Pearson v. Baum

SCHOTTKY, J. Plaintiffs commenced an action against defendants for declaratory relief to construe the meaning of certain provisions of a promissory note.

The following facts are admitted by the pleadings:

In March of 1953 respondents, the Pearsons, exchanged a ranch in Yuba County, California, for rental property of [22]the appellants, the Baums, in the southern part of the state. In addition to the rental property exchanged and as consideration for the ranch, appellants executed a note payable to respondents, secured by deed of trust, on the Yuba County ranch property.

The note was in the principal sum of $49,828.02, bearing 5 per cent interest from date.

The note, deed of trust and the escrow agreement covering the transaction all bear the same terms which read:

“Principal and interest payable in installments of 33% per cent of net income from lease or operation of the land described in trust deed or more. ’ ’

The transaction was consummated and the appellants took possession of the ranch and in early 1954 paid respondents the sum of $1,500.04 as moneys due on the 1953 installment of the note.

Accompanying the installment payment was a statement of appellants showing how the $1,500.04 was computed. (Plaintiffs' Exhibit B.)

The statement shows the income from the ranch in 1953 to be as follows:

Sale of Prunes.........................$2,380.46

Share of Crop Bent..................... 4,902.71

Total ..............................$7,283.17

The statement then claimed the following expenses as deductible from the gross income to arrive at net income:

Labor.................................$ 74.00

Spraying.............................. 154.53

Fuel Oil............................... 4.50

Bean Cleaning and Storage.............. 167.90