Spellman v. Dixon

• Decision Date: 15 November 1967
• Citation: 63 Cal.Rptr. 668,256 Cal.App.2d 1
• Court: California Court of Appeals Court of Appeals
• Parties: John W. SPELLMAN, Dorothy P. Spellman, Plaintiffs and Appellants, v. Esther E. DIXON, Defendant and Respondent. Civ. 30588.

Page 668

63 Cal.Rptr. 668

256 Cal.App.2d 1

John W. SPELLMAN, Dorothy P. Spellman, Plaintiffs and Appellants, v. Esther E. DIXON, Defendant and Respondent.

Civ. 30588.

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

Nov. 15, 1967.

Richard S. Miller, Sherman Oaks, for appellants.

White, Oberhansley & Fleming and David W. Fleming, Van Nuys, for respondent.

ROTH, Presiding Justice.

Appellants appeal from a judgment denying them specific performance or money damages for an alleged breach of contract to convey real property.

Respondent, an 82-year old widow, was the owner of certain real property in Reseda. On May 24, 1961, appellant paid respondent $1,350 outside of escrow and the parties then executed escrow instructions for the sale and purchase of respondent's property for the sum of $40,000, $30,000 of which was to be subordinated to a first deed of trust 'in form furnished by the title company, and upon terms and conditions approved by Buyers and Seller, to be furnished to the escrow.'

Conditions provided for including rezoning of the property, were to occur or be performed on or before November 30, 1961, 'but * * * if said conditions had not been complied with by that time, then the escrow agent was nevertheless to complete said escrow as soon as the conditions (except as to time) had been complied with * * *.' Appellant John W. Spellman was and had been for many years a licensed real estate broker. No rezoning having occurred prior to the original date of escrow termination, John persuaded respondent to extend the original expiration date to October 10, 1962. John admitted that at the time he obtained this latter extension the value of the property was in the 'neighborhood of $55,000.'

On June 5, 1962, respondent repudiated and terminated the escrow and offered to return the money and all things of value she had received from appellants.

On August 8, 1962, appellants advised they were willing and able to complete performance of the agreement and they 'were willing to and did waive the benefit of * * * (the subordination agreement.)' Respondent did not accept, and formally, in writing, rescinded the agreement on August 13, 1962.

On September 24, 1962, respondent sold the property in question for $57,760 to third persons. Appellants thereupon brought this action for specific performance or for money damages.

The trial court held that the contract was too uncertain and specifically the subordination clause thereof to enforce and found:

'(1) There occurred no breach of contract by defendant;

'(2) No valid contract existed between the parties;

'(3) That defendant have judgment against plaintiffs, together with her costs of suit herein;

'(4) That defendant forthwith return to plaintiffs the sum of One Thousand Three Hundred Fifty Dollars ($1,350.00) paid to defendant by plaintiff, and that defendant release all claims on monies now held by escrow so that the same may be returned to plaintiffs less charges of escrow, * * *.'

Appellants concede that the subordination clause of the contract was patently ambiguous, uncertain and unenforceable. They contend, however, that this clause does not invalidate the entire contract and argue that appellants' purported waiver of the clause (treated infra) removes the uncertainty and renders the contract enforceable.

An agreement cannot be specifically enforced unless the terms are 'sufficiently certain to make the precise act which is to be done clearly ascertainable.' (Civil Code, § 3390(5).) It must not only contain all the material terms but also express each in a reasonably definite manner. (Magna Development Co. v. Reed, 228 Cal.App.2d 230, 236, 39 Cal.Rptr. 284; Roberts v. Lebrain, 113 Cal.App.2d 712, 716, 248 P.2d 810.) Similarly, to enforce a contract at law, the offer must be sufficiently definite or must call for such definite terms in the acceptance, that the performance required is reasonably certain. (Witkin, Summary of California Law, Vol. 1, 7th ed. (1960) at page 49).

At bench, it is clear that the subordination provision is neither clear nor enforceable. However, it will not void the entire agreement unless the clause is material.

The importance of certain and unambiguous terms in a subordination clause is that such terms 'will define and minimize the risk that the subordinating liens will impair or destroy the seller's security * * *. Such terms may include limits on the use to which the proceeds may be put to insure that their use will improve the value of the land, maximum amounts so that the loans will not exceed the contemplated value of the improvements they finance, requirements that the loans do not exceed some specified percentage of the construction cost or value of the property as improved, specified amounts per square foot of construction, or other limits designed to protect the security. Without some such terms, however, the seller is forced to rely entirely on the buyer's good faith and ability as a developer to insure that he will not lose both his land and the purchase price.' (Handy v. Gordon, 65 Cal.2d 578, 581, 55 Cal.Rptr. 769, 771, 422 P.2d 329, 331.) In the absence of an effective subordination clause '* * * the contract leaves defendants with nothing but plaintiff's good faith and business judgment to insure them that they will ever receive anything for conveying their land.' (Handy v. Gordon, supra, 65 Cal.2d at page 582, 55 Cal.Rptr. at page 771, 422 P.2d at page 331.)

The agreement at bench represented by the escrow instructions referred to is subject to all the infirmities...