Paul C. Perkins and Pearl O. Perkins, Plaintiffs, v. BERNEY

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District Court of Appeal, First District, Division 1, California.

POLLYANNA HOMES, INC., a corporation, Plaintiff and Appellant, Paul C. Perkins and Pearl O. Perkins, Plaintiffs, v. Stanley P. BERNEY, Morris Kawin, Alfred Gitelson, K. G. & Co., San Carlos, a corporation, San Carlos Estates, a partnership, Defendants and Respondents. *

Civ. 19477.

Decided: May 24, 1961

Maynard Garrison, Jr., Wallace, Garrison, Norton & Ray, San Francisco, for appellant Pollyanna Homes. Currie, Lebsack & Hannig, Gerald B. Ferrari, Redwood City, for respondents.

Appellant brought this action to recover damages allegedly resulting from the delay of respondents (hereinafter referred to as respondent) in installing the off-site improvements in connection with 24 lots which appellant bought from respondent intending to build on them and resell them. The complaint by Paul C. Perkins and Pearl O. Perkins was dismissed. An escrow was opened in the Redwood City branch of the California Pacific Title Insurance Company. On March 7, 1957, each party gave written escrow instructions to the title company. On March 15, 1957, the escrow was closed—the lots were deeded to appellant by respondent and respondent received from appellant cash and notes.

Appellant contends that respondent agreed to install the off-site improvements and complete them by July 15, 1957. Respondent denies that he agreed to do either of these things. Admittedly the only consideration moving from appellant to respondent was the cash and notes in the escrow. Consequently, if there was a contractual obligation concerning the off-site improvements it was a part of the contract to convey the lots. Actually the off-site street and sanitary improvements were constructed by the City of San Carlos, and not respondent. The Resolution of Intention to install the streets and sanitary sewers pursuant to the Municipal Improvement Act of 1913* was adopted by the City of San Carlos on February 5, 1957. (Def. Exh. P.) On February 26, 1957 the City Council of San Carlos opened the bids for this work and awarded the contract to the lowest bidder. This contract was not completed until June, 1958.

Appellant started construction of houses on the lots in April, 1957, but could not close any sales until May, 1958, because the purchasers could not obtain loans from the banks until the street improvements were installed. This resulted in loss to appellant by way of interest on loans, taxes and maintenance for which appellant brought this action.

This appeal is concerned only with the first count of the complaint. On this count the verdict of the jury was for the appellant. Respondent filed a motion for judgment notwithstanding the verdict and for a new trial. The trial court granted both motions. Appellant has appealed from the judgment notwithstanding the verdict.

The two main questions involved relate to the effect of the parol evidence rule (Code Civ.Proc. § 1856) and the statute of frauds (Civ.Code, § 1624 and Code Civ.Proc. § 1973). The parol evidence rule provides: ‘When the terms of an agreement have been reduced to writing by the parties, it is to be considered as containing all those terms, and therefore there can be between the parties and their representatives, or successors in interest, no evidence of the terms of the agreement other than the contents of the writing, except in the following cases: * * *’ (Then follow certain exceptions not applicable here.) Code Civ.Proc. § 1856.

The application of the parol evidence rule turns upon whether the agreement has been reduced to writing by the parties. Whether it has been so reduced is a question of law for the court. Kohl v. Lytle Creek W. & Imp. Co., 24 Cal.App.2d 353, 356, 75 P.2d 71; Weil v. California Bank, 219 Cal. 538, 27 P.2d 904; Thoroman v. David, 199 Cal. 386, 249 P. 513. If the contract in this case has been reduced to writing it is to be found in the title company file. In this file there is the request to reserve lots, the proposal, the escrow instructions, and the deed. The request to reserve lots specifically states that it is not to be considered a contract and in fact only 9 of the 24 lots actually purchased are included in the reservation of lots. The proposal is an unsigned document not referred to in any document signed by either party. This leaves the escrow instructions and the deed (Pl. Exh. 9), but neither of the escrow instructions mentions or refers to the other and in fact there is a certain amount of conflict between them. Appellant's instructions list a promissory note to be given in partial payment for the lots as being in the sum of $12,500. Respondent's instructions list this note as being in the sum of $12,100. In respondent's escrow instructions reference is made to ‘the sum of $54,050.00 covering improvement assessments against the property described in the deed.’ Appellant's instructions are completely silent concerning improvement assessments.

Twisselmann v. Cohn, 57 Cal.App.2d 987, 988, 136 P.2d 33 was a case in which one set of escrow instructions carefully detailed the terms and conditions of the purchase of certain real property and the other escrow instructions said, “I have read and approved the foregoing instructions * * *.” Under these circumstances the court held that the escrow instructions constituted the contract. ‘The question whether a writing is upon its face a complete expression of the agreement of the parties is one of law for the court, and the rule which governs the court in its determination has been well stated as follows: ‘If it imports on its face to be a complete expression of the whole agreement,—that is, contains such language as imports a complete legal obligation,—it is to be presumed that the parties have introduced into it every material item and term; and parol evidence cannot be admitted to add another term to the agreement, although the writing contains nothing on the particular one to which the parol evidence is directed.’' Harrison v. McCormick, 89 Cal. 327, 330, 26 P. 830, 831. See also Kohl v. Lytle Creek W. & Imp. Co., supra; Weil v. California Bank, supra; Thoroman v. David, supra.

There is nothing on the face of the escrow instructions in this case which imports that they are a complete expression of the whole agreement. On the contrary, the documents show that the parties are not in agreement as to the amount of one note, and they do not show who, if anyone, was to install the off-site street and sanitary improvements. Under these circumstances parol evidence could be received if the statute of frauds does not bar action on the contract.

The statute of frauds insofar as pertinent reads as follows: ‘The following contracts are invalid, unless the same, or some note or memorandum thereof, is in writing and subscribed by the party to be charged or by his agent: * * * 4. An agreement for * * * the sale of real property, or of an interest therein; * * *.’ Civ.Code, § 1624.

Obviously this was an agreement for the sale of real property and was within the statute of frauds. As to the lots, it was taken out of the statute by performance. It is appellant's position that, ‘the promise [to install the off-site improvements] did not relate to a sale of interest in real property and is not within the Statute of Frauds.’ If there were a separate contract relating to the off-site improvements appellant's position would be sound. But, admittedly, if there is a contract for the off-site improvements we have the same consideration for the promise to install them as for the promise to sell the land, namely, the payment of $50,000 and the execution of certain notes. It is one contract, not two, and being in part for the sale of real property it is within the statute of frauds. The cases are in accord on the principle that in order to satisfy the statute of frauds all conditions of the contract must be in writing. Manifestly there is no writing that refers to the off-site improvements that may be integrated into the contract. ‘The Statute of Frauds * * * is designed to prevent fraud and perjury by requiring certain contracts to be evidenced exclusively in writing. In order to effectuate that purpose, it demands that every material term of an agreement within its provisions be reduced to written form, whether the parties desire to do so or not. To be sufficient, the required writing must be one ‘which states with reasonable certainty, (a) each party to the contract * * * and (b) the land, goods or other subject-matter to which the contract relates, and (c) the terms and conditions of all of the promises constituting the contract and by whom and to whom the promises are made.’ Restatement, Contracts, sec. 207. Emphasis added. Unless the writing, considered alone, expresses the essential terms with sufficient certainty to constitute an enforceable contract, it fails to meet the demands of the statute. [Citing cases.] Accordingly, where the Statute of Frauds, rather than the parol evidence rule is invoked, it follows that recovery may not be predicated upon parol proof of material terms omitted from the written memorandum, even though the oral understanding is entirely consistent with, and in no way tends to vary or contradict, the written instrument. [Citing cases.] In the words of the Supreme Court, ‘The whole object of the statute would be frustrated if any substantive portion of the agreement could be established by parol evidence.’ Craig v. Zelian, supra, 137 Cal. 105, 106, 69 P. 853, 854.' Ellis v. Klaff, 96 Cal.App.2d 471, 476–477, 216 P.2d 15, 19.

Appellant also contends that if the promise to complete the installation of the offsite improvements by July 15, 1957 ‘was within the Statute of Frauds, full performance by both parties removed it from the Statute,’ but if the off-site improvements were a part of the contract it has not been fully performed on both sides. If it had been there would be no basis for litigation.

However, there are situations where defendant is estopped to assert the statute of frauds. ‘Such fraud may inhere in the unconscionable injury that would result from denying enforcement of the contract after one party has been induced by the other seriously to change his position in reliance on the contract [citing cases], or in the unjust enrichment that would result if a party who has received the benefits of the other's performance were allowed to rely upon the statute.’ Monarco v. Lo Greco, 35 Cal.2d 621, 623–624, 220 P.2d 737, 739. In such a situation ‘the burden rests on the plaintiff to prove the oral agreement by full, clear, and convincing evidence.’ Notten v. Mensing, 3 Cal.2d 469, 477, 45 P.2d 198, 202. ‘There can be no estoppel unless plaintiff will suffer unconscionable injury or defendant will be unjustly enriched if the oral contract is not enforced.’ Ruinello v. Murray, 36 Cal.2d 687, 689, 227 P.2d 251, 253.

Since the off-site street and sanitary improvements were being installed by the City of San Carlos the time of completion was beyond respondent's control, and this fact being known to both parties no estoppel could arise. Similarly no estoppel results from respondent's telling appellant that no writing would be necessary. (Monarco v. Lo Greco, supra; Ruinello v. Murray, supra.) The documents show that the City of San Carlos actually installed the off-site street and sanitary improvements pursuant to proceedings started on February 5, 1957, and that the contract was awarded to the lowest bidder on February 27, 1957. (Pl. Exh. 1; Def. Exh. 23.) The gas and electric services were installed by the Pacific Gas and Electric Company; the water was installed by the California Water Service. Under these circumstances, respondent is not estopped to rely on the statute of frauds.

Appellant contends that where one party has completely performed, the nonperforming party may not rely on the statute of frauds. This statement is too broad. If unconscionable injury would result to plaintiffs from denying enforcement of the contract or if the defendant would be unjustly enriched, then where a plaintiff has completely performed the defendant is estopped to rely on the statute of frauds.

Appellant also alleges that respondent waived the statute of frauds by not objecting on that ground during the trial. The statute of frauds was raised as a special defense by the answer, it was included as an issue in the pre-trial statement, and was urged as an objection during the trial.

The judgment is affirmed.

FOOTNOTES

FOOTNOTE.  Streets and Highways Code, § 10000 et seq.

HOYT, Justice pro tem.

BRAY, P. J., and DUNIWAY, J., concur.