RECORD MACHINE & TOOL CO. v. PAGEMAN HOLDING CORP.*
From a judgment in favor of plaintiff after trial before the court without a jury in an action for (1) declaratory relief, (2) an accounting, and to require defendant, in accordance with the terms of a contract with plaintiff to convey title to certain property, to deposit in an escrow the necessary documents, in compliance with the terms of such contract, defendant appeals.
In April, 1946, plaintiff and defendant entered into a conditional sales contract by the terms of which defendant agreed to sell to plaintiff certain real and personal property; also five United States letters patent, for the sum of $100,000, payable as follows: ‘The sum of Ten Thousand Dollars ($10,000.00) upon the execution of this agreement, the receipt of which is hereby acknowledged (same having been paid under option to purchase), and the sum of One Thousand Dollars ($1,000.00) or more plus interest at the rate of four percent (4%) per annum upon the unpaid balance on the first (1st) day of each and every month commencing on the first (1st) day of June, 1947, and continuing until the full amount of the purchase price has been paid.’
Plaintiff in due time, not being in default under the terms of his contract, offered to pay the balance due and demanded performance by defendant. Defendant has failed to perform and in fact is unable to deliver part of the material consideration for the contract as will hereinafter appear.
The Honorable Leon T. David, the trial judge, prepared and filed an opinion which fully sets forth the facts, defendant's contentions on appeal and the law applicable thereto. Since we have reached the same conclusions as the learned trial judge no useful purpose would be served by our rephrasing the opinion prepared by Judge David. Therefore we adopt the same with minor modifications:
‘On or about August 23, 1951, plaintiff purported to make a tender in full payment and satisfaction of its then existing obligation under a contract with defendant entered into on April 16, 1947, demanding performance by the defendant.
‘As of that date, and now, the defendant corporation was not the owner of the letters patents #2133022, 2151347, 2151348, 2155040 and 2215264. Although in a position to speedily acquire the others, it is established that prior to the date of the contract and ever since, the exclusive license to manufacture, use and sell drill bits under patent 2133022 had been ceded away to another, and defendant cannot be or at least has not been, able to perform. The defendant is in a position to make the required conveyances, etc. otherwise.
‘Because of such disability to perform, plaintiff seeks a declaration of its rights, pointing out that further payments by it under the contract will damage it, since defendant will not be able to perform when payments are made in entirety. Likewise, it is prayed that an accounting be had to determine the balance due; that defendant be ordered to deposit in escrow the necessary documents required for performance, to be delivered to plaintiff when plaintiff pays such balance into escrow.
‘It then is claimed that $5,000 is due to plaintiff, as damages due for a lost opportunity for sale of a lathe by failure of defendant to convey title on the tender; and by failure to perform under the tender plaintiff has lost $120 day rentals for machinery from September 14, 1951, to date. Under the contract of April 16, 1947, on or about September 5, 1951, the plaintiff owed defendant $26,524.33. Since that date, the principal was reduced by payments of $5,000 and $2,000 more since the trial began. On the face of the instrument, $19,524.33 still is owing. On or about September, 1951, the plaintiffs learned that the defendant corporation did not own letters patent #2133022 and the other dependent patents concerned in the agreement, contrary to the assertions of the agreement; and while the ownership of the letters themselves, except as to #2133022 might readily be obtained by defendant; it conclusively appears that from a date prior to the execution of the agreement, the ownership of the basic patent #2133022 was and is now shared by several individuals; and, moreover, the grant of the ‘exclusive license to manufacture, use and sell rotary bits and tools in accordance with the inventions and claims set forth’ for the life of the conditional sales contract is rendered nugatory, and the assignment of the patents ‘free and clear of any liens or encumbrances' upon full performance by plaintiffs is apparently conceded to be impossible by defendant. This arises out of the fact that such exclusive license rests in one Koontz, who also apparently owns 24% of the patent in question. Two witnesses have testified that in their opinion the patent rights involved are of considerable value.
‘Under these circumstances, plaintiffs ask for a declaratory judgment: that defendant is not entitled to further payment unless and until it demonstrates its ability to convey the rights in question by depositing in escrow the agreements required, concurrently with a tender by plaintiff of any balance found due.
‘Continued payments, under the contract it is urged, may work to damage of the plaintiff, if at the end of the period the defendant is unable to perform.
‘The court finds that as of September 5, 1951, plaintiff owed defendant $26,524.33 for principal and interest on the contract. On or about August 22, 1951, plaintiff in writing offered ‘to pay the full amount of the unpaid balance’, and stated that for this purpose an escrow had been opened at the Bank of America and that the escrow holder had been instructed to pay defendant $26,549.18 as the principal and interest to September 5, 1951.
‘Demand was made that the defendant deliver the deeds, conveyances, title insurance policies, transfers and assignments called for under the terms of the contract on or before September 5, 1951, to the escrow holder, with directions they be delivered concurrently with the payment to them of the unpaid balance.
‘The plaintiff paid all escrow charges and advised defendant thereof.
‘Asserting that it could perform (though it now is certain it could not, and that fact was known to its attorney and to Mr. Pageman, individually and as corporate president) the defendant refused to proceed.
‘The basic issue relates to the tender, since defendant claims it legally was insufficient. When a tender is made and refused, it is required the reasons for rejection be specified. (Civil Code, Sec. 1501.) In rejecting the tender, the defendant necessarily admits knowledge of it and of the arrangements proposed.
‘On the trial, defendant contended
‘(a) the vendor did not agree to handle the concurrent exchanges through escrow, nor did it agree to the escrow holder;
‘(b) the arrangement went beyond reasonable requirements;
‘(c) the vendor did not waive objections to these requirements;
‘(d) since the payment proposed was in part to be derived from a loan on the realty required to be conveyed to the plaintiff, the tender was of unavailable funds;
‘(e) the payment was not made by mail to the vendor;
‘(f) the amount tendered was insufficient.
‘No counter directions were given but it was indicated that if plaintiff wished to make any arrangements under an escrow holder satisfactory to the Pageman Holding Corporation it ‘will give such matter consideration’, but that it would perform in accordance with the ‘full tenor’ of the conditions of the conditional sales contract.
‘It appears that at all times the defendant was, and still is, unable to assign to plaintiffs Patent #2133022, ‘free and clear of any liens or encumbrances,’ and that defendant was not, and is not now the owner of any of the patents to be assigned, though R. A. Pagemen, their owner in whole or in part, individually is willing to make assignments of his interests. The court concludes that defendant at the time of its rejection of the tender, was not able to perform, and that this was the underlying and unexpressed reason for rejection of the tender.
‘At all times during the contract to date, the court finds that the defendant is and was in default in that it could not and did not in fact give plaintiff the exclusive license to manufacture the articles covered by said letters patent.
‘The law requires one objecting to a tender to specify the objections, or they are waived. (Civ.Code, Sec. 1501; Code Civ.Proc., Sec. 2076.) The offer conforms to Civil Code, section 1485, in the intent to extinguish the obligation; the question then becomes: was the offer in conformity with the rules prescribed?
‘It was not an offer of partial performance, (Civ.Code, Sec. 1486); it was made by the debtor or by some person on his behalf and with his assent, (Civ.Code, Sec. 1487); it was made to the creditor (Civ.Code, Sec. 1488); it was made at a proper time, (Civ.Code, Sec. 1491); and was made in good faith (Civ.Code, Sec. 1493). It was legal and proper to make the offer depend on the concurrent (Civ.Code, Sec. 1439) delivery of instruments of title by the defendant (Civ.Code, Sec. 1498), and in this connection, as the ordinary incident to a transaction of procuring a policy of title insurance, the defendant would first have to tender the deed, the plaintiff's payment being held in abeyance until the policy was produced. So far as this real estate transaction was involved, this procedure would follow as an ordinary, customary and usual incident of such a transaction. (Civ.Code, Sec. 1655.)
‘The plaintiff must have been able and willing to perform according to his offer. (Civ.Code, Sec. 1495.) The court is satisfied that had the defendant proceeded as indicated, plaintiff was able, as well as willing; even though this depended on making loan proceeds available, not available unless the defendant deposited the deed to the realty. (Russell v. Ramm, 200 Cal. 348, 254 P. 532; McCabe v. Jones, 141 Wis. 540, 124 N.W. 486; Rosenblatt v. Bergen, 202 App.Div. 220, 195 N.Y.S. 276; Walton v. Hudson, 82 Ohio App. 330, 79 N.E.2d 921, 925.)
‘The code prescribes where the offer of performance may be made. (Civ.Code, Sec. 1489.) The offer itself was delivered to the creditor, at the place specified for payments. The defendant asserts the performance was to be by mail to the address specified. Such a direction given as to executory payments does not necessarily govern the final performance by the defendants which involves much more than payment, i. e. the transfer of the documents of title concurrently with the money. The tender of payment was made to the address designated in the contract.
‘The defendant, in rejecting the tender, did not specify the terms he required (Code Civ.Proc. § 2076) except as to the amount as to which it was in error; and as to the mail payment, and refusal to proceed concurrently, it also was in error. It did not object to going to escrow, but only to this escrow; but it did not say it would open an escrow or give directions for one. It never did.
‘It must be borne in mind this was a tender, not a deposit, (both of which seem to be confused in Wuchner v. Goggin, 9 Cir., 175 F.2d 261.)
‘Certain of the items covered in the transaction were personalty. It is the duty of the seller to deliver the goods, and a fortiori, to deliver the instruments of title (Civ.Code, sec. 1761) and the payment and delivery are concurrent conditions (Civ.Code, sec. 1762), to be made at the place of delivery of the goods which, in this case, was at the plaintiff's place of business; and as the escrow holder is the agent of the buyer, the bank constituted the buyer's designated place of business for this purpose.
‘We conclude the tender was valid. (Latimer v. Capay Valley Land Co., 137 Cal. 286, 70 P. 82, citing Civ.Code. secs. 1496, 1498; Hunt v. Mahoney, 82 Cal.App.2d 540, 543, 187 P.2d 43; Hind v. Oriental Products Co., 195 Cal. 655, 665, 235 P. 438; Kofoed v. Gordon, 122 Cal. 314, 318, 54 P. 1115; Walker v. Houston, 215 Cal. 742, 745, 12 P.2d 952, 87 A.L.R. 937.)
‘What was the effect of the tender?
‘As to the realty, defendant held the legal title as security to assert his vendor's lien. (Civ.Code, secs. 3046, 3050.) Under the contract, the plaintiff had a right to tender the entire balance due, and upon refusal of a valid tender, the land is released from any further claim by the vendor, who is remitted to the action for the purchase price. (Haile v. Smith, 113 Cal. 656, 45 P. 872; Cf. Lichty v. Whitney, 80 Cal.App.2d 696, 182 P.2d 582; Civ.Code, sec. 1498.) The present contract permitted the payment of the entire amount due at any time. The principle announced in Hanson v. Fox, 155 Cal. 106, 99 P. 489, 20 L.R.A.,N.S., 338, and similar cases since is inapplicable.
‘A valid tender immediately vests title to all chattels to be conveyed in the purchaser. (Walker v. Houston, 215 Cal. 742, 745, 12 P.2d 952, 87 A.L.R. 937.)
‘To avoid further litigation, as far as possible, this court may order the method of completing performance under the contract. (Rolapp v. Fed. Bldg. etc. Ass'n, 11 Cal.App.2d 337, 53 P.2d 974.)’
Defendant's contention that it was reversible error for the trial court not to make a finding as to the value of the patent No. 2133022, which it is conceded defendant would be unable to assign to plaintiff, is without merit for the reason that the trial court in fact in the judgment made a finding relative to its value. The judgment says: ‘That in as much as damages alleged by the plaintiff are not proved with sufficient certainty and particularity, the plaintiffs take nothing on such claims in the present action for declaratory relief.’
MOORE, P. J., and FOX, J., concur.