Layton v. West

CHRISTIAN, J.

In 1959 appellants Herbert and Sharon Layton took a 15-year lease of respondents’ 42-unit apartment building. Appellants agreed both to pay monthly rent to respondents and to service certain encumbrances, of which the senior was held by Crocker-Citizens National Bank. The agreement gave appellants an option to purchase upon tender of a promissory note for an agreed price less the amount of outstanding encumbrances (which were to be assumed' by appellants upon' exercise of the option) and less a credit for the amount Of rent paid prior to the exercise of the option.

.On February 27, 1963, appellants and respondents-entered into two further agreements. The first was a modification- of the above lease. The term of the lease was extended from 15 to

[510]

33 years, the monthly rental payments were somewhat altered for the years immediately following the modification, and a large “balloon” payment scheduled for the fifteenth year was eliminated entirely. The second document, executed on the same day, was a lease of a 10-unit apartment building by respondents to appellants on terms similar to the first lease.

On’February 10, 1965, when litigation was already pending between the parties, appellants attempted to exercise their option' to purchase the larger building. They sent respondents several documents: a promissory note and a deed of trust to be signed by appellants upon transfer of title; a grant deed to be signed by respondents; and a document by which appellants would assume the note (secured by deed of trust) held by ■ Croeker-Citizens- Bank. The covering letter stated that delivery of the documents and transfer of title should take place on the afternoon of the following day. The attempted exercise of the option was immediately rejected by respondents. The letter of rejection listed five specific objections to appellants’ attempt to exercise the option.

Appellants filed a first amended complaint on February 16, 1965, alleging, among other causes of action, one for a declaratory judgment as to the parties’ rights regarding the lease and option covering the larger apartment building. On July 11, 1966, the first day of trial, appellants amended their complaint to add a new cause of action for specific performance of the lease. The case was tried on only these causes of action.