Facts

In 1998, plaintiffs Phillip and Zena Hayes entered into an oral agreement to lease real property owned by defendants Daniel and Judith Madrigal. On Jan. 31, 1999, they entered into a written agreement for a lease-option of the property, providing that the down payment of $10,000 would be paid over time. It also stated that the payments would take over the current debt of the property. The agreement also provided that any payments of over $500 per month would be applied to the $10,000 down payment.

In the years following the agreement, the Hayes made monthly payments of between $500 and $550. In 2002, the Hayes executed the purchase option, and the parties entered into a written sale agreement. The Hayes paid $3,000 in cash, and received credit for $1,450 in payments toward the down payment. Additionally, the Hayes owed approximately $4,500 in back taxes and were to pay an additional $1,050. In 2003, the Hayes paid the back taxes and paid $1,000 to the Madrigals.

Once the down payment was satisfied, the parties started working on loan assumption papers. In December 2003, the Madrigals executed loan assumption papers. The Hayes later discovered that the Madrigals had canceled escrow, despite the Hayes' requests to continue. The Hayes, believing the sale was still in order, continued to make monthly payments to cover the loan payments on the underlying deed of trust. In January 2005, the Madrigals sent the Hayes a letter indicating a rise in the home's price, and their intent to sell the real property on the market.

DEFENDANTS' CONTENTIONS:
The Madrigals denied that any contract for sale was ever in place.

Result

The parties reached a settlement whereby the Madrigals agreed to sell the property to the Hayes for a purchase price of $90,000. In addition, the Hayes were to take out the existing first deed of trust of about $28,000. $62,000 would be paid to the Madrigals out of escrow. The Hayes would also be responsible for all closing costs and loan fees. The Madrigals acknowledged that the new financing was expressly contingent on the appraisal being adequate to cover the entire purchase price as well as expenses necessary to place a foundation under the mobile home. If financing did not cover these costs, the Hayes would take the maximum amount they can borrow and the Madrigals would put the difference in a promissory note, secured by a second deed of trust.

Other Information

FILING DATE: Oct. 11, 2007.