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District Court of Appeal, Third District, California.


McKELVEY et al. v. BOMBERGER et al.

Civ. 7550.

Decided: April 28, 1949

Edward T. Taylor, of Modesto, for appellants. Vernon F. Gant, of Modesto, for respondents.

The record on this appeal discloses that appellant D.P. McKelvey entered into a contract to purchase from respondents John W. Bomberger and Veva Porter Bomberger, his wife, certain real property, to-wit: Lots 13 to 16 in Block 59, all located in the City of Modesto. The two corner lots, 15 and 16 were improved with a building occupied by the respondents Hill, which they had leased from the Bombergers at a monthly rental of $300. Appellants' purpose in purchasing the Bomberger property, in addition to lots 5 to 12 in the same block, was to construct a building upon a portion and improve the remainder for parking facilities, all of which they planned to lease to a chain store. Among other things, the contract of purchase provided that it was subject to the temporary occupancy of the Hills at a rental of $300 per month as long as the occupancy continued, and that the entire transaction was subject to the satisfactory conclusion of the negotiations involving all of the lots. At about the same time said appellants entered into a contract with respondents whereby respondents agreed to demolish the building then occupied by the Hills so that this space could be used as a parking lot for the proposed market building. Said demolition agreement contained no provision as to the time when respondents were to commence the razing of the building but only provided that such demolition was to be completed at least twenty days prior to the completion of the proposed market building. Appellants agreed to pay the Hills $4000 for the cancellation of the unexpired term of their lease, in accordance with instructions given by them to the escrow holder. Said instructions were later amended to provide that said sum would be payable to the Hills when they voluntarily vacated the building and surrendered the lease subject to a $300 per month credit to be deducted by appellants for each month of occupancy prior to the completion of another structure to be erected for them by the Bombergers. Before respondents Bomberger entered the premises and began the demolition of the building appellants notified them by letter that construction of the proposed market building was “* not contemplated in the immediate future, and that until you should receive further written notice from me I should not want you to dismantle or demolish, in whole or in part, the existing improvements on Lots 15 and 16 (the building occupied by the Hills). You may be sure that I will notify you in ample time for you to have the improvements on Lots 15 and 16 dismantled or removed not later than 20 days prior to the completion of improvements (proposed market building) on Lots 5 to 10.” Respondents answered this letter stating that they had already commenced construction of the new building to be occupied by the tenant; that they had expected to use some of the material from the old building in the construction of the new building, and that they were proceeding with arrangements to wreck the building. In a subsequent letter respondents informed appellants that as soon as the Hills vacated the old building they would proceed with its demolition.

To this letter appellants replied as follows: “* I desire to give you written notice that until such a time as you should receive from me (in the future) written instructions to the contrary you, or your agents or employees, are not to dismantle, demolish, or in any way whatsoever molest any improvements on this property. You are further notified that you, your agents or employees, are not to enter upon said premises or any part thereof in any manner whatsoever other than as customers of Mr. Fred L. Hill, the tenant thereof. For any known violations in these instructions redress at law will be had.”

Despite the receipt of the foregoing notice and in defiance thereof respondents proceeded to demolish the building. Upon discovery of respondents' action, appellants instituted a proceeding in declaratory relief wherein they offered to pay respondents the difference between the cost of the demolition and the contract price and in addition sought an injunction restraining respondents from razing the building. The injunction was denied and respondents continued with the wrecking, thereby making the declaratory relief action moot. Thereafter appellants refused to pay and the present action was instituted by respondents to recover the alleged contract price as damages and to recover as assignors on Hills' cause of action for appellants' failure to pay the agreed amount for the cancellation of the lease.

To the foregoing actions appellants filed a counter-claim and cross-complaint seeking to recover damages for the alleged wrongful action of respondents in demolishing the building after receipt of the foregoing notices not to do so. Upon the issues so framed the case proceeded to trial before the court sitting without a jury. The court made findings of fact favorable to respondents, and judgment was entered accordingly in favor of respondents. It is from this judgment that appellants appeal.

It is to be noted that the original contract contained no provision as to the time respondents could proceed with the demolition of the building. The only provision as to time of performance was that such work should be finished twenty days prior to the date of the completion of the proposed market building. A reasonable interpretation of said provision would appear to be that respondents could commence such work at any time. Thus the basic question presented is whether respondents could do so immediately even after notification from appellants not to commence the demolition until notified by appellants.

Before discussing the legal principles applicable to the issue so raised it is pertinent to first note that the argument of respondents, that appellants were “estopped” from changing their position to the detriment of respondents, is inapplicable under the situation presented herein and that the finding of the trial court that appellants were so estopped is unsupported by the evidence.

The rule is well established that either “* party to a contract has the power to stop performance on the other side by explicit direction to that effect, subjecting himself to such damages as will compensate the other party for the breach, Richardson v. Davis, 116 Cal.App. 388, 390, 2 P.2d 860, 861; Woodruff v. Adams, 134 and that the party thus forbidden cannot go on and thereby increase the damages.” Cal.App. 490, 495, 25 P.2d 529. It is the further rule that a contract pertaining to buildings or other improvements contains an implied covenant that the contractor shall be given possession of the premises to enable him to perform his contract. Gray v. Bekins, 186 Cal. 389, 199 P. 767. Therefore, when the owner of the premises serves notice upon the contractor to keep off the premises which, for the purpose desired, is as effective as physical restraint, he thereby breaches said implied covenant and prevents the contractor from performing. Crawford v. Pioneer Box & Lumber Co., 105 Cal.App. 760, 288 P. 694.

It follows from the foregoing that when appellants gave notice to respondents not to enter upon their land they thereby breached their implied covenant to give respondents possession and prevented respondents from performing since they could not enter upon the property without becoming trespassers. Respondents, having been thus forbidden to proceed with the work, could not perform in defiance of such notice and thereby increase the damages for which appellants became liable by reason of their breach. Richardson v. Davis, supra.

From an examination of the judgment entered herein awarding respondents the full contract price as damages and denying any recovery to appellants, it is apparent that the foregoing rules were not followed by the trial court. Section 3300 of the Civil Code provides in part that, “For the breach of an obligation arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom.” Hence, while the acts of appellants made them liable to respondents said liability did not go into the full amount of the contract price as agreed upon, to-wit: $3500, as found by the trial court, but went only to respondents' loss of profits under said agreement, or what other loss, if any, respondents sustained by reason of appellants preventing their performance under the contract, which loss might necessitate consideration of the Hills' tenancy of the new building to be erected by respondents. However, as respondents were under a duty to mitigate damages, and consequently could not arbitrarily proceed as they did, they thereby became accountable to the McKelveys for any damages thereby sustained by said appellants, such as the loss of rentals they would have received under the Hills' lease were it not for the demolition of the building by respondents.

The judgment is reversed and the cause remanded for further proceedings in accordance with the views herein expressed.

PEEK, Justice.

ADAMS, P.J., and THOMPSON, J., concur.