Smith v. Allen

• Court: California Supreme Court
• Writing for the Court: McCOMB; TRAYNOR
• Citation: Smith v. Allen, 68 Cal.2d 93, 65 Cal.Rptr. 153, 436 P.2d 65 (Cal. 1968)
• Decision Date: 23 January 1968
• Parties: , 436 P.2d 65 May Emerson SMITH, Finis William Smith, and Dorothy Delphia Smith, Plaintiffs and Appellants, v. Deane ALLEN and Ruby Allen, Defendants and Respondents. L.A. 29526.

Page 153

65 Cal.Rptr. 153

68 Cal.2d 93, 436 P.2d 65

May Emerson SMITH, Finis William Smith, and Dorothy Delphia Smith, Plaintiffs and Appellants, v. Deane ALLEN and Ruby Allen, Defendants and Respondents.

L.A. 29526.

Supreme Court of California In Bank.

Jan. 23, 1968.

Clifford W. Twombly, Los Angeles, for plaintiffs and appellants.

Rutan & Tucker, John B. Hurlbut, Jr., and Herbert W. Walker, Santa Ana, for defendants and respondents.

Paul E. Homrighausen, Noel W. Nellis, Morrison, Foerster, Holloway, Clinton & Clark and Robert D. Raven, San Francisco, as amici curiae on behalf of defendants and respondents.

McCOMB, Associate Justice.

Plaintiffs appeal from a judgment of dismissal entered after a general demurrer was sustained to their amended complaint seeking damages for unjust enrichment in a transaction involving the sale of residential property to them by defendants, the latter having reacquired the property in foreclosure proceedings.

Facts: On August 15, 1963, plaintiffs and defendants executed an instrument labeled 'Real Estate Option,' under which plaintiffs agreed to purchase, for a total consideration of $145,000, certain residential property owned by defendants. At the time of the execution of the agreement, plaintiffs paid $5,000 toward the purchase price and took possession of the property.

Defendants agreed to convey the property to plaintiffs on February 1, 1964, provided plaintiffs made certain additional payments on the purchase price, totaling $25,000 ($5,000 on October 1, 1963, $10,000 on November 1, 1963, $5,000 on December 1, 1963, and $5,000 on January 1, 1964), paid $4,193 (apparently interest) on February 1, 1964, and executed a promissory note for the balance of the purchase price ($115,000) and a first deed of trust on the property. By its terms, the promissory note was to bear interest at 7% And was payable at the rate of $900 per month, beginning March 1, 1964.

On February 1, 1964, plaintiffs having fulfilled the conditions hereinabove set forth, defendants conveyed the property to them.

During the period in which they were in possession of the property (slightly over 21 months), plaintiffs allegedly made certain repairs at a cost of $2,239.42 ¹ and certain improvements at a cost of $17,439.74. ²

Plaintiffs paid the 1963--1964 taxes, in the sum of $989.38, and made the first nine of the $900 monthly payments due by the terms of the promissory note ($8,100). They then defaulted, allegedly being 'without funds, assets or credit from which to make any further payment.'

Thereafter, defendants commenced foreclosure proceedings, which culminated in a trustee's sale on May 6, 1965. At that time, the property was sold and conveyed to defendants, who obtained possession from plaintiffs on May 27, 1965.

Plaintiffs allege that the value of the property at the time defendants reacquired it at the trustee's sale was not less than the contract price plue the cost of the repairs and the improvements (a total of $164,679.16); that the reasonable rental value for the period of their occupancy was at the rate of $750 per month, or a total of $16,140; that the total amount of moneys expended by them was $62,961.54; and that they have been damaged, and defendants have been unjustly enriched, by the difference, or the amount of $46,821.14. They ask judgment in that amount.

Question: If a vendor of real property forecloses a deed of trust given to secure the vendee's purchase money note and bids in the property at the foreclosure sale, which is regular in form, and the value of the property at that time is more than the unpaid balance of the underlying debt, is the vendee entitled to restitution of payments made toward the purchase price of the property and moneys expended for repairs and improvements, less the rental value of the property for the period of his occupancy?

No. In Freedman v. Rector, 37 Cal.2d 16, 230 P.2d 629, 31 A.L.R.2d 1, we held that a vendee was entitled to restitution of a $2,000 down payment (less a $900 real estate commission and the expenses of sale) made by him under a contract for the sale of land for $18,000, the vendor having resold the land for $20,000 after the vendee wilfully defaulted. In that case, however, the defaulting vendee had never received title, and the contract of sale was therefore an executory one. (See also Caplan v. Schroeder, 56 Cal.2d 515, 15 Cal.Rptr. 145, 364 P.2d 321.)

Where, as in the present case, the vendor has conveyed the property to the vendee and has taken back a deed of trust which secures the vendee's purchase money note, the contract of sale has been executed, since the object of such a contract is to effectuate a...