Tucker v. Lassen Savings and Loan Ass'n
| Decision Date | 19 September 1973 |
| Citation | 34 Cal.App.3d 579,110 Cal.Rptr. 73 |
| Court | California Court of Appeals Court of Appeals |
| Parties | Jerry TUCKER et al., Plaintiffs and Respondents, v. LASSEN SAVINGS AND LOAN ASSOCIATION, a corporation, and Financial Federation, Inc., a corporation, Defendants and Appellants. Civ. 13702. |
Coshow, Barr & Tocher, by William Coshow, Redding, for defendants-appellants.
Price, Burness & Price, by Robert Burness, Chico, for plaintiffs-respondents.
Defendants and appellants, hereinafter referred to as defendants, appeal from a judgment entered in favor of plaintiffs and respondents, hereinafter referred to as plaintiffs, in the sum of $3,724.85. The facts giving rise to the litigation are as follows.
Three of the four plaintiffs were engaged either as real estate brokers or salesmen. In January of 1969, plaintiffs purchased a parcel of property for the sum of $11,400, making a down payment of $4,000 and financing the remainder with a loan from defendants in the usual form of a deed of trust secured by a note. The note contained a customary provision that if the makers of the note should 'sell, convey or alienate the property described in the Deed of Trust securing this note, or any part thereof, or any interest therein, or shall be divested of title, or interest therein in any manner or way, whether voluntary or involuntary, the holder hereof may, at its option, declare any portion of the entire amount of principal and interest to be immediately due and payable.'
The plaintiffs also executed a 'Borrower's Statement of Understanding' containing the following language:
The deed of trust executed by the plaintiffs as trustors contained language almost identical to that in the note it secured. Although the plaintiffs admitted that they knew that the documents contained some language about acceleration clauses, they denied they understood it. There is testimony from plaintiffs, however, that when they were considering a sale they inquired around as to the meaning of the language but did not contact defendants.
On November 7, 1969, plaintiffs entered into a contract of sale of the subject property to Joseph A. Noll and Delia M. Noll. Defendants were not notified of this transaction, but several months later became aware of it and gave notice that in accordance with the note and deed of trust held by them they were calling for full payment of the loan. The plaintiffs were unable to pay the loan and were unable to find any other lending agency to take over the financing. Although defendants filed a 'notice of default and election to sell under the deed of trust,' an arrangement was worked out whereby the defendants permitted the Nolls to assume the loan at a higher rate of interest and upon paying certain charges.
The court found in favor of plaintiffs and awarded them damages in the amount of $3,724.85, the amount plaintiffs had invested and lost in the property. The court made findings of facts and conclusions of law, but the only significant conclusion made was that the exercise by defendants of the acceleration clause, which we shall hereafter refer to as the 'due on sale' clause, was an unreasonable restraint on alienation under Civil Code section 711. Although plaintiffs had pleaded a cause of action in estoppel, the court made no findings thereon, limiting itself to a finding that defendants' security was not impaired by the sale to the Nolls.
Plaintiffs, in a well written brief, urge a number of general contentions in support of the judgment: That the 'due on sale' clause is unreasonable and unnecessary inasmuch as defendants' security was unimpaired; that the contract was ambiguous; that plaintiffs could have entered into a lease with an option to buy with the Nolls and have avoided the operation of the acceleration provisions.
The judgment cannot be supported on any of the grounds urged by plaintiffs. The trial court makes no conclusion that the agreement is ambiguous and we find no ambiguity. The argument that plaintiffs might have entered into a lease with an option to purchase does not avail them as that is not what they did. They made a contract of sale, an exhibit in this case, which clearly operates to transfer equitable title to the buyers at this time and fee title when the contract is fully performed. In fact, plaintiffs advance no serious argument that the contract of sale to the Nolls did not come within the purview of acceleration provisions of the 'due on sale' clause, contending instead, as we have said, that under the circumstances of this case its enforcement is unjust and unreasonable inasmuch as the lenders' security was not jeopardized by the sale.
Were we to view this case as a case of first impression, our task would require an analysis of the entire field of justifiable and unjustifiable restraints on alienation. But this case is far from being such case of first impression. Thus we are limited in our view to the precise points here involved. The landmark case in the field of permissible restraints on alienation wherein a lender imposed conditions as a condition of making a loan is Coast Bank v. Minder-hout (1964) 61 Cal.2d 311, 38 Cal.Rptr. 505, 392 P.2d 265. In that case, plaintiff bank made loans to defendant upon the condition that defendant borrower would not transfer or encumber without the bank's consent, and if such transfer or encumbrance was made, the entire indebtedness would immediately become due. The original borrower, Enright, conveyed to the defendant, and plaintiff bank instituted foreclosure proceedings when the defendant was unable to pay off the entire loan which the bank had declared due under the acceleration provisions of the loan. The Supreme Court held the accelerated clause valid, declaring: ...
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