ROYER v. CARTER (1950)

Section 3307 of the Civil Code provides: ‘The detriment caused by the breach of an agreement to purchase an estate in real property, is deemed to be the excess, if any, of the amount which would have been due to the seller, under the contract, over the value of the property to him.’

The question on this appeal is whether plaintiff is entitled to recover damages from defendant by reason of the latter's failure to complete a contract of purchase of real property, and if so what is the measure of damages?

Defendant entered into an agreement in writing to purchase from plaintiff a house and lot, together with draperies, furniture and a rug, for the sum of $24,000 and made a deposit of $1,000 on the purchase price. The receipt for the deposit is dated August 23, 1948, and recites: ‘That should the purchaser fail to pay the balance of the purchase price, or fail to complete the purchase, as herein provided, the amounts paid hereon may, at the option of the seller, be retained as the consideration for the execution of this agreement by the seller.’

On August 24, 1948, the defendant signed escrow instructions with a bank reciting that the purchaser, Miss Carter, would hand to the escrow holder cash and notes representing the balance of the purchase price ‘all of which you are authorized and instructed to use and deliver provided instruments have been filed for record entitling you to procure assurance of title in the form of a Standard Joint Protection Policy of Title Insurance issued by Title Insurance and Trust Company in its usual form * * * showing title vested in: Helena Carter, an unmarried woman [,]’ the purchase price to include draperies, rug and furniture as described.

As a part of the escrow plaintiff signed an approval of defendant's instructions reciting ‘The forgoing instructions and conditions are hereby approved and accepted in their entirety and concurred in by me. I will supply you with funds, notes and instruments required from me to enable you to comply with the instructions, which you are authorized to use and deliver provided you hold for my account any instruments accruing to me and the sum of $21,000 and a 2nd purchase money trust deed & note in the amount of $30,000[.]’

On September 13, 1948, plaintiff deposited in escrow a grant deed conveying the real property to defendant, a bill of sale transferring to her the personal property described in the escrow and a termite report, all as required by the instrutions. About September 10, 1948, defendant notified plaintiff that she did not intend to complete the purchase of the property or to pay the purchase price or otherwise comply with the terms of the deposit receipt and the escrow instructions, and defendant did fail to deposit any money or documents in the escrow. On October 1, 1948, by reason of defendant's failure to comply with her agreement, plaintiff cancelled the escrow and her documents were returned to her.

Alleging that the market price and reasonable value of the property at the time of defendant's breach of the agreement was $18,500, plaintiff brought this action for general damages in the sum of $5,500, together with special damages in the amount of $420 paid by plaintiff as the real estate broker's commission, escrow fees and expenses amounting to $45 and title charges in the sum of $40. Plaintiff also asserted the forefeiture of the deposit of $1,000 made by defendant on account of the purchase price.

The court found that the reasonable market value of the property at the time of defendant's breach was $18,500 and that therefore plaintiff had suffered general damages in the sum of $5,500; that the deposit of $1,000 was not retained by plaintiff as a forfeiture but to apply as an offset against her damages; that plaintiff was entitled to special damages in the amounts above specified totaling $505. Judgment was rendered in favor of plaintiff for $5,005.

Defendant contends that plaintiff failed to prove that she had complied with the terms and conditions of the contract or was ready, able or willing to convey the property, and that the court's finding to that effect is not supported by the evidence. Where a seller is in default for failure to deliver his deed he may not rightly contend that the buyer is in default, and a purchaser is not bound to make payment until the seller is prepared to give a good deed, Lifton v. Harshman, 80 Cal.App.2d 422, 433, 182 P.2d 222, but the court found and the evidence sustains the finding (1) that plaintiff deposited in escrow all documents required of her by the escrow, and (2) that prior to the expiration of the period within which the escrow was to be closed defendant notified plaintiff that she did not intend to pay the purchase price or otherwise to comply with the terms and conditions of the agreement and, in fact, did fail to comply in any respect with her agreement. Therefore plaintiff was relieved of any obligation on her part to be performed.

Defendant contends that by reason of the fact that plaintiff was married at the date of her agreement to sell there is a presumption that the property was community property and that husband was a necessary party to the agreement and to this action. No such presumption exists. Had it been acquired (1) before marriage, (2) afterwards by gift, bequest, devise, or descent, it is her separate property (Civil Code, sec. 162) and if acquired by an instrument in writing while married the presumption is that if is her separate property (Civil Code, sec. 164). Hence defendant's contention that plaintiff's husband was a necessary party either to the agreement or to this action vanishes.

Plaintiff did not, as contended by defendant, exercise her option to forfeit the deposit. Upon defendant's notification that she did not intend to comply with the contract plaintiff notified her that she, plaintiff, elected to hold defendant in damages and that the $1,000 deposit did not cover the damages already accrued. Since defendant had repudiated her contract plaintiff was entitled to retain the depositand to apply it on the damages suffered by her.

Defendant contends that when she signed the agreement she was laboring under a mistake as to its legal effect and that she believed it provided that all she could lose was the amount of the deposit. Her contention is based upon her testimony that at the time she signed the documents she was informed by one of the real estate agents that by reason of the language of the contract she could not lose more than the amount of the deposit if she failed to complete the purchase. The agent testified that he did not so state but that he expressed ‘his opinion’ that such would be the limit of her loss. The court's finding is in accord with the agent's version of the conversation and we are bound by the finding.

The evidence does not sustain the finding that plaintiff's general damages amounted to $5,500. The measure of damages is stated in section 3307 of the Civil Code quoted at the opening of this opinion. The damages that may be recovered for a breach of contract of sale of real property is the difference between the contract price and the reasonable market value at the time of the breach. Employees' Participating Ass'n v. Pine, 91 Cal.App.2d 299, 301, 204 P.2d 965; Shurtleff v. Marcus Land & Investment Co., 59 Cal.App. 520, 523, 211 P. 244. Plaintiff's husband testified that after the breach of the contract he was acting on behalf of his wife and stated the price at which he and plaintiff endeavored to sell the property; that he authorized Mrs. Ries, a real estate agent who had assisted in the attempted sale to defendant, to sell the property for $25,000 or more; that the price was reduced and he and the agent determined to sell for $23,500; that Mrs. Ries told him she thought that that was the market value. Subsequently the price was reduced to $22,500 and eventually the property sold for $18,500 on December 23, 1948. Mrs. Ries testified that the reasonable market value of the property did not decrease during September, 1948. The foregoing is the only evidence as to value offered by plaintiff.

One of defendant's witnesses, a qualified real estate salesman, stated the value to have been $23,000 at the time of the breach of the contract, and the other, a qualified appraiser of 18 years' experience, gave the value at that time as $22,500.

The evidence of all the witnesses related to the real property only. None gave any consideration to the value of the personal property included in the contract.

The court's finding of $5,500 general damages is based on the difference between the contract price and $18,500 for which the property was sold on December 23, 1948, three months after defendant breached her contract. The evidence is uncontradicted that conditions and values had changed materially during that period. All witnesses for both parties agreed that the market value of the property in question did not change during September, 1948, but there was a general, rapidly falling real estate market during the succeeding three months, and that the conditions were not, however, abnormal.

From the evidence the lowest reasonable market value that can be placed on the property at any time during September, 1948, was $22,500. Subtracting that amount from the agreed purchase price leaves the sum of $1,500, to which should be added plaintiff's special damages in the sum of $505. Yocum v. Taylor, 50 Cal.App. 294, 295, 195 P. 62. There should be deducted for the agreed value of personal property the sum of $360 which the court did not consider and the $1,000 deposit which the court allowed as a credit. Deducting $1,360 credit from the damages amounting to $2,005 leaves $645 which plaintiff is entitled to recover.

The judgment is modified by striking therefrom ‘$5,005’ and inserting in lieu thereof ‘$645’ and as so modified the judgment is affirmed.

WILSON, Justice.

MOORE, P. J., and McCOMB, J., concur.