Opinion
As Modified on Denial of Rehearing Nov. 16, 1976.
Hearing Granted Jan. 5, 1977.
Opinions on pages 169-183 omitted.
HEARINGS GRANTED
[133 Cal.Rptr. 571]Paul T. Erskine, San Gabriel, for defendants and appellants.
Miller & Stern and Stanley Stern, Los Angeles, for plaintiffs and respondents.
KINGSLEY, Acting Presiding Justice.
Prior to June 26, 1970, the defendants were the owners of 160 acres of desert land located near Boron, California. After negotiations conducted through a broker named Conner, plaintiffs submitted an offer to buy that land at a price of $200 per acre. The offer, submitted on a standard form, provided for a purchase price of $32,000, payable $4,200 down, with the balance payable semiannually at one percent or more per month, including interest. The offer called for the 160 acres to be split into four 40-acre tracts, each tract to involve a separate deed of trust. The offer required the seller to include a 'standard' release clause for each 2 1/2 acres sold. On July 6, 1970, Mr. MacMillan, an officer of defendant bank, acting for the bank and the co-owner, accepted the offer by a letter directed to the broker. The letter requested the broker to provide the escrow holder (a branch of defendant bank) with the language for the release clause. Neither the offer nor the letter of acceptance referred to any kind of an acceleration clause. Thereafter, the escrow department of defendant bank prepared, and mailed to the broker, formal escrow instructions which contained a reference to the inclusion of an 'acceleration clause' in the trust deeds. Plaintiff husband testified that he regarded that reference as referring to the release clause previously agreed upon; inquiry by him of the broker confirmed that impression. Thereafter plaintiffs executed and returned the draft escrow instructions and the four deeds of trust, which contained a so-called 'due on sale' acceleration clause.
In addition to the 'due on sale' clause, the promissory notes that the trust deeds secured and the trust deeds, also included another 'acceleration clause'--namely the standard provision giving to the payee-beneficiary the right to accelerate payment of the principal on any default in making an installment payment called for by the notes.
On October 12, 1970, plaintiffs opened two escrows with prospective purchasers of the property, each involving one of the four 40-acre tracts purchased from defendants. Those escrows called for a purchase price of $300 per acre, payable (in each escrow) $1800 down, subject to defendants' first trust deed and for a second trust deed in favor of plaintiffs for the balance of the purchase price, payable, with interest, at the rate of $35 per month. Those escrows were to close on November 15, 1970--a date more than four months before the first payment would be due defendants (on March 25, 1971), on their trust deed notes.
When defendants learned of the proposed sale, they promptly announced their intent to exercise and enforce the 'due on sale' acceleration clauses in their trust deeds. Extensive negotiations followed. Eventually the defendants offered to waive those clauses as to the proposed resales, but only on condition that (1) the new purchasers assume the payment of the first trust deed notes and (2) agree to the retention of [133 Cal.Rptr. 572] those clauses in the trust deeds as applicable to any further resale. The proposed resale buyers refused those terms and the escrows failed.
On July 17, 1971, negotiations for a complete deletion of the 'due on sale' acceleration clauses having failed, plaintiffs filed suit, seeking reformation of the trust deeds, an injunction against foreclosure and a declaration of rights. On July 21, 1971, defendants began foreclosure proceedings. Those proceedings were stayed by a temporary injunction which ultimately was vacated on January 10, 1972, and defendants' foreclosure was completed on January 21, 1972. On February 21, 1975, an amendment to the then First Amended Complaint was filed, seeking money damages. The case went to trial on that pleading, resulting in a judgment for plaintiffs in the amount of $20,200 plus $4,000 attorneys fees. Defendants have appealed; we affirm.
I
Although the findings of fact by the trial court deal extensively with plaintiffs' right to a reformation, and the briefs similarly devote considerable discussion to that issue, we conclude that, in view of the matters discussed below, we need not consider or determine that issue. Even assuming that plaintiffs were not entitled to reformation, the judgment entered in their favor must be affirmed.
II
We agree with plaintiffs and the trial court that, in the case at bench, the attempt by defendants to enforce the 'due on sale' acceleration clauses was illegal and improper. In Tucker v. Lassen Savings & Loan Assn. (1974) 12 Cal.3d 629, 116 Cal.Rptr. 633, 526 P.2d 1169, the Supreme Court considered the validity of such clauses in cases where the proposed resale was by way of an installment land purchase with the original buyer remaining liable on the original trust deed note. While the resale here was not technically one of installment sale, it bore all the essential elements of such a sale. The terms of the sale did not give plaintiffs, as is the case in ordinary sales, an amount down sufficient to retire defendants' note and deed of trust. The land herein involved was raw desert land, so that any fear of 'waste' on the part of the new purchasers hardly could exist; the terms of sale left plaintiffs with a substantial interest in the property involved; defendants at no time have suggested that there existed any of the exceptional circumstances that Tucker suggests might make enforcement of such clauses proper in cases of installment resales.
Contrary to defendant's contentions, they did attempt to enforce the acceleration clauses. Even their ultimate offer of compromise insisted on new conditions, not involved in the original bargain. Defendants never offered to waive the clauses in question; they offered only a partial waiver in return for a new consideration.
III
It is undisputed that defendants' insistence on its claimed rights under the acceleration clauses caused plaintiffs' resale to fail and that pyaintiffs thereby lost the expected profit from that resale at least to the extent of the $8,000 loss thereby incurred, the judgment is correct.
IV
We conclude that the remaining $12,200 of the judgment likewise was proper. The parties litigated and have argued here whether the fact that plaintiffs, upon learning of defendants' insistence on enforcing the acceleration clauses, ceased making payments to defendants, entitled defendants to proceed with their foreclosure. The parties argue, at length, whether a deposit of one payment with plaintiffs' attorney, a tender of payment contained in the original complaint, and certain claimed correspondence between the parties' attorneys, singly or collectively, operated, as a matter of law, to prevent foreclosure. We need not determine those issues. Although, as we have held, the acceleration clauses were legally ineffective as applied to the factual situation herein involved, and assuming the correctness of defendants' present position [133 Cal.Rptr. 573] that the partial release clause, being typewritten, prevailed over the printed acceleration clause, the fact still remains that, at all times material, defendants were insisting that the clauses were validly enforceable and were in effect. That position effectively placed a cloud on plaintiffs' title and barred them from their expected use of the land as an investment for resale. Inasmuch as no attack has here been made on the trial court's calculation of the amount of damage resulting from defendants' conduct, the judgment, as entered was correct.
The judgment is affirmed.
The trial court is directed, at the time of taxing costs on appeal, to allow to plaintiffs such amount as may be reasonable for attorney fees on this appeal.
DUNN and JEFFERSON, JJ., concur.