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

Harold B. LEVY and Murial M. Levy, his wife, and William Mendelson and Fanny Mendelson, his wife, Plaintiffs and Respondents, v. C. Le Roy WOLFF and J. J. Carey and E. J. Carey, Individually and copartners doing business under the firm and style of E. J. Carey Company, Defendants and Appellants.

Civ. 16477.

Decided: October 17, 1955

Breed, Robinson & Stewart, Oakland, Hoey, Hall & Conti, Martinez, for appellant C. Le Roy Wolff. Edmund S. Barnett, Walnut Creek, for respondents.

Defendant C. LeRoy Wolff appeals from a money judgment for plaintiffs based on findings to the following effect: Plaintiffs paid to defendant Wolff $16,500 cash for certain unimproved real property in Contra Costa County together with a lease thereof. Both parties honestly believed the lease to be in existence but in proceedings instituted by a third party in which the plaintiffs were defendants it was found that said lease had never been binding or in force. Plaintiffs were, however, held entitled to reasonable rent for the period of occupancy, which rent they recovered in the sum of $4,417.98, paying $1,109 for costs of suit, attorneys' fees, etc. The judgment appealed from awarded plaintiffs as damages the lesser value of the land because of the lack of the lease in the amount $5,772.97 less the $4,417.95 rent received but plus the costs and fees expended.

Appellant contends that as the decision was based on honest mutual mistake he could not be liable for damages and that if there was partial failure of consideration respondents had in accordance with section 1728, subdivision 2 of the Civil Code (relating to the destruction of goods, contracted to be sold) the election either to rescind the contract or to uphold it and to pay the full price, the contract being indivisible. Respondents contend that the court could award them the amount with which appellant was unjustly enriched, citing section 25 of the Restatement of Restitution, which reads in part:

‘A person who has paid money to another as full * * * performance of a contract voidable by the payor for mistake and who has received a part of the agreed exchange is entitled

‘(b) at his election, to keep what he has received and to have restitution of so much of his payment as has not been compensated for by the other's part performance,

‘(i) in the case of land, if a fair basis for valuation can be found * * *.’

The above rule of the Restatement is applicable to the facts of this case and ought to be followed. It has been applied in California to allow compensation where the purchaser has mistakenly paid for more acreage than the vendor is able to convey: Butte Creek Consolidated Dredging Co. v. Olney, 173 Cal. 697, 705 et seq., 161 P. 260. Compare Quarg v. Scher, 136 Cal. 406, 411, 69 P. 96; Anderson v. Willson, 48 Cal.App. 289, 294, 191 P. 1016. A rule analogous to the stated rule is expressed as follows in Milkes v. Smith, 91 Cal.App.2d 79, 82, 204 P.2d 419, 420: ‘if a vendor has any interest in the property he has contracted to convey, the vendee at his option may enforce the contract with respect to whatever interest the vendor possesses, and may also receive compensation for the deficiency in performance.’ Many California cases are cited in support of this proposition. No good reason appears why the same right to compensation for a deficiency in performance should not apply when the insufficient performance takes place without action for specific performance. Section 1728, Civil Code, on which appellant relies is a rule as to the destruction of goods (personal property) contracted to be sold, not applicable in this case in which the contract relates to real property not destroyed.

Appellant's contention that the amount of $1,109 for costs and fees should not have been awarded to plaintiffs is without merit. It is a necessary complement to the deduction of $4,417.95 received by respondents for reasonable rent. In the calculation of the compensation due respondents appellant is entitled to deduction of the net advantage only which respondents obtained from the property in connection with the ostensible lease. It is in this respect irrelevant whether the costs which diminished the advantage were costs of suit, execution or otherwise.

Judgment affirmed.

NOURSE, Presiding Justice.

DOOLING and KAUFMAN, JJ., concur.