LESLIE v. FEDERAL FINANCE CO (1938)

About January 11, 1932, appellant, Catherine L. Leslie, and Charles C.L. Leslie, executed a deed of trust upon certain real property in Orange county to the Orange County Title Company, as trustee, securing among other obligations a note for $45,870 payable to the respondent, Federal Finance Company, Inc. The note and trust deed were in effect a renewal of a former note and trust deed between the same parties involving the same property.

About September 18, 1931, one H.O. Jones obtained a judgment against the appellant's husband, Charles C.L. Leslie. This judgment was recorded August 2, 1932, in Orange county. The judgment creditor thereafter caused an execution to be levied upon and against all of the interest and estate of Charles C.L. Leslie in and to the real property covered by the trust deed heretofore mentioned, which execution was recorded September 7, 1932.

On or about December 19, 1932, respondent caused its trust deed to be foreclosed and the real property covered thereby sold by the trustee under the power of sale contained therein. At said sale, which was held on July 25, 1933, respondent corporation purchased the real property for the sum of $56,000, and received a trustee's deed of the legal title thereto.

At the time of the trustee's sale appellant and her husband were the owners of certain tools, farm implements and other equipment, of an alleged reasonable value of $10,000, which had been and were being used in connection with the operation and maintenance of the real property, the legal title to which appellant and her husband transferred to the respondent corporation by written assignment, executed and delivered subsequent to the trustee's sale of July 25, 1933, and prior to August 18, 1934.

Plaintiffs herein brought this action, seeking to have the respondent corporation (1) declared a trustee of the legal title to the real and personal property for their use and benefit; (2) reconvey the property to the appellant; (3) account for the proceeds derived from the operation of the real property; (4) enjoined, pendente lite, from transferring or conveying title to the property.

Appellant's claim to such relief, as set out in the complaint, is based upon certain oral agreements between the parties to the trust deed and their conduct with respect thereto. Appellant alleges that immediately prior to the trustee's sale, she and her husband had numerous conversations with one J.A. George, as the active manager of the respondent corporation, and as a result of which an oral agreement was made between the parties to the following effect:

“(a) For the purpose of clearing the title to the real property in order that the respondent corporation's trust deed loan might be refinanced, the respondent corporation would and should foreclose its trust deed and cause the real property covered thereby to be sold.

“(b) At said trust deed foreclosure sale of the real property, the respondent corporation would and should become the purchaser thereof and that appellant and her said husband would and should remain in possession and operation of the property until such time as they should be able to refinance respondent corporation's said trust deed loan.

“(c) For the purpose of protecting appellant's equity in the real property she and her husband would and should make application to the Federal Land Bank of Berkeley, California, for a substantial loan.

“(d) The proceeds of such loan to be made by said Federal Land Bank of Berkeley would and should be received and accepted by the respondent corporation in reduction of appellant's said trust deed indebtedness.

“(e) The loan to be obtained from said Federal Land Bank of Berkeley would and should be secured by a first mortgage on the real property described in the respondent corporation's said trust deed.

“(f) After said trust deed foreclosure and the sale of said real property, the respondent corporation would and should receive the proceeds derived from the operation of said real property and account to appellant and her said husband for all sums received in excess of the necessary operating expense.

“(g) The net proceeds derived and received by the respondent corporation from the operation of the real property during the period in which title to the same was held by it would and should be applied to the payment of appellant's trust deed indebtedness.”

Subsequent to the trustee's sale of July 25, 1933, and prior to July 18, 1934, it is alleged that appellant and her husband had certain conversations with J.A. George, as a result of which a further oral agreement was made between the parties, to this effect:

“(1) Appellant and her husband would and should transfer and convey to the respondent corporation all tools, farm implements and other equipment used in the operation and maintenance of said real property, under the same agreement which was then in force by and between the parties with respect to the real property.

“(2) The title to said personal property would and should be reconveyed to appellant and her husband as and when the respondent corporation's said trust deed loan should be refinanced.”

In the complaint it is further alleged in substance that on or about August 29, 1933, appellant's husband obtained a tentative commitment from the Federal Land Bank for a loan of $30,000, which commitment the respondent rejected in January, 1934. A similar commitment in the sum of $32,500 was rejected by it in May, 1935.

Respondent corporation in its answer to the complaint specifically denies the allegations with respect to the oral agreement heretofore mentioned and the conduct of the parties relating thereto.

Upon the trial of the case on June 8, 1936, after the appellant and her husband had introduced their proof, a motion for nonsuit was made and denied by the trial court. The parties thereupon stipulated to the entry of an interlocutory judgment in accordance with a written stipulation, which was duly filed. Thereupon judgment was made and entered by the court.

That portion of the interlocutory decree which we deem advisable to relate, in fairly presenting the agreement of the parties, may be recapitulated as follows:

(1) The court on June 11, 1936, decreed that plaintiffs have the right to purchase the real property and also the personal property theretofore described “at any time on or before the 10th day of December, 1936”, for the sum of $57,821.19, plus interest, cost of operation, etc. This sum was subject to an audit by plaintiffs to be completed within 30 days from the date of the decree. The net amount of the purchase price was to be determined in accordance with an account furnished by plaintiffs as of June 3, 1936.

(2) It was further ordered that defendant corporation remain in possession of the real property until plaintiffs paid to defendant the purchase price.

(3) Upon payment being thus made the defendant was to execute to the plaintiffs or their nominee, a grant deed to the real property hereinbefore referred to, free and clear of all liens and encumbrances made, done, or suffered by the defendant as of the date of the purchase by the defendant of said real property at foreclosure sale of the deed of trust, but without covenant or warranty, expressed or implied, the defendant being only required to convey to the plaintiffs the title to the real property which it acquired as purchaser under the foreclosure of the deed of trust.

(4) That upon the purchase of the property by plaintiffs in accordance with the decree, and at the time of the execution of the deed, the purchase price having been paid to the defendant as therein directed, defendant should also assign to the plaintiffs any moneys, due for crops grown on the land, and any interest that it might then have in revolving funds of marketing associations by reason of crops marketed from the real property, and any interest that it might then have in sums to be paid by any citrus marketing association by reason of unpaid balances for crops harvested from the property. It was ordered that at the time and under the conditions related defendant should further execute to plaintiffs a bill of sale of the personal property remaining on the real property, but without warranty.

(5) That all money to be paid to the defendant by the plaintiffs should be paid to its account at the office of the Orange County Title Company in Santa Ana, to be paid by the title company to the defendant upon receiving from the defendant the instruments required to be executed by the defendant under the decree. The certificate of the title company that the moneys had or had not been paid by the plaintiffs or their assigns was to be sufficient evidence to the court for the entry of the final decree therein. If, however, the defendant should, upon notice of deposit of the moneys with the title company, file with the title company the instruments therein referred to, to be executed by the defendant on or before the 10th day of December, 1936, and the moneys were not received by the title company for the unconditional use of the defendant as provided in the decree on or before the said date, then the court should enter its final decree quieting title in the defendant corporation as thereinabove provided.

(6) That if the payments to be made by the plaintiffs to the defendant for the purchase of the real property were made as therein provided, and within the time therein limited, to wit, on or before the 10th day of December, 1936, then the plaintiffs should be entitled to a final decree confirming title to the real and personal property in the plaintiffs, and the court should, under such circumstances and conditions, enter its final judgment confirming title to the real and personal property in the plaintiffs.

(7) That if plaintiffs failed to make the payments as therein provided to be made then immediately after the time limit set by the interlocutory decree, to wit, the 11th day of December, 1936, the defendant should be entitled to a final decree quieting title to the personal property in the defendant and declaring that neither one of the plaintiffs is entitled to any right, title or interest in any of the real or personal property, and the court should enter its final decree to that effect.

On June 11, 1936, appellant's husband, Charles C.L. Leslie, duly assigned to appellant all his right, title and interest in and to the above-mentioned interlocutory decree and the rights thereby granted to him.

On January 7, 1937, the court gave final judgment in favor of the respondent corporation, quieting its title to the real and personal property hereinbefore mentioned. This decree was made following a hearing upon the motion of respondent corporation to enter a final decree. The motion to enter this decree was filed December 12, 1936.

From the evidence presented at the hearing and the affidavits introduced it appears that the amount necessary to be paid to respondent on December 10, 1936, was the sum of $55,259.28. Counsel for appellant filed an affidavit reciting the fact that he was attorney-in-fact for appellant; that on December 10, 1936, he was in the office of the title company arranging for the deposit of the amount required to be paid to the Federal Finance Company and for the purchase of the property by J. Roy Smith and wife, as assignees and nominees of Catherine L. Leslie; that he was present on December 10, 1936, when the necessary funds were deposited with the title company in the exercise of plaintiffs' right to purchase the property and that he directed the title company to pay out of such funds to the Federal Finance Company, Inc., the sum of $55,259.28, upon receipt from the finance company of a deed of conveyance of the real property to J. Roy Smith and wife, together with a bill of sale of the personal property and assignments referred to in the interlocutory decree.

The escrow instructions dated December 10, 1936, directed to the title company and given by Catherine L. and Charles C.L. Leslie, through their attorney-in-fact, contained some of the following provisions:

“I will direct the Federal Finance Company, Incorporated, a corporation, to convey to J. Roy Smith and Grace Lee Smith, husband and wife, as joint tenants with the right of survivorship, covering that certain property described as follows: (describing property) upon payment to you for my account as hereinafter provided, the sum of $68,000.00 of which amount $56,000.00 is deposited in escrow this date and balance of $12,000.00 within 30 days from date hereof, from which sum you may deduct your charges and advances and from which you may also pay all encumbrances on said property necessary to issue your Policy of Title Insurance in your usual form, showing the record title to said property vested in said J. Roy Smith and Grace Lee Smith, husband and wife, as joint tenants with the right of survivorship, free of all encumbrances. * All funds deposited in this escrow are to be disbursed subject to the order of Culbert L. Olsen, attorney in fact for Cathering L. Leslie, at such time as these instructions can be complied with. Your liability under said policy of title insurance to be limited to $68,000.00. *

“Time is declared to be the essence of these instructions and if, within the time specified you are unable to comply with these instructions, then all papers, money or property left with you by me shall be returned to me on my written demand. *”

These instructions were approved by J. Roy Smith and the $56,000 was authorized to be deposited in the general escrow account. Smith signed an instrument agreeing to buy the property on the terms above recited. On the same day the Leslies authorized the title company to pay from the funds deposited by J. Roy Smith, to the finance company the sum of $55,259.28 upon the conveyance by the finance company to J. Roy Smith and wife, of the real estate described and the execution of a bill of sale of the personal property. This written instruction was not signed by J. Roy Smith.

It appears from the testimony of the vice-president of the title company that on December 11, 1936, respondent corporation's counsel tendered a deed, bill of sale, and certain assignments, and demanded the $55,259.88 due under the decree. The title company refused payment and assigned as its reason the fact that the escrow instructions called for an additional $12,000 to be paid by Smith and that the deposit made was conditional upon securing clear title to the property. A title search would have to be completed before a policy of insurance could issue as provided in the instructions. The title search was commenced on the 11th day of December, 1936, and completed on December 18th of the same year, by which it was disclosed that to clear the title a quitclaim deed would have to be obtained from E.E. Pellegrin and dismissals filed in the declaratory relief suit and in the present action, as well as the possible necessity of a release by respondent of a crop mortgage.

The affidavit of counsel for respondent which was received in evidence relates in substance that on December 11, 1936, at 9 o'clock a.m., he telephoned to the vice-president of the Orange County Title Company and asked if there was any money on deposit with that company which the company would pay to the Federal Finance Company upon delivery by it to the title company of the instruments required. The vice-president replied that they had no money to pay it upon delivery of the instruments but that he had taken in an escrow about 6 o'clock the evening before and $56,000 was deposited, but that the moneys could not and would not be paid to the finance company unless and until the title had been searched and the title company could deliver to the proposed purchaser its policy of title insurance, insuring title in purchaser in accordance with the terms of the escrow, and that this would take a number of days; that counsel for respondent then stated that the Federal Finance Company desired to make a tender of the instrument to the title company and was informed that it would be useless because no payment would be made; that on December 11, 1936, a tender of the instruments described in the decree was made and payment was refused; that he requested that he be shown the escrow and was advised that he could not see it because the title company had been instructed by counsel for appellant not to show the escrow nor to disclose its terms to the finance company; that he demanded that the title company issue its certificate in accordance with paragraph VII of the interlocutory decree, stating that the moneys had either been paid or not paid to the title company for the account or unconditional use of the finance company; that if they did not desire to certify to any conclusion that they certify the true facts under which they held the escrow, including the escrow instructions and terms. This demand was refused.

It is apparent from this statement that the respondent used the greatest diligence in making a tender, and that if a tender was required, which we do not hold, it was useless, because respondent was informed in advance that no payment would be made, even upon proper tender. Where a tender is useless, failure to make it is excused. This principle is well established. Pierce v. Lukens, 144 Cal. 397, 77 P. 996; Civ.Code, secs. 1440 and 1515; Hulen v. Stuart, 191 Cal. 562, 217 P. 750; Bell v. Bank of California, 153 Cal. 234, 94 P. 889. The court found that, though it was not required by the terms of the interlocutory decree, the defendant tendered all instruments required by it to be tendered in the event the appellant desired to exercise the option. There is sufficient evidence to support this finding.

It is contended that the trial court erred in sustaining respondent's objection when appellant offered in evidence, at the hearing on the motion to enter final judgment, a complaint entitled E.E. Pellegrin, plaintiff, v. Charles C.L. Leslie, Catherine L. Leslie and Federal Finance Company, Inc., defendants, wherein the plaintiff charges fraud and collusion between the defendants with respect to the sale of the property under the trust deed, and alleges that he was the holder of a sheriff's deed under execution sale upon a judgment formerly rendered in favor of one H.O. Jones and against appellant's husband, Charles C.L. Leslie. This was offered on the theory that respondent suffered the title to the property to become clouded by its fraud and collusion. We are of the opinion that the court properly sustained the objection.

In the case of Osborne v. Winter, 133 Cal.App. 664, 24 P.2d 892, the court, in defining the term “suffer to occur” said [page 893]: “It implies an approval of or acquiescence in an act, and more than nonresistance. Purinton v. Jamrock, 195 Mass. 187, 80 N.E. 802, 18 L.R.A.(N.S.) 926. And denotes knowledge and intention. Bunnell v. Commonwealth (Ky.) 99 S.W. 237.”

In Crist v. Fife, 41 Cal.App. 509, 183 P. 197, construing section 1113 of the Civil Code, which declares that a grant insures among other things that an estate is at the time of conveyance free from incumbrances done, made or suffered by the grantor, the court said “ ‘Suffered,’ as used in the statute, implies reasonable control, and it cannot be held to apply to an incumbrance not caused by the act of the party nor within his power to prevent.”

In Block v. Citizens' Trust & Savings Bank, 57 Cal.App. 518, 207 P. 510, it was held that condemnation proceedings could not be said to constitute an incumbrance “ ‘made, done or suffered’ by the vendor”. [Page 513.]

It cannot be said in the instant case that the mere filing of the complaint in the case of Pellegrin v. Leslie et al., above referred to, by virtue of which the title to the property may have become clouded, constituted a lien or incumbrance made, done or suffered by the respondent, particularly when the claimed act of respondent in transferring the property to J. Roy Smith was, as alleged in the complaint, committed for the purpose of defrauding the judgment creditor of Charles C.L. Leslie. Under these circumstances, appellant would be estopped in an equity proceeding from advancing such a claim, especially where she was to receive all the benefits of such a fraud, if perpetrated, as alleged. Sec. 3517, Civ.Code. As a general rule, equity will not aid one party or another to a transaction which is illegal or contrary to public policy, where they are equally at fault, but will leave them just where it finds them, to settle their questions without the aid of the court. Colby v. Title Ins. & Trust Company, 160 Cal. 632, 117 P. 913, 35 L.R.A., N.S., 813, Ann.Cas.1913A. 515; 10 Cal.Jur. 518, sec. 57. Respondent has specifically denied all of the allegations of the complaint in this action. There is no finding supporting the theory of fraud or collusion on the part of respondent and we cannot presume such fraud or collusion from the record before us. Sec. 1963, Code Civ.Proc. subd. 19.

It is to be noted further that after the introduction of the evidence to which we have referred, and when the court was about to announce its oral decision, appellant asked for a continuance for several days for the purpose of securing further evidence. Respondent objected to the continuance, but the objection was overruled. On the day to which the hearing was continued, appellant called J. Roy Smith as a witness and asked him if he was willing to change the escrow instructions so as to permit the immediate release of the amount required to pay the Federal Finance Company so that the title company might immediately pay over the money to the finance company on receipt from it of the conveyances and assignments designated. He expressed a willingness so to do. A written authorization to this effect was received in evidence. Respondent refused to accept the offer, whereupon the court rendered final judgment in favor of respondent in accordance with the terms of the interlocutory decree.

Appellant in his exhaustive and well-prepared brief strenuously contends that the decree or order being interlocutory, the trial court had the power to extend the time therein provided for the payment of the money by appellant to respondent, and cites the case of Los Angeles Auto Tractor Co. v. Superior Court, 94 Cal.App. 433, 271 P. 363, which involved an interlocutory decree given by the court after trial of the issues, and not one entered by stipulation of the parties. By that interlocutory decree it was adjudged that the plaintiff's title to certain property be quieted against the claims of the defendant Gladiator Manufacturing Company, unless, within thirty days after entry of judgment the company paid to a trustee for the plaintiff $15,500. It was provided that upon payment of said sum by the company to the trustee within said period plaintiff should execute a deed to the company and deliver a certificate of title, and if the company did not pay within the thirty-day period then title should be quieted against defendants by final decree. No payment was made and after the time had expired to make a deposit plaintiff moved for final judgment. The motion was denied on a showing that defendant would be able to comply within a short period of time. No compliance was had and several similar applications were made for final judgment and were, by the court, continued or denied. Plaintiff sought a writ of mandate to compel the court to enter a final decree. The appellate court held that from the language of the interlocutory decree the trial court did not intend that the interlocutory judgment should of itself operate to complete the record of the action and that, therefore, it was subject to amendment by the trial court in the exercise of its discretion. There are many other authorities cited to the same effect. Gerrish v. Black, 109 Mass. 474; 21 Cor.Jur. 703; 10 R.C.L., sec. 350, p. 562; Kelley v. Stanbery, 13 Ohio 408; Dieckhart v. Rutgers, 45 Mo. 132; Lawrence v. Staigg, 10 R.I. 581; Security–First Nat. Bank of Los Angeles v. Superior Court, 132 Cal.App. 683, 23 P.2d 1055.

Respondent does not dispute this general rule, but contends that a different rule applies where the interlocutory judgment is entered as a result of a stipulation and such stipulation specifically recites the terms of and under which the consent judgment may be entered; that such interlocutory judgment is then conclusive upon the consenting parties and cannot be amended or varied without consent. This principle of law receives support in the analogous case of Horning v. Kendrick, Saginaw Circuit Judge, 1910, 161 Mich. 413, 126 N.W. 650. There the defendant was charged with having purchased certain lands as trustee for the complainant. He filed an answer but before proofs were taken the parties agreed upon a settlement of the matters in dispute and a consent decree was entered, by the terms of which the complainant was to pay to the defendant the sum of $6,000 on or before February 15, 1910. Upon the payment of this sum the defendant was to transfer the property in dispute to the complainant. In default of the payment of the said sum on or before the said date, the property in dispute was to become the property of the defendant. On February 15, 1910, complainant filed a petition for an extension of 60 days in which to pay the $6,000. The additional time was allowed upon the ground that the complainant had acted in good faith but had been disappointed in its efforts to raise money. The defendant asked for a writ of mandamus to compel the elimination of an amended decree granting the additional time.

The writ was denied upon the ground that the order extending the time of payment was a final order and that a review thereof could be had only by appeal. In denying the writ the court said [page 651]:

“It is elementary that a decree by consent cannot, in the absence of fraud or mistake, be set aside by rehearing, or on appeal; nor can it be modified without the consent of the parties. Russell v. White, 63 Mich. 409, 29 N.W. 865; Hodges v. McDuff, 76 Mich. 303, 43 N.W. 428; Enc. of Plea. & Prac. vol. 18, p. 5, and cases cited. This proposition is not denied by the respondent; but it is urged that the amended decree, which provides merely for an extension of time in which the money is to be paid, is not an alteration of the decree.

“We are unable to agree with this contention. * If the court below could extend the time once for a month, it could again extend it for a further period, and thus render the decree less valuable, or even useless, to the party not consenting to the change.”

It is apparent to us that the element of time was of the essence of the agreement, which ripened into a decree. The court, in Horning v. Kendrick, supra, went on to say: “Having indicated our views upon the merits, however, it is probable that a proper order will be entered by the learned circuit judge, upon the application of relator, without necessitating the delay incident to an appeal.”

See, also, Himmelmann v. Sullivan, 40 Cal. 125; Faulkner v. Brooks, 125 Cal.App. 137, 13 P.2d 748; Schmidt v. Oregon Gold Mining Co., 28 Or. 9, 40 P. 406, 1014, 52 Am.St.Rep. 759, 764; Estate of Meredith, 275 Mich. 278, 266 N.W. 351, 104 A.L.R. 348, 352; vol. 3, Freeman on Judgments, sec. 1352, p. 2776; Hyde v. Superior Court, 28 R.I. 204, 66 A. 292. Where the decree contains a provision retaining jurisdiction for the purpose of taking such other action as is necessary the court may, under certain conditions, modify the terms of the decree. United States v. Swift & Co., 286 U.S. 106, 52 S.Ct. 460, 76 L.Ed. 999.

Respondent further argues that the terms of the interlocutory decree only amounted to an option to purchase real property which appellant did not exercise and which option ceased with the passing of time. Citing Brickell v. Atlas Assurance Co., Ltd., 10 Cal.App. 17, 101 P. 16; Johnson v. Clark, 174 Cal. 582, 586, 163 P. 1004; California Land Security Co. v. Ritchie, 40 Cal.App. 246, 255, 180 P. 625.

Considering the last points raised, if we accept the theory that the interlocutory decree amounted to a consent judgment by stipulation and is therefore conclusive upon the consenting parties and cannot be amended or varied without consent, under the evidence in this case the final judgment of the trial court is sufficiently supported. If, on the other hand, we accept the appellant's contention that the interlocutory decree is subject to modification to the extent requested, the only question then presented is this: Did the trial court abuse its discretion in entering the final decree quieting title to the property in respondent corporation, under the evidence related, for failure of appellant to comply with the terms of the option set forth in the interlocutory decree, on or before December 10, 1936? We see in the first place, that the deposit of the sum of $56,000 by Smith was accompanied by a number of conditions, which were departures from the terms of the interlocutory decree.

The escrow instructions under which the sum of $56,000 was deposited on December 10, 1936, by Smith, provided that the property should be conveyed to him upon payment by him of the sum of $68,000, of which amount $56,000 was deposited on December 10, 1936, and the balance of $12,000 was to be deposited by Smith within thirty days.

The appellant in the instructions did not arrange for an unconditional payment on or before December 10, of the required sum, but provided for a conditional payment to be made if the conditions were met within thirty days from the ultimate date. It further appears that although the interlocutory decree required that the payment be unconditional, there was the added condition that before payment be made the title company should issue its policy of title insurance showing the record title to the property to be in Smith and his wife, free of incumbrances. This requirement was made by appellant and her husband although a sheriff's deed had been recorded showing an execution sale under a judgment against Mr. Leslie. The title company was likewise given power, in the event of any adverse claim, to refuse to comply with the demands of anyone and to make no deliveries to any person.

It is well established that time is of the essence of a contract of option, regardless of the words used. Under any rule, however, it seems to us that the decree contained sufficient language to show that time was an essential element. Paragraph XI of the decree provides that in the event of a failure to make payments, then immediately after the time limited by the decree, to wit, the 11th day of December, 1936, the defendant shall be entitled to a final decree. Williams v. Long, 139 Cal. 186, 189, 72 P. 911; Bennett v. Hyde, 92 Cal. 131, 134, 28 P. 104; Skookum Oil Co. v. Thomas, 162 Cal. 539, 542, 123 P. 363.

The evidence, under either theory discussed, impels the ultimate conclusion that the trial court did not err or abuse the discretion reposed in it by law.

Accordingly the judgment from which this appeal has been perfected, of necessity, must be and is affirmed.

GRIFFIN, Justice.

We concur: BARNARD, P.J.; MARKS, J.