HAMES ET AL v. RUST ET AL

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District Court of Appeal, Third District, California.

HAMES ET AL. v. RUST ET AL.

Civ. 6727.

Decided: April 13, 1943

H. Ward Sheldon, in pro. per., of Nevada City, for appellants. Busick & Busick, of Sacramento, for respondent.

The plaintiffs brought suit to cancel a lease and option to purchase from George A. Nihell two mining claims in Nevada County for alleged default of the terms thereof, and to quiet title thereto. The lease and option are included in one instrument originally executed to the defendants John A. Rust and S. W. Tull, and subsequently assigned to the respondent, Deer Creek Union Mining Company. Three years later, while the former lease was in force, the owner of the claims, George A. Nihell, executed to J. T. Hames and Jett A. Hames a similar lease and option to purchase the claims. The plaintiffs thereafter served notice of default upon the mining company and brought this suit. The court adopted findings favorable to the mining company and rendered judgment against plaintiffs to the effect that they take nothing by this suit. From that judgment this appeal was perfected.

George A. Nihell owned two mining claims in Nevada County called the “Union Quartz Mine” and the “Union Extension Quartz Mine.” October 27, 1934, the owner executed to John A. Rust and S. W. Tull a written lease and option to purchase the claims for the sum of $30,000, to be paid in specified monthly installments together with ten per cent of all net proceeds derived from sales of ore extracted from the mines. This lease and option contained the following provision:

“This agreement shall inhere to and be binding upon the personal representatives, heirs and assigns of the parties hereto.”

The option and lease was assigned to Deer Creek Union Mining Company on December 22, 1934. In the fall of 1936, the time for performance of that agreement was extended as the court determined. In 1937, the mining company was in default of certain payments provided by the contract. January 15, 1937, George A. Nihell, the lessor, waived in writing default on account of those deferred payments, in the following language: “I am willing to wait for payments on the mine till the financing program is completed as it is my understanding that arrangements will be completed in a short time.”

June 19, 1937, Mr. Nihell again waived in writing the previous defaults in payments in the following language: “I hereby agree to extend the moratorium on your lease and option to September 1, 1937, in order to give time to unwater, sample and prospect the Union Mine.”

May 6, 1937, regardless of the foregoing extensions of time and waiver, the owner, Nihell, executed to J. T. Hames a lease and option to purchase the claims, on almost the exact terms of the prior lease to Rust and Tull. On June 21, 1937, Nihell executed another option to purchase the claims to J. T. and Jett A. Hames on similar terms, except that the purchase price was reduced to $20,000. June 21, 1937, Nihell also executed to J. T. and Jett A. Hames a purported assignment of his interest in the original agreement of October 27, 1934, authorizing the assignees to collect the payments due thereunder. August 12, 1937, Nihell executed and delivered to the mining company a written modification of the lease and option of October 27, 1934, cancelling and extinguishing all deferred payments and all payments to become due thereunder to November 15, 1937. October 29, 1937, Nihell executed a third option to purchase the mining claims, to J. T. and Jett A. Hames, on substantially the same terms expressed in the original lease. This suit was commenced October 1, 1937, before the last mentioned instrument was executed. The notice of default, upon which this suit is founded, is not dated, and we are unable to determine when it was served on the defendants. It was signed by George A. Nihell, J. T. Hames and Jett A. Hames. It is true that an “insured parcel” was delivered to the secretary of the mining company at Nevada City on July 9, 1937. We are not informed regarding the contents of that parcel. The court found that “it is not true that notice in writing of default was given defendant Deer Creek Union Mining Company, a corporation, in the manner provided by said contract.”

The defendant Deer Creek Union Mining Company answered the complaint, denying the material allegations thereof, and affirmatively alleging that it held title to and possession of said mining claims, as assignee of the original lease and option to purchase the claims, executed to Rust and Tull October 27, 1934, and that said instrument is in full force and effect. It denied that the defendants are in default of any of the terms of that agreement, or that plaintiffs ever notified defendants of any default as required by the lease. The answer alleges that the defendants fully performed all of the covenants of their lease and option to purchase; that they did not fail to operate the mines or to make payments as required by said agreement, and, that on the contrary George A. Nihell and the plaintiffs waived any breach of covenants which might have occurred by modifying in writing the contract and by extending the times of payments thereunder. Finally, it is alleged that plaintiffs have no right or title to said claims superior to those which are possessed by the mining company.

The defaults of the defendants Rust and Tull were entered for failure to answer the complaint.

The suit was first tried by the late Judge Raglan Tuttle, and judgment was rendered in favor of the defendant Deer Creek Union Mining Company. A new trial was granted on the ground of insufficiency of the evidence. On appeal that order was affirmed. Hames v. Rust, 14 Cal.2d 119, 92 P.2d 1010. The cause was then retried in Nevada County by Judge George L. Jones, sitting without a jury. The court adopted findings favorable in every respect to the defendant mining company. It was determined that the lease and option to purchase the mining claims, executed by George A. Nihell to John A. Rust and S. W. Tull on October 27, 1934, was duly assigned and transferred to the Deer Creek Union Mining Company; that for a valuable consideration said lease was modified by a written agreement of Mr. Nihell on August 12, 1937; that he subsequently waived in writing all defaults of said mining company with respect to the covenants of said agreement; that the mining company has paid to Nihell all money and installments due under said modified contract; that the plaintiffs failed to give notice of alleged default as required by the agreement; that the lease and option dated October 27, 1934, as modified, is in full force and effect, and that the plaintiffs are not entitled to the relief sought by their complaint. Judgment was accordingly rendered against the plaintiffs. From that judgment this appeal was perfected.

Pending the appeal of this case the plaintiff J. T. Hames died, and the administrator of his estate was duly substituted as a party plaintiff.

The appellants contend that the waiver of breaches of contract and the extensions of time within which to make stipulated payments were given without consideration, and that they were subsequently revoked. It is also asserted that the respondent was unable to make the payments when they became due and that it did not rely on the written extensions of time, and therefore may not complain of a failure to serve the notice of breaches of contract as required by the original lease.

Since the original lease and option, dated October 27, 1934, contained no clause prohibiting the subletting or assignment of the agreement, and upon the contrary specifically provided that it should “be binding upon the personal representatives, heirs and assigns of the parties hereto,” it was assignable. Montgomery v. De Picot, 153 Cal. 509, 512, 96 P. 305, 126 Am.St.Rep. 84, 38 A.L.R. 1173, note.

The evidence adequately supports the finding of the court that the lease and option to purchase the two mining claims which was duly executed by George A. Nihell to John A. Rust and S. W. Tull, October 27, 1934, and assigned to the respondent, Deer Creek Union Mining Company, is in full force and effect. There is sufficient evidence to support the further finding that “George A. Nihell, in the Fall of 1936, granted Defendant, Deer Creek Union Mining Company, a Corporation, an extension of time in which to perform the terms and conditions of said contract, * * * and that on January 15, 1937, said owner, George A. Nihell, granted to said Deer Creek Union Mining Company, a Corporation, in writing, an extension of time for a reasonable time, in which to perform the terms and conditions of said contract.” The last mentioned written extension of time, previously quoted, was granted before any other lease and option was executed.

There was sufficient consideration for the granting of the extensions of time within which to pay the installments of money and to perform the covenants of the agreement. § 1605, Civ.Code; Lincoln Holding Corp. v. Levering, 219 Cal. 427, 27 P.2d 74; Brownfield v. McFadden, 21 Cal.App.2d 208, 68 P.2d 993; 6 Cal.Jur. 168, §§ 117, 118; 12 Am.Jur. 990, § 412. In the authority last cited it is said in that regard:

“Any new agreement between the parties to an existing executory contract, made in substitution or modification of the elder compact and bilateral in benefit or burden, has, like the primary contract, a sufficient consideration in the mutual advantages or obligations which it confers or imposes. Where an agreement amounts to a waiver or discharge of mutual stipulations in a contract, either in whole or in part, the discharge of each by the other from the obligations of the contract may furnish a sufficient consideration.”

Section 1605 of the Civil Code provides that: “Any benefit conferred, or agreed to be conferred, upon the promisor, by any other person, to which the promisor is not lawfully entitled, or any prejudice suffered, or agreed to be suffered, by such person, other than such as he is at the time of consent lawfully bound to suffer, as an inducement to the promisor, is a good consideration for a promise.”

In the present case there is evidence that the modification of the original lease and the extensions of time to make the specified payments were executed in writing in consideration of an agreed forbearance to sue Nihell for a truck and pump belonging to the mining company which he was charged with selling and converting. That forbearance furnishes adequate consideration for the modification and extensions of time.

Mr. Elmer Rastorfer, secretary of the respondent mining company, testified that George A. Nihell wrongfully transferred the property and executed bills of sale to the truck and pump, belonging to that company, to purported purchasers thereof. Rastorfer said that they had discussed that matter several times; that the mining company had demanded a return of that property to which it held title, and that Nihell had wrongfully appropriated and converted it to his own use and benefit by purporting to sell and transfer the truck and pump to a purchaser thereof to whom he executed bills of sale therefor. The witness said, in effect, that the company agreed to and did refrain from suing Nihell on that account in consideration of his giving to the mining company the requested modification and extensions of time to perform the covenants of the agreement, and that he did so. Mr. Rastorfer testified in that regard:

(Mr. Rastorfer): “Several times we discussed about a truck and a pump that he had given a bill of sale for, or for which he owed us money. * * *

“Q. You insisted that he would have to give you an extension of time, otherwise you would proceed against him? A. Sure, we threatened that several times * * *

“Q. This extension of June nineteenth was given to you by Mr. Nihell simply as a concession without any further consideration for it; you didn't pay him anything for it; * * * isn't that right? A. It was given to help him out, too, in this action about the truck and pump. * * * Because we threatened to sue him if he didn't get the pump back. * * *

“Q. Now, on the nineteenth of June, in connection with the extension that we have last talked about, did you agree not to sue him? A. Yes.

“Q. If he would give that extension? A. If he would give us the extension so we could go ahead with this party that we had in mind, that we would not sue him at that time.”

No action was brought against Nihell for the truck and pump. We are of the opinion there was adequate consideration for the granting of the modification of the contract and the extensions of time.

The appellants contend that the extensions of time were given without consideration and that Mr. Nihell was therefore authorized to rescind them at any time prior to fulfillment of the modified covenants by the lessee. Atlantic Fish Co. v. Dollar S. S. Line, 205 Cal. 65, 269 P. 926; 6 Cal.Jur. 378, § 227. The foregoing rule has no application to the present case. We have previously held that the extensions of time were given for adequate consideration, consisting of forbearance to sue Nihell on an asserted valid claim, which was a benefit to him and a detriment to the lessee mining company. That brings it within the provisions of section 1605 of the Civil Code.

The decision in the Atlantic Fish Co. case, relied upon by the appellants, was founded on the assumption that the modification of the contract which was there involved, with respect to refrigeration of fish which were to be shipped, was “without any consideration to support it.” That case did not involve the principle of forbearance to sue. In the present case not only was there a valid consideration for the extensions of time, but the respondent relied and acted upon that modification by pumping out the flooded mine and by resuming the operation thereof. Mr. Rastorfer testified in that regard: “Q. You accepted his proposition and continued operating the mine? A. Yes, sir.”

Moreover the modification of the lease with respect to the deferred payments and to all other payments to become due “before the fifteenth day of November 1937” required no consideration because those obligations were specifically cancelled and released by a written instrument. § 1541, Civ.Code; Weddle v. Heath, 211 Cal. 445, 455, 295 P. 832; W. Ross Campbell Co. v. Sears, Roebuck & Co., 136 Cal.App. 765, 769, 29 P.2d 910; Rogers v. Kimball, 121 Cal. 247, 253, 53 P. 648. Section 1541 of the Civil Code provides that: “An obligation is extinguished by a release therefrom given to the debtor by the creditor, upon a new consideration, or in writing, with or without new consideration.”

August 12, 1937, Mr. Nihell modified the respondent's lease of October 27, 1934, by executing and delivering to it a written instrument waiving all unpaid installments together with all payments which would accrue before November 15, 1937. It contains the following language:

“It is hereby understood and agreed that the attached lease and option dated October 15, 1934, and given to John A. Rust and S. W. Tull, who assigned the same to the Deer Creek Union Mining Corporation, be amended as follows: Paragraph two, page two, be amended by adding the following words at the end of the paragraph: ‘Or an extension of time granted upon agreement of party of the first part and party of the second part.’ * * *

“It is understood and agreed that the balance due party of the first part under the terms of the lease and option before the fifteenth day of November, 1937, is hereby cancelled. Dated August 12, 1937. (Signed) George A. Nihell, party of the first part. Deer Creek Union Mining Co., party of the second part, by O. Kunel, president, E. D. Rastorfer, secretary–treasurer.”

The appellants concede that this release and cancellation of those obligations by the written instrument would be a complete defense to this action except for the alleged fact that the owner of the mining claims, Nihell, executed and delivered to J. T. and Jett A. Hames on May 6, 1937, another lease and option to purchase the claims. But the answer to this contention is that Nihell, in consideration of the mining company's forbearance to sue him for his alleged conversion of the pump and truck, as the trial court specifically determined, “in the Fall of 1936, granted Defendant, Dear Creek Union Mining Company, a Corporation, an extension of time in which to perform the terms and conditions of said contract,” and again extended in writing, on January 15, 1937, its time for performance, and that the original lease of October 27, 1934, had not been terminated but was therefore in full force and effect.

It follows that the modification of the original lease and the extensions of time were valid and binding and they could not lawfully be rescinded by subsequent notice or by an effort on the part of the owner of the mining claims to thereafter transfer his title or interest therein. The purported transfer of interest in the original lease to J. T. and Jett A. Hames was subject to the paramount title and contractual rights of the mining company.

The court therefore properly determined that the plaintiffs were entitled to take nothing by their action.

The judgment is affirmed.

THOMPSON, Justice.

ADAMS, P. J., and PEEK, J., concurred.