Opinion
NOT TO BE PUBLISHED
APPEAL from the Superior Court of San Bernardino County. Super. Ct. No. VCVVS033830 William E. Burby, Judge. (Retired judge of the Los Angeles S.Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.)
Law Offices of Feinberg & Fitch and Michael S. Feinberg for Defendants and Appellants.
Stanley W. Hodge and Arshak Bartoumian for Plaintiff and Respondent.
OPINION
MILLER, J.
INTRODUCTION
Underlying this appeal is an action for specific performance of an agreement to purchase a house. After finding that the plaintiff had “substantially performed her end of the transaction” to exercise an option to purchase the property, the trial court concluded that the plaintiff was entitled to specific performance and ordered the defendants “to deliver clear title to the property . . . as soon as possible.” On appeal the defendants maintain the doctrine of substantial performance is inapplicable to options; thus, there existed no agreement to which the doctrine of specific performance could be applied. The defendants further contend that because it was impossible for them to deliver clear title to the property at the time judgment was entered, the court exceeded its power in ordering them to do so. We conclude that, notwithstanding the court’s stated reason for its ruling, there is substantial evidence that the plaintiff exercised the option and thereafter substantially performed under a purchase and sale agreement created when the option was exercised. However, we agree with the defendants that, to the extent the court ordered them to deliver clear title at a time when they were incapable of doing so, the matter must be remanded for reconsideration and/or clarification.
We note at this juncture that even where it is established that the trial court’s legal reasoning was unsound, its decision will be affirmed if it is correct on any theory. (See, e.g., Davey v. Southern Pacific Co. (1897) 116 Cal. 325, 329-330.)
FACTUAL AND PROCEDURAL BACKGROUND
Mabel Molesky (plaintiff) met with Toyian Dawodu (Dawodu), owner of T&S Investments (T&S), on June 22, 2003, regarding residential real property located in Hesperia. The property, then owned by T&S subject to two trust deeds, was to be acquired by plaintiff for her son and daughter-in-law, Alex and Lisa Molesky, who lacked sufficient income and assets to purchase the house themselves. Although the property had been advertised in a local newspaper as a “lease/option,” Alex and Lisa “wanted to buy it from the day [they] saw it.” At Dawodu’s suggestion, they decided to lease the house pending close of escrow so that they could move in immediately.
At the June 22 meeting, plaintiff signed a form lease/option agreement (LOA), which Dawodu had prepared using a standard form obtained from a stationery store. Although plaintiff signed the document that day, it was not signed on behalf of T&S until the following October. Relevant to this appeal are paragraphs 4 through 7, which provide as follows:
“4. OPTION CONSIDERATION: LESSOR/OPTIONOR hereby acknowledges receipt from LESSEE/OPTIONEE, as non-refundable option consideration, the sum of $15,000 evidenced in the form of a check given in consideration for this exclusive Right to Buy Option.
“5. OPTION TO PURCHASE: LESSOR/OPTIONOR hereby grants to LESSEE/OPTIONEE the exclusive and irrevocable option to purchase the LESSOR/OPTIONOR’s right, title, and interest in the below described real and/or personal property upon the sale terms described below, for a period commencing on the 22 day of June, 2003, and terminating at midnight on the 21 day of January, 2004. A memorandum of option shall be given to LESSEE/OPTIONEE upon acceptance, and escrow instructions as well as all other documents required to close this transaction shall be fully executed and held in a designated true escrow account, the cost of said escrow to be shared equally between LESSOR/OPTIONOR and LESSEE/OPTIONEE.
“6. EXERCISE OF OPTION: LESSEE/OPTIONEE may exercise this option by delivering into escrow Two hundred and twenty five [thousand] and 00/00 DOLLARS ($225,000) LESS CREDIT FOR . . . the option consideration. . . . [¶] . . . Escrow agent shall follow the escrow instructions executed with this agreement and close the sale of the property as provided therein.
“7. TITLE: Within five (5) days upon receipt of written notification by LESSEE/OPTIONEE to exercise the option, LESSOR/OPTIONOR shall so notify escrow holder. Escrow shall be deemed ‘open’ as of the date of LESSOR/OPTIONOR’s notification to escrow holder. After notice of LESSEE/OPTIONEE’s intent to exercise, LESSEE/OPTIONEE’s duty to perform hereunder is contingent upon title to the property being insurable as free and clear of all liens, encumbrances, or other clouds on title to the property [with two exceptions not relevant here]. LESSEE/OPTIONEE shall have fifteen (15) days from receipt of a title report to examine the title to the property and to report in writing any valid objections thereto. Any exceptions to the title which would be disclosed by examination of the record shall be deemed to have been accepted unless reported in writing within said fifteen (15) days. If LESSEE/OPTIONEE objects to any exceptions to the title, OPTIONOR shall use due diligence to remove such exceptions at their expense before close of escrow. But if such exceptions cannot be removed before close of escrow, all rights and obligations hereunder may, at the election of the LESSEE/OPTIONEE, terminate and end. Should LESSEE/OPTIONEE elect to rescind the contract because of title exceptions, OPTIONOR shall refund all option consideration paid. At the expiration of said fifteen (15) days period for examination of title, LESSEE/OPTIONEE shall be deemed to have accepted such title in the absence of the required written objections.”
Pursuant to the LOA, plaintiff tendered a check for $15,000. The LOA also provided for immediate occupancy of the residence at a monthly rental of $1,500.
After signing the LOA, plaintiff immediately took action to obtain the necessary financing. Dawodu, who also happened to be a mortgage broker and who agreed to help her to obtain a loan, gave her a loan application. The completed application indicated that plaintiff owned a home in Anaheim, in which she had equity of $270,000. She apparently also had $130,000 in savings, and monthly income of $7,500. Dawodu reviewed the application and referred plaintiff to another loan broker, Dave Velasquez (Velasquez), to assist her in obtaining financing.
Escrow instructions were prepared on August 20, 2003, and signed by Noah Awoniyi (Awoniyi), Vice President of T&S. The instructions referenced a first trust deed conventional loan of $210,000. The instructions further stated: “Prior to 9/19/2003, Buyer will hand you funds [a]s required in addition to the sum of $15,000.00, which WILL be deposited with escrow. Buyer will cause you to be handed the net proceeds of a New 1st Trust Deed Loan in the AMOUNT of $210,000.00 to complete a total consideration of $225,000.00.” The instructions also provided: “Close of escrow is contingent upon Buyer and property qualifying for and obtaining a New 1st Trust Deed Loan in the AMOUNT of $210,000.00 in favor of LENDER OF BUYER’S CHOICE . . . .”
In December 2003, the residence was appraised for $215,000. T&S thereafter agreed to plaintiff’s request for a $5,000 price reduction, and supplemental escrow instructions to reflect the revised purchase price were prepared and signed.
On January 12, 2004, plaintiff was notified that she was approved for a loan in the amount of $193,500, and two days later she deposited into escrow an additional $22,638.74. On or about January 21, 2004, the lender wired “to the title company” loan funds of $193,361.65.
Defendants assert “[a]lthough the exact date on which it occurred was not established by the evidence, the lender subsequently wired the loan funds to the title company to hold until they were to be deposited into escrow.”
The escrow company then sent payoff demands to the two existing lien holders, only one of whom responded. The other, Deborah Morales (Morales), had died intestate, and a formal payoff demand could not be obtained. As a result, and for reasons not entirely clear from the record, the funds were returned to the lender. Plaintiff learned about the cloud on title when she was at Velasquez’s office to sign the loan documents.
Defendants acknowledge that it is unclear from the record whether the title company decided on its own to return the funds to the lender or whether the mortgage broker or the escrow company instructed the title company to do so. Nonetheless, the court made a finding that the escrow company, at the behest of the title company, made a decision to return the funds to the lender.
Plaintiff filed her lawsuit against T&S, Awoniyi, and Escrow Street, Inc., on March 30, 2004. On June 30, 2004, she filed an amended complaint alleging causes of action for breach of contract, fraud, and specific performance. According to the complaint, plaintiff had exercised the option, after which an escrow was opened. It further alleged that she had performed all conditions, covenants and promises on her part to be performed under the LOA; that on or about March 16, 2004, T&S directed the escrow company to cancel the escrow, claiming that plaintiff had made such a request on January 29, 2004; and that she never asked that the escrow be closed.
The escrow company, Escrow Street, Inc., which is one of the parties against whom judgment was entered, is not a party to this appeal.
In May 2005, the specific performance cause of action was bifurcated from the remaining causes of action.
Trial commenced in June 2006. At the outset, the court remarked that the only matter before it was the request for specific performance, and that “the other issues would follow depending on the ruling on that.”
Evidence was presented that at the time the loan was funded, it was plaintiff’s understanding that the proceeds had been deposited into escrow. Plaintiff later learned that the money had been returned to the lender because of the cloud on title. The escrow was not can celled by or on behalf of plaintiff. As far as plaintiff knew, the escrow was still open, as they had $37,638.74 of her money. Plaintiff believed that the $15,000 paid when she signed the LOA was a down payment on the house and that by paying it, she was exercising the option to purchase.
The record reflects that both the escrow company’s telephone log and an email from Velasquez to the lender indicate that Molesky wanted to cancel the escrow and to look for another property. However, Molesky never signed an instruction to cancel the escrow.
Dawodu testified that although he was at all times aware of the trust deeds against the property which would have to be paid off before he could deliver title, he did not inform plaintiff as he did not believe it was relevant. He had learned on January 12, 2004, that plaintiff had obtained approval on a loan. At that time, the escrow company requested the demands from the lien holders. He was emphatic that the loan funds were not delivered into escrow. He informed escrow as soon as he discovered that he could not get a demand to give them to pay off the loan. He maintained that he had received an oral notification that escrow was to be can celled, after which instructions were given to him to be signed on behalf of T&S.
Dawodu further testified that that as soon as he found out T&S was unable to get the second payoff demand, he told plaintiff that T&S would sell her the property and carry the paper. However, he did not recall doing so in writing. At trial he took the position that because T&S was on title, it could sell the property to plaintiff even without the demand. However, he was no longer willing to sell the house to her.
Lisa Molesky testified that she was present at Velasquez’s office when plaintiff was signing the loan documents, and that it was then when they learned about the cloud on title. She had previously learned from the escrow company that the loan had funded and that the money was in escrow. Dawodu never explained to her the concept of a lease/option because it was not her and her husband’s intention to lease the house; they just wanted to buy it. No one seemed to care about the lease/option because everyone knew they were going to buy the house.
Evidence was presented that in order to cancel the escrow, plaintiff was required to sign a cancellation instruction. The escrow company at no time received a signed instruction from plaintiff. Nonetheless, according to Awoniyi, he was unable to consummate the sale because he had signed a cancellation instruction. He further indicated that it was his understanding, after reading the escrow instructions, that plaintiff would, in essence, “‘hand [him] funds as required.’”
The record reflects unsigned amended escrow instructions dated March 16, 2004, stating that escrow was to be can celled “per your request on 01/29/04 and seller signed cancellation instructions.”
Velasquez testified that “funded” means that loan documents are signed and funds are wired to the title company. In this case, he learned about the title problem after the funds were wired to the title company. He was inconsistent in his testimony as to how he learned of the problem, however, first stating that he was informed by T&S and the escrow company, and then saying it was the title company, and not T&S.
Velasquez further testified that the loan proceeds went from the lender to the title company, and back to the lender; they never went to the escrow company. However, in his email communication to the lender on January 28, 2004, wherein he explained why the funds were being returned, he wrote, “Upon hearing this news [about the difficulty in obtaining the payoff demand], the Escrow Company decided that they should return the money to the lender at the behest of the Title Company.”
The full text of the email is as follows: “The following is the explanation I just received from the Escrow Company (Escrow Street) handling this purchase transaction. [¶] Escrow had requested demands for payoffs on both the first and second mortgages showing on title. They received a demand on the first and had not yet received a demand on the second. After receiving funds from 1st Magnus on this loan, they received a demand from an attorney representing the now deceased beneficiary on the second note that had only an estimated amount to payoff the lien. The Title Officer . . . at United Title said that she could not accept this document because it did not have a specific amount and it was not signed by a Judge. The attorney told the Escrow Company that it could take 1 week or up to 3 months to obtain the Judge’s signature. The loan was never recorded. Upon hearing this news, the Escrow Company decided that they should return the money to the lender at the behest of the Title Company. . . . [¶] The buyer in this transaction is furious. She was assured by the seller (a for sale by owner) that everything was OK and they would be able to close. The buyer called me and said that she will be moving out of the house this week-end into a temporary location and will be actively looking for a new home to purchase in the same area. She asked me if I would still be willing to do her new loan for her on the new property she finds. Of course I said yes I would still help her. Unfortunately neither I nor the borrower knew that the second TD holder was deceased and that this would create a cloud on the Title. [¶] . . . . Had I known that the second TD party was deceased and this might cause a problem, I would have instructed your funder not to fund this loan.” (Italics added.)
Velasquez also told the lender that the buyer was furious, as she had been told by T&S that everything was okay and that they would be able to close. Further, he said that Lisa told him she was looking for a new home to purchase and that she wanted to cancel the deal. He indicated the reason the funds were returned to the lender was due to the cancellation instruction he had received. The following day, Velasquez emailed a copy to Lisa, who denied telling Velasquez that she intended to move out of the house. Rather, she believed that his comments were made solely to preserve his relationship with the lender.
On August 31, 2006, the trial court issued its statement of decision. In essence, it found that “[t]here was never a cancellation of escrow by the plaintiff. The escrow instructions are clear, that in order to cancel escrow the parties must do so in writing. The court finds from this evidence that escrow still remain open.” The court continued: “Plaintiff substantially performed her end of the transaction to exercise the Option Agreement. She deposited $22,638.74 in escrow on or about January 14, 2004[,] and received loan approval for $193,361.00 on January 21, 2004. Closing instructions were prepared by Escrow Street. On or about January 28, 2004, plaintiff was informed via e-mail by witness Dave Velasquez, that at the request of Escrow Street, the money was going to be returned to the lender at the behest of the title company. The reason was [the] cloud on title by the Morales Deed of Trust. Plaintiff was prepared to close, but was prevented by defendants, T&S Investments, who were obligated to deliver clear title. T&S could have bonded off the Morales Trust Deed with the title company and/or could have deposited funds and security to provide clear title. The fact that plaintiff did not deposit into escrow $225,000.00 when she exercised the option . . . was not contemplated by the parties. It was expected that plaintiff would finance the purchase of the property through a loan, which is exactly what she did.”
The court issued a written tentative decision which was to become its statement of decision “unless any party specifies controverted issues which are not covered in this Tentative Decision and which are necessary to the result. . . .” Neither party took any action in response.
Judgment was entered on October 4, 2006, stating: “Plaintiff is entitled to judgment of specific performance and Defendants are ordered to deliver clear title of [sic] the property . . . as soon as possible.”
DISCUSSION
The essence of defendants’ argument is that it is impossible to substantially perform an act, such as exercising an option, where the effectiveness of the act depends upon full performance. Accordingly, because the LOA expressly provided that to exercise the option plaintiff was required to deposit the full purchase price into escrow, which she did not do, there exists no valid enforceable purchase and sale agreement between the parties and thus no contractual obligation which can be enforced by an order of specific performance. Moreover, defendants maintain that because the LOA was unambiguous insofar as it specified the manner of exercising the option, the court erred in permitting extrinsic evidence to explain the parties’ intent.
As we shall explain, defendants’ argument is flawed. While we have no quarrel with defendants’ position that the doctrine of substantial performance is inapplicable to an option (see, e.g., Bekins Moving & Storage Co. v. Prudential Ins. Co. (1985) 176 Cal.App.3d 245, 251 [an option is an offer which expires by its own terms if it is not accepted with the time prescribed; thus, “there can be no question of substantial compliance with the terms of a contract that never came into existence”], the court’s decision to order specific performance need not be predicated for its efficacy on its finding that plaintiff substantially performed her end of the transaction to exercise the option. Rather, and notwithstanding the court’s finding, there is substantial evidence that the option was in fact performed. Moreover, even if, as defendants assert, the language of the LOA appeared unambiguous on its face, the court was not precluded from considering extrinsic evidence revealing another meaning to which the language was reasonably susceptible. Thus, in light of the evidence that defendants knew that plaintiff would be taking a loan for the balance of the purchase price, which the court believed, substantial evidence supports a finding that the option was exercised contemporaneously with the transmittal of the loan proceeds to the title company, thereby creating an enforceable purchase and sale agreement. Finally, because there is substantial evidence that plaintiff substantially performed under that agreement, the trial court was correct in ordering specific performance.
A. Substantial evidence supports a finding that the option was exercised when the loan funds were tendered to the escrow company.
Under the LOA, plaintiff could exercise the option by “delivering into escrow” the sum of $225,000 less credit for the option consideration. Defendants maintain “[t]he bargained for act to exercise the option was a deposit of the full purchase price into escrow and anything less than that was a substantial and material breach of the option agreement, preventing any obligation from arising on the part of T&S.” Pointing to the escrow officer’s testimony that plaintiff did not deposit the full purchase price into escrow, they insist that “the evidence was clear that the full purchase price was never delivered to the escrow holder.”
However, evidence was also presented from which the court could conclude that the funds were in fact sent to the escrow company by the lender. Indeed, as plaintiff’s counsel pointed out during closing argument, Velasquez informed the lender by email that “‘[u]pon hearing [the news about the cloud on the title], the escrow company decided that they should return the money to the lender at the behest of the title company.’” Counsel then argued: “Now, it is clear from that statement that it was the title company insisting that the funds be returned, but that the escrow company made the decision to return funds. Now, you can’t make a decision to return funds that you don’t have . . . .”
The court referred to this evidence in its statement of decision: “On or about January 28, 2004, plaintiff was informed via e-mail by witness Dave Velasquez, that at the request of Escrow Street, the money was going to be returned to the lender at the behest of the title company.” Defendants neither voiced an objection to that evidence, nor challenged the court’s finding on that basis.
B. The trial court properly admitted and then considered extrinsic evidence to demonstrate the parties did not contemplate that exercising the option meant delivering the full purchase price into escrow, but rather, that the option would be deemed exercised at the time the lender transmitted the funds to the title company.
After plaintiff completed her case in chief, defendants moved for non suit (Code Civ. Proc., § 581, subd. (d)), contending there was no evidence whatsoever that plaintiff delivered into escrow the full purchase price, as required by the LOA. The court denied the motion, indicating that extrinsic evidence was admissible with regard to the parties’ intent. Said the court: “Well, it’s a narrow interpretation. But the problem I have is the language is pretty clear. I just don’t know about the intention of the parties, if that was their intent to say that if she went out and got a loan to comply with this paragraph and lender then jerks it out because there’s not clear title to the property, was that all to be foreseen by these parties on Paragraph 6?”
Thereafter, over the objection of counsel for defendants, Dawodu testified that he knew that Molesky was seeking a loan. And while he insisted that he did not know she could not buy the house without a loan, he acknowledged that he was aware, based on plaintiff’s loan application, that she did not have enough cash to do so. Defendants’ counsel then renewed his objection and moved to strike any testimony taken after the court’s determination that the language of paragraph 6 was clear. The motion was denied.
Plaintiff then testified that she had no way of buying the house without a loan. She further stated that in talking with Dawodu, the subject of paying cash never came up.
The court was satisfied from the testimony that the parties understood that plaintiff could not acquire the house without first obtaining a loan. Then, after the court denied the motion for non suit, counsel for defendants moved for a mistrial, which the court also denied. Said the court: “[M]y point is when they sat down on January 22 and executed this contract, did both sides have in mind that if [plaintiff] applied for a loan and it was approved, that downstream there would be cloud on title and that the lender would reject the loan, now she must come up with this money from some other source. I don’t think that was on her mind.”
Thus, although it found no ambiguity in the language of paragraph 6, the court stated: “My point is that if we have what happened in this case, does that mean that she has to come up with the money from some other source to have specific performance here? That’s where I’m at.” The court further noted that T&S had signed the escrow instructions with knowledge that plaintiff needed a loan and that the transaction was contingent on approval of that loan. “So their state of mind was she was going to get a loan, and I don’t think they had in their mind at all that if her loan was turned down because of this cloud on title she’d have to sell her house or go get an equity loan or dig up $225,000. I don’t think they expected her to do that.”
As indicated above, paragraph 6 of the LOA provides that plaintiff may exercise the option by “delivering into escrow” the sum of $225,000 less the option consideration set forth in paragraph 4. Defendants maintain that because this language is “clear and unambiguous,” the trial court erred in permitting extrinsic evidence of the parties’ intent in entering into the agreement. We disagree.
“‘The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties.’ [Citations.] The mutual intention to which the courts give effect is determined by objective manifestations of the parties’ intent, including the words used in the agreement, as well as extrinsic evidence of such objective matters as the surrounding circumstances under which the parties negotiated or entered into the contract; the object, nature and subject matter of the contract; and the subsequent conduct of the parties. [Citations.] [¶] Where the meaning of the words used in a contract is disputed, the trial court must provisionally receive any proffered extrinsic evidence which is relevant to show whether the contract is reasonably susceptible of a particular meaning. [Citations.] Indeed, it is reversible error for a trial court to refuse to consider such extrinsic evidence on the basis of the trial court's own conclusion that the language of the contract appears to be clear and unambiguous on its face. Even if a contract appears unambiguous on its face, a latent ambiguity may be exposed by extrinsic evidence which reveals more than one possible meaning to which the language of the contract is yet reasonably susceptible. [Citations.] [¶] Extrinsic evidence is thus admissible to interpret the language of a written instrument, as long as such evidence is not used to give the instrument a meaning to which it is not reasonably susceptible. Where the interpretation of contractual language turns on a question of the credibility of conflicting extrinsic evidence, interpretation of the language is not solely a judicial function. [Citations.]” (Morey v. Vanucci (1998) 64 Cal.App.4th 904, 912-913.) Thus, “[w]here there is conflicting parol evidence that requires a resolution of credibility issues, the appellate court will be guided by the substantial evidence test. [Citation.]” (Warburton/Buttner v. Superior Court (2002) 103 Cal.App.4th 1170, 1181, fn. omitted, italics added.)
Recently, our high court reiterated the rule: “As California courts previously have observed, the ‘meaning of language is to be found in its applications. An indeterminacy in the application of language signals its vagueness or ambiguity. An ambiguity arises when language is reasonably susceptible of more than one application to material facts. There cannot be an ambiguity per se, i.e. an ambiguity unrelated to an application.’ [Citations.] [¶] Accordingly, ‘[e]ven if a contract appears unambiguous on its face, a latent ambiguity may be exposed by extrinsic evidence which reveals more than one possible meaning to which the language of the contract is yet reasonably susceptible.’ [Citation.] ‘The test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible.’ [Citation.]” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 391.)
Accordingly, and notwithstanding the LOA’s language providing that the option may be exercised upon depositing the full purchase price into escrow, the court was well within its power to ask counsel to provide evidence of the parties’ intent in embarking upon this transaction. It was reasonable for the court to surmise, particularly in view of the fact the form of the agreement utilized by the parties was not expressly made for this transaction, that the parties may have intended something else. The evidence thereafter presented, coupled with the evidence already presented, confirmed the court’s wisdom and insight.
Nonetheless, defendants contend that “[a]ny evidence that ‘into escrow’ did not actually mean ‘into escrow’ would be evidence that directly contradicts the clear language of the contract and, therefore, would be inadmissible in accordance with these well-established rules. Yet the trial court not only allowed but solicited this evidence and then relied upon it to support its conclusion of law. By making a finding that the parties anticipated that [plaintiff] would be obtaining conventional financing for which the property would itself be the security, the court concluded that it was the mutual intention of the parties that [defendants] would take whatever steps necessary to ensure that [plaintiff’s] lender would be willing to deposit the full purchase price into escrow. What is astounding about this tack is that it effectively imposed on the [defendants] a preexisting contractual duty even though [defendants] had no bilateral contract with the [plaintiff] until and unless she exercised the option.”
Defendants miss the point entirely. The evidence established that, in taking steps to secure financing—as T&S contemplated she would do—which culminated in the funding of the loan, plaintiff exercised the option, thereby creating a bilateral purchase and sale agreement. Thus, the court’s finding did not impose upon defendants a duty which they did not already have.
Alternatively, defendants argue the evidence established that T&S “neither knew nor cared whether [plaintiff] obtained conventional financing on the property or paid cash. [They] were unaware from what source the monies to exercise the option were coming. The terms of the financing, if any, [were] left entirely up to [plaintiff] and her agents.” Defendants miss the point here as well. Defendants’ position in the trial court and on appeal is that plaintiff was required to personally deposit funds into escrow. However, it would have been unreasonable for defendants to have expected her to do so. Indeed, with knowledge that plaintiff was obtaining financing, defendants presumably knew that the option would be exercised in due course—upon plaintiff taking all necessary and appropriate steps to obtain financing, followed by the funding of the loan.
In this regard, defendants take the untenable position that plaintiff’s intent to procure a conventional loan was not communicated to defendants; thus, her intent “did not alter her obligation to deposit the full purchase price into escrow to effect an exercise of the option.” Indeed, there is more than enough evidence that both parties were well aware that plaintiff’s purchase of the house was contingent upon her obtaining a loan.
C. Substantial evidence supports the court’s finding that plaintiff substantially performed under the purchase and sale agreement; accordingly, plaintiff was entitled to specific performance.
Upon exercise of the option, the LOA ceased to exist and was converted into an enforceable bilateral purchase and sale agreement. (Claremont Terrace Homeowners’ Assn. v. United States (1983) 146 Cal.App.3d 398, 406.) That plaintiff substantially performed under that agreement cannot seriously be disputed by defendants. Indeed, in their closing brief in the trial court, defendants acknowledged, “[w]hile it is true that it would have been [their] obligation to remove the cloud by obtaining the reconveyance, this obligation was not triggered until satisfaction by Plaintiff of the condition precedent, to wit: that Plaintiff exercise her purchase option in accordance with paragraph 6 of the Lease/Option Agreement . . . .” Inasmuch as we have already concluded that the option was exercised, defendants’ statement speaks volumes in support of the trial court’s decision that plaintiff did everything she was required to do to acquire the residence.
Furthermore, the record belies defendants’ contention as asserted in the trial court that plaintiff herself, in unilaterally canceling the escrow, was responsible for the decision to return the funds to the lender. Indeed, the evidence supports the trial court’s finding that the escrow was not can celled. Moreover, plaintiff expressly denied that defendants offered to self-fund the loan and permit her to acquire the residence.
During trial, counsel for T&S asserted his clients had “offered, during the option period which was specified as a six-month finite option period, to carry the paper. And that offer was rejected by the purchaser.” In their opening brief, defendants assert that on January 30, 2004, eight days after the date on which the option period was to expire under the terms of the LOA, it informed plaintiff that it would carry the amount of the unsatisfied loan pending receipt of the exact payoff amount, or plaintiff could continue to rent the house until the debt could be paid off. Arguably, if defendants’ position could be substantiated, it would mean that T&S acted upon the LOA even though, in its view as asserted on appeal, the option had not been exercised.
D. Defendants are correct insofar as they dispute Awoniyi’s obligation under the judgment to deliver title to the property to plaintiff.
Pointing to evidence establishing that defendant Awoniyi has no ownership interest in T&S, defendants contend “[t]here was not a scintilla of evidence produced that could serve as a basis for imposing liability on [him].” We agree. Even if, as alleged in plaintiff’s first amended complaint, Awoniyi attempted to cancel the escrow by signing the escrow instructions, we fail to see how the court could properly order a person having no ownership interest in T&S to deliver clear title of the property to plaintiff.
Civil Code section 3390 provides that certain obligations cannot be specifically enforced, including, “[a]n agreement to perform an act which the party has not power lawfully to perform when required to do so[.]” Thus, even though, on the record before us, no effort was previously made by defense counsel to ensure Awoniyi is dismissed from the case, in light of Civil Code section 3390, we see no alternative but to do so now.
In fact, defendants’ closing brief in the trial court is silent with regard to this issue.
As noted previously, judgment was also entered against Escrow Street, Inc. Although we question the court’s power to order it to specifically perform under the purchase and sale agreement, Escrow Street, Inc. has not appealed the judgment. “[W]here only one of several parties appeals from a judgment, . . . the judgment is considered final as to the non appealing parties.” (Estate of McDill (1975) 14 Cal.3d 831, 840.)
E. To the extent that T&S cannot immediately deliver clear title to plaintiff, modification of the judgment is required to comport with Civil Code section 3390.
By its judgment, the court directed T&S to “deliver clear title to the property . . . as soon as possible.” To the extent that T&S’s lawsuit to clear the cloud on title, which was pending at the time of trial, has not been resolved by the time this opinion becomes final so as to enable T&S to deliver clear title to plaintiff, the judgment must be modified to direct T&S to promptly do so once its capability has been ascertained.
DISPOSITION
The matter is remanded to the trial court with directions to confirm that the aforesaid cloud on title has been cleared, thereby enabling T&S to specifically perform its obligation under the purchase and sale agreement in accordance with the judgment entered on October 4, 2006. To the extent the cloud on title has been removed, T&S shall forthwith comply with the judgment. In the event the court is presented with credible evidence that T&S is not capable of specifically performing its obligation under the purchase and agreement due to an existing cloud on title, the trial court shall issue an order requiring T&S to show cause, on a date certain, why it cannot perform under the purchase and sale agreement. Further, insofar as the judgment directs defendant Noah Awoniyi to deliver to plaintiff clear title to the property, it is reversed. The parties shall bear their own costs on appeal.
We concur: McKINSTER, Acting P.J. KING, J.