Handy v. Gordon

• Decision Date: 20 January 1967
• Citation: Handy v. Gordon, 65 Cal.2d 578, 55 Cal.Rptr. 769, 422 P.2d 329 (Cal. 1967)
• Court: California Supreme Court
• Parties: , 422 P.2d 329, 26 A.L.R.3d 848 C. Jon HANDY, Plaintiff and Appellant, v. M. E. GORDON and Edith Gordon, Defendants and Respondents. L.A. 29137. In Bank

Page 769

55 Cal.Rptr. 769

65 Cal.2d 578, 422 P.2d 329, 26 A.L.R.3d 848

C. Jon HANDY, Plaintiff and Appellant, v.M. E. GORDON and Edith Gordon, Defendants and Respondents.

L.A. 29137.

Supreme Court of California,

In Bank.

Jan. 20, 1967.

William L. Stein, Beverly Hills, for plaintiff and appellant.

Heily & Blase, Oxnard, Edward L. Lascher, Van Nuys, and William C. Hoel sken Oxnard, for defendants and respondents.

TRAYNOR, Chief Justice.

Plaintiff appeals from a judgment for defendants entered after the trial court granted a motion for judgment on the pleadings.Plaintiff contends that his complaint states a cause of action for specific performance of a contract to sell land and that therefore the trial court erred in granting the defendants' motion.(SeeMacIsaac v. Pozzo(1945)26 Cal.2d 809, 815--816, 161 P.2d 449.)

The complaint alleges that on January 21, 1964, the parties entered into a written contract in which defendants agreed to sell certain real property to plaintiff.The contract was set forth in escrow instructions that described the property as approximately 320 acres known as the Gordon Ranch and excepted about three acres that included the sellers' home.The purchase price was $1,500,100.The instructions stated that $300,000 was paid to the sellers outside of escrow and that an additional $100 was deposited with the escrow company.The buyer agreed to execute a note secured by a deed of trust for the balance of $1,200,000 plus interest of 2 percent per year.The note was to be paid in annual installments of $120,000 or more beginning three years after the close of the escrow, and any unpaid balance was to become due 10 years after the escrow closed.The sellers agreed to subordinate their trust deed to other trust deeds securing loans to be obtained by the buyer for construction and permanent financing.

The buyer was given the right to obtain a zoning modification and to withdraw from the contract if he did not approve geological, engineering, and zoning reports.At the close of the escrow the legal description was to be approved by the parties and was to show title vested in plaintiffC. Jon Handy or nominee.

The complaint alleged that the recital of the $300,000 payment was a sham and was included in the instructions at the sellers' request to win a bet.The true consideration was $1,200,100, which plaintiff alleged was fair and reasonable and was substantially higher than the prices at which comparable property in the locality was selling.

After defendants sought to rescind the contract on April 2, 1964, plaintiff brought this action for specific performance.The court granted the defendants' motion for a judgment on the pleadings on the ground that the agreement was too uncertain to be enforced because the subordination clause lacked essential terms.

Plaintiff contends that the trial court erred in holding that the subordination clause lacked essential terms.He points out that the clause specified that the construction and financing loans should be in the maximum amounts of $10,000 and $52,000 per lot, should have maximum interest rates of 7 percent and 6.6 percent, and should mature in not more than 6 and 35 years respectively.Although the contract does not specify the number of lots into which the land is to be divided, plaintiff contends that the number of lots was not left to future agreement of the parties but was properly left to his discretion as the developer of the contemplated subdivision.No problem of indefiniteness is presented under plaintiff's view of the contract.It sets forth all the terms defendants deemed essential to protect their interests and leaves to the business judgment and good faith of plaintiff the working out with lenders, builders, and home buyers of the details to make the venture a success.

Defendants contend that whether or not the trial court erred in finding that the contract is too indefinite to enforce, its ruling must be sustained on the ground that it appears from the complaint as a matter of law that the contract 'is not, as to (them), just and reasonable.'(Civ.Code, § 3391, subd. 2.)We agree with defendants' contention.

Although the parties to a contract of sale containing a subordination clause may delegate to the vendee or third party lenders power to determine the details of subordinating loans, an enforceable subordination clause must contain terms that will define and minimize the risk that the sub ordinating liens will impair or destroy the seller's security.(Stockwell v. Lindeman, 229 Cal.App.2d 750, 758, 40 Cal.Rptr. 555;Magna Development Co. v. Reed, 228 Cal.App.2d 230, 236, 39 Cal.Rptr. 284;Burrow v. Timmsen, 223 Cal.App.2d 283, 289--290, 35 Cal.Rptr. 668, 100 A.L.R.2d 544;Roven v. Miller, 168 Cal.App.2d 391, 398, 335 P.2d 1035.)Such terms may include limits on the use to which the proceeds may be put to insure that their use will improve the value of the land, maximum amounts so that the loans will not exceed the contemplated value...