ELLWOOD v. NIEDERMEYER

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

ELLWOOD v. NIEDERMEYER.*

Civ. 9939.

Decided: December 19, 1935

Alfred T. Cluff, of Los Angeles, Allan F. Bullard, of San Francisco, and Sawyer & Cluff, of Los Angeles, for appellant. Felix F. Bangs, John Beardsley, and Charles E. Beardsley, all of Los Angeles, for respondent.

This action is for damages for breach of a contract for the sale of real estate.

In her complaint plaintiff pleaded a contract entered into between herself and the defendant. Under it she was to receive some lots in exchange for a furnished house owned by her. By a further provision defendant agreed to loan $10,000 to her upon the security of the lots she was to acquire. Plaintiff alleged that she had performed all of the conditions of the contract; that defendant in bad faith and without just cause had refused to perform within the 45 days limited by its terms for performance, or at all, notwithstanding her demand therefor; and that the value of the property she would have received had the exchange been carried out was some $12,000 more than that of her own. The defendant alleged that the contract had been entered into by him because of certain misrepresentations of the plaintiff, but that he had, notwithstanding them, performed all of the conditions required of him. He also denied plaintiff's allegations of value.

The court found that at the time the contract was made plaintiff was the owner of the property agreed to be conveyed by her, but that the property to be conveyed by the defendant was owned by him and his wife, for whom he was guardian, in joint tenancy; that prior to the expiration of the 45 days fixed for the consummation of the exchange defendant had not deposited either his deed or money in the designated escrow; that plaintiff then gave defendant notice requiring him to perform within 5 days, but that this notice did not allow defendant sufficient time to perform. By a further finding the court declared that it was the intention of the plaintiff at the time of giving such notice and demand to withdraw from the agreement if the exchange could not be completed within the 5 days fixed by her notice and to sell her furniture, although she had been able and willing to perform at all times before. Other findings are that within the 5 days fixed by plaintiff's notice, defendant deposited $10,000 in escrow with a deed to the lots executed by him; that he immediately thereafter commenced proceedings for authority to sell his wife's interest in the lots, and some two months thereafter deposited in the escrow a deed executed by him as guardian of his wife's estate conveying her interest therein under an order of court confirming the sale; that appellant had made no misrepresentations; that the value of the properties plaintiff was to receive under the contract was not in excess of that which she was to give; and that defendant had acted in good faith at all times. Judgment was entered in favor of defendant.

The evidence shows that at the time the contract was made the appellant was the owner of a furnished house, and that the real property was subject to a deed of trust to secure a note for $25,000 made by a previous owner. She entered into a written contract with Mr. Niedermeyer to exchange the house and furniture for three vacant lots. The lots which he was to convey to her were owned by him and his wife. Two days after the contract was signed, Mrs. Ellwood signed escrow instructions at a bank, and thereafter deposited with the bank a deed to her property and other papers.

The 45-day period provided for in the exchange agreement expired on January 10. On that date Mr. Niedermeyer had not signed any escrow instructions nor deposited any documents nor otherwise indicated any intention to carry out his part of the agreement. On January 19th Mrs. Ellwood by written notice informed Mr. Niedermeyer that she had deposited in the escrow instruments of conveyance of her property, and stated that she required him “on or before the close of business on January 24, 1933, to complete and perform the said exchange on your part, and to execute and deliver to me proper instruments of conveyance of your said three lots, and to pay to me the sum of $10,000.00.”

At that time the note secured by the deed of trust on Mrs. Ellwood's property was in default, and the trustee was about to make a sale of the security. Pressed by her financial difficulties she had arranged for a sale of her furniture at auction on January 25th, the day following the expiration of the 5-day period. On the afternoon of January 24th, the last of the 5 days fixed in Mrs. Ellwood's notice to Mr. Niedermeyer, he deposited in the escrow the sum of $10,000 and a grant deed to the three lots executed by him alone. He gave notice of this to Mrs. Ellwood, calling her attention to the fact that their exchange agreement provided “that in the event errors appear in the titles to either or any of the properties, then the agreement shall be extended for a reasonable time that the same may be corrected.” He demanded “an extension for a reasonable time to cure any defect which such title certificate, when secured, may show in the title to the three lots * * * conveyed.”

It is conceded by the defendant and impliedly found by the court that the deed which Mr. Niedermeyer deposited in the escrow only conveyed an undivided one-half interest in the lots. Title to the remaining interest was in his wife. She was under disability at the time, and her estate was being administered by Mr. Niedermeyer as her guardian. On the following day Mr. Niedermeyer, as guardian, caused proceedings to be commenced in his wife's estate for an order confirming a sale of an undivided one-half interest in the lots to one D. H. Carleton. On March 17th Mr. Niedermeyer's attorney deposited in the escrow a deed executed by Carleton conveying his interest in the lots, the sale to him having been confirmed by the probate court. However, Mrs. Ellwood's property had in the meantime been sold under the provisions of the deed of trust, and none of the deeds was ever delivered.

As the basis of her appeal from the judgment appellant contends that respondent did not perform his contract within the time limited for performance and made no valid tender of performance. She insists that where one who has agreed to convey property in which he only has an undivided one-half interest fails to acquire the outstanding interest within the time limited for performance, he may not thereafter perform by tendering a deed executed only by himself but purporting to convey the full title, and claim further time for performance under the guise of correcting an error in the title. Specifically her claim is that the evidence on the issue of performance does not support the findings. She also makes the point that the evidence does not support the finding of the court that the value of the property which she was to receive by the exchange was not in excess of that which she was to convey.

It was not necessary for the respondent in this case to have owned the fee-simple title to the property which he agreed to convey to appellant in order to enter into the contract with her. But in such a case the vendor must be able to make good title at the time fixed by his contract. In the early case of Burks v. Davies, 85 Cal. 110, 24 P. 613, 20 Am.St.Rep. 213, the court quoted from and followed a Minnesota case (Goetz v. Walters, 34 Minn. 241, 25 N.W. 404) holding that the vendor under a contract for the sale of land which he did not own must be prepared at all times within the period fixed by his contract to convey a good title. When the vendee complied with his contract, the vendor, the Minnesota court said, “would have been entitled to no more time than was reasonably necessary for the execution of the papers.” In the later case of Hanson v. Fox, 155 Cal. 106, 99 P. 489, 490, 20 L.R.A.(N.S.) 338, 132 Am.St.Rep. 72, which is one of the leading cases on the subject, being widely cited, it was declared to be the settled rule in this state that “it is perfectly legal for one to contract to convey title to land which he does not own, and he is in default under such contract only when the vendee has performed his part of the contract and made demand for a title which the vendor is unable to furnish.” This language was quoted with approval in Lemle v. Barry, 181 Cal. 6, 183 P. 148, and states the general rule.

Thus in Haight v. Salter, 260 Mich. 6, 244 N.W. 209, 210, the court said: “The fact that a person lawfully may contract to sell real estate which he does not own does not extend the contract time for delivery of a deed. He must take steps to acquire title in anticipation of his duty to deliver. After payment of the contract price, the vendor is not entitled to time to make title. He is entitled only to a reasonabe time to execute the proper conveyance. 39 Cyc. 1326 et seq.; 27 R.C.L. 524.”

In Myers v. Fidelity-Philadelphia Trust Co., 290 Pa. 283, 138 A. 834, 835, the court had occasion to pass upon a case where several joint owners were sued to recover money paid on an unconsummated agreement for the purchase of real estate. The defendants could not deliver title to the property at the time called for by the contract because it was subject to a lien for debts. The court said: “Defendants frankly admit that plaintiff was entitled to have a marketable title, and that at the time of settlement, they were unable to give it, because of the lien of those debts. They claim, however, that plaintiff had no right to rescind the contract at that time, because (1) he should have given them an opportunity to apply to the orphans' court, * * * for leave to sell the property free from the lien of those debts; and (2) he had made no tender of performance on his part. These objections are unavailing.” The obligation of the vendor is succinctly stated in Walsh v. Colvin, 53 Wash. 309, 101 P. 1085, 1088, as follows: “While a vendor may have a reasonable time in which to prepare and deliver a deed, he does not have a reasonable time in which to acquire title to the property to enable him to perform his contract. If a vendor agrees to convey title at a given time and has no title when the date for performance arrives, the question of a reasonable time for preparing a deed does not enter into the case.”

In the case at bar respondent agreed to convey property to which he only had title to an undivided one-half interest. The time which he asserts he was entitled to was used by him for the purpose of procuring by purchase title outstanding in another individual. Under the authorities, in such a case he was entitled only to the time reasonably necessary to execute and deliver the deed. The time fixed by the appellant was manifestly sufficient for this purpose because respondent delivered his deed conveying all the title in him, as demanded by the vendee. Respondent contracted at his peril for the delivery of title to property which he did not own, and having so contracted, appellant was entitled to call for delivery of a deed conveying a marketable title in fee simple at any time she complied with her part of the agreement and within the period provided for performance. The court found that Mrs. Ellwood was able and willing to deliver title to her property at all times up to the expiration of the period fixed by her notice and demand. This finding is not challenged by respondent. It follows that the evidence does not support the finding that respondent performed his contract.

Respondent contends that he has a complete defense to this action, notwithstanding his failure to deliver title, by the following provision of the exchange agreement: “In the event that errors appear in the titles to either or any of said properties, then this agreement shall be extended for a reasonable time that the same may be corrected. In the event any error cannot be corrected, this agreement shall be null and void, except as to the payment of commissions, unless the title to the property affected is accepted subject thereto.” However, this provision relates to “errors” in the title. It would be an unusual construction of this language to apply it to an absence of title. It obviously refers to some defect in the title which is subject to correction, or, at least, one which it might reasonably be assumed could be corrected even though it was afterward found that the assumption was erroneous. It is not so broad as the language of the contract in the case of Crosby v. Wynkoop, 56 Wash. 475, 106 P. 175, which is relied upon by respondent, which provided that the agreement there considered should be void “if said abstract does not show such title, or cannot be made to do so within ten days from notice of defects.”

The judgment is reversed.

EDMONDS, Justice pro tem.

We concur: HOUSER, P.J.; DORAN, J.