Yackey v. Pacifica Development Co.

• Decision Date: 12 December 1979
• Citation: Yackey v. Pacifica Development Co., 99 Cal.App.3d 776, 160 Cal.Rptr. 430 (Cal. App. 1979)
• Court: California Court of Appeals
• Parties: George F. YACKEY et al., Plaintiffs, Cross-Defendants and Appellants, v. PACIFICA DEVELOPMENT COMPANY, etc., et al., Defendants, Cross-Complainants and Respondents. Civ. 18473.

Page 430

160 Cal.Rptr. 430

99 Cal.App.3d 776

George F. YACKEY et al., Plaintiffs, Cross-Defendants and Appellants, v.PACIFICA DEVELOPMENT COMPANY, etc., et al., Defendants, Cross-Complainants and Respondents.

Civ. 18473.

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

Dec. 12, 1979.

Hearing Denied Feb. 7, 1980.

Jones, Hatfield, Penfield & Garrett and Clinton F. Jones, San Diego, for plaintiffs, cross-defendants and appellants.

William A. Tookey, Pasadena, for defendants, cross-complainants and respondents.

STANIFORTH, Acting Presiding Justice.

PlaintiffsGeorge F. Yackey and Alma H. Yackey brought this action to recover money damages for breach of contract (escrow instructions) against the Pacifica Development Company(partnership) and its co-partners William R. Swann and Edward Gessin.

Upon trial, the court found the release clause in the escrow agreement so uncertain as to render the entire agreement void, unenforceable and upon that sole basis gave judgment for defendants.Yackey appeals.¹

I

Mr. and Mrs. Yackey agreed to sell to the partnership 375 acres of real property located in Fallbrook, California.When the buyers refused to perform the agreement, according to the terms of the escrow agreement the Yackeys filed this suit for damages for breach of contract.The partnership denied the essential allegations of the complaint and set up affirmative defenses including allegations of fraud in the inducement.The partnership also cross-complained against Mr. Yackey, seeking damages for fraud.

At trial, the defendants abandoned their cross-complaint and rested their whole case upon the premise that the escrow instructions, more particularly the release clause contained therein, were so uncertain as to render the entire contract unenforceable.The trial court after making specific findings in favor of the Yackeys on the existence of the contract, its breach by defendants and $70,785.40 damages, and against the partnership in its fraud contention, concluded "(t)he release clause set forth in the escrow instructions . . . was so uncertain as to render the entire agreement void and unenforcible (sic) both in equity and in law."And that "(b)ut for (such) invalidity . . . defendants would have been in breach of contract and plaintiffs would have been entitled to damages" totalling $70,785.40.Judgment was thereupon entered in favor of defendants on the complaint and for plaintiffs(cross-defendants) on the cross-complaint.The Yackeys appeal; defendants have not appealed the adverse ruling on their cross-complaint.

II

The Yackeys owned 375 acres of real property, unplanted, undeveloped, consisting of brushlands, canyons and rolling hills.In 1972, they had agreed to sell the property to Sam Ku for the total purchase price of $750,000.That agreement was not fulfilled and the Yackeys were sued by Ku for specific performance.In connection with that action, Ku recorded a lis pendens on the Yackeys' property which was not released of record until September 23, 1976.The Yackeys sought to remove this cloud on title to their real property and offered to settle Ku's lawsuit by the paying of some $20,000.Their offer was rejected by Ku.He demanded $123,500 for a dismissal.

In April 1975, while the Ku v. Yackey lawsuit was pending, Swann was introduced the property by a real estate broker, Dorothy Gessin, wife of partner Edward Gessin.Partner Swann was an experienced builder and developer.He had built roughly 5,000 units and put together eight to ten subdivisions.Swann and Mrs. Gessin met the Yackeys at the property and discussed the physical characteristics of the land at that time.Thereafter, Swann and Gessin instructed Mrs. Gessin to make an offer on the property.There were no further meetings with the Yackeys until after the escrow was signed.Mr. Yackey consulted his attorney about the offer and was advised not to accept it.However, Yackey, against his lawyer's advice, agreed to accept the Swann offer.Swann selected the escrow company one which he frequently used to handle the sale and Swann telephoned the information to the escrow officer which was in fact used in preparation of the escrow instructions.Swann caused to be included in the escrow agreement an acknowledgment of the "lis pendens"(Ku's) action and an instruction to the officer "to close escrow prior to its release."Before the signing of the instructions, Mr. Swann had been advised by the Yackeys' attorney of the nature of the lis pendens (Ku's) action.The instructions made specific provision for Swann to assume the defense of that action.

By the terms of the escrow instructions, so dictated by Swann, $750,000 was to be paid for the 375 acres, $150,000 to be paid at close of escrow and the balance, $600,000, to be paid in the form of a promissory note secured by a purchase money trust deed.

Swann directed the escrow officer to include in the instructions a provision for the following release clause to be included in the trust deed:

"Provided the trustor is not then in default hereunder or with respect to the payments due on note secured hereby, at his request, a partial reconveyance may be had and will be given from the lien or amount to apply on the principal of said note based on the rate of $2500.00 for each acre to be so reconveyed."

These escrow instructions were dated April 30, 1975, and provided that the sale was to close "on or before 120" days from that date.Escrow did not close within the 120-day period and thereafter several attempts were made to find a means whereby the date for closing could be extended and at the same time to allow the Swann-Pacifica to commence their development of the property.These efforts proved fruitless, and finally, by letter dated December 2, 1975, Swann's attorney stated that Yackeys' last offer was unacceptable and Swann had no counterproposal to submit at that time.On that date, the attorney for the Yackeys wrote Swann's attorney to announce that the Yackeys considered Mr. Swann to be in breach of the contract.He had, in fact, not performed any of the terms specified to be performed in the escrow agreement.

III

The trial court concluded the release clause was uncertain and that uncertainty rendered the whole agreement void upon the reasoning expressed in White Point Co. v. Herrington, 268 Cal.App.2d 458, 466, 73 Cal.Rptr. 885, 889, where it was said:

"In recent years subordination agreements have frequently been reviewed by appellate courts with respect to the issues of uncertainty, materiality and fairness.Where the subordination provisions have been found uncertain and incapable of ascertainment by reference to an objective standard, the contracts have been deemed void for the uncertainty of a material provision (citations)."

In White Point Co. v. Herrington, supra, 268 Cal.App.2d 458, 73 Cal.Rptr. 885, the parties, with numerous terms as yet unresolved, including the trust deed obligation and others relating to the financing of the security in the event of future development, disregarded the escrow officer's advice that they first consult a lawyer to resolve the uncertainties, caused the escrow instructions to be prepared and signed.Among the matters which remained unresolved were the terms of contemplated release clause.The instructions, after providing for a trust deed note, simply stated that the note was to have a release clause providing for partial releases of $3,000 per acre.(Id., at p. 462, fn. 1, 73 Cal.Rptr. 885.)The buyers thereafter deposited the proposed form of release clause in escrow; it was never approved by the sellers.Thus, White Point, supra, is a classic example of an agreement to agree.Upon such factual base, the reasoning and the conclusion of the White Point court is sound contract law.

However, the White Point rule does not fit this case.If we assume for purposes of discussion the release clause is uncertain, yet such fact does not render the entire contract ipso facto void; only where the terms of such clauses are to be determined at a later date and by mutual consent of the buyer and seller in effect an agreement to agree will the contract be deemed void from its inception.(Stockwell v. Lindeman, 229 Cal.App.2d 750, 40 Cal.Rptr. 555;Woodworth v. Redwood Empire Sav. & Loan Assn., 22 Cal.App.3d 347, 99 Cal.Rptr. 373.)However, as was said in Schomaker v. Osborne, 250 Cal.App.2d 887, 893, 58 Cal.Rptr. 827, 830:

"The necessity of future agreement on limited phases of the transaction does not prevent birth of a binding contract upon acceptance since, if the parties cannot agree on these phases, each may force the other to accept the determination of a court of equity."

And in Eldridge v. Burns, 76 Cal.App.3d 396, 425, 142 Cal.Rptr. 845, it was held a release clause will not be deemed uncertain merely because the parties delegate to the buyer or to the third party lender the right to determine the property to be released or the power to detail terms of construction in permanent loans.

Similarly, if such determination is reserved by or given to the seller, a contract is not thereby rendered unenforceable for uncertainty.(Ontario Downs, Inc. v. Lauppe, 192 Cal.App.2d 697, 13 Cal.Rptr. 782.)Where, however, such delegation is made to the buyer and it does not contain terms that will sufficiently protect the Seller's security from undue risk, the clause and/or the entire contract may be vulnerable to the claim that it is not, As to the seller, just and reasonable.(Handy v. Gordon, 65 Cal.2d 578, 55 Cal.Rptr. 769, 422 P.2d 329;Eldridge v. Burns, supra, 76 Cal.App.3d 396, 142 Cal.Rptr. 845.)

Further, the claim of unfairness may be asserted only in an action for specific performance.It is not available to the partydefendants here in an action for damages for breach of contract.It may be asserted only as a defense and only by the person as to whom the contract is unjust and unreasonable.In this instance it would be the...