Lawrence v. Shutt

• Decision Date: 17 February 1969
• Citation: Lawrence v. Shutt, 269 Cal.App.2d 749, 75 Cal.Rptr. 533 (Cal. App. 1969)
• Court: California Court of Appeals
• Parties: Marvin E. LAWRENCE, Beverlie A. Lawrence and Marvin E. Lawrence Co., a corporation, and S. V. Hunsaker & Sons, Inc., etc., Plaintiffs and Appellants, v. Roy V. SHUTT, Winifred Shutt and Philip F. Marantz et al., and Security Title Insurance Company, Defendants and Respondents. Civ. 8919.

Page 533

75 Cal.Rptr. 533

269 Cal.App.2d 749

Marvin E. LAWRENCE, Beverlie A. Lawrence and Marvin E. Lawrence Co., a corporation, and S. V. Hunsaker & Sons, Inc., etc., Plaintiffs and Appellants, v.Roy V. SHUTT, Winifred Shutt and Philip F. Marantz et al., and Security Title Insurance Company, Defendants and Respondents.

Civ. 8919.

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

Feb. 17, 1969.

Hearing Denied April 17, 1969.

[269 Cal.App.2d 753] Wenke, Pilskaln, Kemble & Marx, and Paul Frederic Marx, Santa Ana, for plaintiffs and appellants Lawrence and Marvin E. Lawrence Co.

O'Melveny & Myers, and Allyn O. Kreps and Girard E. Boudreau, Jr., Los Angeles, for plaintiff and appellant, S. V. Hunsaker & Sons, Inc.

Best, Best & Krieger, and John H. Barnard, Riverside, for defendants and respondents, Shutt.

Thompson & Colegate, Riverside, for defendant and respondent, Security Title Ins. Co.

OPINION

FOGG, Associate Justice pro tem.^*

This appeal concerns the issues of the validity of a release clause in a purchase money deed of trust, and if invalid, whether or not rescission of the entire sales transaction was justified.The action was brought by plaintiffsMarvin E. Lawrence, Beverlie A. Lawrence, and Marvin E. Lawrence Company(Lawrence) and S. V. Hunsaker & Sons, Inc.(Hunsaker) for specific performance of the release clause, for a declaration of the rights and obligations of the parties under the release clause, and to quiet title to the property as to which the release was demanded.Plaintiffs also included an alternative cause of action for damages which they elected not to pursue at the time of trial, and a fifth cause of action for reformation of the release clause to insert the inadvertently omitted legal description of the '80-acre parcel'(see footnote 1, Infra) to which defendants stipulated at pretrial.Roy V. Shutt and Winifred Shutt(Shutt), sellers of the property and beneficiaries under the deed of trust, answered the complaint by denying the validity of the release clause, counterclaimed for rescission of the transaction of sale, and sought to set aside the conveyance to Lawrence.After a court trial, judgment was entered in favor of the Shutts rescinding the agreement of sale and declaring the grant deeds and deeds of trust to be void, ordering the grant deeds and deeds of trust to be cancelled, declaring the Shutts to be the owners of said property, and further ordering the Shutts to restore to plaintiffs the $250,000 paid by the latter under said agreement.

Plaintiffs filed motions for a new trial and to vacate the judgment; however, the motions were denied.This appeal is from the judgment.

In March 1963, the Shutts were the owners of 1280 acres of land situated, for the most part, in Riverside County at the boundary between Riverside and San Bernardino Counties.Except for the Shutt residence and accompanying farm structures, the property is unimproved.Access from County Line Road, a public road, can only be had from the east, and there are no public or improved roads on the property.The land is very hilly and rough except for the most easterly 80 acres.

By escrow instructions, dated March 15, 1963 and March 22, 1963, the Shutts agreed to sell the 1280 acres to Dr. Gerald Rutten for the total sum of $1,175,000 of which $250,000 was to be in cash and the balance of $925,000 to be evidenced by a promissory note secured by a first deed of trust.In these instructions, Rutten reserved the right to assign his interest in said transaction without further approval of the seller.The instructions also contained a provision which later was incorporated in the deeds of trust and which provided for the manner in which parcels of the real property would be released from the lien of the deed of trust.¹This clause was drafted in its entirety by the attorney for the Shutts.It was subsequently revised so as to break down the property from two to three sectors for release purposes.The three sectors became the '80-acre parcel' having a release price of $5,000 per acre; that portion of the 1200-acre parcel lying in Section 15, Township 2 South, Range 2 West, S.B.B. & M. (containing 240 acres) having a release price of $2,000 per acre; and the remainder of the 1200-acre parcel (960 acres) having a release price of $1,000 per acre.

By escrow instructions dated September 16, 1963, the time for close of escrow was extended to January 15, 1964, and it was provided that the Shutts could retain possession, rent free, for twelve months following the month in which escrow closed, of the residence and approximately 25 acres in the southeasterly portion of the property.

By escrow instructions dated January 15, 1964, the escrow was amended to extend the time for closing to August 15, 1964, and to increase the total purchase price to $1,280,000.The down payment was not increased, but the note securing the balance of the purchase price was increased to $1,030,000, interest at 6% Per annum payable semi-annually, with principal payable in ten equal annual installments, commencing three years from the close of escrow.

On March 20, 1964, Rutten sold, assigned and transferred all right, title and interest in the escrow to Marvin E. Lawrence for agreed cash payments totaling $65,000 and a trust deed to be given at close of escrow for the balance of the purchase price of $512,000.Lawrence in turn assigned his rights to himself and his wife and Marvin E. Lawrence Company, a corporation.Notice of the assignment was given to the escrow holder, Security Title Insurance Company, on May 12, 1964, accompanied by an acceptance of the assignment and the escrow instructions, and a ratification of all acts performed by Rutten.No notice of the assignment was given the Shutts because the escrow instructions gave Rutten the right to assign his interest without the Shutts' approval.

On June 24, 1964, the escrow holder forwarded to the Shutts a map and legal description of two parcels, totaling 143.5 acres, which the buyers had requested to be excluded from the deed of trust pursuant to the release clause.The Shutts refused to release the parcels requested and, on August 13, 1964, the escrow closed and the various grant deeds and trust deed were recorded.On the same morning, plaintiffs commenced this action and attached the proceeds of the escrow as well as the bank accounts of the Shutts.Plaintiffs also demanded a partial reconveyance of the two parcels previously requested to be omitted from the trust deed; however, this request was refused by the Shutts.From August 13, 1964, the two parcels for which releases were sought were owned by S. V. Hunsaker & Sons, Inc., and Marvin E. Lawrence, joint venturers doing business under the firm name of S.V.H. & L.C. Development Co., which joint venture became effective July 10, 1964.The $250,000 down payment which was eventually received by the Shutts was paid by Hunsaker.

Some three or four months before the escrow was to close, the Shutts began expressing dissatisfaction with the release clause.They changed counsel twice prior to the close of escrow, and again following the close of escrow.Just prior to close of escrow, the Shutts, through their then counsel, indicated their belief that the release clause was unenforceable in its present form as contended by the buyers, and that it was their interpretation that the property first eligible for release was the 80-acre parcel.However, they did not specifically object to the closing of escrow.

More than a month after escrow closed, the Shutts mailed to Lawrence a notice of rescission setting forth the following grounds: mistake, invalidity of the agreement, failure of consideration, fraud, and the failure of the escrow to close according to instructions.The grounds of fraud and improper closing of the escrow were abandoned by time of trial.

By their pretrial statement, dated February 16, 1965, the Shutts' contentions were stated for the first time that they denied the original request for release because it failed to comply with the express provisions of the release clause in two respects: (1)'Parcel 2' was less than the required 40 acres in size, to-wit, only 6.5 acres; (2) its effect would be to deprive the Shutts of reasonable access to unreleased portions of the land.

On May 8, 1965, plaintiffs made a second request for release adding to the two parcels previously sought to be released the 73.7 acres immediately north of 'Parcel 2.'Evidence of this second request was admitted by the trial judge for the limited purpose of showing the 'intention of the defendants(the Shutts) toward the entire transaction.'

The attachments were released on September 18, 1964, and at that time the Shutts gave their notice of rescission and tendered all benefits received.

During the entire period from the close of escrow to date of judgment, the Shutts denied Lawrence's ownership and interfered with his access, use and development of the property.Lawrence sought and obtained a temporary injunction against further interference and harassment by the Shutts with access to and use of said property by Lawrence, his agents, employees and representatives.Ultimately, Mr. Shutt was incarcerated three days for contempt of this court order.

The Shutts also refused to accept interest on the deed of trust and continued to pay real property taxes after the close of escrow.

In its findings of fact, the trial court found, in pertinent part, as follows:

'19.At the time of entering into the escrow instructions defendants SHUTT believed that property would be released from the provisions of the Deed of Trust in such a manner that the property in the '80 acre parcel' would first be released, and that thereafter generally rectangular shape parcels of 40 acres or more, each proceeding from one boundary of the property parallel to adjacent boundaries towards the center of the property, would be released; and defendant would not...