Hollypark Realty Co. v. MacLoane

California Court of Appeal Sep 16, 1958 No. Civ. 22990Published

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Holding. The court held that when the property owners sold the subject property to a third party after the defendants' repudiation, they terminated the underlying purchase contract and the defendants' obligation to pay the purchase price, thereby discharging the note that evidenced that obligation.

Issues

Whether the sale of the subject property to a third party by the owners after the defendants' repudiation of the purchase contract discharged the defendants' obligation under the promissory note.

Disposition. reversed

Quotations verified verbatim against the opinion

“When the owners elected to sell the property to a third person they terminated the contract of purchase and no longer had the right to pursue either of the two remedies above-mentioned.”

“The note sued upon was not given in payment of the contract price but merely evidenced defendants’ obligation as to a part of that contract price.”

“When, however, the owners sold the subject property they terminated the obligation which the note evidenced and the note thereupon ceased to be an obligation binding upon the defendants.”

THE COURT.

Defendants appeal from a judgment against them in the sum of $5,500 plus attorneys’ fees.

By its complaint in this action the plaintiff alleged that on June 3, 1956, the defendants delivered to the plaintiff their promissory note in the sum of $5,500 by the terms of which they promised to pay, 29 days after date, to the order of “Hollypark Realty, Trust Account,’’ the sum of $5,500 without interest and, in case of suit, to pay an additional reasonable sum as attorneys’ fees. It further alleged that by the terms of the note defendants promised to pay plaintiff the sum of $5,500 on or before July 2, 1956, without interest and that no part of said sum of $5,500 had been paid.

By their answer, the defendants denied all the allegations of the complaint and in addition thereto alleged certain special defenses including want of consideration. The details of these special defenses pleaded are not material in view of the conclusion which we have reached.

The plaintiff seeks to enforce the note pleaded as the trustee of an express trust and not as the beneficial owner and holder of the note. At the trial the plaintiff did not content itself as it might have with proof of the execution of the note and

[551]

that plaintiff was the holder thereof hut, in addition thereto, introduced evidence which established the following facts: The plaintiff had been employed as a real estate broker by one Westerman and his wife to sell an apartment house commonly known as 11620 South Crenshaw Boulevard, Inglewood. On June 3, 1956, the property was being shown as an “open house” by one Stein, a real estate salesman employed by the plaintiff, and on that day Stein showed the defendants through the property as well as other properties and thereafter took them to the office of the plaintiff where he prepared two instruments ; the first in the form of a deposit receipt. This deposit receipt is very uncertain in its terms but the body thereof, in substance, provides as follows: That Stein, as a broker, acknowledged the receipt of “$5,500 form note” to be applied on the purchase price of $55,000 for the subject property; that the terms of sale were that the buyers were to assume existing first and second trust deeds in the approximate aggregate amount of $37,500; give their note secured by a third deed of trust in the approximate sum of $6,000 and make a cash down payment of $11,500 (this includes the $5,500 evidenced by the note).

Hollypark Realty Co. v. MacLoane

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THE COURT.

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