London Homes, Inc. v. Korn

• Citation: 234 Cal.App.2d 233,44 Cal.Rptr. 262
• Court: California Court of Appeals Court of Appeals
• Decision Date: 05 May 1965
• Parties: LONDON HOMES, INC., Plaintiff and Appellant, v. Carl E. KORN et al., Defendants and Respondents. Civ. 7514.

Page 262

44 Cal.Rptr. 262

234 Cal.App.2d 233

LONDON HOMES, INC., Plaintiff and Appellant, v. Carl E. KORN et al., Defendants and Respondents.

Civ. 7514.

District Court of Appeal, Fourth District, California.

May 5, 1965.

Rehearing Denied May 24, 1965.

Hearing Denied June 30, 1965.

Tiday & Casey, and Ronald L. Tiday, Garden Grove, for plaintiff and appellant.

Arthur M. Bradley, Santa Ana, and Gordon X. Richmond, Orange, for defendants and respondents.

CONLEY, Justice. ^*

Robert H. Grant, a designer and executant of subdivisions in Orange County and other areas of southern California, and his various subsidiary organizations engaged in the same enterprises, executed an assignment of all claims which they might have against the defendants to London Homes, Inc., the plaintiff and appellant herein. For the sake of effective exposition, we shall refer to this whole group of planners and builders as 'plaintiff' without in all instances going into the details of the preliminary relationship of these people. In other words, for the sake of conciseness, the entrepreneurs will be referred to herein under one grouping as 'plaintiff' or as 'appellant.'

Arthur C. Korn and Carl E. Korn, brothers, had an ownership interest in three parcels of land located in or near the City of Stanton in Orange County. Arthur C. Korn and Vera O. Korn, his wife, owned approximately 6.010 acres; Carl E. Korn and his wife, Ethel A. Korn, 5.567 acres, and the estate of their father, Charles Korn, administered upon a parcel of 29.544 acres. These three pieces of land were contiguous, and they and neighboring lost caught the eye of the subdivision planners.

At that time, Arthur C. Korn and Carl E. Korn were the duly appointed, qualified, and acting executors of the estate of Charles Korn, deceased; they were two of a family of five siblings, who were the beneficiaries and heirs under the will of their father; the three sisters were Cora Schauner, Ruth A. Korn and Edna Pannier. The Korn brothers were never specifically named agents by any of the other heirs.

The plaintiff's predecessors made three contracts with the Korn brothers; one with Arthur C. Korn and his wife, Vera O. Korn, for their land; one with Carl E. Korn and Ethel A. Korn for their real property; and one with the two Korn brothers signing individually and not as executors for the real property administered by the estate of their father. The three contracts were essentially parallel in their terms. Each 'Deposit Receipt and Agreement' was set forth on one of the printed forms of Security Title Insurance Company; they were agreements on the part of the plaintiff to purchase the 6.010 acres owned by Arthur C. Korn and his wife, the 5.567 acres owned by Carl E. and Ethel A. Korn, and the 29.544 acres owned by the heirs of Charles Korn, and administered by his estate, all at the rate of $7,100 per acre. The three contracts contained the same contingency provision, namely, that the plaintiff must approve the title and an engineering report relative to the land within 50 days after the 19th of December, 1958, the date of the contract.

Enthusiastically pushing its plans for the subdivision, the plaintiff executed written agreements to purchase adjoining parcels contiguous to or in the vicinity of the Korn property in favor of the owners, Pearlman, Bock, Ingils, Pautz, Moore, and Harring. By the end of February, 1959, the plaintiff had become obligated to pay $151,000 for these other pieces of property, had expended $4,468.44 for engineering services, and had become liable to pay approximately $11,925.00 for the completion of necessary engineering services on the tract; it had expended $1,738.85 for various incidental items including surveys, newspaper advertisements and plans for rezoning the area. Besides this, plaintiff argued that one-half of the $12,000 monthly overhead of the planners should properly be allocated as an expense of this project.

Part of the land in the proposed subdivision was within the City of Stanton and part of it was in Orange County outside of the city limits. Some of the parcels were originally zoned for manufacturing and some for agriculture. The plaintiff initiated proceedings to have the portions of the property in the county area annexed to the City of Stanton and also undertook the necessary official procedure to change all of the zoning to R-1. These moves were initiated immediately after the Korns signed the deposit receipts; there were necessary newspaper publications, surveys, and appearances by attorneys in several departments of the city. The Korn brothers were fully aware of these enterprising moves of the plaintiff, and that the subdivision planners were necessarily spending time, money and concentrated effort on the advancement of the project. On February 2, 1959, Arthur C. Korn signed and delivered to one David Clark, acting as agent for the plaintiff, a letter requesting the City of Stanton to rezone the property. In fact, Carl Korn solicited the plaintiff to help him to have certain of his property on Katella Avenue, which he was retaining, rezoned to a C-2 classification.

The efforts of plaintiff to secure the annexation of all of the land to the City of Stanton and to rezone the property as prayed were carried through to realization.

Unhappily for the plaintiff, the Korn brothers flatly told David Clark, its agent, on or about the 26th day of February, 1959, that they would not complete the transaction someone else had made them a higher offer at the rate of $8,000 an acre for the land and they refused to make good their agreement to sell to the plaintiff at the former stipulated price. It is true that the Korns at that time contended that the condition in each of the deposit receipts that there must be an approval of the title and of the engineering report by the plaintiff within 50 days after the date of the agreement, had not been complied with, and that, consequently, they were released from any obligation to carry out their original promises. This position was erroneous for the court found that there had been oral compliance with the 50-day requirement; the Korns evidently felt that, as no written statement of compliance was delivered to them, the plaintiff was not satisfied with the title or the engineering report and that plaintiff's request to extend the time within which it could accept the title and the engineering report showed that plaintiff had not complied with the terms of the contingent agreement within the specified time. In this respect, however, the plaintiff stated that there was no necessity of the acceptance of these conditions in writing, and that, in fact, it had actually approved both the title and the engineering report within the time limit, but had asked for a formal extension of time to do so simply because the City of Stanton had not, prior to the expiration of the 50-day limitation, finally annexed the proposed subdivision land to the city, and had not as yet rezoned the real property as requested. While we accept the trial court's finding of fact that there was an approval both of the title and the engineering report within 50 days, this does not mean that the Korns did not act in good faith in contending that the plaintiff had lost its right to insist upon the performance of the contracts through a failure to accept title and engineering reports within the time limited.

In consternation at the situation which threatened the timely completion of the subdivision, the employees of the plaintiff finally arranged a meeting of the Korn brothers, Mr. Richmond, their attorney, Mr. Willard Pool, attorney for the plaintiff, and representatives of the plaintiff, at which a contract for the acquisition of the land from the Korns was renegotianted.

Mr. Richard L. Owen, who represented the plaintiff in its efforts to secure the land testified as follows:

'Q. Mr. Owen, you were questioned concerning a conversation in Mr. Richmond's office. At that time was it--did you believe that your agreement of December 19, 1958, was a valid agreement? A. Yes, I did.

'Q. Then why is it that you executed a new agreement wherein you agreed to pay $650 per acre more than in the original agreement? A. If we didn't acquire the Korn property we were going to sustain tremendous obligations and have to acquire quite a bit of additional ground which we had absolutely no use for and all the money that we had spent for engineering and everything would have been wasted and we had to have the Korn property or go broke, that was about all there was to it. We had to have it.

'Q. You mentioned you were advised if you didn't sign that new agreement or enter into the new agreement that you would have to go to court. Did you consider then what a court procedure would do to you concerning your development there. A. Yes, sir. We knew we would be tied up for at least two years and we couldn't stand to--financially to be tied up for two years and hold all this additional small parcels of property waiting for the outcome of the trial.'

On cross-examination, Mr. Owen testified:

'Q. You wanted to get everybody together and renegotiate? A. No, sir, I didn't want to renegotiate. I had to have title to their property.' (Emphasis added.)

'Q. Did Mr. Richmond make any statement in regard to what he thought your rights were under the instrument signed at that time?

'Mr. Tiday: Object to this, if the Court please, as being incompetent, irrelevant, immaterial at that state, that far in the future as to what he is----

'The Court: I don't think so. Overruled. It's part of the conversation.

'The Witness: Would you repeat?

'By Mr. Bradley: What did Mr. Richmond say? (Record read.)

'By Mr. Bradley: That is the deposit receipt agreement. A. He probably did and I don't remember exactly what he said.

'Q. He probably told you you were in a bad position as far as----

'The Court: I assume you are referring to the one covering the estate property only?

'Mr....