Kish v. Bay Counties Title Guaranty Co.

• Decision Date: 28 September 1967
• Citation: 254 Cal.App.2d 725,62 Cal.Rptr. 494
• Court: California Court of Appeals Court of Appeals
• Parties: Stephen O. KISH and Lily D. Kish et al., Plaintiffs, Defendants in Intervention, Cross-Complainants, Appellants and Respondents, v. BAY COUNTIES TITLE GUARANTY COMPANY et al., Defendants, Defendants in Intervention, Appellants and Respondents, Michael J. Sussman and Marylee Sussman, Plaintiffs in Intervention, Cross-Defendants, Appellants and Respondents. Civ. 22639.

Page 494

62 Cal.Rptr. 494

254 Cal.App.2d 725

Stephen O. KISH and Lily D. Kish et al., Plaintiffs, Defendants in Intervention, Cross-Complainants, Appellants and Respondents, v. BAY COUNTIES TITLE GUARANTY COMPANY et al., Defendants, Defendants in Intervention, Appellants and Respondents Michael J. Sussman and Marylee Sussman, Plaintiffs in Intervention, Cross-Defendants, Appellants and Respondents.

Civ. 22639.

Court of Appeal, First District, Division 3, California.

Sept. 28, 1967.

Rehearings Denied Oct. 27, 1967.

Molinari, Casalnuovo & Berger, Joseph L. Casalnuovo, San Francisco, for plaintiffs.

Vernon W. Humber, San Francisco, for plaintiffs in intervention.

Peart, Baraty & Hassard, Joseph S. Rogers, Robert D. Huber, San Francisco, for defendants.

SALSMAN, Associate Justice.

Emilio L. and Mary Isabelle Urrea ¹ owned an interest in a motel in Reno, Nevada. Urrea listed the motel for sale with Kish & Co., a San Francisco realty firm owned by Stephen O. (and Lily D.) Kish. Michael J. (and Marylee) Sussman owned a house in San Francisco. He wanted to buy the Reno motel. In a single transaction, he sold his San Francisco house to Kish and bought the motel on a land sale contract. Sussman's equity in the house was part of the down payment. Kish loaned Sussman his commissions both on the motel and the house sales, and the amount of the loan also became a part of the down payment. Bay Counties Title Guaranty Company, ² the escrow holder, was instructed by Kish and Sussman to prepare a note and security device. Sussman signed a note for the loan, but no security device was ever prepared. Instead, Bay Counties obtained his signature on two blank sheets of paper.

Shortly after giving up possession of his house and taking possession of the motel, Sussman realized that certain facts were not as he had supposed them. He had been told that the motel's books would be available to him, but there were none. Nor was the motel's income as high as he had been told. On advice of counsel, he notified Bay Counties and Kish that he was rescinding his contract. He left the motel and returned to the San Francisco house. He paid nothing toward the purchase of the motel or on the note to Kish. Urrea sold the motel.

Sussman successfully sued Urrea in Nevada, and obtained a judgment for rescission on the theory that Urrea had concealed from him the existence of a balloon payment due on Urrea's contract.

In the superior court, Kish sued Bay Counties on five theories. First, he sought to quiet title to the money on deposit with Bay Counties. Secondly, he complained that Bay Counties breached a written agreement to provide him with a promissory note and a security instrument signed by Sussman; thirdly, he contended that Bay Counties' negligent conduct of the escrow cost him $7110. Next, he asked for a declaration as to the rights and obligations of the parties under the instruments of the transaction. Finally, he sued on common counts.

Sussman intervened, accusing Kish and Bay Counties of fraud, deceit and misrepresentation, asking for the return of the consideration he gave up in the deal, seeking removal of certain trust deeds on the San Francisco house, and praying for general and exemplary damages against Kish and Bay Counties.

Kish cross-complained against Sussman, seeking to quiet title to the San Francisco house, to recover it from Sussman's unlawful detainer of it, to get rent for the time he occupied it, to recover on the promissory note Sussman signed, to enjoin Sussman from dealing with any award he might recover in the Nevada action against Urrea, and declaratory relief.

After trial to the court title to the San Francisco house was quieted in Kish, subject to the trust deeds. He was given possession. He got a joint and several judgment for $7110 (plus $2000 interest) against Sussman and Bay Counties, and a judgment against Sussman alone for attorney's fees and rent. Sussman lost on every count and was taxed every party's costs. He moved for a new trial; the motion was denied. He then appealed.

Kish appeals from the judgment in favor of Bay Counties as to attorney's fees. Bay Counties appeals from the judgment in favor of Kish. Aligned with Bay Counties are Raymond Flanagan (its employee) and San Francisco Auxiliary Corporation and San Francisco Savings and Loan Association (trustee and beneficiary of the first deed of trust which secured the loan Kish took to finance his purchase of the San Francisco house).

Sussman seeks to set aside the entire transaction, and to undo all its consequences. To some extent he has succeeded; the federal court ordered the motel transaction rescinded and Sussman's consideration (representing his equity in the San Francisco house) returned to him. He now wants title to the house restored as well. The trial court properly refused to do so, as we shall demonstrate.

There is considerable support for Sussman's contention that no title passes where the escrow holder delivers and records a deed before full performance of the escrow's terms. See, e.g., Todd v. Vestermark, 145 Cal.App.2d 374, 377, 302 P.2d 347; Love v. White, 56 Cal.2d 192, 14 Cal.Rptr. 442, 363 P.2d 482; Hildebrand v. Beck, 196 Cal. 141, 146, 236 P. 301, 39 A.L.R. 1076; Los Angeles High School Dist. v. Quinn, 195 Cal. 377, 383, 234 P. 313; Montgomery v. Bank of America, 85 Cal.App.2d 559, 193 P.2d 475; cf. Borgonovo v. Henderson, 182 Cal.App.2d 220, 6 Cal.Rptr. 236. But in each of the cited cases, title to property was purportedly delivered to one who himself had failed to comply with a condition precedent to or concurrent with delivery to him. In the present case, the converse is true. The condition--creation of a security instrument--was for the protection of Kish, not Sussman, but it is Sussman who now complains. (Cf. Wales v. Greene, 125 Cal.App.2d 387, 270 P.2d 534.) Kish, on the other hand, is content to keep title to the San Francisco house and the damages incidental to it. The rule for which Sussman contends would mean that the injured party cannot waive failure to comply with a condition of escrow. Such a rule is too broad. The possibility of waiver by the aggrieved party is at least recognized in Todd v. Vestermark, supra, 145 Cal.App.2d 374, 380, 302 P.2d 347.

Sussman argues that a condition precedent to the sale of the San Francisco house--the 'successful completion of the Reno motel' deal--never occurred because he was entitled to rescind. He also urges that the rescission may be viewed as a failure of consideration in the Kish-Sussman contract. Kish concedes that consummation of the motel deal was an express condition precedent to Sussman's obligation to sell the house, but he argues that subsequent rescission does not work backward to undo an already consummated deal. He analogizes with broker's commission cases. (See Cochran v. Ellsworth, 126 Cal.App.2d 429, 440--441, 272 P.2d 904; Peak v. Jurgens, 5 Cal.App.2d 573, 576--577, 43 P.2d 569.)

Sussman's position is without merit. Title was properly conveyed to Kish by deed, not contract. The condition precedent to consummation of the Kish-Sussman transaction took place. Under these circumstances, even total failure of consideration will not justify rescission. Lavely v. Nonemaker, 212 Cal. 380, 383, 298 P. 976; Promis v. Duke, 208 Cal. 420, 425, 281 P. 613; Duckworth v. Watsonville Water, etc, Co., 170 Cal. 425, 434, 150 P. 58.

Kish's further answer to Sussman's demand for rescission, that Sussman has never offered to restore the consideration he received from Kish, is meaningless, because the consideration of which he speaks is the loan of Kish's commissions, Kish's right to which Sussman here contests.

Sussman attacks Kish's right to commissions on the sales of the house and the motel on a number of grounds. Most are in turn based on the same alleged misrepresentations by Kish or his employee (concerning the motel's income, the availability of books and the protection given the buyer of land under a contract of sale), and their failure to find out the truth for their client, Sussman. But the trial court found that there were no misrepresentations by Kish or his employees, nor any reliance by Sussman.

When we view the evidence as we must, most favorably to the judgment, we find that it supports the findings. There is conflict, of course, but once the trier of fact has resolved them, we are bound to accept the resolution.

The evidence shows that Sussman was himself suspicious of the claims made for the motel's earning potential, and agreed to buy if the annual earnings were $25,000, not the claimed $50,000. He did insist that he wanted to see the books, but directed his efforts principally to Urrea, not Kish. After being put off several times, he finally agreed to go ahead with the deal even though his demands had never been satisfied. There is no room here for us to overturn the findings of the trial court.

Sussman's contention that the protection given the purchaser under an installment land contract was also misrepresented to him is no more sound. The only evidence which conflicts with the court's finding is the testimony of Sussman himself. Although the other parties present testified that Flanagan discussed the assignability and transferability of land sale contracts, they did not say that he represented the protection to the vendee under such a contract is greater than that of a California deed of trust.

The result of the federal action in Nevada casts further doubt on Sussman's position. The district court found that Sussman was entitled to rescind because he relied on a misrepresentation about a balloon payment of $4,000, and not for any of the reasons he now advances.

We conclude that Sussman may not now ignore the outcome of those transactions into which he entered. Title to the San Francisco house was properly quieted in Kish, and Sussman therefore owes Kish the reasonable rental value of the property for the time he lived...