*1 No. 17719. In July F. Bank. [S. 1949.] WILLIAM BARKIS, E. Respondent, v. VERNER B. SCOTT al., Appellants.

et *2 Eugene Elerding and Appellants. M. Hardie for Albert Marshall Rutherford Ralph Respondent. and Nathanson for TRAYNOR, Defendants have appealed J. from judg a plaintiff’s ment quieting parcel a property. title to of real In 1941, plaintiff and defendants executed a contract whereby agreed purchase plaintiff’s defendants to house and paid lot in Oakland. Seven hundred dollars was down and the $5,450 per balance of with 6 cent interest was be paid per at the rate of provided $42.50 month. The contract payments day to be on were made the fifteenth of each month and payment should “If any be made in the of Default principal, said sums of interest or at installments maturity thereof, moneys paid premises all theretofore in the by parties part said of shall, option the second at the of said party absolutely part, of the first become forfeited to and by party part, liquidated be retained said the first as and for agreed damages agreement; and for breach of this and this absolutely agreement then be shall become and void Being Agreed Expressly no ... effect. that time is the It pos essence of this contract. ...” Defendants went into monthly payments up made and including session and May They payment permanent 1946. also the due made improvements property $3,114.47. on the of the value of The plaintiff August payments sent to for the June and checks by “Refer were returned the bank marked to Maker.” The August July 26, 1946, plaintiff check was honored. On noti fied that he had elected to declare a forfeiture defendants their interest under the contract for the defaults August payments. Plaintiff was not aware that June accepted dishonored when he the June check had been July payment, and defendants were not aware that either they plaintiff’s had dishonored received check until been forfeiture was re- the notice of notice of forfeiture. After immediately for tendered checks ceived, defendants certified accept refused to them. De- due, plaintiff the amounts but provisions opened under fendants then an account deposited plaintiff’s have section 1500 of the Civil Code and have due under the contract. credit all amounts that become July pay- Defendants contend the retention provisions by plaintiff ment to a waiver of amounted providing for forfeiture making time of the essence and regardless of there was default, and that whether case of them from any waiver, court should have relieved the trial of section 3275 of the Civil provisions default under entitled to relief it is clear that defendants are Code. Since unnecessary there to decide whether under section it making defaults in either the June was a waiver of the August payments. “Whenever, the terms of provides:

Section party forfeiture, incurs a or a loss thereto. obligation, an forfeiture, reason of his failure to of a nature in the may therefrom, be provisions, he relieved comply with *3 compensation except other making party, full upon negligent, willful, or fradulent breach of grossly ease of Although by its terms this section authorizes relief duty.” is case, contends that it the settled law of plaintiff in this defaulting relief is unavailable to vendee that such state this time has been made of the essence. contract where under a n however, 3275, have considered section that The decisions granting point denying or relief careful out have been brought or party in default has has not himself statute, and whenever conditions the terms within granted been relief has whether have been satisfied made the essence been of involved. had time Hirose, 213, 793]; 33 Cal.2d 215-216 P.2d (Gonzalez v. [200 Inc., Co., 73, 14 82 Finance Cal.2d P.2d v. Federal Leslie [92 Co., ; 136, Lake Hemet Water 9 Henck Cal.2d 143-145 v. 906] Hopkins Woodward, 216 619, v. Cal. 621-622 849]; P.2d [69 Co., 499]; 496, Ebbert v. Mercantile Trust 213 P.2d Cal. [15 Cal.App.2d v. 88 ; Gattman, Breitman 499-500 P.2d [2 776] Cal.App.2d 86 124, 311]; Coleman, P.2d Gattian 128 v. [198 Flanery ; Mudd, Cal.App.2d 86 266, P.2d v. 270 [194 728] Barber, Cal.App.2d 80 250, ; P.2d Bedell v. 254-255 806] [194 806, Co., 591]; P.2d Miller v. Modern Motor 107 807-808 [182 38, 122]; Knaust, 44-45 P. Fickbohm v. 103 Cal.App. [290 ; Knight Black, 446 P. v. 19 Cal.App. 443, Cal. 692] [284

119 Cal.App. 518, 512]; App. Kingsbury, 526 P. McDonald v. 16 [126 244, 380]; P. see Borad, O’Morrow v. 27 [116 794, 800-801 483]; Fleshman, Cal.2d P.2d v. 65 [167 Clifford Cal.App. 762, 45]; Troughton Eakle, 770 P. v. 58 Cal. [225 App. 161, 161]; Colburn, 173 P. Leak v. Cal.App. 55 [208 784, 788 249].) contends, P. however, Plaintiff [204 granted cases where relief has although been time was of essence, made there had either been a waiver provision estoppel against time or an the vendor assert (See Hirose, it. 213, Gonzalez v. 33 Cal.2d 216 [200 793]; Flanery Mudd, Cal.App.2d 250, v. 86 254 806]; Bedell v. Barber, 806, 807 591]; Miller v. Modern Motor Cal.App. 38, 44 [290 122]; P. Knaust, Fickbohm 103 Cal.App. 443, v. P. ; Eksoozian, Collins v. P. 692] McDonald Kingsbury, Cal.App. 244, v. 380].) P. It settled, however, is found, if estoppel waiver or resort to (McCart relief under necessary. section 3275 is not ney Campbell, v. 715, 216 Cal. P.2d 729]; Laffoon Collins, P. 808]; Butte Creek Consol. Olney, D. Co. v. City Cal. 260]; Los Angeles Krutz, Cal. Stevinson Joy, Hayt 751]; Bentel, Templeman, Boone v. 290, 295, 139 Am.St.Rep. 126]; Leballister v. Morris, 59 Cal.App. 699, Accordingly, estoppel the waiver or found in those eases that also relied on section ground 3275 must be considered as an alternate than section, decision rather a condition to relief under that (Miller expressly and some those cases have so held. Modern Motor Fick Knaust, ; see, bohm v. P. 692] Borad, also, O’Morrow Co., Inc.,

Leslie v. Federal Finance 14 Cal.2d 80 [92 Gattman, Cal.App.2d 124, Breitman v. *4 266, 311]; Coleman, Cal.App.2d P.2d v. [198 Gattian 728].) P.2d [194 contended, however, interpretation It an is such granting per cases relief 3275 is not under section in missible view of the rule laid down in Glock v. Howard & Colony Co., Am.St.Rep. Wilson 713, 17, 123 Cal. P. 199], 43 L.R.A. and the in Henck Lake Hemet statement v. Co., Water 849], provisions Cal.2d 136 “The P.2d necessarily language qualified of section 3275 are is, generally section where time made 1492, so that a case agreement party may relief essence of the a obtain (9 143.) under of these that section.” at Neither Cal.2d vendee, after controlling cases is here. In the case the Gloek being years, in default for three tendered the balance over rejected price the contract and demanded a deed. The vendor sought- convey. then the tender and refused to The vendee amount to rescind the contract and recover back the total paid. that he had The court held that where time was put the essence the vendee could not a late tender vendor for rescission and in default so as to found a cause of action recognized, however, that under cer restitution. The court of the es default, even when time was tain circumstances against in the case before be relieved but noted that sence, could attempted excuse “even to be made.” Section it no was default, presupposes party seeking relief is in that the (cid:127) necessary is and in order to secure relief under its terms it. justify appli plead prove for him facts that will (Patten Pepper Co., cation. v. Hotel 153 Cal. City Oakland, ; Palo Dodini

P. & v. Taylor 739, P.2d v. United States F. & G. Fleshman, 65 898]; v. Clifford Troughton Eakle, 58 45]; v. Cal. consistently App. 161, 161].) It has therefore 173 [208 proof facts, tinee been held the absence of of such is established the vendee cannot recover back his default (Glock part v. Howard & Wilson payments he has made. Am.St.Rep. 17, 43 Colony Co., 713, 123 Cal. Hoppin Munsey, L.R.A. Cohen, Cal.App.2d 177, 180 398]; Landfield Cal.App. Security-First Bank, Nat. Wilson v. Meyers, Poheim v. 2d P.2d 975] quiet Similarly, although a title action (Gonzalez Hirose, 33 Cal.2d nature equitable is 577, 584- O’Brien, 197 O’Brien v. P.2d 793] 216 [200 CaLApp. Kazarian, ; Ohanian equity penalty cannot “enforce 42]), 202 3369; v. Fed (Civ. Code, Leslie any case” § forfeiture 906]; Ebbert Co., Inc., eral Finance Trust Mercantile 421]; see Cal.App.2d 582, Gray, Plante of a in the absence generally held 194), it

20 Cal.L.Rev. the benefit _ will realize more than the vendor showing that

121 bargain may quiet of his he property his title to the refunding any part price paid. (Myers without v. Williams, 173 304 ; Cal. P. Schwerin Estate [159 982] Realty Slye, Co. v. Cal. 172-173 Ross v. [159 Gentry, Schuy P. 1098]; Darter v. [271 ler, Cal.App. 827].) [190 suggest

The facts and similar Clock case cases attempt rely upon that the reason no was made to section 3275 defaulting was that the qualify vendee could not for relief under that section and only hope that therefore his of recover ing any money he paid keeping had the contract alive in proving was that it was the vendor who was in In default. many cases amount forfeited was a small fraction of the price total and there was no indication that it exceeded damage amount the caused the vendor the vendee’s breach. (Tuso Green, Hoppin Cal. 574 P. 327]; v. Mun sey, 185 ; Cal. 678 v. Cohen, 89 398] Cal. Landfield App.2d Keelan v. Belmont Cal. App.2d 6 Ulrich, Kelso v. Cal.App.2d 930] P.2d 407]; Meyers, Poheim Cal.App. 65].) hand, On the other when sought relief has been denied under section 3275 the frequently pointed courts have out that the damages sustained the vendor were no less in amount already than the paid (Buckey vendee had v. Mc Graw, 206 Cal. ; Sawyer Sterling Realty Co., 41 Cal.App.2d 715, also, P.2d 449]; see, Weatherlee Sinn, ), or 134] that the nature of the condition that was breached was such impossible it was compute to damages the actual in (Parsons volved. Smilie, 647, 654, Palo City & Dodini v. Oakland, Cal.App.2d 739, 750 764].) In other cases the vendee has been unable to continue performance with contract, although inability such prevents his being default from (Ebbert wilful v. Mercantile Trust see Rest., Contracts, e), com. it also right § defeats his to have the kept force, since he is unable to make compensation full for (Neher the default. v. Kauffman, P. 713]; Steele, Grimes v. 56 Cal.App.2d 786, Deevy P.2d 874]; Lewis, P.2d Story, Christin v.

A vendee default seeking who is keep to the contract secure relief than

alive, however, position is in a better to of what he seeking one recover back the excess who necessary give vendor the paid has over the amount bargain performance benefit of under the con his after may In it be so tract has terminated. the latter situation damages compute difficult the vendee vendor’s *6 prove unjustly will en be unable to that the vendor will be money allowing keep riched him to all the that has been Colony paid. (See Co., 1, Wilson Glock v. Howard & Cal. 713, Am.St.Rep. 17, 199]; 3 Williston 7-8 L.R.A. p. Corbin, Right on The 791, 2230; Contracts [rev. ed.] § Defaulting Paid, Vendee to the Restitution Installments 1026.) the 1013, hand, 40 Yale L.J. On the other when willing default has not been serious and the vendee and performance contract, able to continue with his the damage by allowing vendor suffers no the vendee to do so. situation, part perform In if this there has been substantial improvements ance or if the vendee has in made substantial contract, permitting on reliance his the vendor to terminate rights keep the vendee’s under the and the install paid only ments that have been can result the harshest Accordingly, granted sort of forfeitures. relief will be whether or time (Gonzalez not has been made of the essence. Hirose, 213, ; 215-216 P.2d Cal.2d Leslie v. 793] Co., Inc., 73, Federal Finance 80-81 Cal.2d P.2d Hopkins 906]; Woodward, 619, ; P.2d 499] Co., 496, v. Mercantile Trust 499-500 Elbert P.2d 776]; Gattman, Cal.App.2d 124, Breitman v. 127-128 ; Coleman, Cal.App.2d 266, Gattian v. 311] ; Barber, Cal.App.2d 806, Bedell v. 728] Cal.App. Miller Modern Motor 591] Eksoozian, 44-45 Collins v. 670]; Kingsbury, McDonald v. 246-247 see 3 Williston on Contracts [rev. ed.] 791, p. 2229; Rest., Contracts, 5-6.) 374, illus. § §

In Henck v. Lake Hemet Water 849], only forfeiture that was involved was a loss bargain, the benefit of the situation was therefore analogous wholly executory where that the contract is still expenditures and no substantial made in reliance have been on it. It is settled such situations relief from default granted, cannot be when time has been made of the essence estoppel of the contract and there has been no waiver of provision. (Martin Morgan, to assert time 350, Am.St.Rep. ; Grey Tubbs, 208-209 Pitt v. 364; Mallalieu, Cal.App. Thorne v. Gordon, Yoakum, 202, 204, Urban Code, Williston 1492; Civ. see 3 on Contracts § [rev. p. 2388; 1-2.) Rest., Contracts, Since illus. § ed.] § present perform in the part case there substantial has been properly ance of the contract and have raised the defendants question right of their to relief under section there is nothing prevents either Clock or the Henck cases that granting provision requiring of relief for the breach payments strictly be made on time. contends, however,

Plaintiff that relief must be denied finding because of the of the trial court “That defendants’ obligation failure by issuing upon to meet said checks drawn Bank grossly he had neg which not sufficient funds was ligent duty.” and a wilful breach of The evidence does not finding. sustain this Both they defendants testified that did they know the checks had been dishonored until received plaintiff’s they notice forfeiture both believed they had sufficient funds in the bank cover them. At most *7 appear the overdrafts to have been the an result of error in computation coupled delays with making in deposits the usual caused defendant husband’s illness. contends, Plaintiff however, finding the wilful of a default must be sus tained voluntarily because defendant husband failed to make inquiry when the June cheek not “paid” was returned marked with his statement, June bank particularly when that state ment charge contained a for one unidentified overdraft. The not, however, issue is voluntarily whether defendants failed investigate to whether the June check had been honored but they wilfully whether or gross negligence as a result of breached (Parsons their contract. Smilie, 97 Cal. That good they in defendants faith believed

had sufficient prevents funds to cover the checks their breach being wilful, from fully and investigate their failure the implications of their June bank statement most at amounts simple negligence. It does not evidence that “entire want of care which would presumption raise a of the conscious consequences” necessary indifference to gross to constitute negligence. (Bedington P. T. C. Pacific 432, 48 Am.St.Rep. 132]; Coit Western Union Tel. Am.St.Rep. Rarity,

L.R.A. Krause ) 77 A.L.R. 1327]. judgment

The is reversed. Carter, J., and Gibson, J., Shenk, J., Edmonds, J., C. Spence, J., concurred. Although, face, ease

SCHAUER, I dissent. on this J. may affirmance, aspects in hard one for seem some of its to be a I think that either follow the law on the record we should actually exists, frankly changed. as it or declare that the law (1898), v. Howard 69 Am.St. Glock Rep. 17, Lake Hemet 199], 43 L.R.A. and Henck v. Water (1937), 849], contain Co. statements majority I opinion; which are inconsistent with the think they squarely should be followed or overruled insofar they as are inconsistent. finding gross negligence

As to the wilful breach majority, evidence, the in the face of substantial court; substitute their conclusion of fact for trial majority hold that as a matter of law the use defend- ants, making payments on the time-essence contract on two occasions months, within three of checks drawn on an account without checks, sufficient funds to cover such does support specific finding of the trial court that such grossly conduct negligent. using was either wilful or If bad support finding checks two times three months does not gross negligence of wilfulness or would three times in three not, months be sufficient? If would 12 times in months perhaps And, implications if negligence suffice? there be related, wilfulness the conduct what excuses shall the required, law, accept trial court be as a matter of as over- weighing conflicting implications? going How far are we in the trend toward de appeal novo consideration on of con- flicts evidence? prefer

I judges juries would to leave with trial finding exclusively (For fact function which once was theirs. *8 appellate supervision illustration of the trend toward of fact finding weight Isenberg on the of evidence see v. California Employment (1947), Stab. Com. 30 Cal.2d 45-46 Sugar (1948), Oil Union Co. Union Co. 31 Cal.2d seq. 300, et