Pixley v. First Federal Savings & Loan Assn.

HANSON, J. pro tem.

This is a suit for damages for breach of a contract to convey a residential property.

The defendant savings and loan association, the appellant, contended in the lower court, as it likewise contends here, (1) that its escrow instructions—which together with the instructions signed by plaintiffs comprised the written contract between the parties—were not binding upon it as they were signed in its behalf only by its secretary and not by its secretary and its vice president; (2) that there was a mutual mistake of law and fact which voided the contract; and (3) that the trial court erred in finding the defendant was guilty of bad faith in refusing to convey and in its allowance of damages based on that theory.

The defendant in 1946 made a construction loan to one Grosbach in the sum of $8,000 and as security took back a trust deed on the property here involved. The defendant did not inspect the property prior to recording the deed to ascertain whether any building material had been deposited, or work done, upon the premises which might give mechanics’ liens subsequently filed a priority over the lien of the trust deed. Evidently this failure was due to the inadvertence of some one or more employees of the defendant charged with such duty. More than a year later four mechanics’ liens were filed against the property; one, in August, 1947, and three in January, 1948, but at the trial no evidence was offered to show that any of these mechanics’ liens were entitled to priority over defendant’s trust deed and for want of such evidence the court found they had no priority.

In October, 1948, the defendant caused notice of default under the terms of its trust deed to be filed, but the trustee’s

[429]

sale was not had until July 19, 1949, at which time the defendant bid in the property for the sum of $8,378.55.

Prior to the trust deed sale the plaintiffs had several conferences with one Kibbe, vice president of the defendant, in which they sought to purchase the property. At a conference had on July 11, 1949, the parties orally agreed, subject to the approval of the defendant’s board of directors, that plaintiffs should not bid at the trustee’s sale, but that the defendant should purchase the property upon said sale, and resell it to plaintiffs at a price totaling the balance due on defendant’s trust deed, plus interest, foreclosure expenses, buyers’ and seller’s escrow expenses, title policy costs, and a $500 profit to defendant, and thereupon it would deliver a good title evidenced by a policy of title insurance. In these conferences there never was any discussion concerning mechanics’ liens.