HOLIDAY INNS OF AMERICA INC v. KNIGHT (1968)

OPINION

Plaintiffs are four corporations, Holiday Inns of America, Inc., Rancho Palos Verdes Corporation, Amberson Corp. and Orange County Properties, Inc. They appeal from a summary judgment favoring defendants D. Manley Knight and his wife Lavinia Knight.

On September 30, 1963, Manley Knight and his mother Mary C. Knight granted Holiday an exclusive option to buy real property in Orange County for $198,633. The contract, in writing, provided in part: an escrow was to be opened with Security Title Insurance Company and remain open during the option's term; for the option Holiday was to pay $10,000 to Security Title when Holiday approved the preliminary title report and Knight deposited a grant deed to the property in the escrow; after that, as provided in Paragraph 1, Holiday was to pay four additional annual $10,000 payments directly to Manley and Mary Knight on July 1, 1964, 1965, 1966 and 1967, unless the option was exercised or cancelled before the date for making the payments; Paragraph 2 provided failure to make payment on or before the July 1 date automatically cancelled the option; the latest date for Holiday to exercise the option was April 1, 1968; the amounts paid for the option were not to be applied on its purchase price.

On December 9, 1963, the contract was amended: annual payments under Paragraph 1 were to be made to Security Title; in the event Security Title did not receive the annual payments as required in Paragraph 1, Security Title was to cancel the escrow upon notice from the Knights, without any instructions from Holiday; under general provisions, it was recited time is of the essence. No change was made in Paragraph 2.

The initial $10,000 payment was made. Mary C. Knight died and Manley Knight became the sole and separate owner of the option property.

On June 11, 1964, Holiday assigned all its rights in the option contract to plaintiffs. They paid the 1964 and 1965 payments.

The 1966 attempted payment was by a stranger to the action and to the contract, was sent to the wrong party, to the wrong place, and arrived July 2, 1966, rather than July 1. More particularly, an envelope containing a check for $10,000, dated June 30, 1966, drawn by The City Management Corp., payable to D. Manley Knight and Lavinia Knight was postmarked P.M. of July 1, 1966, sent to D. Manley Knight and Lavinia Knight, 809 North Richmond Avenue, Fullerton, California. No zip code was listed. The return address on the envelope was another stranger, Lakes Properties, Inc., 630 Shatto Place, Los Angeles, Calif. 9005. The explanation on the check was ‘Option Payment due 7/1/66 $10,000.’

The Knights received the check July 2, 1966. Manley Knight returned it to plaintiffs July 8, stating he considered the option contract cancelled. On July 8, The City Management Corp. tendered Knight another $10,000 check, which he refused. On July 15, plaintiffs deposited with Security Title a $10,000 check payable to Knight; Security Title tendered the check to Knight, whose attorney returned it July 27, advising plainiffs the agreement was terminated on the ground plaintiffs had not paid the 1966 installment by July 1, 1966.

Plaintiffs sued in declaratory relief, seeking a judicial declaration the contract was in full force and effect. After defendants answered, plaintiffs noticed a motion for summary judgment on the ground ‘there is no defense to the action and no triable issues of fact.’ Code of Civil Procedure, section 437c requires

‘The affidavit or affidavits in support of the motion must contain facts sufficient to entitle plaintiff or defendant to a judgment in the action, and the facts stated therein shall be within the personal knowledge of the affiant, and shall be set forth with particularity, and each affidavit shall show affirmatively that affiant, if sworn as a witness, can testify competently thereto.’

However, the only declaration in support of the motion merely identified the four plaintiff corporations as assignees of Holiday Inns. See In re Nelson's Estate, 227 Cal.App.2d 42, 46–47, 38 Cal.Rptr. 459. The Knights' counter declarations pointed out they did not receive the $10,000 option check until July 2, 1966; their attorney declared he returned the July 15 $10,000 check July 27, advising plaintiffs by letter the agreement was terminated by their default in failing to pay the $10,000 by July 1; he stated in the letter the contract provision, Paragraph 2, auomatically cancelled the option without notice, on failure to pay on or before July 1, 1966; the letter told Security to close the escrow and return the grant deed to Manley Knight.

Defendants responded further by noticing a summary judgment motion on the ground ‘as a matter of law there is no triable issue of fact involved and * * * the defendants are entitled to judgment on the basis of the undisputed facts.’ The motion was accompanied by declarations setting forth the facts recited in the paragraph above. The declarations were not countered or contradicted by plaintiffs.

The court denied plaintiffs' motion for summary judgment and granted defendants' motion. Before the judgment was entered, however, plaintiffs moved for reconsideration; noticed Manley Knight's deposition; and moved to set aside the order granting summary judgment for defendants on the ground through mistake, inadvertence and excusable neglect plaintiffs did not file a declaration before the court heard the motions for summary judgment. The accompanying declaration merely explained why plaintiffs had not filed declarations supporting their motion for summary judgment, but did not tender a copy of the missing declaration or supply any of the factual and legal requirements of Code of Civil Procedure, section 437c. Plaintiffs continued to flounder and flail by noticing another motion for summary judgment with an accompanying attorney's declaration which does violence to the parol evidence rule by seeking to change the terms of the contract as amended. The court reconsidered plaintiffs' motion for summary judgment, then denied it and denied plaintiffs' second motion for summary judgment, denied their motion to set aside the order granting defendants' motion for summary judgment, and gave summary judgment for defendants, terminating the contract as amended, for failure of the plaintiffs to make the annual $10,000 payment on or before the required July 1, 1966 date.

By the plain language of the contract (Paragraph 2), failure to make payment on or before July 1, 1966, automatically cancelled the option without notice. It would be difficult to conceive a stronger method of making time of the essence. This requirement was not changed by the contract amendment of December 9, 1963. The notice there required was merely to advise Security Title to cancel the escrow. A check mailed on July 1 and received on July 2, 1966, is not payment made on July 1. (Blumer v. Kirkman Corporation, 38 Cal.2d 480, 484, 241 P.2d 17.) Plaintiffs did not timely perform that condition which would have kept the option alive.

Plaintiffs make no attempt to establish waiver, estoppel or any other ground for equitable relief, based upon any act of defendants lulling them into a belief a later payment would be accepted.

Judgment affirmed.

GERALD BROWN, Presiding Justice.

COUGHLIN and WHELAN, JJ., concur.