Galdjie v. Darwish

In Galdjie v. Darwish (2003) 113 Cal.App.4th 1331, the buyer was required by the sale contract to provide a preliminary loan commitment letter by February 17 in anticipation of completing the escrow by April 9. (Id. at p. 1334.) Buyer neither provided a timely loan commitment letter nor did he have the necessary financing on April 9. Between April 9 and seller's unilateral cancellation of the escrow on May 13, buyer and seller were in "'constant communication'" and buyer told seller of his efforts to obtain a loan. Seller "'communicated her approval of his efforts'; 'agreed orally to extend escrow beyond April 9, 1998'; 'told buyer to call the escrow company and have the escrow extended"; and as of May 8 ... was still cooperating and encouraging buyer to go forward with the transaction.'" (Id. at pp. 1336-1337.) "A few days" before seller unilaterally canceled the escrow, buyer told seller that he had received the loan commitment letter. "She said that was fine." (Id. at p. 1335.) By the time seller notified buyer of her desire to cancel the escrow, buyer "had tendered the loan approval letter" and his failure to actually tender the loan funds was due to seller's failure to provide a necessary document. (Id. at p. 1342.) On those facts, the appellate court affirmed a trial court judgment awarding specific performance to the buyer. (Galdjie v. Darwish, supra, 113 Cal.App.4th at pp. 1333-1334.) In Galdjie v. Darwish (2003) the Darwishes appealed from a judgment that awarded Galdjie specific performance of a real estate agreement between Galdjie and the Barbara Kramer Darwish and David Darwish Revocable Living Trust. The Galdjie court considered "whether respondent's failure to name the Trust as defendant or to specify that appellants were being sued in their capacity as trustees means that the judgment is against the wrong parties and cannot be enforced." (Id. at p. 1337.) The court rejected respondent's argument that the Darwishes had waived the issue of whether the proper party had been named. (Id. at p. 1343.) The Galdjie court reasoned: "The judgment rendered was for specific performance requiring transfer of a property owned by the Trust. If the Trust was an indispensable party and was not properly brought into the lawsuit, the enforceability of the judgment may be in question." (Ibid .) On the merits, the Galdjie court reviewed both the common law and California statutory law concerning the liability of trustees to third parties. (See Prob. Code, 18000 et seq.) The court concluded, "It is clear that the proper procedure for one who wishes to ensure that trust property will be available to satisfy a judgment, whether for damages for breach of contract or for specific performance, should sue the trustee in his or her representative capacity." (Galdjie, supra, 113 Cal.App.4th at p. 1349.) The court further concluded, however, that under the particular facts of that case, the respondent's failure to name the defendants as trustees in their representative capacities did not require reversal of the judgment: "The evidence before us establishes that the Trust is a revocable inter vivos trust, that appellants are the sole trustees and, that as beneficiaries, they have the power during their lifetimes to direct the sale of the real property owned by the trust. In view of the above authorities, their signatures as individuals on the title deed as required by the judgment entered herein is sufficient to convey good title from the Trust." (Id. at p. 1350.) The Court concluded that a specific performance action seeking to compel the settlors/trustees of a revocable trust, in their individual capacities, to convey title to property held in the trust, was not fatally flawed. As the court explained: "a revocable inter vivos trust is a probate avoidance device, but does not prevent creditors of the settlors - who are often also the trustees and the sole beneficiaries during their lifetimes - from reaching trust property." (Id. at p. 1349.) After surveying the development of the law of trusts from the common law through the adoption of Probate Code section 18000 et seq. in 1986 (Cal. Stats. Ch. 820, 7, p. 2730), the Court of Appeal held that "the proper procedure for one who wishes to ensure that trust property will be available to satisfy a judgment, whether for damages for breach of contract or for specific performance, is to sue the trustee in his or her representative capacity." (Galdjie, supra, 113 Cal.App.4th at p. 1349.) The court continued: "We do not believe, however, that this results in an ineffectual judgment due to the specific facts of the case before us. The judgment did not give respondent the right to attach property owned by appellants as individuals; it entitled him to receive a piece of real property owned by the Trust by obtaining appellants' signatures on a deed. . . . . . . The evidence before us establishes that the Trust is a revocable inter vivos trust, that appellants are the sole trustees, and that as beneficiaries, they have the power during their lifetimes to direct the sale of the real property owned by the trust." (Id. at pp. 1349-1350.) Consequently, the court found that the individuals properly before the court could convey good title from the Trust. The Second District Court of Appeal held that defendants, who were both trustees and beneficiaries of a trust, could not avoid a judgment for specific performance entered against them in their individual capacities because "their signatures as individuals on the title deed as required by the judgment . . . is sufficient to convey good title from the Trust." (Id. at p. 1350.)