Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Stanislaus County, Super. Ct. No. 348188. William A. Mayhew, Judge.
Lawrence T. Niermeyer for Plaintiffs and Appellants.
Law Offices of Mayol & Barringer and Bart Barringer for Defendant and Respondent.
OPINION
Levy, J.
INTRODUCTION
Appellants Sergio and Sandra Miranda appeal from the judgment entered after the trial court found in favor of respondent, Carl W. Williams, in the Mirandas’ action for breach of a residential purchase agreement and specific performance. The court found that Williams’s performance was excused by the defense of impossibility. On appeal, the Mirandas contend the trial court lacked substantial evidence to make that finding. We will affirm the judgment.
FACTS
On January 14, 2003, the parties entered into a contract by which the Mirandas agreed to pay $168,300 and Williams agreed to build an approximately 1,200-square-foot residence on the lot at 400 Laurel Avenue in Modesto. The contract specified, “Completion Date approx. July 1 - 2003,” and provided “Floor plan & [amenities] to be determined by const contract.”
On March 20, 2003, the Mirandas deposited $5,000 and signed escrow instructions. Williams did not sign because, around that time, he became aware that he could not build the house to which the parties had agreed. Williams discovered that the sewer line ran across a corner of the property rather than through the dedicated easement at the street. The City of Modesto refused to move the sewer line or to issue a permit to build over the sewer line, and setback requirements precluded Williams from simply repositioning the agreed upon house on the lot.
Sometime before July 2003, Williams notified the Mirandas that he could not build the house they had agreed on. Williams had to redesign the house to fit on the lot and the additional plan and changes would increase the price of the house by about $20,000. The Mirandas indicated they could not afford a higher price so they tried to negotiate adjustments to the house, such as using siding rather than stucco, to lower the cost. However, while the parties agreed “conceptually” on a revised plan in early May 2003, they never reached final agreement. The purchase contract was not modified to reflect those changes and Williams did not prepare a construction contract for the revised plan because the Mirandas rejected the projected increased cost of construction.
In June 2003, Williams submitted new plans to the city and obtained the required permits. He began construction in late fall of 2003 and completed the house in July 2004. Because the contract was not modified or extended, Williams thought the contract expired on July 1, 2003, the date of completion indicated in the purchase contract. Nevertheless, he continued to speak with the Mirandas, apparently with both parties hoping that an agreement would be reached.
During spring of 2004, the Mirandas learned they did not qualify for a loan. Sandra Miranda had credit problems. In May 2004, Sergio Miranda applied for a loan in his own name and was approved on June 7, 2004. The loan approval was contingent on Sandra Miranda being removed from the purchase contract and Williams providing a letter explaining why the purchase price was only $168,000. Williams refused to provide the letter of explanation because he was not going to sell the house for $168,000. By then the house was worth about $220,000.
On June 8, 2004, Williams notified the escrow officer he was not going to sell the house to the Mirandas. Williams explained his reasons in a letter written the next day, which began “Due to a number of unforeseen circumstances,” and listed several reasons, including the out-of-easement sewer location, which “made it impossible … to deliver the home as agreed.”
The Mirandas testified they were not aware that Williams did not intend to perform. Sergio Miranda testified that he offered to pay more for the house but also inconsistently testified that, when someone called him and said he needed to change the purchase contract dates and the purchase amount, he refused. He conceded that although they met with Williams several times and agreed on a new house plan, they never modified the purchase contract to reflect the necessary changes. He was not aware the purchase contract called for a construction contract.
The court found the contract void due to impossibility. The court explained, “[T]he Contract, with the Original Floor Plan, became impossible to perform as it would have never passed permit and inspection requirements imposed by the City of Modesto and the Contract would have been frustrated as the dwelling would never have been issued an occupancy permit.” Further, to the extent the parties discussed the building of a different and more expensive residence on the property, they never agreed on a new contract.
DISCUSSION
The Mirandas contend there is no substantial evidence to support the finding that Williams’s performance of the purchase contract was excused by reason of impossibility. However, whether impossibility exists in a given case is a question of law. (Autry v. Republic Productions, Inc. (1947) 30 Cal.2d 144, 157.) Thus, the reviewing court determines whether, on the trial court’s findings, the factual basis for the defense of impossibility existed to excuse Williams’s performance under the purchase contract. (Ibid.)
This case turns on whether the purchase contract required the transfer of a specific thing or a generic thing. (See 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 841, pp. 927-928.) For example, “[a] contract to manufacture goods in a particular factory is discharged by the destruction of the factory; a contract to do work on a specific building is discharged by the destruction of the building; a contract to carry goods by a particular ship is discharged by the loss of the ship; a contract to ship goods on a certain line of steamers is discharged by the discontinuance of that line. (See discussion, H. Hackfeld & Co. v. Castle (1921) 186 C. 53, 57 …..)” (Id. at p. 928.) Williams asserted he agreed to build a specific house for the Mirandas. Because it was impossible to build that house, his performance was excused. The Mirandas countered, in effect, that Williams agreed to build them a generic house and, because he eventually built a similar house on the lot, his performance was not excused. We agree with the trial court that the evidence and the law support Williams’s position.
The impossibility that excuses performance under a contract must be in the nature of the thing to be done and not in the inability of the promisor to do it. Mere unforeseen difficulty or expense does not constitute impossibility and ordinarily will not excuse performance. (Kennedy v. Reece (1964) 225 Cal.App.2d 717, 724-725, 226 [plaintiff was not excused from completing 400-foot well simply because cost of drilling through brittle rock at 270 feet resulted in a moderate increase in the cost]; Butler v. Nepple (1960) 54 Cal.2d 589, 599 [increased price of supplies did not constitute impossibility]; Ellison v. City of San Buenaventura (1975) 48 Cal.App.3d 952, 962 [court could not modify parties’ agreement and limit port district’s contractual obligation to maintain a waterway where substantial economic hardship could reasonably have been anticipated]; Glendale Federal Savings & Loan Association v. Marina View Heights Dev. Co. (1977) 66 Cal.App.3d 101, 153-154 [a party’s mistaken assumption that there would be freeway access to property to be developed did not constitute impossibility].)
The Miranda’s contention that Williams cannot be excused from performance of the contract simply because he found the construction of the house more expensive than contemplated at the time of the agreement is misconceived. Williams did not ground his defense of impossibility on the increased cost of construction. Rather, Williams testified the City of Modesto prevented him from constructing the house he had agreed to build for the Mirandas. The City of Modesto would not issue a permit to build the house on the sewer line, they would not agree to move the sewer line, and their setback requirements precluded the placement of the agreed upon house at a different site on the lot. Thus, the nature of the thing (the original house) could not be completed as agreed by the parties. Despite all their argument on appeal to the contrary, the Mirandas did not present any contradictory evidence.
This case is analogous to Collins Hotel Co. v. Collins (1906) 4 Cal.App. 379 and Dairy Food Store, Inc. v. Alpert (1931) 116 Cal.App. 670. In Collins Hotel Co., a building height ordinance prevented the promisor from building the agreed upon hotel, which would have exceeded the height limits on one side. The court stated, “[a]ssuming these ordinances to be valid, the defendant was excused for nonperformance of the contract … ‘by the operation of law’ ….” (4 Cal.App. at p. 381.) Likewise, in Dairy Food Store,the court held that defendants were excused from their agreement to lease 12 feet of frontage space to plaintiffs in a building to be erected with a frontage of 46 feet. The building, however, was erected with a frontage of only 38 feet due to the widening of the street and over which the parties had no control. The court held that the subject matter of the lease, to which the parties had agreed, never came into existence. Hence, both parties were excused from their obligations under their agreement. “‘… [W]here performance depends upon the existence of a given thing, and such existence was assumed as the basis of the agreement, performance is excused to the extent that the thing ceases to exist or turns out to be nonexistent.’” (116 Cal.App. at p. 672.)
Those holdings are applicable in this case. When the parties entered into the purchase contract, they both believed that Williams could build the agreed upon house on the property. Due to circumstances over which the parties had no control -- the sewer line not being located in the dedicated easement as shown on the subdivision plans -- it was impossible to build the agreed upon house. Williams could not perform under the contract because the City of Modesto would not issue a building permit for a house that extended over the sewer line, and the city’s setback requirements precluded placing the house in a different location on the lot.
The Mirandas also assert that Williams’s performance cannot be excused because he should have anticipated the sewer line might be mislocated, as he had encountered “similar” problems when constructing a home on a nearby lot. This argument fails for two reasons. First, the problems Williams encountered with the earlier construction were not similar. The earlier problems involved miscommunication between the city and county regarding overhead easements and lot lines. Second, the reasonable inference from Williams’s testimony was that builders rely on subdivision drawings that indicate utility placement. Williams stated he did not need to personally investigate placement of the utilities because he had stamped plans from a civil engineer designating where the sewer and other utilities were located for the Laurel Street lot. Further, the record is devoid of any indication that a misplaced sewer line was an anticipated and foreseeable risk that Williams assumed in the purchase contract. The Mirandas cite no authority for the proposition that Williams’s reliance on city plans was unreasonable or that he was obligated to further investigate the property before contracting to build on the sight.
The Mirandas also contend that the fact that Williams eventually built a similar house on the lot establishes that his performance was not impossible. This argument ignores the evidence that the parties had agreed that Williams would build the particular house indicated in the drawing he had shown them before the purchase contract was signed. While the amenities were to be flushed out in a construction contract, the specific house that the parties had agreed on was impossible to build because that house would have extended over the misplaced sewer line and the city would not issue a permit to build it.
Accordingly, ample evidence supports the trial court’s findings of fact and those findings established Williams’s defense of impossibility. (Baird v. Wendt Enterprises, Inc. (1967) 248 Cal.App.2d 52, 55.)
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to respondent.
WE CONCUR: Vartabedian, Acting P.J., Cornell, J.