Swain v. Wright
Filed 12/30/09 Swain v. Wright CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
NICOLE SWAIN, Plaintiff and Appellant, v. LAWRENCE K. WRIGHT, Defendant and Respondent. | B212934 (Los Angeles County Super. Ct. No. SC094740) |
APPEAL from a Judgment of the Superior Court of Los Angeles County. Linda K. Lefkowitz, Judge. Reversed.
Michael J. Simkin for Plaintiff and Appellant Nicole Swain.
No appearance for Respondent.
__________________________________
Nicole Swain appeals the judgment in her action for specific performance of an option sale contract for a condominium in Marina del Rey. The court entered respondent Lawrence K. Wrights default, but at the prove-up hearing refused to order specific performance of the contract and awarded damages solely for Swains remodeling costs, prejudgment interest and attorneys fees. We reverse and remand for the trial court to determine Swains entitlement to specific performance and additional damages as appropriate.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
On May 18, 2007, Swain and Wright entered into a rental agreement and option agreement for the purchase of a house in Marina del Rey, California. Rent was $3,500 per month ($3,000 if paid on the first of the month). Pursuant to the option agreement, in exchange for $1,000, Wright gave Swain the option to purchase the house for $1.3 million by giving Wright 30 days notice of her exercise of the option prior to May 31, 2009. Swain paid the $1,000 upon execution of the option agreement.
Swain moved into the house and made repairs to the house worth approximately $42,000. On June 12, 2007, she opened an escrow for the purchase of the property, and notified Wright that she would be exercising the option. Wright refused to sign the escrow instructions, and told Swain he wanted an additional $250,000 for the property.
On July 26, 2007, Swain filed this action for specific performance of the option agreement and damages for her remodeling expenses. On September 6, 2007, Wright answered the complaint.
On June 8, 2008, the trial court granted Swains motion for terminating sanctions against Wright for his failure to respond to discovery, and struck Wrights answer. Wright did not seek to set aside the default.
In her prove-up, Swain sought: rent payments totaling $30,000 made to Wright after her exercise of the option (although she was not obligated to do so under the option agreement) because he threatened eviction; $525,000 additional interest over the life of her purchase loan because the interest rate had increased; attorneys fees of $42,421.72 in connection with Wrights failure to perform under the option agreement; and prejudgment interest of $1,528.08, for a total damage claim of $598,949.80. Swain also sought specific performance of the option agreement.
On October 7, 2008, the trial court held a prove up hearing on the default, and after taking the matter under submission, denied Swains request for specific performance and awarded her $42,000 in damages. The court concluded it could not transfer property by default judgment under Code of Civil Procedure section 764.010. On November 7, 2008, the court denied Swains motion for reconsideration, and on December 2, 2008, entered judgment against Wright in the sum of 89,891.54, consisting of $42,000 in damages, $5,051.54 in prejudgment interest, and $42,840 in attorneys fees and costs.
DISCUSSION
Swain contends that the trial court erred in refusing to grant specific performance of the option agreement because Code of Civil Procedure section 764.010 does not prohibit the transfer of title to real property by default, but instead requires the trial court to conduct an evidentiary hearing in quiet title actions. Furthermore, she claims that the option agreement entitles her to recover all rent paid after the exercise of her option, and damages incidental to specific performance.
I. THE TRIAL COURT ERRED IN APPLYING SECTION CODE OF CIVIL PROCEDURE SECTION 764.010 TO SWAINS CLAIM FOR SPECIFIC PERFORMANCE.
1. Code of Civil Procedure Section 764.010 Applies to Actions to Quiet Title.
An option to purchase real property is a contract in which the owner (the optionor) gives another (the optionee) the exclusive right to purchase real property in accordance with the terms of the option. (Wachovia Bank v. Lifetime Industries, Inc. (2006) 145 Cal.App.4th 1039, 1049.) An option agreement does not constitute a purchase and sales agreement for the property, but a sale of the right to purchase the property. (Ibid.) On its exercise, the option ceases to exist and is transformed into a purchase and sale contract for the property. (Id. at pp. 1049-1050.) If, after a valid exercise of the option, the optionor refuses to perform, the optionee may sue for specific performance. (Id. at p. 1050.) Although the option gives the optionee the right to purchase the property, it does not vest title in the property. (Ibid.)
Because an option is a contract, it is subject to the general rules of contract law. (Robert T. Miner, M.D., Inc. v. Tustin Avenue Investors, LLC (2004) 116 Cal.App.4th 264, 270.) For that reason, Civil Code section 764.010, which governs judgments in quiet title actions, does not apply in the first instance.[1]
2. Specific Performance of the Option Contract.
To obtain specific performance after a breach of contract, a plaintiff must show: (1) the legal remedy is inadequate; (2) the underlying contract is both reasonable and supported by adequate consideration; (3) the remedies are mutual; (4) the contractual terms are sufficiently definite to enable the court to know what it is to enforce; and (5) the requested performance is substantially similar to that promised in the contract. (Real Estate Analytics, LLC v. Vallas (2008) 160 Cal.App.4th 463, 472.) We review the decision for abuse of discretion. (Ibid.)
Here, because it determined it could not order specific performance at the default prove-up hearing, the trial court failed to determine whether Swain was entitled to specific performance. We note that if the court determines Swain is entitled to specific performance of the contract, she is not entitled to remodeling cost damages because such damages are an alternative to specific performance. We therefore remand the matter for the trial court to consider Swains showing on the specific performance.
II. DAMAGES FOR RENT PAID AFTER EXERCISE OF OPTION AND INCREASE IN INTEREST RATE.
1. Rent Damages.
Swain contends that pursuant to the option agreement, she is entitled to the $30,000 she paid to Wright in rent after exercise of the option. The elements of a claim for breach of contract are (1) the existence of a valid contract, (2) performance or excuse for nonperformance, (3) breach, and (4) resulting damage. (Smith v. Royal Mfg. Co. (1960) 185 Cal.App.2d 315, 325.) Where an option contract does not expressly provide for the payment of rent after exercise of the option, the optionee is not required to pay rent. (Abadjian v. Superior Court (1985) 168 Cal.App.3d 363, 373.) Here, the option agreement was silent as to rental payments after exercise of the option. Therefore, if the trial court on remand finds that Swain properly exercised the option and is entitled to specific performance of the option agreement, Swain is also entitled to recover any rental payments made after exercise of the option.
2. Incidental Damages: Higher Interest Rate.
Swain contends she is entitled to incidental damages arising from her right to specific performance, including the increased interest rate she would have to pay to purchase the property. The trial court, on remand, should it find specific performance available, shall also consider any such damages.
DISPOSITION
The judgment of the Superior Court is reversed, and the matter is remanded for a determination of whether Swain is entitled to specific performance of the contract, and to make a determination of damages based on that finding; furthermore, the court is also to award prejudgment interest and attorneys fees as appropriate.
ZELON, J.
We concur:
PERLUSS, P. J.
JACKSON, J.
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[1] Code of Civil Procedure, section 764.010 provides: The court shall examine into and determine the plaintiff's title against the claims of all the defendants. The court shall not enter judgment by default but shall in all cases require evidence of plaintiff's title and hear such evidence as may be offered respecting the claims of any of the defendants, other than claims the validity of which is admitted by the plaintiff in the complaint. The court shall render judgment in accordance with the evidence and the law. Contrary to the trial courts ruling here, Civil Code section 764.010 does not flatly prohibit default judgments in quiet title actions; rather, it requires a higher standard of evidence at the prove-up hearing. (Yeung v. Soos (2004) 119 Cal.App.4th 576, 580.)
