Opinion
Hearing Granted Jan. 31, 1962.
Appeal Dismissed by Stipulation April 26, 1962.
Purchio & Fairwell, Robert Fairwell, Hayward, for appellant.
Cleveland J. Stockton, Jr., Modesto, for respondent.
STONE, Justice.
This is an appeal from a judgment entered pursuant to an order sustaining demurrer without leave to amend.
Plaintiff-appellant, Sky Crest Investment, Inc., entered into a written agreement with defendant Stone & Miles, Inc., to finance the purchase of certain subdivision lots The gist of the agreement was that Sky Crest would advance the purchase price for the lots but title was to be vested in Security Title Insurance Company, defendant and respondent herein, as escrow agent. Security was to convey title to the ultimate purchasers upon the happening of certain conditions contained in the agreement between Sky Crest and Stone & Miles. The condition with which we are concerned required a certain sum per lot to be paid to Sky Crest upon completion of the escrow. Actually, there were two such agreements executed between Sky Crest and Stone & Miles, and each was deposited with Security as escrow holder. Although the agreements were not signed by respondent Security Title, that Company did orally agree to act as escrow agent pursuant to the terms of each agreement. The first agreement was dated September 16, 1954, and on October 21, 1954, Security wrote the following letter to Sky Crest:
'We have recorded a deed from Stone and Miles, Inc., to Security Title Insurance Company describing Lots 6-10 inclusive Block 3069 of Mineni Manor. We are holding title in our name in accordance with paragraph 5 of that certain agreement dated September 16, 'We also hold 5 unsecured notes in the amount of $1154.00 each in favor of Sky Crest Investment, Inc.
'It is understood and agreed that we merely hold title for the benefit of the parties in said agreement and are not to incur any personal liability because of title being in our name.
'Will you please advise us if you wish us to forward the notes to you.'
The second agreement was dated March 18, 1955, and on April 14, 1955, Security wrote to counsel for Sky Crest:
'We enclose 24 notes executed by Stone & Miles, Inc.
'We now hold title to the lots described on said notes in accordance with the Agreement dated March 18, 1955.'
Thus, we have two agreements signed by the parties to the principal transaction, deposited with the escrow agent but not signed by it. We also have two letters referring to the written agreements, signed by respondent escrow agent and addressed to appellant, a party to the agreements.
Appellant filed this action against respondent, alleging that it failed to comply with the terms of the escrow agreements. Respondent demurred to the complaint upon the ground that appellant's cause of action was barred by Code of Civil Procedure, section 337, subdivision 1; specifically, that the escrow agreement which appellant alleges respondent failed to perform was not based upon an obligation in writing.
Since this appeal is from a judgment after sustaining demurrer without leave to amend, we must assume that respondent failed to comply with the terms of the escrow as alleged in the complaint. The sole question presented is which statute of limitations controls, that governing written contracts or that pertaining to unwritten obligations.
The time within which an action predicated upon an oral obligation may be brought is governed by Code of Civil Procedure, section 339, subdivision 1. Insofar as here pertinent, the section reads as follows:
'Within two years: 1. An action upon a contract, obligation or liability not founded upon an instrument of writing, other than that mentioned in subdivision 2 of section 337 of this code; * * *.'
The applicable portion of section 337, subdivision 1, Code of Civil Procedure, governing obligations founded upon an instrument in writing, reads:
'Within four years: 1. An action upon any contract, obligation or liability founded upon an instrument in writing, * * *.'
The weight of authority in this State holds that even though written escrow instructions are filed with an escrow agent, the obligation to perform the escrow agreement is not founded upon a written instrument, unless the instructions are signed by the agent or acknowledged by the agent in writing. In the absence of a written acknowledgment of the obligation, Code of Civil Procedure section 339 controls. (Shumaker v. Rippy, 138 Cal.App.2d 815, 816, 292 P.2d 536; Howard v. Security Title Insurance & Guarantee Co., 20 Cal.App.2d 226, 228, 66 P.2d 1247.) Thus, the pivotal question here is whether the two letters set forth above, in which the escrow agent refers to the escrow instructions, are sufficient to take the case out of the general rule governing escrow agreements and bring it within the purview of section 337, subdivision 1.
Respondent contends the letters were only progress reports, not promises to perform the escrow agreement. It places reliance upon the numerous cases which follow the early decision of McCarthy v. Mt. Tecarte Land & Water Co., 111 Cal. 328, 340, 43 P. 956, 959, which holds that:
'* * * a cause of action is not upon a contract founded upon an instrument in writing, within the meaning Respondent also compares each letter to a mere receipt for money, and cites Scrivner v. Woodward, 139 Cal. 314, 316, 73 P. 863, which held that a receipt does not come within Code of Civil Procedure section 337 because it does not constitute a promise to pay. In that case the court, in substance, held that a receipt embodies no enforceable agreement to do anything. The letters before us, however, are something more than mere reports or receipts. They specifically refer to the escrow instructions. By the words 'in accordance with the agreement,' respondent acknowledged that it was performing its duties as escrow agent according to the written instructions, and impliedly acknowledged that it would continue to perform its escrow duties in conformity with the same written instruments. By thus referring to the written agreements, we believe each letter constituted an acknowledgment of an obligation in writing. In O'Brien v. King, 174 Cal. 769, 774, 164 P. 631, 633, the Court said:
'The promise must be one arising directly from the writing itself, and included in its terms. But in determining whether the obligation is 'supported by an express promise or stipulation in the written instrument,' we must regard, as included in the terms of the writing, all obligations and promises which its words necessarily import.' (Italics added.)
See, also Wilson v. Wallace, 113 Cal.App. 278, 288, 298 P. 86; Tagus Ranch Co. v. Hughes, 64 Cal.App.2d 128, 148 P.2d 79.
The letters are sufficient to satisfy the requirements of Code of Civil Procedure section 337, subdivision 1.
The judgment is reversed.
CONLEY, P.J., concurs.
BROWN, J., deeming himself disqualified, did not participate.