Riess v. Murchison

• Decision Date: 17 March 1964
• Docket Number: No. 18198.,18198.
• Parties: Stephan RIESS and Thelma McKinney Riess, Appellants and Cross-Appellees, v. C. W. MURCHISON and Simi Valley Development Company, Appellees and Cross-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

329 F.2d 635 (1964)

Stephan RIESS and Thelma McKinney Riess, Appellants and Cross-Appellees, v. C. W. MURCHISON and Simi Valley Development Company, Appellees and Cross-Appellants.

No. 18198.

United States Court of Appeals Ninth Circuit.

March 17, 1964.

COPYRIGHT MATERIAL OMITTED

Loeb & Loeb, Alden G. Pearce, Frank E. Feder, and Robert A. Holtzman, Los Angeles, Cal., for appellants and cross-appellees.

Walter Ely, Los Angeles, Cal., for appellee and cross-appellant C. W. Murchison.

Stuart L. Kadison, Los Angeles, Cal., for appellee and cross-appellant Simi Valley Development Co.

Before HAMLEY and KOELSCH, Circuit Judges, and MacBRIDE, District Judge.

MacBRIDE, District Judge.

This is a diversity action involving a land sale contract.

Stephan Riess and Thelma McKinney Riess (referred to herein as the sellers) entered into a contract with C. W. Murchison, who subsequently assigned to Simi Valley Development Company (referred to herein as the buyers) for the sale of certain real estate, namely: A three and one-half acre parcel of land in the Simi Valley in Ventura County, California, on which were located a number of wells (referred to herein as the water lands) and, in addition, approximately three hundred subdivided lots in the same area (referred to herein as the additional lands).

The contract consisted of two separate letters from C. W. Murchison to Stephan Riess, dated September 13, 1955, and June 12, 1956, constituting a single integrated agreement, under which: (1) The sellers were to convey the water lands and the additional lands to the buyers on June 12, 1956, (referred to herein as the consummation date). (2) The buyers were to deliver one-sixth of the common stock of the Simi Valley Development Company to the buyers on the consummation date. (3) The buyers were to pay the sellers $1,000,000 as follows: $50,000 was to be paid on the consummation date. $24,000 was to be paid in each of the two years immediately following the consummation date. No fixed time was set for payment of the balance; it was to be paid at the rate of ten cents per 1,000 gallons of water produced, saved, and sold from the water lands, provided, however, that if during any year the amount payable at this rate should be less than $24,000, the sellers were to be entitled to take the difference in water at the rate of twenty cents per 1,000 gallons, though if the buyers should elect to pay the difference in money, they might do so. (4) "Subject to" the physical ability of the water on the water lands to adequately service certain other lands which were owned by the buyers and which were to be developed for residential and commercial uses (referred to herein as the Montgomery lands), the buyers were to build or install a reservoir and pipelines on the water lands to transmit water taken therefrom to the nearest boundaries of the Montgomery lands by June 12, 1958. In case of a disagreement as to the sufficiency of the water on the water lands to adequately service the Montgomery lands, the question was to be submitted to arbitration. (5) The buyers were to have the right at any time to reconvey the water lands to the sellers and terminate the contract and their future obligations thereunder, if, in their opinion, the water on the water lands should no longer be capable of producing water in quantities sufficient to be commercially profitable to them.

Pursuant to the contract the sellers conveyed the water lands and the additional lands to the buyers on the consummation date. They have performed all the material covenants and conditions on their side of the contract.

During the fourteen months prior to the consummation date, the buyers paid the sellers $28,000 in fourteen monthly installments of $2,000 each (referred to herein as the voluntary payments). The contract recites that this amount should be a "credit on the purchase price." On or about the consummation date, the buyers paid an additional $50,000 to the sellers, and they delivered one-sixth of the common stock of Simi Valley Development Company to the sellers.

During the fifteen months immediately following the consummation date, the buyers paid the sellers $30,000 in fifteen monthly installments of $2,000 each. Thereafter, the buyers refused to make any further monthly payments, contending that the voluntary payments ($28,000) should be credited against the balance due for the last nine months of the first two year period ($18,000), thereby satisfying such balance and creating an overpayment of $10,000.

Subsequently, during certain meetings between the sellers and the buyers, and in certain correspondence and conversations between them, concerning future performance by the buyers under the contract, the buyers expressed some unwillingness to comply exactly with the terms of the contract. Whether the buyers actually repudiated the contract is in dispute.

The buyers did not build or install the reservoir and pipelines on the water lands by June 12, 1958, as promised, though they did build and install them at a later date before trial. They asserted that the water on the water lands was insufficient to adequately service the Montgomery lands and that, therefore, the condition to their duty to build or install the reservoir and pipelines by that date did not occur.

The buyers have not paid the sellers at the contract rate for water produced, saved, and sold by them from the water lands, though between the consummation date and the date of trial they did produce, save, and sell water therefrom.

The buyers have never exercised their right under the contract to terminate the contract for insufficiency of the water on the water lands.

On October 8, 1958, the sellers brought the present action in the District Court. They demanded a jury trial. At trial they proceeded on the theory that the buyers committed total breach of the contract by failing to perform their duties thereunder and by unequivocally repudiating such duties.

Before and during the trial, the buyers sought to enforce the contract's arbitration clause. They made a number of motions to stay the proceedings pending arbitration of the question of the sufficiency of the water on the water lands to adequately service the Montgomery lands. The District Court denied such motions on the ground that the question of sufficiency was not material to the case.

After three days of trial to a jury, during which time Stephan Riess was the only witness, the District Court ruled as a matter of law that at the times here relevant the contract was not susceptible to total breach and that consequently the sellers could recover only their actual damages for partial breach. The amount of the actual damages having been stipulated, the court held that no issue of fact remained for the jury, and accordingly it dismissed the jury.¹

The District Court then proceeded to make findings of fact and conclusions of law. It held that the buyers committed partial breaches of the contract: The court held that the buyers breached by paying only $30,000, instead of $48,000, during the two years immediately following the consummation date; in this connection, it held that the voluntary payments of $28,000 made prior to the consummation date should be credited against monies to become due under the contract after trial, not against the $48,000 due during such first two years. The court also held that the buyers' duty to build or install the reservoir and pipelines on the water lands by June 12, 1958, was absolute, not conditional, and, therefore, that their failure to build or install them by that date constituted a breach, regardless of the sufficiency of the water on the water lands to adequately service the Montgomery lands. The court further held that the buyers breached by failing to pay the sellers at the contract rate for water produced, saved, and sold by them from the water lands.

With respect to the question of total breach, the District Court held that the contract was not susceptible to total breach at the times here relevant, and it found that even if it had been, still in fact the buyers did not commit total breach, by repudiation or otherwise. Accordingly, the District Court entered judgment for the sellers, but awarded them only actual damages for partial breach. Both sides appeal. The questions raised by the appeals are considered below.

1. Did the District Court err in ruling as a matter of law that the contract was not susceptible to total breach at the times here relevant? For the reasons stated below, we hold that the ruling was erroneous, though we express no opinion as to whether in fact the buyers did commit total breach, by repudiation or otherwise.

The District Court, after stating its legal ruling that the contract was not susceptible to total breach, proceeded to make findings of fact and found, among other things, that even if the contract had been subject to total breach, still the buyers did not repudiate it and did not commit total breach. We feel that this finding was merely gratuitous and should be disregarded on this appeal, for in a case such as this, where the trial court has taken an issue from the jury,² the appellate court should consider only questions of law with respect to that issue. See 5 C.J.S. Appeal & Error § 1469 (1958). Cf. West Coast Products Corp. v. Southern Pac. Co., 226 F.2d 830, 832 (9th Cir. 1955).

It is undisputed that, for purposes of the legal question stated above, the substantive law of California governs. Erie Ry. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Klaxon v. Stentor Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Calif.Civ.Code, § 1646; Blair v. New York Life Ins. Co., 40 Cal.App.2d 494, 104 P.2d 1075 (1940). Under the California cases, as we read them, the controlling rule is as follows: A breach of contract which, by itself, would be considered partial may be total if it is accompanied by unequivocal repudiation of the...