White Point Co. v. Herrington

• Decision Date: 23 December 1968
• Citation: White Point Co. v. Herrington, 268 Cal.App.2d 458, 73 Cal.Rptr. 885 (Cal. App. 1968)
• Court: California Court of Appeals
• Parties: WHITE POINT COMPANY, a Corporation, and La Salle Music Corporation, etc., Plaintiffs and Respondents, v. Paul B. HERRINGTON and Marjorie M. Herrington, Defendants and Appellants. Civ. 32494.

Page 885

73 Cal.Rptr. 885

268 Cal.App.2d 458

WHITE POINT COMPANY, a Corporation, and La Salle Music Corporation, etc., Plaintiffs and Respondents, v.Paul B. HERRINGTON and Marjorie M. Herrington, Defendants and Appellants.

Civ. 32494.

Court of Appeal, Second District, Division 1, California.

Dec. 23, 1968.

Rehearing Denied Jan. 20, 1969.

Hearing Denied Feb. 19, 1969.

Dodge & Loveridge, Paul F. Loveridge and Oakley C. Forst, Santa Ana, for defendants and appellants.

Joseph J. Snyder, Sepulveda, and Walleck, Shane & Baechtold, and David L. Shane, Van Nuys, for plaintiffs and respondents.

FOURT, Associate Justice.

Paul B. Herrington and Marjorie M. Herrington, husband and wife and the owners of certain unimproved land in Moorpark, California, appeal from an order of the court, sitting without a jury, decreeing specific performance of an alleged agreement for the purchase and sale of a portion of the Herrington real property.

Appellants contend that certain provisions in the escrow instructions which constitute the alleged contract of sale contemplate future agreement by the parties, and that material terms as to release clauses and easement locations are so uncertain as to render the entire agreement unjust and unreasonable as to appellants and not specifically enforceable.We have concluded from our examination of the entire record that appellants' contention is well taken and that the trial court's decree of specific performance constituted an abuse of discretion in that it in effect created a new contract for the parties.

The Herringtons (hereinafter sometimes together referred to as Herrington) in 1963 owned several hundred acres of unimproved ranch land in Moorpark, California.Frank La Salle, owner of La Salle Music Corporation(hereinafter sometimes called La Salle Music), had on various occasions informally discussed with Paul Herrington the prospective sale of a portion of the acreage, and had in fact purchased twelve and one-half acres thereof sometime prior to the present transaction.In December 1963, La Salle and Mrs. Mary E. Shaffer, owner of White Point Company(hereinafter sometimes called White Point), met and discussed with Paul Herrington their prospective joint purchase of three parcels of the Herrington property: the north 20 acres of Lot 21, the south 40 acres of Lot 22, and a 2.5 acre parcel in Lot 20 upon which was situated the old Herrington single family residence, a total of about 62.5 acres.

Herrington was interested in selling the acreage for a total price of $3,500 per acre, but he was concerned about a couple of matters with reference to the future use of the property: (1) the Herrington acreage was supplied with water from a single well situated in the southwest corner of Lot 22 which Shaffer and La Salle proposed to purchase, and Herrington was under compulsion to retain title to the well bacause he had granted to a corporate lessee the right to remove therefrom at its own expense all the water it might need for gravel pit operations on other Herrington land some distance from the well; (2) easements would be required to provide temporary protection of pipeline locations and maintenance rights for both the two-inch pipeline from the well to the Herrington residence and a five-inch pipeline from the well to the gravel pit, and to provide for prospective relocation of these lines over Lots 21 and 22 upon future development of the property.The prospective purchasers, on the other hand, were principally concerned with the finances and engineering requirements for the potential commercial development of the property, either as a shopping center or a residential subdivision.Herrington testified, and it seems reasonable to suppose, that La Salle and Shaffer considered it desirable, if not essential, to open an escrow for the purchase before investing in engineering feasibility reports or instituting an application for rezoning.

Therefore, the parties, with numerous terms as yet unresolved between them, agreed that an escrow for the purchase and sale of the property should be opened at the Bank of A.Levy in Simi, California.Accordingly, on January 23, 1964, Paul Herrington met Shaffer and La Salle at the escrow department in the bank where they discussed the proposed transaction at length with the escrow officer.As of that date the parties had not yet agreed upon the precise amount of the down payment or the trust deed obligation, the method of handling the well situation, the description of the pipeline and other easements, and the appropriate terms of clauses relating to financing and security in the event of future development.The escrow officer's suggestion that the parties consult a lawyer to resolve uncertainties was rejected as premature and the escrow officer thereafter, at the request of the parties, drafted escrow instructions naming the Herringtons as sellers and La Salle Music and White Point as joint purchasers with the right to use other names in the ultimate vesting of title.

The escrow officer's original proposed instructions provided for a $38,750 down-payment with the unpaid balance of $180,000 to be evidenced by a promissory note with interest at 6% Per annum, principal payments to be amortized by equal $12,000 annual installments over the 15-year term of the note and interest payable in semiannual installments.The promissory note was to be secured by the 60 acres of property located in Lots 21 and 22 while the purchasers were to receive free and clear, in consideration of their down-payment, the deed to the 2.5 acre parcel in Lot 20 on which the single family residence was situated.The instructions additionally gave the buyer the right to a 30-day extension for closing, provided for partial releases at $3,000 per acre, ¹ gave buyers an easement over the wellsite, ² and allowed for the realignment of pipelines.³These instructions were not fully acceptable and on January 29, 1964, the parties once more met at the escrow department.At the buyer's request a provision was added purporting to allow the buyer to sell parcels of five or more acres during escrow which might be covered by separate trust deeds.⁴Both the original instructions and the amendment thereto were then executed by the Herringtons, by Mrs. Shaffer on behalf of White Point and by La Salle on behalf of La Salle Music.

The Herringtons promptly obtained and deposited in escrow a legal description of the parcels, including the 2.5 acre parcel surrounding the old family residence and the wellsite surface area of approximately .48 acres which were surveyed for that purpose.The buyers were required by the escrow instructions to 'deposit in escrow written approval of the C, C & R's of record and the Engineering Report being obtained by buyer.'They subsequently decided, however, to avoid the expense of obtaining an engineering report because the originally contemplated commercial development was deemed premature.Accordingly, White Point and La Salle Music deposited in escrow their written approval of the preliminary title report and their approval and waiver of engineering reports.Although respondents also deposited in escrow a proposed form of release clause, that document was neither transmitted to nor approved by appellants.It appearing to Herrington that certain matters remained to be satisfactorily resolved, signed deeds to the property were not deposited in escrow.White Point and La Salle Music as the named purchasers thereupon instituted the within action seeking specific performance.

At the opening of the trial the parties orally stipulated by counsel in open court that respondents' cause of action for damages and appellants' cross-complaint for fraud were dismissed, and that the consideration in terms of money agreed upon as the purchase price of the property was fair and adequate as of the date upon which the escrow instructions were executed.Following the presentation of evidence, the court took the matter under submission and on April 3, 1967, filed its Memorandum of Opinion expressing its intention to rule in favor of respondents.By minute order of the same date, the court directed counsel for respondents to prepare findings of fact, conclusions of law, and the judgment which the court directed 'shall contain the direction to the plaintiff to arrange for all cash payment to the defendants or in lieu thereof, to the parties to negotiate on the details for the release clause with provision to seek the aid of the court if that becomes necessary.'

The Memorandum of Opinion ⁵ reviews the provisions of the escrow instructions in the light of the evidence and the law.Although the court was impressed that the ambiguity of the provision for release clauses cast doubt upon the validity and enforceability of the contract and made it unfair, the court sought to incorporate therein an implied-in-law covenant of good faith requiring the parties'to sincerely and earnestly negotiate to complete adequate details so as to make the contract fair and reasonable.'The court further declared '* * * I feel that the matter of formulating release details beyond the expressed fundamentals, in order to insure fairness, lends itself adequately to the supervisory capacity of the court.Of course the plaintiffs can obviate all such problems by securing outside financing and paying the defendants all cash through the escrow.'

On June 2, 1967, plaintiffs noticed a motion for an order of the court'determining certain items left unresolved in the Court's Memorandum of Judgment dated April 3, 1967, and more particularly for an Order resolving and determining the language, terms and conditions of the notes, trust deeds, easements and release clauses to be incorporated in the Judgment to be rendered in favor of plaintiffs in the above action.'Counsel's supporting declaration states that 'Counsel for plaintiffs are unable to consummate the purchase of the property in cash, a possibility...