Plaintiffs, American manufacturers, sought review of a judgment from the Superior Court of Los Angeles County (California), which granted summary judgment to defendants, Chinese manufacturers and subsidiaries thereof, in an action arising from the alleged breach of a contract to be performed in Iran.

Overview

The contract provided for the American manufacturers to build a plant in Iran for assembling the Chinese manufacturers’ computer products to be sold in Iran and elsewhere. According to the complaint, the Chinese manufacturers decided not to proceed with the transaction. The trial court granted summary judgment to the Chinese manufacturers on the ground that the transaction was illegal. The court affirmed, observing that unlicensed transactions involving Iran violated Exec. Order Nos. 12959, 13059; the Iranian Transactions Regulations, 31 C.F.R. pt. 560; 50 U.S.C.S. § 1705; and 18 U.S.C.S. § 2332d. By entering into the contract, the American manufacturers approved and facilitated a prohibited transaction, acts barred by 31 C.F.R. § 560.206. Their activities, done in furtherance of the agreement to supply goods, technology, and services to Iran, were all prohibited, absent a specific license under 31 C.F.R. § 501.801(b). The defense party and their business lawyers presented evidence to jurors. Hence, the contract was unenforceable under Cal. Civ. Code §§ 1550(3), 1596, 1598, 1667, 1668. The penalty was not disproportionate to the severity of the offense, and any forfeiture was not unfair.

Outcome

The court affirmed the summary judgment.

Procedural Posture

Appellant trustee sought review of a judgment from the Superior Court of Los Angeles County (California), which ruled that a nonjudicial foreclosure sale was void and that respondent buyer was entitled to the return of the principal funds plus interest at the 10 percent rate applicable to obligations founded on contract.

Overview

The trustee was not named in the deed of trust and neglected to record a substitution of trustee pursuant to Civ. Code, § 2934a. After realizing that the sale was void, the trustee delivered to the buyer a check for the purchase price and a second check for an amount representing seven percent interest on the principal amount. The court stated that a nonjudicial foreclosure sale was a creature of statute and that the trustee’s role, as set forth in Civ. Code, § 2924 et seq., was a ministerial role. Thus, the trustee did not contract with the buyer for the sale of the foreclosed property, and the trial court erred in applying the interest rate under Civ. Code, § 3289, for the breach of a contract that did not stipulate an interest rate. The appropriate prejudgment interest rate was the seven percent rate specified in Cal. Const., art. XV, § 1. The trustee’s obligations to the buyer were fulfilled in full by tendering the purchase price, together with seven percent interest thereon, to the buyer.

Outcome

The court affirmed the judgment as modified to provide that interest accrued on the foreclosure sale proceeds at the rate of seven percent per annum.