Hunt v. Smyth

• Citation: 101 Cal.Rptr. 4,25 Cal.App.3d 807
• Court: California Court of Appeals
• Decision Date: 22 May 1972
• Parties: Peter HUNT and Jane V. Hunt, Plaintiffs and Appellants, v. Ted L. SMYTH, Defendant and Respondent. Civ. 28254.

Page 4

101 Cal.Rptr. 4

25 Cal.App.3d 807

Peter HUNT and Jane V. Hunt, Plaintiffs and Appellants, v. Ted L. SMYTH, Defendant and Respondent.

Civ. 28254.

Court of Appeal, First District, Division 1, California.

May 22, 1972.

Rehearing Denied June 21, 1972.

Hearing Denied July 19, 1972.

Herbert J. Friedman, San Francisco, for appellants.

I.R. Goodman, Berlin, O'Grady & Goodman, Redwood City, for respondent.

SIMS, Associate Justice

Plaintiffs, the makers of a promissor note secured by a second deed of trust on property which they purchased from the defendant, have appealed from a judgment which (a) failed to grant them a permanent injunction against a threatened sale under the deed of trust because of their failure to pay principal and interest on the note according to its terms, (b) discharged, subject to a new injunction pendente lite to cover the period of appeal, a preliminary injunction previously granted, (c) adjudged that plaintiffs are obligated to pay defendant according to the terms of the promissory note, no modification or alteration of the note having been made, and (d) awarded defendant attorney's fees and costs. They contend that the court erred (1) in concluding that there had been no novation with respect to the agreement in the note and that plaintiffs were obligated to pay the defendant, as provided in the note, in monthly instalments of $350, rather than $250, from January 1, 1968; (2) in striking a proffered amendment to the complaint and in denying plaintiffs' motion to amend the complaint, all to conform to proof, in order to show that defendant was demanding payments of instalments which allegedly had been waived; (3) in failing to find that the defendant had waived the right to claim that plaintiffs were in default with respect to instalment payments which had not been paid; (4) in awarding defendant attorney's fees; and (5) in failing to award plaintiffs attorney's fees.

It is concluded that there is no error in the judgment of the trial court. The finding that there was no modification or alteration of the terms of payment contained in the note is sustained by the evidence. The court properly found and concluded that plaintiffs were in default in making payments under the note after defendant had given notice that he would not tolerate further delinquencies, that plaintiffs had not relieved the default by their inadequate tenders, and that they were not entitled to enjoin the threatened sale under the deed of trust. The court did not abuse its discretion in striking and refusing to permit plaintiffs' proposed amendments to the complaint because plaintiffs failed to exercise diligence in ascertaining the facts upon which their new theory to enjoin the sale was predicated, and in presenting such facts to the court, and because the amendments, in any event, failed to set forth an equitable defense to the proposed foreclosure by sale. There was accordingly no error in failing to make findings on the the subject matter of the amendments. The court did not err in awarding attorney's fees to defendant, and in denying them to plaintiffs.

Nevertheless, since it is proper to remand the case for the purpose of determining the defendant's attorney's fees on appeal, and because it is in the interests of both parties that the amount necessary to cure the default pursuant to the provisions of section 2924c of the Civil Code be established, the judgment is modified to provide that a further hearing be held to determine, as of the date of such hearing, the amount so necessary, with leave to plaintiffs to pay such amount within 13 days thereafter if they desire to permanently enjoin the sale.

Plaintiffs, husband and wife, purchased approximately 137 acres of undeveloped land improved by a residence in western San Mateo County from defendant in 1960 for $57,500. The terms of the sale consisted of a cash payment to defendant of $27,500 which plaintiffs received from Eureka Savings and Loan Association in return for a deed of trust making it the primary lien holder and which plaintiffs were to pay off at the rate of $347 per month, and a note payable to defendant for $30,000 secured by a second deed of trust. The instalment note, executed on May 25, 1960 provided that plaintiffs promised to pay defendant $30,000 with interest from June 1, 1960 on unpaid principal at the rate of 6 percent per annum, principal and interest payable in monthly instalments of $250 on the first day of each month beginning on July 1, 1960 and continuing until January 1, 1968, at which time the monthly payments were to increase to $350 per month, and continue at that rate until the principal and interest were paid. The note further stipulated that each payment would be credited first on interest then due and the remainder on principal and that should default be made in payment of any instalment when due the whole sum would become immediately due at the option of the holder. Further, it provided that if action was taken on the note, the makers promise to pay attorney's fees fixed by the court.

Between January 1962 and December 1968 a total of 68 $250 payments were made leaving 16 unpaid. ¹ Plaintiffs' payments were frequently late. All of these payments were accepted by defendant and no protest was made as to their amount. During 1968 defendant would call plaintiff husband approximately every two months asking him to bring the payments up to date and to make them timely. On May 2, 1968, defendant wrote to plaintiff husband requesting three payments that were allegedly due in 1968 and a payment each month thereafter and threatened foreclosure if no affirmative response was forthcoming. The plaintiffs made two payments of $250 each in May following the receipt of that letter, but made no payments in August or November of 1968.

In 1969 no payment was made in January, and $250 was paid February 15. On March 12 plaintiff husband by letter requested defendant to advise plaintiffs at what price he would discount or sell the note. Defendant advised plaintiff husband by telephone that he would not discount the note. He demanded that plaintiffs pay all of the payments due up to that date, and stated he would institute foreclosure proceedings if those payments were not forthcoming. Plaintiffs paid $250 on March 15, thereby reducing the principle balance of the loan to $21,181.95. (Cf. fn. 1 above.) On March 17 plaintiffs by letter offered $15,000 for the note. On March 19 the collecting band marked its collection account closed. At sometime during this period the defendant had picked up the note from the bank, and then discovered that the note called for monthly payments since January 1, 1968 of $100 more than had been paid. On March 19, 1969 he wrote plaintiffs as follows: "This is to inform you that the Wells Fargo Bank in Belmont is no longer servicing the note in which you are paying. Please make the payments to me at my address in Redwood City. I will not accept less than the full payment of $350.00 each first of every month after you have made the payment of $700.00 no later than the first day of April which will make you current for this year. I am not interested in discounting the note and I am insisting that you pay as agreed from this date forth.... P.S. The full amount of your note to date is $21,181.95. The full amount on your first mortgage is $6,781.00."

Plaintiffs sent defendant a check for $250 dated April 10, 1969. On April 11, 1969 defendant caused to be recorded a notice of default for plaintiffs failure to pay principal and interest. A second notice of default was recorded on April 16, 1969 because the defendant was concerned because there was no notarial acknowledgment on the first notice. ^1a Defendant returned the plaintiffs' check on April 12. A similar check for $250 dated May 7, 1969 was returned under date of May 13, and again on June 16, 1969 the defendant returned a check for $250 dated June 13, 1969.

On July 3, 1969 plaintiffs filed their complaint for preliminary injunction and permanent injunction and other relief against defendant and the original and substituted trustee under the second deed of trust. The complaint sets forth the execution and delivery of the note and deed of trust. It alleges that beginning with the payment due January 1, 1968 and with respect to each and every monthly payment of principal and interest thereafter due until April 11, 1969 plaintiffs paid and defendant accepted the sum of $250 per month on account of principal and interest, and that said payments of $250 were made with the intention that the agreement to pay$350 per month beginning January 1, 1968 as provided in the note was to be extinguished and a promise to pay $250 per month was to be substituted therefor. It is further alleged that defendant has recorded a notice of default and is threatening sale of the property, and that plaintiffs have tendered the monthly instalments of $250 and that there was no default. Plaintiffs prayer requested an order that the note be modified to provide for monthly payments of $250 commencing with January 1, 1968, an injunction pendente lite to prevent all proceedings for a sale of the property, and attorney's fees, costs of suit, and "all other proper relief."

The record fails to reveal the disposition of plaintiffs' motion for a preliminary injunction which was originally set for hearing on July 10, 1969. In any event no further proceedings were taken to sell the property under the second deed of trust. A preliminary injunction was granted on September 24, 1969 following the hearing on the merits, and proceedings have been stayed pending this appeal by an injunction pendente lite filed February 27, 1970. Defendant's answer generally denied any modification of the note and sought attorney's fees by way of counterclaim.

The evidence received at the trial and other proceedings taken by the court are discussed below. The court ultimately made findings of fact and...