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District Court of Appeal, Fourth District, California.

EVARTS et al. v. JOHNSTON et al.

Civ. 3927.

Decided: August 27, 1948

E. F. Evarts and Monrova S. Evarts, in pro. per. Clarence B. Smith, of El Centro, and H. L. Welch, of Los Angeles, for respondents. John M. Cranston, of San Diego, amious curiae for California Real Estate Association.

On January 30, 1945, plaintiffs filed this action against defendants Samuel W. and Sarah E. Johnston, demanding specific performance of an agreement for the sale of a ranch in Imperial County containing approximately 467 acres. A signed, written agreement, dated November 22, 1944, and signed escrow instructions, alleged and referred to in the complaint, constituted the written negotiations of the parties. The agreement acknowledged payment of $100, paid to the broker, cross-defendant R. S. Harrington, on account of the purchase price, and provided generally for a payment of $4,000 in escrow, $1250 cash and an equity of $2750 in a house in Long Beach, which house was subject to an incumbrance of $3750. The total purchase price of the acreage was fixed at $25,000. The balance of $21,000 was to be paid by note secured by a trust deed payable $2500 per year. It was agreed that there was an incumbrance on the land for $2600 and delinquent state and county taxes totaling $3362.85, payable $1231.96 per year. Delinquent irrigation district taxes were $2288.76, payable $1144.38 per year. Payments on these items were to be made by the purchaser before delinquency and were payable out of the total annual payment of $2500, with the seller being paid the excess. The seller was to pay the first half of the 1944–45 state and county taxes and district assessments. The purchaser was to take the property subject to leases thereon totaling 195 acres and have the rent that was unpaid thereon. The buyers were to have possession upon payment of $1150 in escrow. The sellers agreed to allow the buyers to put a first trust deed on the property to secure a loan to pay off any indebtedness due and to accept a second trust deed for the balance of the purchase price. The Long Beach property was to be turned in by the buyers, which contract of purchase was to be assigned by them to the sellers. The agreement then contains the clause that the purchasers agree to buy and the sellers agree to sell on the terms and conditions stated and that the sellers agree to pay the agent $1250.

The escrow instructions provided generally that the purchaser pay into escrow $1150 and execute the trust deed as above indicated and specified the various claims in detail which made up the purchase price of $25,000.

All moneys and instruments left by the parties were to be returned to them within 30 days from the date of the escrow if the sellers were unable to comply or within such additional time as might be required by the sellers to complete the transaction. Johnston agreed to place his deed in escrow. Subsequent to the execution of these agreements the sellers leased 40 acres of their land for $1400. $700 cash was paid to them. Plaintiffs alleged in their complaint alleged in their complaint that they had performed all that was required of them by the agreement and that defendants refused to perform their part of it; that the consideration of $25,000 was just and reasonable; that plaintiffs stood ready to abide by and perform the agreements on their part. They prayed that defendants be required to specifically perform their part of the contract.

Defendants answered, admitted signing the agreement and escrow instructions but alleged (1) that their signatures thereto were obtained by fraud and mistake and alleged that J. H. Harrington, the broker, and also plaintiffs' attorney, had been acting, for several months prior to November 22, 1944, as plaintiffs' agent and attorney; that he prepared and presented to defendants for their signature, the agreement; that they refused to sign because it provided that defendants would accept an assignment of contract of the Long Beach property as payment of $2750 on the purchase price of their ranch; that they verbally informed Harrington that they would not sign such an agreement but would only accept $4,000 in cash; that he assured them that if they would sign the agreement as written, that he would sell the Long Beach property, obtain $4,000 cash, and place that amount in escrow in place of the assignment, and stated that defendants could take his word for it; that no deal would be consummated unless the $4,000 was so deposited, and that the agent so agreed; that they then signed it because he stated it was all right and that it would save him the trouble of going to his office and rewriting the agreement; that when they noticed the escrow instructions they contained the same clauses in this respect as set forth in the first signed agreement; that they called the agent's attention thereto and he again assured them that no deal would be consummated until he had sold the Long Beach property and placed $4,000 in cash in the escrow; (2) that defendants informed the agent that they would be compelled to pay $1000 on the existing trust deed before January 1, 1945, and that the agent represented to them that plaintiffs were well to do people and they could easily take care of that; that Harrington failed to sell the Long Beach property and failed to deposit $4,000 in cash in escrow, and on December 23, 1944, defendants informed the agent of the $1,000 payment due on the trust deed and that he then said: ‘My clients cannot raise the money’; that on January 17, 1945, they then ordered the escrow canceled because of this fact and for the added reason that they failed to deposit $1150 in cash in escrow, and further that the agent kept the $100 paid him by plaintiffs and thereafter failed to pay defendants the $100 outside of escrow as provided in the instructions; that plaintiffs did not deliver to the escrow holder the assignment of contract of sale of the Long Beach property and did not indicate the unpaid balance thereon; that defendants never extended the closing date of the escrow beyond December 24, 1944, and did not give Harrington or any other person authority to do so.

Defendants admitted that they subsequently leased the 40 acres and did not deposit the $700 in escrow as demanded by plaintiffs but applied that amount in payment of delinquent taxes. They denied that plaintiffs performed all things required of them to be done and admitted that defendants refused to perform under the agreement as signed; denied that $25,000 is a just and reasonable price for the property and claimed that the agreements as signed are unfair and that advantage was sought to be taken of them; denied that plaintiffs are able or ready to abide by and perform the agreements on their part. They seek cancellation of the agreement on the ground of fraud and mistake and ask that plaintiffs take nothing.

In a supplemental complaint plaintiffs allege that the $700 obtained on the subsequent lease belonged to plaintiffs and defendants should have deposited that amount in escrow, as demanded, as part of the cash down payment. They then specifically alleged that the value of the premises involved (467 acres), at the time of entering into the contracts, was $30,000, and that by reason of defendants' failure to perform their contract plaintiffs have been damaged in the sum of $5,000. Other items of claimed damage are set forth. By order of the court defendants were permitted to bring in R. S. Harrington and to file a cross-complaint against him seeking damages for $2250, on some transaction in connection with a lease upon defendants' property. It was claimed that at all times Harrington was the agent of plaintiffs and aided and assisted them in deceiving and misleading the defendants.

In a second count of the cross-complaint damages are sought from the agent and plaintiffs for the agent's misrepresentations of Evarts' financial responsibility and for plaintiffs' defaulting in their obligations under the agreements, and it is alleged that as a result of the filing of this action and the recording of a lis pendens a cloud was cast upon their title interfering with defendants' refinancing of the property. $2,000 is claimed for damages for slander of title and a decree quieting their title is sought.

In the answer to the supplemental or amended complaint defendants admit that the 467 acres were, at the time of entering into the contracts, of the value of $30,000, and allege that they had a value greatly in excess of that amount, but denied that plaintiffs were damaged. They then allege that at the time of entering into the agreement plaintiffs were not familiar with the value of the property and relied entirely upon their agent, who assured them that the land was worth not in excess of $25,000.

On January 21, 1947, plaintiffs, by leave of court, amended the allegations of their supplemental complaint to conform to the proof in reference to the value of the property, and therein alleged that $25,000 was the fair and reasonable value thereof at the time of the execution of the agreements. Plaintiffs denied that Harrington was their agent at any of the times herein mentioned and claimed that at all times he was the agent of the defendants. They denied that Harrington made any misrepresentations and denied generally the defendants' allegations in their cross-complaint.

After trial the court found that the parties entered into the agreements in writing as set forth in the complaint but then found: (1) ‘That there was not a meeting of the minds of the parties to said agreement, who are the parties to this action, with respect to how or in what manner the initial or ‘down’ payment was to have been made under said contract'; (2) that the terms of the agreements are not sufficiently certain to make clearly ascertainable the amount of the trust deed to be given by plaintiffs as a part of the consideration for the transfer of the premises or to make ascertainable the terms of the obligation to be assumed by the defendants upon the ‘equity’ or ‘contract for the sale’ of the house in Long Beach, and that it cannot be ascertained therefrom whether the contract of sale is assignable or whether the owner of the house and lot in Long Beach will assent to the assignment of the contract of purchase; (3) that defendants received the $700 from the lease but paid delinquent taxes with it; (4) that plaintiffs did not deposit in escrow the sum of $1250 in cash but only $450; (5) that plaintiffs, at all times, were not able financially to perform according to the terms of the agreement; (6) that the value of the premises is and was at all times $30,000; and that the consideration of $25,000 called for in the agreement was not, at the time of the execution thereof, a fair or reasonable value of the property, and the consideration was not adequate and the agreement was not just and reasonable; and (7) that Harrington, at the time of making the agreement between the parties, was acting as a real estate broker or agent for the defendants and at the same time was acting on behalf of plaintiffs as an attorney at law in the negotiation and preparation of the contracts between them.

The court denied plaintiffs relief under their complaint, held that Harrington was not entitled to any commission, quieted defendants' title to the acreage, held that they were not entitled to recover under their cross-complaint, and that all parties be restored to their former status as it existed prior to the making of the agreements in question. Judgment was entered accordingly. Plaintiffs appealed. Cross-defendant Harrington did not appeal.

Plaintiffs were represented at the trial by counsel. However, they have elected to perfect their own appeal in propria persona. It is difficult to ascertain the real legal question involved. As we construe the sum total of the argument it is this: that the evidence does not support the findings.

Amicus curiae, appearing on behalf of the California Real Estate Association, was permitted to argue in respect to certain phases of the written contract of sale and the sufficiency and validity of the court's findings thereon. He points out that the trial court found that the parties signed the written agreements; that therefore, since these provisions are definite in their terms as to the method of disposition of the Long Beach property, and since there was an absence of a finding of fraud, misrepresentation or mistake, the trial court was not authorized, under the evidence, to set aside the agreement merely by a finding that there was not a meeting of the minds of the parties on that subject. With this contention we are in accord. (See Sec. 1856, Code Civ.Proc.; Secs. 1638, 1639, 1640 and 3391, Civ.Code.)

In Nourse v. Kovacevich, 42 Cal.App.2d 769, 109 P.2d 999, it is said (quoting from the syllabus):

‘When the terms of an agreement have been reduced to writing by the parties, it is to be construed as containing all the terms thereof, and there can be, between the parties and their representatives or successors in interest, no other evidence of the terms of the agreement than the contents of the writing, except (1) where a mistake or imperfection in the writing is put in issue by the pleadings, (2) where the validity of the agreement is in fact in dispute, or (3) where it is necessary to explain an ambiguity in the agreement.’

See, also, Payne v. Commercial Nat. Bank, 177 Cal. 68, 169 P. 1007, L.R.A.1918 C, 328; Thoroman v. David, 199 Cal. 386, 249 P. 513; and Bank of America etc. v. Pendergrass, 4 Cal.2d 258, 48 P.2d 659, in which latter case it is held (syllabus No. 6):

‘Parol evidence of fraud to establish the invalidity of an instrument must tend to establish some independent fact or representation, some fraud in the procurement of the instrument or some breach of confidence concerning its use, and not a promise directly at variance with the promise of the writing.’

Defendants do not claim that plaintiffs Evarts themselves made any misrepresentations. The only showing is that if there were any such misrepresentations they were made by Harrington. As to that, defendants' evidence shows that Harrington made some contemporaneous oral agreement to sell the property for them and place the money in escrow instead of the assignment provided for in the agreement.

The trial court failed to find on the issue of fraud and misrepresentation or mistake as raised by the pleadings. A finding that there was no meeting of the minds of the parties to the contract respecting the Long Beach property was not the issue or even if it were the issue, it lacked legal evidentiary support to justify a rescission of the contract. Plaintiffs' undisputed evidence, as well as the testimony of defendants, show that several weeks after the signing of the escrow agreement defendants authorized Harrington to dispose of the equity in the Long Beach property at a discount of $500 from the agreed price.

Finding on point number 2 is not supported by the evidence. The amount of the trust deed was ascertainable under the terms of the written agreement and the provisions for the sale of the Long Beach property were clearly stated in the receipt and escrow instructions. It there provides that the equity of $2750 in the house, which is subject to the trust deed of $4000, with a balance of $3750 due thereon, shall be applied on the purchase price of the acreage. A written assignment of that contract was deposited by plaintiffs in escrow and they quitclaimed any interest they had therein to defendants. This was in accordance with the written agreement. Defendants failed to furnish any evidence that such contract was not in fact assignable or that plaintiffs could not perform their part of the agreement in this respect.

Finding on point number 3 is admitted. As to finding on point number 4 the evidence conclusively shows that $450 cash was paid into escrow by plaintiffs, the $100 was admittedly paid to the defendants' agent out of escrow and was considered part of the $1250 cash payment. Defendants, without the consent of plaintiffs, leased a portion of the acreage and received $700 cash on account. The agent, plaintiffs, and the title company repeatedly demanded that this sum be paid into escrow as part of the cash payment. It would not now seem equitable for defendants to claim a breach of duty on the part of plaintiffs for failure to pay into escrow an additional sum of $700.

Finding on point number 5 that plaintiffs were at all times financially unable to perform the contract likewise lacks evidentiary support. In fact, the undisputed evidence seems most conclusive to the contrary.

Defendant Mrs. Johnston testified that Harrington told her that Evarts was ‘a man of means'; that he had properties outside of the county and equities in other property; that he owned farm machinery and was able to go ahead and farm. On this subject Evarts testified that he had between $5,000 and $6,000 worth of farm machinery and trucks in November, 1944. The evidence shows that he moved some of it onto defendants' ranch, by agreement, soon after the escrow was signed; that he had approximately $4,000 consisting of cash in bank and travelers' checks; that he owned about 320 acres of land in Imperial Valley with an equity of about $14,000 in that acreage, in addition to a trust deed payable to him for $2250 on another acreage in the valley; six quarter sections of land in Antelope Valley, valued at $27.50 per acre with $1,000 taxes due on it; also an equity in the Long Beach property and a deposit of $750 on a duplex in Long Beach. He likewise testified that he was in the process of securing a loan on the acreage here involved to finance the transaction but that defendants refused to place their deed in escrow and the bank would not approve the loan until defendants did this. There is also a letter in evidence from plaintiffs to defendants' attorney offering to pay defendants $28,000 cash for the property in settlement of the litigation. There is no evidence disputing the above testimony. We perceive no substantial evidence upon which the trial court could reasonably find that plaintiffs were financially unable to perform their part of the contract. The execution of the contract of sale is proof that the seller is satisfied with the qualifications of the purchaser and of his ability to perform the contract. Ralston v. Demirjian, 86 Cal.App.2d 124, 194 P.2d 41.

Finding on point number 6 that the value of the property was $30,000 at the time of entering into the contract and that $25,000 was not a fair and reasonable price also lacks evidentiary support. Defendants had this property listed with Harrington for several months. He was unable to find a purchaser. He advertised the property for sale and in response thereto plaintiffs proceeded to the agent's office and were informed later by Johnston, when they visited the property, that he wanted to sell for $25,000, with a payment of $4,000 down. Defendants signed an agreement as to the price. Harrington testified that he discussed the sale price and the terms of the agreement with defendants. He admitted that he told them that he would wait until the Long Beach property was sold before he would claim his commission as broker. He testified that about January 11, 1945, Johnston came to his office and said: ‘Evarts is no good’; that he didn't see Johnston again until January 17th, at which time Johnston told him that a man from the bank said that Johnston could get $30,000 for the ranch and he was not going to sell to Evarts; that he told Johnston he should have some better reason than that to tell Evarts why he wanted to back out of the deal. Johnston said he did not remember such a conversation but admitted that subsequently on June 18, 1946, he leased the property to another with an option to purchase for $30,000 ‘subject to this trial’.

Plaintiffs' amended pleadings allege the value of the property at the time of making the contract to be $30,000. Defendants admitted this allegation. With this admission there might be some support for this finding, but a later amendment, alleging its value as $25,000 ‘in order to conform to the proofs', was ordered by the court. This amendment destroyed the effect of the former pleading and answer thereto. We have examined the entire evidence and find no substantial support for the finding that the actual, fair and reasonable value of the property at the time of the execution of the agreements, was in fact $30,000, or anything different from that alleged. The only other evidence was that several real estate men told Johnston in December, 1944, that they ‘would like’ to list the property at $30,000. There is therefore no substantial evidence supporting this finding. The option to purchase at $30,000, given on June 18, 1946, during a period of rising prices, is not evidence of the value of the property on the date of the execution of the agreements.

Finding on point number 7 that Harrington was acting as agent for defendants and at the same time acting for plaintiffs as attorney at law in the negotiations and preparation of the contracts is likewise without evidentiary support. It was during the spring of 1944 that defendants listed the property with the agent who advertised it for sale. Plaintiffs answered the ad. The only evidence on that subject is that Harrington was associated with another attorney in bringing and prosecuting this action from January 30, 1945, until he withdrew from the case, and some statement made by counsel for defendants that he offered to prove that Harrington had been attorney for plaintiffs in some other case, except a statement by Evarts that Harrington represented him in a legal matter prior to the time ‘we entered into the contract with Johnston’.

Since the findings lack evidentiary support the judgment must be and is reversed.

GRIFFIN, Justice.

BARNARD, P. J., and MUSSELL, J., concur.