NELSON v. FERNANDO NELSON SONS (1935)

Cross-appeals are presented herein from a judgment in favor of plaintiff for $2,500 with interest from May 2, 1929. Plaintiff appeals on the judgment roll alone, claiming that under the findings she is entitled to a judgment for $18,250 with interest. Defendant on its appeal presents a typewritten transcript of the evidence and urges that the evidence does not support the findings in a number of particulars.

In 1926 plaintiff and Frank F. Nelson were husband and wife. Marital differences between them having become acute, on August 11, 1926, they entered into a property settlement agreement. As a part of said agreement Frank F. Nelson agreed to convey to plaintiff three certain lots of land, and to each of their two children one lot of land. Title to these five lots at the date of said agreement was in the defendant herein.

On August 12, 1926, defendant and Frank F. Nelson entered into a contract of purchase and sale of said five lots wherein and whereby defendant agreed to sell said five lots to Frank F. Nelson. By the terms of this agreement Frank F. Nelson was to make a total down payment of $10,000 and to give his note for the balance of the purchase price of one lot, which we shall designate as the Lincoln Way lot. As to the other four lots, the agreement was silent as to the time for paying the balance on the price of each or any of them, but the agreement recited in this regard: “The delivery to the Purchaser of a good and sufficient deed conveying title to said property and the payment of the balance of the purchase price are concurrent conditions.”

The evidence shows that in order to finance the down payments on the five lots a bank mortgage of $10,000 was placed on the Lincoln Way lot to secure a promissory note in that amount executed by plaintiff and Frank F. Nelson and indorsed by defendant. The $10,000 thus borrowed was paid to defendant and applied as follows: $7,000 on the purchase price of the Lincoln Way lot; $1,000, respectively, on each of two other lots which by the terms of their property agreement Frank F. Nelson was to convey to plaintiff; and $500, respectively, on each of the lots which by such agreement Frank F. Nelson was to convey to the children. As a part of this transaction, title to the Lincoln Way lot was conveyed to plaintiff forthwith.

On August 13, 1926, Frank F. Nelson assigned to plaintiff all of his rights in the aforesaid contract of purchase and sale, and covenanted with her to perform all of its obligations. On May 2, 1929, defendant herein conveyed one of the lots covered by its said contract of sale with Frank F. Nelson to a third party for $5,000. On learning of this sale, plaintiff demanded of defendant that it pay to her the difference between the selling price to the third party and the price fixed in its agreement of sale with Frank F. Nelson, and defendant thereupon notified plaintiff that it recognized no rights in her under said contract on the expressed ground that the contract was with Frank F. Nelson. This suit followed, in which plaintiff sought to recover from defendant the amounts paid upon the four lots plus the difference between the selling price to Frank F. Nelson and the market value of the lots on May 2, 1929, the date of its repudiation of the contract. It further appears that defendant was a family corporation, the stock of which was all held by a father and five children, one of the children being Frank F. Nelson.

With this preliminary statement, we shall proceed to a consideration of the findings of fact attacked by defendant as unsupported by the evidence. The court found that “from and after about said date of August 13, 1926, defendant knew and was informed of said assignment by said Frank F. Nelson to plaintiff.” Plaintiff testified positively that in July or August, 1927, she personally presented the assignment to Fernando Nelson, the president of defendant corporation. Without affecting the rights of the parties in any way, we may accept this date as the date of first notice to the defendant. Accordingly this finding is ordered modified by changing the words therein “said date of August 13, 1926” to read “August, 1927.”

The court found that “after the execution of said contract, the down payment of $10,000, defendant and said Frank F. Nelson and plaintiff, each and all of them, allowed said contract to continue in full force and effect without further performance by either of them”; and further that “it is untrue that defendant and said Frank Nelson mutually rescinded or canceled or terminated or abandoned said contract on August 14, 1926, or at any other time, or at all”; and that “said defendant Fernando Nelson & Sons, a corporation, did duly approve and execute said contract, and did at all times thereafter, until May 2, 1929, recognize said contract as being in full force and effect.”

It is claimed by defendant that defendant and Frank F. Nelson mutually abandoned said contract in August, 1928, by oral agreement. Against this testimony plaintiff showed five bills sent by defendant to plaintiff covering taxes and sidewalk costs on these lots in 1927 and 1928, and on October 29, 1929, after its repudiation of the contract, defendant sent a letter to plaintiff purporting to cancel three such bills on the ground stated in the letter: “These bills were wrongly charged to your personal account as the contract on Lot 17 Block 3273 Lot 2 Block 2484 is with Frank F. Nelson, we are therefore charging his account.” The account books of the corporation also show charges against plaintiff in connection with these lots which remained on the books unchanged until after the repudiation of May 2, 1929, and a charge against Frank F. Nelson on August 1, 1929, in connection with the contract for the purchase of the lots.

This evidence is ample to support the findings above set out. It is sufficient to support an inference that defendant recognized plaintiff's interest in the contract until May 2, 1929, and recognized the contract as existing and in force between it and Frank F. Nelson even after that date, and is entirely inconsistent with the theory of a mutual abandonment by Frank F. Nelson and defendant in 1928.

In addition to this, defendant had notice of the assignment to plaintiff in August, 1927. The effect of the assignment was to transfer all of Frank F. Nelson's rights under the contract to plaintiff (Harris v. Miller, 196 Cal. 8, 17, 18, 235 P. 981; Kemp v. Enemark, 194 Cal. 748, 756, 230 P. 441; Laack v. Dimmick, 95 Cal. App. 456, 469, 273 P. 50), although the burdens of the contract still rested upon Frank (Lisenby v. Newton, 120 Cal. 571, 52 P. 813, 65 Am. St. Rep. 203). It would be highly inequitable under such circumstances to permit Frank to surrender by agreement the rights in the contract which were no longer his property but had become the property of plaintiff by his assignment. After defendant had notice of such assignment, it could no longer deal with Frank as the owner of the rights under the contract. To foreclose plaintiff of her rights, it should have tendered deeds to her and demanded payment of the balance as was done in Drips v. Moore, 179 Cal. 249, 252, 176 P. 159.

It was further found that “on May 2, 1929, the market values of the lots were: Southwest corner West Portal Avenue and 15th Avenue, $5000; Block 3273, Lot 17, $4750; Lot 30, $4000; Lot 33, $4500.”

Appellant admits that the evidence supports the finding of the value of the first lot as $5,000. As to the others, the only evidence of their value on May 2, 1929, was: First, evidence of bank appraisements made for mortgage purposes, one appraisement made in 1930, and the others in 1925; second, testimony of Frank F. Nelson as to the value of the lots in 1926; and, third, a memorandum prepared by Frank F. Nelson in 1926 for use in negotiating the property agreement with his wife. Frank Nelson testified that property values decreased rapidly after 1926, and that he was unfamiliar with the values of these lots in 1929.

It may be said of all this evidence that none of it is competent to prove values on May 2, 1929. Frank Nelson's testimony of values in 1926, conceding that it might otherwise not be too remote, is completely nullified by his testimony of decrease in values between 1926 and 1929, and his further positive testimony that he did not know the 1929 values. The bank appraisements were made, two considerably before and the third almost a year after May 2, 1929. They were both hearsay and incompetent. Such evidence is in the same category as evidence of offers to buy or sell, or sales of other property. “No rule is better settled in California than the rule that the value of property cannot be proved by evidence of sales of other property, or of offers to buy or sell the property in question.” Merchants' Trust Co. v. Hopkins, 103 Cal. App. 473, 478, 284 P. 1072, 1074, and cases cited.

There being no competent evidence pointed to in the record to support a finding for these three lots of any value on May 2, 1929, in excess of the prices fixed in the contract with Frank F. Nelson, finding V is accordingly ordered modified to read: “On May 2, 1929, the market value of the lot on the southwest corner West Portal Avenue and 15th Avenue was $5,000, and the market value of lots 17, 30 and 33, block 3273, and each of them, was not greater than the purchase price fixed for said three lots in the agreement between Fernando Nelson & Sons, Inc., and Frank F. Nelson executed August 12, 1926, a copy of which is attached to plaintiff's complaint herein and marked ‘Exhibit A.”’

Two other findings are also attacked by defendant; one reading, “Said final payments were to be payable on or before August 12, 1929,” becomes immaterial in view of the finding already approved herein that all parties “allowed said contract to continue in full force and effect without further performance by either of them.” The other finding, that “in 1927 Frank Fernando Nelson indorsed and defendant corporation took over 40 shares of Frank Fernando Nelson's stock and over 10 houses partially built by him of a net value greater than his monetary obligations to defendant” will be discussed in connection with plaintiff's appeal herein.

Defendant also attacks the finding that $10,000 was paid on account of the purchase price of the various lots. The basis of this attack is that the $10,000 was borrowed on the security of the Lincoln Way lot which was up to that time the property of defendant, and that defendant indorsed the note given for its payment, and therefore rendered itself liable thereon. The primary liability to the bank, however, was that of the makers of the note, plaintiff and Frank F. Nelson, and the money was borrowed by them. In return for the payment of $7,000 of this money and the agreement of Frank Nelson to pay the balance of the purchase price of this lot, the lot was conveyed by defendant. Neither the existence of defendant's vendor's lien for the unpaid balance on the purchase price of this lot, nor the secondary liability of defendant as an indorser of the note, can change the fact that the money was borrowed by plaintiff and Frank Nelson and by them paid to defendant. The mortgage has since been renewed, defendant again indorsing the note. We need not here determine what would be defendant's rights in the event of default, foreclosure, and deficiency judgment against defendant as indorser. Suffice it to say that none of those contingencies was shown to have arisen.

Passing now to plaintiff's appeal, it was found by the court in findings IX and X as follows:

“IX. On May 2, 1929, and at the time of defendant's repudiation of plaintiff's rights as above set forth, plaintiff's assignor, said Frank Nelson, had paid the sum of $3,000 on account of said four lots, allocated as follows:

“1. $1,000 on the lot on the southwest corner of West Portal Avenue and Fifteenth Avenue.

“2. $1,000 on Lot 17, Block 3273.

“3. $500 on Lot 30, Block 3273.

“4. $500 on Lot 33, Block 3273.

“The $5,000 received by defendant from said Mabel G. Hunter for said lot, as set forth in Paragraph VII above, exceeded the contract price to said Frank Nelson and to plaintiff by the sum of $1,500.”

“X. Plaintiff, therefore, has been damaged in the total sum of $2,500, being the $1,000 paid down by plaintiff's assignor, said Frank Nelson, on the said 15th Ave. lot, plus the $1,500 received by defendant from said Mabel G. Hunter over and above the price of $3,500 at which defendant had previously agreed to sell said one lot to plaintiff's assignor as above set forth.”

It is plaintiff's position that finding X is really a conclusion of law, although set out among the findings of fact, and that such conclusion of law is erroneous in that the findings of fact compel the allowance of a much greater sum in damages. That this finding is no more than a legal conclusion which cannot stand if it is contrary to the other findings we agree. We therefore proceed to examine plaintiff's contentions in this regard. In this connection plaintiff points to section 3306 of the Civil Code: “The detriment caused by the breach of an agreement to convey an estate in real property, is deemed to be the price paid * * * but adding thereto, in case of bad faith, the difference between the price agreed to be paid and the value of the estate agreed to be conveyed, at the time of the breach. * * *”

As to the price paid, plaintiff argues from the finding that Frank Nelson in 1927 transferred to defendant property “of a net value greater than his monetary obligations to defendant” that the court found that Frank Nelson in 1927 paid the full balance of the purchase price of the four lots in question in this manner. We do not so construe this finding. If that is its meaning, it is in conflict with the other finding that the parties “allowed said contract to continue in full force and effect without further performance by either of them.” It is elementary that findings apparently contrary to one another should be reconciled if possible so as to support the judgment, but in fact the two findings are not contradictory. The payment of the balance of the purchase price and the delivery of deeds to the lots were expressed by the contract to be concurrent conditions. Frank Nelson could only become liable for the payment of the balance upon a tender of such deeds by defendant. Benson v. Shotwell, 87 Cal. 49, 59, 25 P. 249; Boone v. Templeman, 158 Cal. 290, 297, 110 P. 947, 139 Am. St. Rep. 126. It follows that the payment of the balance of the purchase price of these lots was not among Frank Nelson's “monetary obligations to defendant” in 1927. The finding can in no sense be construed as a finding that Frank Nelson paid defendant the balance of the purchase price of the lots in 1927.

We agree with plaintiff, however, that under the findings she is entitled to judgment for the sum of $1,000 paid down on lot 17 and the sums of $500 each paid down on lots 30 and 33, all in block 3273. These sums, aggregating $2,000, were paid out of the original $10,000 bank loan. Defendant argues that the contract as to each lot was severable, and that the refusal to pay plaintiff the difference between the balance due on the Lincoln Way lot and the price at which it was sold to Mabel Hunter was not a breach as to the other three lots. The court found, however, as to this: “Defendant then and there entirely repudiated and refused to recognize any rights of plaintiff under said contract and said assignment.” Upon such repudiation the breach of the entire contract was complete as to all lots, and plaintiff was entitled to her action for damages as to all of them. Walker v. Harbor Business Blocks Co., 181 Cal. 773, 778, 186 P. 356.

The last question to be considered depends upon the “bad faith” provision of section 3306, Civil Code. It has been repeatedly held that the willful and deliberate refusal to perform without just cause or excuse amounts to bad faith within the meaning of this Code section. Haight v. Marin Mun. Water Dist., 208 Cal. 753, 756, 757, 284 P. 926; Johnson v. Schimpf, 197 Cal. 43, 47, 239 P. 401; Clark v. Yocum, 116 Cal. 515, 518, 48 P. 498. If there was any doubt cast on this rule by Wilson v. Rosenkranz, 112 Cal. App. 511, 297 P. 44, or the opinion of the Supreme Court in denying a hearing in Shaw v. Union Escrow & Realty Co., 53 Cal. App. 66, 71, 200 P. 25, the later Supreme Court cases above cited would seem to put such doubt at rest.

Accordingly, as to the lot sold to Mabel Hunter the court properly allowed plaintiff $1,500 for loss of bargain. As to the other three lots, no such damages can be allowed because of our holding that the finding of any value for them in excess of the contract price on May 2, 1929, is without evidentiary support. Plaintiff's recovery against defendant should accordingly be increased from the principal sum of $2,500 to $4,500 by adding thereto the $2,000 down payment on the other three lots.

In accordance with the views herein expressed, finding X is ordered stricken from the findings of fact, and the conclusions of law are ordered modified to read as follows: “From the foregoing findings of fact, the court concludes, as a matter of law, that plaintiff is entitled to judgment against defendant Fernando Nelson & Sons, a corporation, in the sum of $4,500 with interest thereon at the rate of 7% per annum from and after May 2, 1929, until paid, and for costs of suit.”

The judgment is ordered modified to provide for the recovery of said sum of $4,500 with interest thereon as aforesaid and as so modified it is affirmed, neither party to recover costs on appeal.

DOOLING, Justice pro tem.

We concur: TYLER, P. J.; CASHIN, J.