Soon v. Beckman

California Court of Appeal Apr 28, 1965 No. Civ. 490Published

Before: Stone

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Holding. The court held that respondents waived their right to rescind the option to purchase and their right to assert the doctrine of unclean hands by continuing to accept rent payments with full knowledge of the appellants' prior default.

Issues

Whether respondents waived the right to rescind the option and assert the doctrine of unclean hands by accepting rent after learning of the appellants' default.
Whether the appellants' prior unconscionable conduct resulted in prejudice to the respondents sufficient to bar equitable relief.

Disposition. reversed

Quotations verified verbatim against the opinion

“acceptance of rent accruing subsequent to a known default waives a forfeiture arising from the default.”

“Waiver may be shown by conduct, and it may be the result of an act which, according to its natural import, is so inconsistent with the intent to enforce the right in question as to induce a reasonable belief that such right has been relinquished.”

“respondents failed to prove that either damage or prejudice would result to them if the option were specifically enforced.”

STONE, J.

This is an appeal from a judgment quieting title to real property in respondents and denying appellants specific performance of an option to purchase the same property.

Respondents, by a written instrument, leased a 5-acre trailer park to appellants for a term of 78 months. Rental was fixed at 45 per cent of the gross receipts, with a minimum guarantee of $550 per month commencing with the second year of the term. The lease also contained an option providing that:

”... the Lessees shall have the first option to purchase this particular property for the price of $235,000.00 upon the condition that all rental has been paid according to the within Lease and together with the $50,000.00 payment in cash (and the purchaser can pay more if he so desires) and the balance purchase price is to be a first trust deed, payable from the purchaser to the seller at the rate of $1,000.00 or more per month including six (6%) percent interest upon the unpaid balance. This option will be in full force and effect during the whole term of this Lease.”

Appellants entered into possession April 15, 1957, and from April 1959 through October 20, 1962, they maintained two sets of records. The correct record that reflected the true income of the trailer court they kept for themselves. The other showed only a portion of the income and this they gave respondents, paying less than the percentage rent due. About October 20, 1962, appellants became either conscience stricken or option-conscious, for they confessed, with advice of counsel, that they had under-reported the gross receipts from the operation of the trailer court. Appellants admitted to respondents they owed them $7,579.56 for withheld rent including interest at the rate of 7 per cent per annum. This amount they tendered at the time of disclosure.

[35]

Respondent Jeong Soon told appellants they had breached the lease, and refused to accept the check. Appellants thereafter opened a bank account and deposited the unpaid rent and interest in respondents’ names. Respondents did not withdraw the money, instead they referred the matter to their attorney. Nothing was done at that time toward terminating the lease, and respondents continued to accept rental payments. It appears that some six months after the default respondents consulted their present counsel and on April 8, 1963, he gave notice that respondents were rescinding appellants’ right to exercise the option to purchase the property. Appellants continued to pay and respondents to accept the rent from the time notice of rescission was given until the lease expired in October 1963.

Soon v. Beckman

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STONE, J.

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