SMITH v. ALLEN (1967)

The plaintiffs have appealed from the judgment of dismissal which was the consequence of the order sustaining defendants' demurrer to the amended complaint, without leave to amend.   The action is one brought to recover a sum characterized by the plaintiffs as the unjust enrichment reaped by the defendants in a transaction involving the sale of residential property by the defendants to the plaintiffs, the transaction coming to a conclusion with the property and considerable more in the defendants' hands, when the plaintiffs found themselves unable to carry further the burden that they had assumed.   We are reversing the judgment, with directions to overrule the demurrer.

Under date of August 15, 1963, the three plaintiffs and the two defendants had signed a “real estate option.”   The option provided:  receipt of five thousand dollars from the plaintiffs which was acknowledged by the defendants “as part payment for” the real estate described.   The “entire price to be paid” for the property was stated to be “one hundred forty-five thousand ($145,000.00) Dollars * * * to be paid as follows:  An additional $5,000.00 October 1, 1963, $10,000.00 November 1, 1963, $5,000.00 December 1, 1963, $5,000.00 January 1, 1964, and an additional $4,193.00 February 1, 1964.”   Then this paragraph appears:  “February 1, 1964, when the monies paid upon this option are received in full the seller agrees to give to the buyers a grant deed with the following provisions:  A note secured by a first trust deed in the amount of $115,000.00 bearing interest of 7% per annum with payments of $900.00 per month including payments to principal and interest until the entire amount is paid, with first payment due March 1, 1964, and continuing on the first day of each calendar month until all said principal and interest have been paid in full.  * * * ”

The agreement continues:  “Buyers to assume 1963–1964 taxes.  * * *   Interest on unpaid balance to February 1, 1964 is included in this contract.   Buyers to take occupancy as of this date.”

The “option” contains these three paragraphs, just above the signatures of the parties:  “A good and sufficient Grant Deed to be executed and delivered by the said Deane and Ruby E. Allen to May Emerson Smith, Finis William Smith and Dorothy D. Smith heirs or assigns on or before the 1st day of February 1964.  * * *

“Provided, however, that the payments of above amounts are tendered or paid at said date.   If the said payment of above amounts are not paid or tendered on or before the 1st day of February 1964, then this contract to be void and of no effect, and both parties released from all obligations herein, and in that event the said monies paid is to be retained by Deane and Ruby E. Allen as liquidated damages.”

From the amended complaint we gather that the plaintiffs entered occupation of the property at once (August 15, 1963) and that they paid defendants all sums called for by the option.   In addition, they paid sums totaling over $6,000.00 for repairs and improvements to the place and more than $13,000.00 for an additional house.   A note for $115,000.00 was given, secured by a trust deed, when the grant deed was delivered to the plaintiffs, and they made nine of the monthly $900.00 payments required.   Then their means to carry on became exhausted;  the trust deed was foreclosed by the trustee, without any judicial proceeding;  the defendants bought in the property and the plaintiffs sued.

Let us stop at this point to see just what sort of an agreement the parties have.   Beyond doubt the owners of the property, the defendants, were bound to deed the property to the plaintiffs on February 1, 1964, provided the several payments called for before then had been made.   According to the terms of the agreement itself, had the buying plaintiffs just before February 1, advised that they had gone as far with the deal as they were able to go, they could not have been required to make further payments.   Up to that time they would have paid, on the $145,000.00 obligation, $30,000.00 which, if the agreement of the parties was to control, would be lost to them as “liquidated damages.”   It seems to be a fact in this case, however, that actual damages would not be so difficult to determine that a provision for liquidated damages in so large a sum would be honored, but that plaintiffs would be allowed to recover, at the “option's” end, what they had paid, less the reasonable value of their occupancy of the property, and it may well be, some other deductions.  (See Freedman v. The Rector, etc. of St. Matthias Parish (1951) 37 Cal.2d 16, 230 P.2d 629;  Caplan v. Schroeder (1961) 56 Cal.2d 515, 15 Cal.Rptr. 145, 364 P.2d 321 and cases cited.)

The fact that the plaintiffs did not quit at the option's end, nor immediately thereafter, but received title, and his payments became due under the note for $115,000.00, does not mean that a new deal had been made.   All this was agreed to from the first.   We see no reason to regard the defaulting plaintiff as having forfeited his right to recover the sum that in justice, he should have by the cases cited, although the agreement had been carried out a bit more than to the end of the “option.”  (See Branche v. Hetzel, (1966) 241 Cal.App.2d 801, 810, 51 Cal.Rptr. 188 and cases cited.)   Plaintiffs have made out a case, so that the demurrer to the amended complaint should be overruled.

The judgment of dismissal is therefore reversed, with directions to enter an order overruling the demurrer to the amended complaint.

FOOTNOTES

FOOTNOTE.  

BISHOP, Associate Justice.* FN* Retired Judge of Superior Court sitting under assignment by the chairman of Judicial Council.

JEFFERSON, Acting P.J., and KINGSLEY, J., concur.