Title Insurance & Trust Co. v. King Land & Improvement Co. (1912) · DecisionDepot

Title Insurance & Trust Co. v. King Land & Improvement Co.

Name: California Superior Court Tentative Rulings
Creator: DecisionDepot
License: https://creativecommons.org/licenses/by-nc/4.0/

California Court of Appeal Jul 15, 1912 No. Civ. No. 1085.Published

Before: James

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Holding. The court held that because the contract was an option agreement rather than a binding contract of sale, the plaintiff's rescission of the agreement upon the defendant's default relieved the makers and guarantors of the promissory note from liability.

Issues

Whether the promissory note was supported by an executed consideration independent of the option right.
Whether the plaintiff's rescission of the option agreement precluded recovery on the promissory note given as consideration for that option.

Disposition. affirmed

Quotations verified verbatim against the opinion

“Certainly plaintiff could not be permitted to collect the full consideration agreed to be paid as the price of an optional right and at the same time decline to permit the exercise of such right.”

Synopsis

The facts are stated in the opinion of the court.

[459]

JAMES, J.

This action was brought by the plaintiff on a promissory note made for the principal sum of $10,000 executed by the King Land & Improvement Co. and W. J. King, and guaranteed by respondents G. W. Burleigh, C. R. Ward and Robert McFadden. Judgment was in favor of the respondents mentioned. The appeal is on the part of plaintiff and is taken from the judgment and also from an order denying a motion for a new trial.

In October, 1907, plaintiff, acting as trustee for the owners of a considerable acreage in the Rancho Sausal Redondo, in Los Angeles county, made an agreement with W. J. King, whereby it was provided that the said King should be given an option to purchase the real estate so held in trust for the total amount of $130,000. A similar agreement had previously been made between the same parties, but King, having failed to fulfill the obligations thereof on his part to be performed, a new arrangement was consummated and a second writing executed. In this writing it was first recited that it was the desire to give a further extension of the option to King, and that the original agreement was abrogated and annulled, and it was then recited:

“2. That in consideration of the nine thousand ($9000) dollars heretofore paid as herein recited, and in further consideration of the execution of two promissory notes to the party of the first part by the party of the second part and the King Land and Improvement Company, a corporation, said notes dated October 1, 1907, drawing interest from date at the rate of 6 per cent per annum, the first of said notes for $8,000, payable on or before November 5, 1907, the second of said notes for $10,000 payable on or before March 1,1908, and both of said notes endorsed and guaranteed by W. J. King, Chas. Kern, Dr. Geo. Burleigh, A.' C. Black, IT. E. Smith, C. R. Ward, Robt. McFadden, H. C. Cartmell, Wm. I. Innes and Albert Fuller, and in consideration of the prompt payment of said two promissory notes at the maturity thereof, time being of the essence of the contract with respect to the payment thereof, the party of the first part gives and extends to the party of the second part the exclusive option right and privilege of purchasing the said real property from the party of the first part at the price of one hundred and thirty» (130,000) dollars, gold coin of the United States.

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the purchase upon the terms agreed. The question then presents itself as to whether these payments evidenced by the promissory notes for $6,000 and $10,000, respectively, were payments to be made for an executed consideration, to wit, an optional right extending from the time of the making of the agreement up to the date of the maturity of said notes. We are of the opinion that it was not contemplated that King should have any option at all until he made payment of the promissory notes according to their terms, and that the condition imposed upon him was that he should become possessed of this option right when, and only when, both promissory notes had been paid according to their terms; that is, if he paid the notes in full and promptly, then the option to,purchase would be extended to him. On the contrary, if he failed to pay the notes promptly, the option right which was to accrue upon these payments being made would not accrue, and plaintiff might decline to allow him to purchase the property for the price agreed upon and rescind the agreement, which in fact it did do. In aid of this conclusion is the language used by plaintiff itself in the notice which it gave to King on April 1, 1908. In that notice it is recited that the agreement provided that if the $10,000 note was paid promptly, “the undersigned would give and extend to you the exclusive option and privilege of purchasing certain real property described in said agreement. You having failed to pay the said $10,000 promissory note in full, have, of course, failed to secure the option of purchasing said property.” The agreement, then, as we interpret it, so far as it affected the giving of an option, was executory on both sides. It ivas rescinded on the part of the plaintiff because of the failure of defendant to satisfy conditions imposed upon him, and having been rescinded, the makers and guarantors of the promissory note for $10,000 were thereby relieved from any liability on that account. Certainly plaintiff could not be permitted to collect the full consideration agreed to be paid as the price of an optional right and at the same time decline to permit the exercise of such right. King could not under his agreement have claimed the privilege of purchasing the real property at the agreed price of $130,000 until he had satisfied the indebtedness evidenced by the promissory notes which constituted the consideration to be paid by him for that privilege. The effect of

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Synopsis

JAMES, J.

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