WARE v. FRANK MELINE CO

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District Court of Appeal, Third District, California.

WARE v. FRANK MELINE CO., Inc., et al.*

Civ. 5448.

Decided: January 27, 1936

Coleman E. Stewart, of Santa Barbara, for appellants. Walter H. Hewicker, of Los Angeles, for respondent.

The defendants have appealed from a judgment which was rendered against them for the rescission of an executory contract to convey real property on the ground of a failure of consideration resulting from the destruction of a material portion of the property on account of inroads of the sea. The judgment also requires the repayment to plaintiff of the installments which were paid to the defendants on account of the purchase price of the property.

The defendant Security-First National Bank of Los Angeles, a banking corporation, is successor in interest of Pacific-Southwest Trust & Savings Bank, which was the owner of lot 866, block 2, in Ventura county, as per map thereof recorded in Book 15, pages 26 to 31, of the records of said county. The lot borders on the Pacific Ocean. The defendant the Frank Meline Company, Inc., is the acknowledged agent of the owner of the lot in question. January 25, 1926, the plaintiff entered into a written contract to purchase the lot from the owner thereof through its agent, the Frank Meline Company, for an initial payment of $79 and monthly payments of $10 to be paid each month thereafter until the full purchase price therefor amounting to the sum of $790 was fully paid, with interest on all deferred payments at the rate of 7 per cent. per annum. Prior to September 11, 1931, the plaintiff paid to said agent the total sum of $955.75, which included the principal installments due, and interest thereon. The lot was unimproved, and the plaintiff never had possession thereof. The contract for purchase of the lot provided that the vendor would make specified improvements thereon and appurtenant thereto, including apparatus for street lighting, water, gas, etc. These improvements were made. No deed to the property passed. In January, 1931, without the knowledge of plaintiff the value of the lot was materially destroyed by encroachment of the sea which washed out the “Shore Drive” intervening between the lot and the sea and utterly destroyed the equipment for lighting, water, and gas appurtenant thereto and by covering the lot with “sand and debris.” The court found that the owner of the lot was an “undisclosed principal,” but it appears that a formal contract of sale was executed January 25, 1926, and thereafter delivered to the plaintiff, in which instrument the Pacific-Southwest Trust & Savings Bank was named as the vendor. October 15, 1931, the plaintiff discovered the material damage to the lot and the court found that the plaintiff then “notified defendants that he would not accept a deed of conveyance to the real property.” In May, 1932, the attorney for the plaintiff notified the agent of the defendant bank in writing that the value of the lot in question had been materially destroyed by encroachment of the sea as above related, and that the plaintiff “demands of your company at this time repayment of all moneys paid to you on account of the contract in question.” Payment was refused by the defendants, and this suit was instituted. The cause was tried by the court which adopted findings favorable to the plaintiff on all essential issues. A judgment was thereupon rendered rescinding the contract of purchase of the lot on the ground of a material loss of the value thereof by encroachment of the sea and awarding plaintiff the sum of $955.75 and costs of suit. From this judgment the defendants have appealed.

It is contended the agent of the vendor of the lot in question is not liable on rescission for repayment of the money received on account of the purchase price thereof; that damage to the lot by encroachment of the sea, over which the defendants had no control, does not furnish ground for rescission, and that the owner of the lot was not given notice of rescission which is a necessary prerequisite to the maintenance of this suit.

Under the circumstances of this case, the plaintiff was entitled to rescind the contract to purchase the lot in question on the ground of a material failure of consideration. The contract was executory. The conditions thereof were not fulfilled. The plaintiff never had possession of the property. The deed had not passed. Pending the contract, the value of the land was materially impaired by inroads of the sea which destroyed the apparatus for furnishing light, water, and gas to the premises and by covering the lot with sand and débris and by washing out the “Shore Drive” adjacent to the land, thus causing a material failure of consideration and rendering it impossible for the vendors to specifically perform the terms of the contract. Under such circumstances, the purchaser of real property under an executory contract is entitled to rescind the instrument and recover the money paid on the purchase price thereof. Section 1689, Civ.Code; Conlin v. Osborn, 161 Cal. 659, 120 P. 755; Ogren v. Inner Harbor Land Company, 83 Cal.App. 197, 256 P. 607; Higbie v. Shields, 27 Cal.App. 536, 150 P. 801; 4 Cal.Jur. 785, § 20; 25 Cal.Jur. 718, § 189. Section 1689 of the Civil Code provides in part:

“A party to a contract may rescind the same in the following cases only: * * *

“(4) If such consideration, before it is rendered to him, fails in a material respect, from any cause.”

Assuming, without so deciding, that it is necessary under the circumstances of this case for the purchaser of real property under an executory contract to give the owner formal notice of rescission as a prerequisite to the maintenance of a suit to cancel the contract, we are of the opinion the notice which was given in this case is adequate. The plaintiff's attorney wrote to the acknowledged agent of the owner of the lot giving specific reasons why he considered the material damages which resulted to the property on account of the inroads of the sea a substantial failure of consideration, and, in effect, demanding a cancellation of the contract and repayment of the money advanced thereon, and upon failure to do so he threatened to institute proceedings for that purpose. The letter contains the following language: “Dr. James G. Ware demands of your company at this time repayment of all moneys paid to you on account of the contract in question.”

No specific form of notice of rescission is required. It is sufficient if it may be understood from the notice which is given that the purchaser of land under an executory contract contends that it is void for any reason and that he intends to rescind it. 2 Black on Rescission and Cancellation, p. 1346, § 573. In the case of Guscetti v. Dugan, 60 Cal.App. 187, 212 P. 397, 399, it is said in that regard: “No specific form of notice of an intention to rescind is required, and we apprehend that the rights of the defendants were fully satisfied by any notice which would convey to them, within a reasonable time, the idea that the plaintiff wished to cancel the deed and recover the property.”

It was not necessary to also serve written notice of rescission on the Security-First National Bank before commencing the action. Notice to its duly authorized agent, under the circumstances of this case, is adequate notice to the principal. The entire transaction for sale of the lot in this case was conducted by the Frank Meline Company, Inc. It is not disputed that it was the duly authorized agent of the owner of the lot in that transaction. A contract for the sale of the lot disclosed the name of the principal, but the plaintiff dealt with the agent only in this transaction, and all payments were made to it. Regarding the service of notice upon an agent, it is said in 20 Ruling Case Law, page 356, § 20: “It seems that where notice is actually conveyed to the person to be notified, as by service on a duly accredited agent, this is sufficient.”

Under the circumstances of this case there was an implied authority conferred on the duly authorized agent of the owner of the lot to accept notice of rescission of the contract.

The plaintiff received from the defendants nothing of value which he was required under the provisions of section 1691 of the Civil Code to tender back to them as a prerequisite to the maintenance of this action for rescission. The contract was executory. The plaintiff had neither possession nor title to the land. He received nothing of value to be restored. Larkin v. Mullen, 128 Cal. 449, 60 P. 1091; Shaffer v. Security Trust & Savings Bank, 4 Cal.App.(2d) 707, 713, 41 P.(2d) 948; 2 Black on Rescission and Cancellation, p. 1431, § 621. It was not necessary for the plaintiff to return to the defendants the executory contract in question. The defendants could not be injured by plaintiff retaining the contract in question, and, moreover, he was entitled to hold that instrument in the event that rescission should be denied. Shaffer v. Security Trust & Savings Bank, 4 Cal.App.(2d) 707, 715, 41 P.(2d) 948; 2 Black on Rescission and Cancellation, p. 1431, § 621. The text of the authority last mentioned reads in this regard: “One seeking the rescission of a contract or other transaction is not required to make a tender or offer of restoration of that which he would be entitled in any event to retain, that is, either by virtue of an original liability of the other party if the contract should be rescinded, or under the contract itself if rescission should be refused.”

The findings that the plaintiff contracted to purchase the lot in question from the Frank Meline Company, Inc., as agent for the undisclosed principal, is not supported by the evidence. The agent is therefore not liable in this suit for rescission for the return of the money paid on the purchase price thereof. It is a well-established rule of law that an agent who contracts to sell real property in his own name without disclosing the name of his principal is personally liable for breach of the terms thereof. Murphy v. Helmrich, 66 Cal. 69, 4 P. 958; Coover v. Cox, 95 Cal.App. 1, 272 P. 343; Clark v. Baen, 75 Cal.App. 389, 242 P. 872; 1 Cal.Jur. 860, § 136; 1 Mechem on Agency (2d Ed.) p. 1039, § 1410. In the authority last cited it is said: “An agent who conceals the fact of his agency and contracts as the ostensible principal is liable in the same manner and to the same extent as though he were the real principal in interest.”

In the present case, however, the evidence is undisputed that the Frank Meline Company, Inc., signed a preliminary instrument on January 25, 1926, termed a receipt, specifically referring to the contract of sale “thereafter to be issued.” On that same date the formal contract for sale of the property was executed by and in the name of the principal as the seller thereof. This was admitted by the plaintiff. He concedes that this contract was delivered to him “a little bit later.” There is nothing in the record to support the contention that the plaintiff did not know from the very outset of the transaction who the real owner of the lot was. In the case of Marks v. Jos. H. Rucker & Co., 53 Cal.App. 568, 200 P. 655, 656, it is said in that regard: “To relieve the agent of liability, it is sufficient that the other contracting party have actual knowledge of the identity of the principal; it is immaterial how such knowledge was acquired.”

The judgment is reversed as to the defendant the Frank Meline Company, Inc., and it is entitled to its costs on appeal.

The judgment is affirmed as to the defendant Security-First National Bank of Los Angeles, a national banking corporation.

Mr. Justice THOMPSON delivered the opinion of the court.

We concur: PULLEN, P. J.; PLUMMER, J.