NORRIS v. SAN MATEO COUNTY TITLE CO

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District Court of Appeal, First District, Division 2, California.

NORRIS et al. v. SAN MATEO COUNTY TITLE CO. et al.

No. 14438.

Decided: December 14, 1950

P. H. McCarthy, Jr., F. Nason O'Hara, and Herbert S. Johnson, all of San Francisco, for appellants. Norman S. Menifee, Redwood City, for respondents.

This is an appeal from an order granting plaintiffs' motions for summary judgment and from judgment entered thereon in an action for money had and received brought by the vendors (the plaintiffs Norris) of a parcel of real property in San Mateo County against the vendees and escrow holder (defendant San Mateo County Title Company) to recover the sum of $2000 alleged by defendants to have been received by defendants to the use of the plaintiffs. Defendants Ribarsky answered with a general denial and a separate affirmative defense of a prior adjudication. The title company filed no answer.

The affidavit of plaintiffs in support of the motion for summary judgment made by one of the plaintiffs, William M. Chance, Jr., avers that he could testify that he and plaintiff Keeler were licensed real estate brokers and copartners doing business under the name of Peninsula Realty Company; that plaintiffs Norris were prior to March 17, 1947, the owners of certain real property in Belmont, San Mateo County; that on January 26, 1947, defendants Ribarsky executed and delivered to plaintiffs Keeler and Chance, a certain written deposit receipt whereby said defendants agreed to purchase the Norris property for a total purchase price of $20,000, and deposited with plaintiffs Keeler and Chance, the sum of $2000 as and for a deposit for the purchase of said real property, and then and there agreed in writing to pay the remainder of said purchase price within 45 days from date of said deposit receipt. Affiant averred further that on January 26, 1947, plaintiffs Norris accepted in writing the aforesaid deposit receipt and agreed in writing to sell the property described therein on the terms and conditions stated in said deposit receipt, and agreed to pay to plaintiffs Keeler and Chance as commission ‘the sum of (5%) of sale price, or one-half the deposit in case same is forfeited by purchaser provided the same shall not exceed the full amount of the commission;’ that the said deposit receipt further provided as follows:

‘In case said purchaser shall fail to pay the remainder of said purchase price or complete said purchase as herein provided, the amounts paid hereon shall, at the option of the Seller be retained as liquidated damages.’

The affidavit set forth that on or about March 12, 1947, pursuant to authorization of defendants Ribarsky, affiant deposited the said sum of $2000 with defendant San Mateo Title Company together with a Deed duly executed by plaintiffs Norris and escrow instructions in conformity with the deposit receipt; that plaintiffs Norris fully complied with all terms and conditions of said deposit receipt which applied to them; that on or about March 15, 1947, defendants Ribarsky notified plaintiffs that defendants would not comply with the terms of said deposit receipt, would not complete the purchase, and would not pay any further sum than the $2000 on account of the purchase price; that the said sum remains on deposit with defendant San Mateo County Title Company, that plaintiffs Norris are entitled to the whole of said sum, and that plaintiffs Keeler and Chance, doing business as the Peninsula Realty Company, are entitled to be paid one-half of said sum.

The affidavit of Emil J. Ribarsky in opposition to the motion for Summary Judgment averred that he could testify that the Peninsula Realty Company, on or about January 26, 1947, through its agents, servants and employees, as an inducement to defendants, represented that they would sell affiant's real property within 45 days thereof in consideration of affiant signing and executing a written deposit receipt whereby said defendants Ribarsky agreed to purchase plaintiffs Norris' real property for the sum of $20,000, and in consideration of the promise of plaintiff Peninsula Realty Company tendered a deposit of $2000 which was accepted by the agents, servants and employees of plaintiff realty company; that during the aforesaid 45 days subsequent to January 26, 1947, said realty company wholly failed to perform their promise to sell the property of defendants Ribarsky, and as a result defendants were damaged in the sum of $2000. Affiant further deposed that he was one of the defendants in action No. 43043 of the Superior Court of San Mateo County, that the parties in the present action are the same parties as in the aforesaid action; that the subject matter is the same in both actions; that the judgment rendered in the prior action exonerated defendants Ribarsky from any liability to plaintiffs; that said prior judgment has not been set aside, modified or reversed, but remains in full force.

It was stipulated at the hearing of the Motion for Summary Judgment, that the record in the prior action should be considered by the trial judge together with the affidavits.

The same judge who heard the previous suit for damages brought by the plaintiffs Norris against the Ribarskys, heard the motion for summary judgment. His minute order stated that it was granted on the authority of Martinelli v. Hogrefe, 123 Cal.App. 438, 11 P.2d 412. The judgment decreed that ‘plaintiffs Homer A. Norris and Alice Norris, his wife, Peggie C. Keeler and William M. Chance, Jr., individually and as copartners doing business under the firm name and style of Peninsula Realty Company, do have and recover of the defendants, San Mateo County Title Company, a corporation, Emil J. Ribarsky and Bernice F. Ribarsky, the sum of $2,000.00, together with their costs of suit * * *.’

The complaint in the prior action was filed by Homer and Alice Norris seeking $3250 in damages from the Ribarskys for their failure to complete the purchase. It alleged a written agreement providing for the payment of the full purchase price of $20,000 within 45 days from January 26, 1947, and that time was the essence of the contract (no mention was made of the $2,000 deposited in escrow); that plaintiffs performed all conditions by them to be performed prior to March 15, 1947, and were willing, ready and able to deliver title and possession to defendants; that defendants wilfully and without cause, refused to pay the sum of $20,000 or any part thereof and refused to complete the purchase; that relying on the representations of defendants that they would complete the purchase, plaintiffs obligated themselves to the purchase of another piece of property, and hence by reason of defendants' default, were forced to sell their real property for the net sum of $17,000 and incurred other necessary expenses of $250 as the direct and proximate result of defendants' breach of contract.

Defendants entered a general denial and filed a cross-complaint against Homer and Alice Norris, and Keeler and Chance doing business as the Peninsula Realty Company. They alleged that cross-defendants Keeler and Chance were employed by cross-defendants Norris, and then continued with allegations of fraudulent representations substantially the same as those contained in the affidavit in opposition to the Motion for Summary Judgment, noted above. It was further alleged that cross-defendants agreed to refund the $2000 deposit if any of the representations were untrue, and that the agreement should then be null and void; and finally that when defendants ascertained that cross-defendants ‘would not and did not sell their real property for the sum of * * * $18,000 or for any sum at all, and on the 15th day of March, 1947, defendants rescinded the agreement to purchase plaintiffs' real property and the same by mutual consent and agreement of the parties hereto, was rescinded.’ Cross-complainants asked that plaintiffs take nothing by their action; or (2) for judgment in the sum of $3250; (3) costs; (4) such other and further relief as the court might deem proper.

Cross-defendants Keeler and Chance answered denying all the allegations of fraud and the allegations setting forth an agreement between said cross-defendants and cross-complainants concerning an agreement to sell cross-complainants' property; denied also the allegation of a mutual rescission.

Cross-defendants Norris answered, denying each and every allegation of the cross-complaint.

Defendants also filed a second count of amended cross-complaint alleging an oral guarantee by cross-defendants Keeler and Chance to sell defendants' property for a minimum of $20,000, in reliance whereon defendants signed the contract to purchase the Norris property and that said agents' violation of their agreement caused cross-complainants to be unable to fulfill their obligation to plaintiffs and to become liable to them in damages for breach of contract.'

The Findings of Fact and Conclusions of Law first recited that judgment had been entered for plaintiffs and in favor of cross-defendants on the cross-complaint, but upon motion for new trial by defendants and pursuant to Section 662 of the Code of Civil Procedure, the court set aside its judgment and reopened the case for the introduction of additional evidence on the issue of damages.

The court them made Findings of Fact reciting that a deposit receipt for the purchase of plaintiffs' real property had been signed by defendants on January 26, 1947; that said receipt provided for a deposit of $2,000 and the balance of the purchase price within 45 days from said date; that the real estate agents for said sale was the Peninsula Realty Company; that on or about March 13, 1947, defendants notified plaintiffs and Peninsula Realty Company that defendants would not comply with the terms of the aforesaid deposit receipt; that the fair and reasonable value of the real property to said plaintiffs on March 13, 1947, was the sum of $20,000; that the sale by plaintiffs on March 17, 1947, was a forced sale and did not represent the reasonable market value of said property at a fair sale on the open market. It was found further that the allegations in the paragraph of the cross-complaint alleging fraud of the real estate agents were untrue.

In the Conclusions of Law the court stated that plaintiffs failed to prove that they sustained any damage as a result of defendant's refusal to complete the purchase of plaintiffs' property. Judgment was for defendant with costs, and on the cross-complaint judgment was that cross-complainants take nothing.

Appellants contend that the trial court erred in granting respondents' motion for summary judgment on the pleadings and affidavits.

It is argued first that such a judgment is proper only when the supporting affidavit states facts sufficient thereto and the affidavit in opposition tenders no triable issue or defense. Coyne v. Krempels, 36 Cal.2d 257, 223 P.2d 244; Eagles Oil & Refining Company v. Prentice, 19 Cal.2d 553, 122 P.2d 264. ‘In considering a motion for summary judgment the affidavits presented thereon must be considered most favorably to the party against whom the judgment is sought and facts alleged in his affidavits must be accepted as true. (Citations).’ Weichman v. Vetri, 100 Cal.App.2d 177, 223 P.2d 288, 290. And a summary judgment is improper if the supporting affidavits are insufficient for any reason, even if opposing affidavits raise no issue of fact, or if there is no opposing affidavit. Gardenswartz v. Equitable Life Assur. Soc., 23 Cal.App.2d Supp. 745, 68 P.2d 322.

Appellants say that the supporting affidavit of William M. Chance, Jr., states no cause of action as to respondents Keeler and Chance against defendants herein. The affidavit states that plaintiffs Norris agreed in writing to sell the property described in the deposit receipt and ‘agreed in writing to pay plaintiffs Keeler and Chance as commission the sum of Five (5%) of sale price, or one half the deposit in case same is forfeited by purchaser * * *’; that the deposit receipt executed by plaintiffs Norris and defendants Ribarsky further provided that if the purchaser failed to pay the remainder of the purchase price or complete the purchase ‘the amounts paid hereon shall, at the option of the Seller be retained as liquidated damages.’ It is true, the affidavit shows a cause of action by respondents Chance and Keeler against plaintiffs to pay said brokers one-half the deposit, if it is conceded that it was forfeited by the purchasers, but their claim would not be against either defendant Title Company or the appellants. Respondent replies that while there may be some merit in this contention, the argument is purely academic as far as appellants are concerned, if the plaintiffs Norris were properly awarded a judgment for $2000 against defendants and appellants.

Appellants maintain that the supporting affidavit was lacking in essential averments as to the difficulty of assessing damages, and that such an averment is required if liquidated damages are pleaded. Section 1670 of the Civil Code provides that contracts fixing liquidated damages for a breach of an obligation are to that extent void except as provided in Section 1671, which section allows liquidated damages for a breach ‘when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage.’ In the present case there is no allegation or showing of the difficulty of fixing actual damages.

If plaintiffs herein are basing their claim on the theory of liquidated damages, not only would the pleading be defective as pointed out by appellants, but the claim being in damages for the same breach of contract pleaded in the prior action, would be barred by the former judgment. Sutphin v. Speik, 15 Cal.2d 195, 99 P.2d 652, 101 P.2d 497; Morrison v. Willhoit, 62 Cal.App.2d 830, 145 P.2d 707; Slater v. Shell Oil Co., 58 Cal.App.2d 864, 137 P.2d 713. For although respondents did not ask for liquidated damages in that suit, the court could allow damages according to the proper measure. Phillips v. Stark, 186 Cal. 369, 199 P. 509; W. C. Cook & Co. v. White Truck & Transfer Co., 124 Cal.App. 721, 13 P.2d 549.

Respondents avoid this result by asserting that they are not seeking in this action of debt to recover damages of any kind; that the present case involves only the right of respondents to retain the deposit of $2000, the down payment on the purchase price. It is pointed out that the case of Martinelli v. Hogrefe, 123 Cal.App. 438, 11 P.2d 412, 414, upon which the trial judge based his decision herein, was a case in which the defaulting vendee sought to recover a $500 deposit paid under a contract for the purchase of real property at a price of $17,500, in which it was provided that upon plaintiff's default, his rights would cease and his deposit would be retained as ‘liquidated and agreed damages.’ The opinion therein states: ‘And evidence was produced by plaintiff at the trial that there had been no diminution in the value of the property, and hence no damage from plaintiff's failure to perform. But, as was said in the Glock Case [Glock v. Howard & Wilson Colony Co., 123 Cal. 1 at page 13, 55 P. 713, 43 L.R.A. 199], a covenant for liquidated damages is of no consequence in such contracts, ‘where the liquidated damages are expressed as the moneys paid by the vendee; for in all such cases, as has been shown, the vendor is entitled to retain these moneys, whether designated as liquidated damages or not’.' In Krobitzsch v. Middleton, 72 Cal.App.2d 804, 165 P.2d 729, the above rule is reiterated, and in Wilson v. Security-First Nat. Bank, 84 Cal.App.2d 427, 432, 190 P.2d 975, 978, it is said, ‘The right of the seller to retain the amounts paid on the purchase price exists regardless of any provisions in the contract for forfeiture or liquidated damages.’ The defendant title company under this theory, would be holding moneys received by them to the use of respondents.

In Peak v. Jurgens, 5 Cal.App.2d 573, 578, 43 P.2d 569, 572, a case in which a vendee defaulted, and a broker was suing the vendor for a commission, the vendor having previously sued the title company and vendees to recover the deposit, it was said that ‘The purpose of escrowing this payment was obviously to place it within the reach of either who might be entitled thereto, if there was a controversy between the parties on that score. The suit by the respondent here was necessary. It was not a suit to recover damages * * * it was not, strictly speaking, a suit to enforce the contract at all. It was one to have the rights of the vendees terminated and, incidentally, to have the depositary turn over the deposited sum to its rightful owner. * * * In principle, we can see no difference between the case of the vendor retaining a payment actually in his possession under such circumstances and his suing to recover the same from an escrow holder.’ In 25 Cal.Jur. 608, sec. 113, it is said, ‘Where time is made essential and payment by the purchaser is to be made not later than a specified date, the forfeiture resulting from not making such payment is complete on that date and may not be undone by any subsequent act of the purchaser.’ Under these authorities, respondents say, they are entitled to the $2,000 without allegation and proof of damage. This assumes, of course, that the pleadings herein, and the judgment roll of the prior action disclose an unexcused default by appellants. If there has been such a default, then under the above cases, the forfeiture has automatically taken place, and the money on deposit with the escrow holder as of that date belongs to respondents Norris.

Appellants contend that there is an issue of fact to be tried because of their defense of failure of consideration resulting from fraud of the real estate agents of the Peninsula Realty Company. This issue has been concluded by the former judgment for in the prior case the same defense of fraud was pleaded and was found by the court to be untrue. Therefore, appellants failure to complete the purchase stands as an unexcused default and the only inference that is possible from the pleadings in this and the prior case, is that such default was wilful, the excuse pleaded having been adjudged untrue.

The forfeiture having taken place on March 13, 1947, the money belonged to respondents Norris when they wished to claim it. The subsequent damage suit which was unsuccessful and afforded them no remedy, would have no effect upon the money which had already vested in said respondents upon the forfeiture. In the damage suit, plaintiffs did not plead the deposit and the court did not adjudicate the status of said deposit, although it found that such a deposit had been paid. The decision in the case herein would indicate that the trial judge was of the opinion that as a matter of law the deposit belonged to the plaintiffs. While appellants in that first action did not specifically pray for a return of their deposit, they alleged that it had been paid and that there was an oral promise to refund it if cross-defendants representations were untrue; they asked the court for whatever relief it should deem proper and all relief was denied.

Appellants maintain that there was a triable issue of election of remedies, and therefore a summary judgment was improper, but this is question of law, not of fact. They say that the provision in the contract that upon default the deposit ‘shall, at the option of the seller, be retained as liquidated damages,’ clearly shows an intent that ‘the seller has an election to retain the deposit in lieu of actual damages, i. e. to choose between the two but not to take both.’ In the present case it is clear that respondents have not taken both, for the reason that the damage suit was unsuccessful. It is true that the remedies of retention of the deposit and a suit for damages are alternative remedies. In a recent case, Baffa v. Johnson, 35 Cal.2d 36, 216 P.2d 13, the court said: ‘It has frequently been stated that the vendor may retain payments as an alternative remedy to an action for damages for breach of a contract to purchase real property.’ If they are inconsistent remedies an election would have been made by prosecution of the damage action to judgment. Steiner v. Thomas, 94 Cal.App.2d 655, 211 P.2d 321; 10 Cal.Jur. 3–10. However, if they are not inconsistent remedies, there would be no election. In volume 10 Cal.Jur. p. 9, sec. 7, under the heading of ‘Alternative but not Inconsistent Remedies,’ it is said ‘Where the law affords distinct but not inconsistent remedies, an election to follow one does not operate as a waiver of the other.’ Both retention of the deposit and a suit for damages are remedies in affirmance of the contract. Glock v. Howard & Wilson Colony Co., 123 Cal. 1, 55 P. 713, 716, 43 L.R.A. 199; 25 Cal.Jur. 609, sec. 113.

In Glock v. Howard & Wilson Colony Co., supra, which is followed consistently in all of the cited cases having to do with forfeiture of a deposit upon wilful default in contracts for the sale of realty, it is said after enumerating the alternative remedies of suit for damages, retention of the deposit, and specific performance, that ‘he [the vendor] may agree with the vendee for a mutual abandonment and rescission, in which last case, and in which last case alone, the vendee in default would be entitled to a repayment of his money.’ (Emphasis added.) And in Barkis v. Scott, 34 Cal.2d 116, 121, 208 P.2d 367, 370, the court points out in commenting on the Glock case, that in cases where the defaulting vendee could not qualify for relief under Civil Code section 3275 [wilful default being such a case] ‘his only hope of recovering any of the money he had paid * * * was in proving that it was the vendor who was in default.’ In the cross-complaint in the first suit appellants pleaded a mutual rescission because of the fraud alleged in the preceding paragraphs of said cross-complaint, and while the court made no finding on this particular allegation, it found the allegations of fraud untrue and found against appellants on their cross-complaint.

If Glock v. Howard & Wilson Colony Co., is still good authority, and this phase of the cited case appears to remain unshaken by Barkis v. Scott, supra, which limited the application of the Glock case in other respects, then the forfeiture of a deposit such as that herein is still sanctioned upon wilful default. It is also the rule of the Restatement of Contracts, sec. 357, comment e, that ‘one who sues for restitution of value that he has given in part performance, can recover none of it if his breach is wilful and deliberate * * *.’ It would seem that Martinelli v. Hogrefe, 123 Cal.App. 438, 11 P.2d 412, on which the trial judge relied, and Glock v. Howard & Wilson Colony Co., which it followed, warrant the interpretation that a forfeiture and not a damage theory is the basis of the retention of the deposit (See Williston on Contracts, Rev.Ed. Vol. 3, sec. 791). Under this theory, the forfeiture having taken place automatically on March 13, 1947, the $2000 has since that time been the property of respondents Norris.

There would be merit in appellants' argument that the prior judgment of ‘no damages' in favor of defendants foreclosed respondents' right to bring this suit if it could be said that there is a damage theory behind the retention of such a deposit. While logic would seem to demand such a theory Glock v. Howard & Wilson Colony Co., as interpreted in a long line of cases, appears to hold otherwise. It is true that Barkis v. Scott, 34 Cal.2d 116, pages 121–122, supra, 208 P.2d 367, suggests a damage theory in cases of retention of deposits (and even cites the Glock case as authority therefor) but that case is not one of wilful default. Another recent case, Baffa v. Johnson, 35 Cal.2d 36, 216 P.2d 13, supra, seems to suggest that if a wilfully defaulting vendee can show that the payment deposited exceeded the damage to the vendor, he can recover the excess. In the Baffa case the vendee did not furnish proof of an excess of the deposit over the vendor's damage and there was no recovery. It is difficult to tell whether this case is following the old rule of no recovery to a wilfully defaulting vendee or is holding that there is no recovery because the vendee failed to prove unjust enrichment. We cannot be sure that this case has turned from the long established rule of this state toward the rule which is at present the minority rule in this country. (See Williston on Contracts, Rev.Ed., Vol. 3, sec. 791). We must therefore conclude that the old rule still obtains until expressly overruled, although in cases where a judgment has decreed there is no damage, it would certainly appear to be the enforcement of a penalty.

Since appellants herein contracted to buy respondents' property for $20,000 and the resale price was $17,000, respondent sellers received less than the benefit of their bargain after recovery of the deposit, so in any event there was no unjust enrichment.

Judgment affirmed.

PER CURIAM.