Spurgeon

I

Facts

Appellant George J. Drumheller entered into a written contract on May 1, 1982, to purchase respondents Charles and Sally Spurgeon’s residence for $385,000. The terms of sale were Drumheller would take “subject to” two existing deeds of trust, one of which had a balance of $212,000 and was held by Far West Savings and Loan, a state chartered savings institution, and contained a “due on sale” clause. At that time, Wellenkamp v. Bank of America (1978) 21 Cal.3d 943 [ 148 Cal.Rptr. 379 , 582 P.2d 970 ], precluded enforcement of a due on sale clause by state chartered institutions unless the lender could demonstrate necessity to prevent impairment of the security or risk of default. Drumheller received a letter from the escrow bank dated June 10, 1982, demanding he complete and return a financial questionnaire from Far West Savings and Loan in order to close the escrow. Drumheller contacted his attorney requesting the escrow be cancelled, and the attorney wrote a letter cancelling the agreement. Respondents filed suit for breach of contract on July 2, 1982.

Respondents relisted the property for sale at $390,000, then dropped the price to $365,000. By November 17,…