Karlsen v. American Sav. & Loan Assn.

• Citation: 15 Cal.App.3d 112,92 Cal.Rptr. 851
• Court: California Court of Appeals Court of Appeals
• Decision Date: 08 February 1971
• Parties: Alfred S. KARLSEN, Plaintiff, Cross-Defendant and Appellant, v. AMERICAN SAVINGS AND LOAN ASSOCIATION, a corporation and First Charter Financial Corporation, Defendants, Cross-Complainants and Respondents. Civ. 36270.

Page 851

92 Cal.Rptr. 851

15 Cal.App.3d 112

Alfred S. KARLSEN, Plaintiff, Cross-Defendant and Appellant, v. AMERICAN SAVINGS AND LOAN ASSOCIATION, a corporation and First Charter Financial Corporation, Defendants, Cross-Complainants and Respondents.

Civ. 36270.

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

Feb. 8, 1971.

Hearing Denied April 8, 1971.

Levinson, Marcus & Bratter, and Caditz and Grant, Beverly Hills, for appellant.

Frank B. Belcher, Belcher, Henzie & Biegenzahn, Mark Brandler, McDonald & Shafton Fadem & Kanner, by Michael M. Berger, Los Angeles, for respondents.

ROTH, Presiding Justice.

Alfred S. Karlsen (Karlsen) appeals from a judgment against him rendered pursuant to a motion for judgment on the pleadings after an objection had been made and sustained to the introduction of any evidence. ¹ Karlsen's complaint was against American Savings and Loan Association (American) and First Charter Financial Corporation (Charter) who were alleged to be agents of and acting for each other. It alleged three causes of action to (1) set aside a trustee's sale; (2) damages for breach of an oral agreement and (3) to establish a constructive trust in respect of certain real property.

THE FACTS. ²

On August 15, 1966, Karlsen was in default on a total indebtedness to American in the principal sum of $300,000 then due on his promissory note, and accrued interest. Charter, the named trustee in the trust deed executed by Karlsen, did, pursuant to American's instructions, properly notice a sale for February 3, 1967, of the property described in the trust deed.

The date of sale was continued on four separate occasions at Karlsen's request. Each of the four continuances was made by separate agreement between the parties in consideration of the payment by Karlsen of interest due and accruing on the principal obligation. The last of the four continuances expired on March 10, 1967. Karlsen asserts that on March 10, 1967, respondents orally agreed to a fifth continuance 'for at least an additional period of 35 days beyond * * * March 10, 1967 * * *.'

During the period prior to March 10, 1967, and thereafter, means and methods were discussed by the parties for curing the default which included '* * * transactions then pending for refinancing and sale of portions of * * *' the property embraced in the trust deed.

Karlsen asserts that during these negotiations he had requested American to reconvey a portion of the property (less than 12% Of the total) for $175,000 and so permit him to consummate a proposed deal with Humble Oil and Refining Company (Humble). There is no allegation that respondents agreed to such procedure, indeed, it is conceded that respondents did not and that nothing in the trust deed required release or reconveyance of a portion of the property on any terms. There is no allegation that appellant ever consummated the deal mentioned or any deal with Humble or anyone else.

The Humble negotiations relied upon by Karlsen, as revealed in the record, are described to their best advantage in Karlsen's opening brief as follows:

'During the course of the weekly continuances, Karlsen and respondents engaged in numerous conferences and negotiations concerning the various methods by which appellant intended to cure his default. One such method involved Karlsen's sale of a portion of the property to Humble * * * for $175,000 under an option purchased by Humble. Karlsen had told American about the Humble sale as early as November 1966, and American's chief appraiser found that the value of the remaining property, net of that parcel to be sold to Humble, would be $433,000. American's appraiser recommended reconveyance of the Humble parcel by American upon a payment of $40,000. Such recommendation was not accepted by American which demanded full payment. In order to pay off American, Karlsen offered to pay to American all of the $175,000 proceeds from the Humble sale, and to refinance the remaining $125,000. However, American refused to reconvey the Humble parcel. * * *.

'* * *.

'Negotiations between the parties continued after March 10, 1967. During the course thereof, Karlsen frequently informed respondents that he would not allow his property to be sold and that he would make such arrangements as would be necessary to postpone the sale further.'

The record discloses in addition that neither a sale to Humble or anyone else of a part or portion of the property was ever completed nor that any firm arrangements were ever made by Karlsen with anyone to refinance his loan on the property covered by the trust deed at any time before the motion for judgment on the pleadings was decided on September 4, 1969.

A trustee's sale was held on April 14, 1967. American purchased the property for $312,650, the amount then due.

Karlsen asserts that at the time of the sale the property was reasonably worth one million dollars. He alleges in his second amended complaint that on April 18, 1967, a few days after discovery of the sale, he did: '20. Upon discovery of said trustee's sale * * * orally and in writing (tender) to defendants the full amount outstanding on said promissory note, but defendants did thereupon reject said tender, and on or about May 10, 1967, offered to resell said property to plaintiff at a price of $514,000.00 cash, which said price represented a profit to defendant American of $202,000.00.'

Respondents admit that the sale was voidable ³ and that if an adequate tender had been made they would have been bound to accept it. We think the issue of adequate tender is decisive and will first address ourselves to that subject.

In the trial court the entire argument in chambers and in open court revolved around the question whether the first tender was adequate. The trial court decided on the facts shown by the record that there was no valid tender. Karlsen was then granted a further opportunity to amend. He filed a third amended complaint and made an offer or substitute tender referred to Infra.

CONTENTIONS ON APPEAL.

The complaint in its three causes of action attacks the sale on the grounds that: public announcement of the various sale continuances was not properly given; ⁴ that it was made in violation of section 694 of the Code of Civil Procedure; ⁵ that by reason of the continuing negotiations between the parties for payment of the amount due, Karlsen was lulled into a false sense of security; and that there was an oral promise not to sell until 35 days after March 10, 1967, coupled with an oral promise that a sale would not be made without personal notice to him of the specific date And without first giving him a reasonable opportunity to arrange an additional continuance. Karlsen alleges further that the sale made on April 14, 1967, was without notice or knowledge thereof by him, and that the price was so inadequate as to render the sale unfair and unconscionable.

RIGHT TO SET ASIDE THE SALE.

Respondents assert that even though the trustee sale was voidable, Karlsen cannot invoke the jurisdiction of a court of equity to set it aside when the complaint fails to show payment of the obligation for which the property was security or an offer in good faith to pay and that implicit in such offer must be the ability to pay.

A valid and viable tender of payment of the indebtedness owing is essential to an action to cancel a voidable sale under a deed of trust. (Shimpones v. Stickney, 219 Cal. 637, 649, 28 P.2d 673; Humboldt Savings Bank v. McCleverty, 161 Cal. 285, 290, 119 P. 82; Copsey v. Sacramento Bank, 133 Cal. 659, 666, 66 P. 7, 204; Crummer v. Whitehead, 230 Cal.App.2d 264, 268, 40 Cal.Rptr. 826; Mack v. Golino, 65 Cal.App.2d 731, 735, 213 P.2d 760; Py v. Pleitner, 70 Cal.App.2d 576, 581--582, 161 P.2d 393; Carpenter v. Hamilton, 59 Cal.App.2d 149, 151, 138 P.2d 355; Touli v. Santa Cruz County Title Co., 20 Cal.App.2d 495, 499, 67 P.2d 404.)

In a situation comparable to the one at bench, the court in Leonard v. Bank of America Etc. Assn., 16 Cal.App.2d 341, 344, 60 P.2d 325, 327, held: '* * * (O) ur Supreme Court, in one of its earliest decisions on the subject, said:

"* * * It is apparent from the general tenor of the decisions that an action to set aside the sale, unaccompanied by an offer to redeem, would Not state a cause of action which a court of equity would recognize.' (Copsey v. Sacramento Bank, 133 Cal. 659, at p. 662, 66 P. 7, 204, 85 Am.St.Rep. 238.)

"'In giving determinative force to the application of the principle of equity-jurisprudence just enunciated, the court has taken requisite cognizance of the fact that it appears without any conflict that the plaintiff was both at the time of the exercise of the power of foreclosure and is now in substantial default in the performance of the obligation of her contract and that she has in no manner shown by the evidence any ability to presently relieve herself from such defaults. Equity will not interpose its remedial power in the accomplishment of what seemingly would be nothing but an idly and expensively futile act, nor will it purposely speculate in a field where there has been no proof as to what beneficial purpose may be subserved through its intervention."' (Emphasis added.)

Our analysis of the pleadings together with Karlsen's admissions and answers to the interrogatories demonstrates that the only 'tender' made, if any, was in the form of Karlsen's Hope that American would release a portion of the property he hoped Humble would buy and that if a sale had been completed and part or all of the sales price had been paid by Humble, it would be delivered to respondents and applied in reduction of his note to American, and that American or some other person would refinance the balance of the obligation. The record shows, however, that American was under no obligation to release a portion of the property, that it had refused to do so, that it had never been suggested it would and that it had not nor had anyone...