Kelly v. Smith

January 6, 1927, the respondents Kelly and wife agreed to sell to the appellant certain real property located in Watsonville, together with the improvements thereon for the sum of $24,000, payable $5,500 cash, $600 on April 6, 1927, and $600 every six months thereafter until the whole was paid, together with interest on deferred payments at the rate of six per cent per annum, interest payable quarterly. The written instrument evidencing the contract of the parties required appellant to provide fire insurance, and in the exact language thereof said she would “cause the improvements on said premises to be insured against loss by fire, in the sum of $4000.00, loss if any payable to the parties hereto as their interests may appear, and pay all premiums to become due on account of said insurance. In the event that said second party shall fail to effect said insurance as hereinabove provided, first [party] may purchase said insurance and charge the cost thereof to the said second party. The premiums on said

In order to clarify the situation with respect to the proceeds of the policy, it is necessary to recite that appellant was leasing from respondents other and different property for hotel purposes, and according to the claim of respondents was in. default in her payments of rental therefor. Regardless of the merits of that contention, which was not tried in either of the present cases, the respondents caused an attachment to be levied upon the interests of appellant in the proceeds of the policy amounting to the sum of $1300, that being the amount at which the loss by fire was adjusted.

During the latter part of January or the early portion of February the fire chief of Watsonville notified Mr. Kelly, one of the respondents, that the burned improvements constituted a fire hazard and that the building would have to be razed and the debris removed. Kelly replied that the matter should be referred to Mrs. Smith, as she was the owner of the property. Consequently on February 17, 1930, the fire chief sent a similar notice to her, inclosing a copy to Kelly. Thereafter in a conference between them, Mrs. Smith informed Kelly that a Mr. Whitsett had a man named Manning who would do the work for the lumber he could salvage. Mr. Whitsett had been representing Mrs. Smith as a real estate agent. Mr. Kelly instructed his representative, a Mr. Taylor, to contact Mr. Whitsett for the purpose of having the buildings razed by Mr. Manning. This was done and during the early part of March, 1930, the partially destroyed building was torn down and the debris removed. On February 16, 1930, Mrs. Smith being still in

The actions were consolidated and judgment entered for plaintiffs in the quiet title action and against defendant upon her cross-complaint, and another judgment denying any recovery to the appellant, the plaintiff in the second cause of action. Two appeals are prosecuted from the judgments so entered.

In brief, the court found that appellant had made default in the payment of installments under the contract, and had thereby forfeited all right to the property and to the moneys theretofore paid on account of the contract, and, in substance, that the default had occurred October 6, 1929. Also it was found that respondents had not entered upon the property and razed the buildings without appellant’s consent, but that the entry and work of destruction and removal of the debris was expressly consented to, authorized and directed by Mrs. Smith. It was further found that appellant had elected to and had affirmed the contract by

The appellant contends that she was not in default under the contract because strict compliance therewith had been waived by respondents by the acceptance previously of late payments, and that the notice to perform was not sufficient to require prompt payment by her, and that the partial destruction of the building, followed by its demolition, constituted a failure of consideration.

The evidence does not disclose a waiver by the respondents of the terms of the contract. But we cannot agree that the default which is found to have occurred on October 6, 1929, worked a forfeiture of her rights under the contract. The exact language of the agreement in this particular is as follows: “It is further understood and agreed that should the said second party fail to make any payment at the time and in the manner hereinbefore agreed, or fail to perform any covenant and condition on her part to be paid, kept and performed, then the said parties of the first part may terminate all the rights of second party under this agreement by notice personally served on the said second party, or mailed to her by registered mail addressed to her at Watsonville, California, and may re-enter upon said premises and remove all persons therefrom.” Under this stipulation of the parties a notice of forfeiture was required which was not given until February 16, 1930, demanding performance on or before April 16, 1930. We entertain no doubt that the notice was sufficient to accomplish the desired purpose upon the expiration of the date specified. But it must also follow that there was no forfeiture or any attempted forfeiture prior to the expiration of the time designated. Hence, we are compelled to inquire into the effect of the fire upon the contract of the parties. We may ignore

Next we refer to Conlin v. Osborn, 161 Cal. 659 [ 120 Pac. 755 , 760], in which case the contract was not consummated nor had a change of possession occurred, but the vendee had borrowed from the vendor an abstract of title for use in having the title searched, and prior to the expiration of the time allowed for that purpose the improvements on the property were burned down in the great conflagration of 1906 in San Francisco. It was held that the loss fell on the seller and that there was a failure of consideration.

The case of Potts Drug Co. v. Benedict, 156 Cal. 322 [ 104 Pac. 432 , 25 L. R. A. (N. S.) 609 ], is entirely beside the question here involved, although general expressions are therein contained which would seem to bear upon the problem. In that case there was an assignment of a leasehold with intent to then and there vest title in the assignee, and although the assignor retained possession for a short period during which the premises were destroyed by fire, it was held that the loss fell upon the assignee, he being the owner of the title to the leasehold estate.

Higbie v. Shields, 27 Cal. App. 536 [ 150 Pac. 801 ], is to be classified with Conlin v. Osborn, supra. The contract was wholly executory and possession had not been delivered. The loss was held to fall upon the vendor, the court basing its opinion almost exclusively upon the fact that possession had not changed.

In Wong Ah Sure v. Ty Fook, 37 Cal. App. 465 [ 174 Pac. 64 ], the vendee under a contract which called for payments subsequent to the initial one, was held to be entitled to recover the value of reconstructing a burned building, but in that ease the court found an agreement on the part of the vendor immediately following the fire that if the vendee would rebuild he would be allowed by the vendor the cost of reconstruction. A like special agreement was involved in LeChance v. Brow, 41 Cal. App. 500 [ 183 Pac. 216 ].

In Kirtley v. Perham, 176 Cal. 333 [ 168 Pac. 351 ], personal property was sold, but title reserved until the total purchase price was paid. Upon the authority of many of the cases already examined it was held that the loss fell upon the seller, although the court quoted from Mr. Williston’s treatise on Sales to the effect that the majority rule is contrary, upon the theory that the rule in this jurisdiction was established. The case, however, is no longer of any authority for the reason that the rule was changed by legislative enactment in 1931. Section 1742 of the Civil Code now

The observations just indulged bring us to a consideration of the case of Cooper v. Huntington, 178 Cal. 160 [ 172 Pac. 591 ], in which case the Coopers (a mother and son) purchased from defendants ten acres of land of which four were washed away by a flood. The case originally grew out of misrepresentations respecting the available water supply for the property. After the filing of the complaint for fraud the parties arranged for a settlement and a check was given by plaintiffs, but payment thereon was stopped because the flood came and washed away the soil from the four acres. And in order to minutely observe the distinction drawn by the court we quote the. following sentence: “We are of the opinion that before partial consummation of this contract by a payment of any of the purchase price under it, the Coopers were in a position to withdraw from it.” This language was followed later on in the opinion by saying that the statements in Conlin v. Osborn, supra: “ . . . [D]id not amount to a decision that under no contract may there be a failure of consideration of which a

We now come to the ease which is most nearly in point, that of Lubarsky v. Chavis, 99 Cal. App. 610 [ 279 Pac. 205 ], There a complaint in two counts, its first framed on fraudulent representations for rescission, and the second alleging failure of consideration arising by reason of the destruction by fire of a house on the property and asking that the agreement be rescinded, was filed. A demurrer was sustained and upon plaintiff’s refusal to amend, judgment was entered for defendant. On appeal it was reversed, the court saying that the first count was sufficient and also deciding, solely upon the authorities heretofore discussed, that the loss fell upon the vendor, even where the possession was in the vendee. The case cannot be considered as authoritative upon the point here for the reason that the conclusion is founded upon the following language used in referring to Conlin v. Osborn, supra: “The vendor had not yet delivered possession but that fact has not been considered as a distinguishing circumstance in California. The case has been followed where the vendee was in possession and where title had not passed.” We have already ascertained that the reason cited for the conclusion does not in fact

The discussion of the prior decisions should not be closed without a reference to Owen v. Pomona Land & Water Co., 131 Cal. 530 [ 63 Pac. 850 , 856, 64 Pac. 253 ], which case involved the sale of land and water stock, with possession in the vendee during the completion of the contract. The water supply failed and the purchaser sought to rescind on the ground of failure of consideration as well as for other reasons. With respect to the contention regarding the water this court said: “Whether or not in the final adjustment of this controversy it may be held that the plaintiff can claim or recoup damages for any actual failure of the supply of water which his stock purported to represent—a point as to which we express no opinion—it is certain that the failure which occurred was not a cause for rescission. If this part of the consideration for plaintiff’s obligation failed in any degree, the failure was due to no fault of the defendant, and so was not a ground of rescission.” (Italics ours.)

There can be no doubt about the rule generally. In a note to Sewell v. Underhill, 197 N. Y. 168 [ 90 N. E. 430 , 124 Am. St. Rep. 863 , 18 Ann. Cas. 795, 27 L. R. A. (N. S.) 233 ], will be found a citation of numerous authorities to the proposition that the loss falls upon the vendee in those cases where in equity the vendee becomes the owner of the property. Reference may also be made to Good v. Jarrard, 93 S. C. 229 [ 76 S. E. 698 , 43 L. R. A. (N. S.) 383 ], and note thereto, 76 S. E. 698 . See, also, article by Professor Yanneman, 8 Minnesota Law Review, 127. Some differences of opinion will be found to exist with respect to those cases where the vendee is not in possession, but where the vendee is in possession, enjoying the entire beneficial use of the

Judgments affirmed.

Seawell, J., Shenk, J., Curtis, J., Preston, J., Waste, C. J., and Spence, J., pro tern., concurred.