## Facts

- Defendants purchased twelve lots in Modesto to build a chain grocery store and parking; four lots (including Lots 15 and 16) were bought from plaintiffs for $60,000.
- Lots 15 and 16 contained a business structure occupied by the Hills under a lease; plaintiffs assigned the lease to defendants on March 16, 1946.
- The parties arranged for the Hills to surrender the lease for $4,000, less rent credits of $300 per month after March 1, 1946, and to vacate after plaintiffs completed a new building for them at another Modesto location.
- A written deposit receipt provided that the Hills’ occupancy was temporary at $300 per month, and that occupancy would end and improvements would be removed no later than twenty days before completion of the contemplated chain store building; it also imposed $70 per day for certain delays.
- Separately, the parties orally agreed defendants would pay plaintiffs $3,500 upon demolition and removal of the old building on Lots 15 and 16.
- A key element of the demolition arrangement was plaintiffs’ right to keep salvaged materials from the old building for use in another construction project.
- Defendants later could not obtain materials for the chain store and notified plaintiffs the demolition project was canceled.
- Plaintiffs proceeded anyway, demolished and removed the building, and salvaged materials.
- Plaintiffs sued for the $3,500 demolition price and, as assignees of the Hills, for the amount promised for surrender of the lease (net of credits).
- Defendants counterclaimed and cross-complained for damages for trespass and waste based on the demolition; the trial court entered judgment for plaintiffs and against defendants on the counterclaims.

## Issues

1. After defendants’ notice that they would not proceed with the contemplated development, could plaintiffs continue performance of the demolition arrangement and recover the agreed price where plaintiffs had interests in performance beyond profit (including salvage and third-party obligations)?
2. Did plaintiffs’ demolition and removal of the building constitute trespass or waste, or was it authorized under the parties’ agreements?
3. Were defendants liable for the amount promised for surrender of the Hills’ lease (assigned to plaintiffs) despite the change in defendants’ development plans?

## Decision

- The California Supreme Court affirmed the judgment for plaintiffs.
- Plaintiffs were permitted to proceed with demolition and salvage and to recover the agreed $3,500.
- Defendants’ counterclaim and cross-complaint for trespass and waste were rejected.
- Plaintiffs, as assignees of the Hills, were entitled to recover the promised lease-surrender amount, subject to the agreed rent credits.

## Legal Principles

- Although a party generally may stop performance upon notice in response to the other party’s cessation or repudiation, that notice does not necessarily bar continued performance and recovery when the performing party’s contract interest is not limited to profit and performance is tied to independent obligations or interests.
- Where the parties’ overall arrangement contemplates demolition and allocates salvage to the performer as a material term, the performer’s completion of demolition after the other party’s project change may remain contractually authorized.
- Performance undertaken pursuant to contractual authorization is not actionable as trespass or waste merely because the other party later changes plans.
- An assignee may enforce a promise to pay for surrender of a lease when that promise is part of the bargain facilitating the transaction, subject to agreed offsets.

## Conclusion

The court upheld plaintiffs’ right to complete demolition and retain salvage despite defendants’ attempted cancellation, awarded plaintiffs the agreed demolition price and the assigned lease-surrender payment (with credits), and found no trespass or waste because plaintiffs acted within the parties’ contractual scheme.


Bomberger v. McKelvey, 35 Cal. 2d 607 (Cal. 1950)