Pease v. Brown

• Decision Date: 16 November 1960
• Citation: 8 Cal.Rptr. 917,186 Cal.App.2d 425
• Court: California Court of Appeals Court of Appeals
• Parties: Robert E. PEASE and Irene L. Pease, Plaintiffs and Respondents, v. John D. BROWN and Mabel E. Brown, Defendants and Appellants. Civ. 24457.

Page 917

8 Cal.Rptr. 917

186 Cal.App.2d 425

Robert E. PEASE and Irene L. Pease, Plaintiffs and Respondents, v. John D. BROWN and Mabel E. Brown, Defendants and Appellants.

Civ. 24457.

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

Nov. 16, 1960.

Hal L. Coskey, Los Angeles, for appellants.

Anderson, Adams & Bacon and Robert L. Bacon, Rosemead, for respondents.

FORD, Justice.

The defendants appeal from a judgment for specific performance of a contract of sale of land.

Under the contract dated September 14, 1957, the defendants agreed to sell a lot to the plaintiffs for $5,750 in cash. The agreement contained the following handwritten language: 'This sale is contingent on construction loan of approximately $11,000 obtained by buyer. Also that 3 homes may be built and contingent on sale of property Escrow No. to close November 10, 1957.' A printed provision was: 'Time is of the essence of this agreement.'

An escrow was opened on September 16, 1957. While it was stipulated at the time of the pre-trial conference that in the escrow, opened 'for the purpose of carrying out this [sales] contract,' ¹ there were included the matters upon which the sale was contingent as stated in the contract, the actual wording of the escrow instructions upon that subject was: 'The within escrow is contingent upon the Buyer being able to obtain a building loan for approximately $11,000.00. It is also contingent upon you [escrow agent] being notified by Mr. Conrad [the broker with whom the sellers had listed the property] or myself [buyers] that three houses can be built on the within described property and is also contingent upon the closing of your [escrow agent's] escrow 44-23140.' The escrow instructions also contained the following provision: 'If the conditions of this escrow have not been complied with prior to the date set out on line 1 [November 13, 1957], or any extension thereof, you are nevertheless to complete the escrow as soon as the conditions, except as to time, have been complied with, unless written demand shall have been made upon you not to complete it.' ²

At the pre-trial conference, it was stipulated that 'a construction loan of $11,000.00 could have have been obtained by plaintiffs in regards to the construction they contemplated on defendant's property, [and] that the property in question was zoned to allow the construction on the property of three homes.' Consequently, the only factual issue raised at the trial was whether the cancellation of the escrow by the defendants on December 3, 1957, rendered ineffectual the tender by the plaintiffs of the purchase price on December 6, 1957. ³ The findings of fact of the court were in part as follows: 1. The escrow upon which the sale was 'contingent' closed on December 5, 1960. 2. Time was not of the essence 'in either the escrow instructions or the contract for the sale of the property.' 3. At numerous times from November 13 until December 3, 1957, the defendants, through their agent, Harlan C. Conrad [the real estate broker with whom the property had been listed], orally informed the plaintiffs that the plaintiffs would not have to deposit the purchase price for the property until the other escrow had closed. 4. The plaintiffs believed such statements. 5. After November 13, 1957, the defendants never, either orally or in writing, demanded payment of the purchase price of the property from the plaintiffs but 'cancelled the escrow and sale without prior notice' on December 3, 1957.

It is not claimed on this appeal that there was not substantial support in the evidence for the findings of fact with respect to the sellers' acquiesence in the buyers' delay in depositing the purchase price. Even when time is of the essence, the provision with respect thereto may be waived by the conduct of the parties. When there has been such a waiver by a party he must, in order to put the other party in default, not only give notice that delay will no longer be tolerated but must allow the other party a reasonable time within which to perform. Carberry v. Trentham, 143 Cal.App.2d 83, 89, 299 P.2d 966; Lifton v. Harshman, 80 Cal.App.2d 422, 433, 182 P.2d 222. As has been stated, the provisions relating to the availability of a construction loan and as to the number of houses which could be built on the lot were the subject-matter of a stipulation at the time of the pre-trial conference. But aside from that, they were obviously for the benefit of the buyers and were subject to being waived by them. Johnson v. Lehtonen, 151 Cal.App.2d 579, 582, 312 P.2d 35; O'Connell v. Zimmerman, 157 Cal.App.2d 330, 336, 321 P.2d 161; see 5 Corbin, Contracts (1951), § 1194, p. 824. Clearly, the bringing of an action by the buyer for specific performance would constitute such a waiver. See GOTTLAUB V. COHEN, 139 N.J.EQ. 323, 51 A.2D 254, 255;⁴ cf. Sequoia Investment Corp. v. Paillard, 135 Cal.App.2d 166, 172, 286 P.2d 857. Consequently, under the facts as found by the court, as of the time the suit was brought the plaintiffs were entitled to the equitable relief which they sought (see King v. Stanley, 32 Cal.2d 584, 592, 197 P.2d 321; Van Fossen v. Yager, 65 Cal.App.2d 591, 596, 151 P.2d 14; Moore v. Heron, 108 Cal.App. 705, 709, 292 P. 136; MAJOR V. PRICE, 196 VAL. 526,⁵ 84 S.E.2d 445, 446; 5 Corbin, Contracts (1951), § 1194; Note, 22 A.L.R.2d 508, 522), unless appellant's contention as to the lack of mutuality of obligation, made for the first time on this appeal, ⁶ has merit. We turn to the question of law so presented.

It is the position of the appellants that 'neither the deposit receipt nor the escrow instructions created a binding contract' because 'plaintiffs' promise was illusory' in that it was contingent upon the availability of a construction loan, the propriety of building three houses on the property, and the closing of the other escrow. They further assert that, '[t]here being no contract between the parties, defendants were of course at liberty to withdraw the offer at any time prior to its acceptance and therefore the judgment in favor of the plaintiffs was improper and should be reversed.'

The applicable law with respect to the problem thus presented is to be found in Mattei v. Hopper, 51 Cal.2d 119, 330 P.2d 625, 626. There the written agreement was evidenced on a form commonly known as a deposit receipt. The concluding paragraph of that agreement was: 'Subject to Coldwell Banker & Company obtaining leases satisfactory to the purchaser.' The leases were to be of shopping center buildings to be constructed. The Supreme Court said, 51 Cal.2d at page 122, 330 P.2d at page 626: 'Nor does the provision making the agreement 'subject to' plaintiff's securing 'satisfactory' leases necessarily constitute a condition to the existence of a contract. Rather, the whole purchase receipt and this particular clause must be read as merely making plaintiff's performance dependent on the obtaining of 'satisfactory' leases. Thus a contract arose, and plaintiff was given the power and privilege to terminate it in the event he did not obtain such leases. (See 3 Corbin, Contracts (1951), § 647, pp. 581-585.)'

In the discussion of the matter of mutuality of obligation, it is stated at page 122 of 51 Cal.2d, at page 626 of 330 P.2d of the Mattei opinion that: 'When the parties attempt, as here, to make a contract where promises are exchanged as the consideration, the promises must be mutual in obligation. In other words, for the contract to bind either party, both must have assumed some legal obligations. Without this mutuality of obligation, the agreement lacks consideration and no enforceable contract has been created. (Shortell v. Evans-Ferguson Corp., 98 Cal.App. 650, 660-662, 277 P. 519; 1 Corbin, Contracts (1950), § 152, pp. 496-502.) Or, if one of the promises leaves a party free to perform or to withdraw from the agreement at his own unrestricted pleasure, the promise is deemed illusory and it provides no consideration. See J. C. Millett Co. v. Park & Tilford Distillers Corp., D.C.N.D.Cal., 123 F.Supp. 484, 493. Whether these problems are couched in terms of mutuality of obligation or the illusory nature of a promise, the underlying issue is the same--consideration.' As to the matter of the satisfaction of Mattei with respect to the leases, the court said, 51 Cal.2d at page 124, 330 P.2d at page 627: 'The standard of evaluating plaintiff's satisfaction--good faith--applies with equal vigor to this type of condition and prevents it from nullifying the consideration otherwise present in the promises exchanged.' See, also, 3 Williston, Contracts (Rev.Ed. 1936), § 675a, p. 1943; Rest., Contracts (1932), § 265, comment a.

In Braxdale v. Bange, 166 Cal.App.2d 399, 333 P.2d 420, 421, which was an action for damages for breach of a contract to form a partnership, the last paragraph of the agreement was: 'This proposal shall not be binding upon any parties signing unless adequate finances are assured to support the entire endeavor.' The court held that, although the plaintiff had the responsibility of securing such financing, under the reasoning of the Mattei case the last paragraph of the agreement did not render it unenforceable.

In Rodriguez v. Barnett, 52 Cal.2d 154, 338 P.2d 907, 909, one paragraph of the agreement was: 'All above items subject to approval of buyers, this agreement is contingent upon their approval.' The Supreme Court said, 52 Cal.2d at pages 160-161, 338 P.2d at page 911: 'The agreement was neither illusory nor lacking in mutuality of obligation merely because the parties thereto inserted a provision making the purchasers' performance dependent on their satisfaction with the subdivision map to be obtained by them. Contracts making the duty of performance of one...