, defendant's board of directors approved the sale of the property to plaintiffs. Mr. Joseph immediately called plaintiffs, congratulated them and told them that their offer had been accepted by the board of directors.

On August 26, 1963, plaintiffs went to defendant's office to complete the transaction. Plaintiff Joseph Goodman, father of plaintiff James Goodman and a member of the California Bar, informed Mr. Bickett, vice president of defendant, that plaintiffs would not sign the notes and trust deeds until they first saw a written acceptance 'of the deal' by defendant. Mr. Bickett thereupon prepared and signed the following letter, dated August 26, 1963, addressed to plaintiffs: 'Please be advised that on July 17, 1963, the Board of Directors of Community Savings and Loan Association approved your bid for the purchase of thirty-two (32) lots known as lots 2 to 20 inclusive and lots 24 to 36 inclusive of Tract No. 3754, for the purchase price of $1,520,000.00. This sale subject to the terms of our Escrow No. 63-3357.

'At your request and at no liability to this Association, you have our authority to commence your promotion and advertisement for the rental of said property with the understanding that possession of said property will not be given to you until the completion of the off-site improvements which are to be approved by the City of Orange and Community Savings and Loan Association.'

Plaintiffs thereupon signed the notes and trust deeds, after which they were requested to sign escrow instructions. Plaintiff Joseph Goodman inquired as to the necessity for the instructions because 'We have made our deal,' to which Mr. Bickett replied, 'This is what they want.' Plaintiffs examined the instructions and at first objected to the deletion of the provision relating to the proration of taxes, but when Mr. Bickett informed them that the off-site and on-site improvements would be completed within two weeks or at most three weeks, consented to the deletion. Plaintiffs then questioned the provision allowing Buyers a credit of only $3000.00 for landscaping, but Mr. Bickett indicated that it could be accomplished at $100.00 per building and that was all the Seller was willing to allow. Plaintiffs then signed the instructions which described the property, set forth the purchase price, the amounts of the 1st and 2nd deeds of trust and when payments thereunder were to commence--March 10, 1964, on the 1st and March 7, 1964, on the 2nd--and provided that the property was to be free of all encumbrances, subject to covenants, conditions, reservations, easements, and rights-of-way of record. The instructions also contained the following typed provisions: 'Possession to be given to Buyers at the completion of the off-site improvements. Sellers agree to allow $3000.00 towards purchase price (credit of cash through escrow) for landscaping which the Buyers will complete on subject properties.'

In August 1963 the buildings were not yet ready for occupancy and, although the sewer and water lines had been installed, other off-site improvements such as streets, berme, curbs, gutters, and some street lights remained to be completed and installed. The on-site work continued sporadically until February 1964 and the off-site improvements were not completed until February 27, 1964, when the last building was released by the city for occupancy. In order to make the buildings suitable for occupancy plaintiffs expended substantial time and money.

The keys to the premises were turned over to plaintiffs upon the recordation of the deed on September 24, 1963, but since the buildings were not ready for occupancy, plaintiffs did not commence renting until November 1963, and then only as and when the buildings were completed and as the off-site work progressed. There was evidence that plaintiffs lost substantial rental income because of the delay in the completion of the on-site and off-site improvements.

When payments became due on the note and trust deeds in March 1964, plaintiffs withheld payment, instituted the present action, and deposited with the Clerk of the Court all payments due on the promissory notes executed by them as part of the purchase price.

At the conclusion of the trial, the court first determined the issue of liability. Finding for plaintiffs on that issue, the court suggested that counsel consider the possibility of agreeing upon the amount of damages. Following recess and a discussion in chambers between court and counsel, the court announced that it would use the figure of $40,000.00 in fixing damages.

On the material issues the court found as follows: Defendant agreed in writing to complete the buildings for occupancy, and to complete the off-site improvements but failed to perform those obligations. Plaintiffs, at a cost of $6,553.00, did...