Fink v. Weisman

Separate appeals are prosecuted by defendant William Weisman and defendant Joseph Toplitzky from a judgment entered against both defendants pursuant to the verdict of a jury. The action was to recover secret profits in the purchase of four separate pieces of real property in each of which plaintiff Fink purchased a one-half interest through defendant Weisman at a price in excess of that- agreed by Weisman to be paid to the vendor. Defendant Toplitzky was interested in the transaction as a real estate broker and since the relationship between Fink and Weisman in the transactions and that between Fink and Toplitzky were substantially different we shall for the sake of clarity consider the two appeals separately.

The Weisman Appeal.

In so far as the evidence may be conflicting it is axiomatic that on appeal we must consider the evidence most favorable to respondent. Pursuant to that- rule we are justified in

Pink came to Los Angeles in March, 1920, and there met Weisman, who is his wife’s uncle and whom he had known for many years. In June or July, 1920, Pink and Weisman discussed the matter of buying real estate together. Thereafter Weisman told Pink that the Woodward Hotel could be purchased for $245,000, $210,000 for the building and $35,000 for the furniture, and suggested that Pink put up one-half the money for a one-half interest in the property; that the deal was to be on a 50-50 basis and they could buy the property and operate the hotel together. Later Weisman introduced Pink to Toplitzky, who was acting for the seller, and Toplitzky in Weisman’s presence repeated the statement as to the price at which the property could be purchased. Pursuant to these representations Pink paid $17,500 for a one-half interest in the furniture and $12,500 as one-half the down payment on the realty. In truth the purchase price of building and furniture was $210,000 in all, and as a result Fink paid $17,500 more than the price of one-half the property. At the time of the purchase by Fink, Weisman had a contract to buy the entire property but the deed was not received from the seller until after Pink had made his payments. Weisman deeded a one-half interest to Pink, the deed reciting: ‘There having been no money paid for this deed, no United States Revenue Stamps are required. ’ ’

Thereafter the Woodward Hotel was operated by Pink and Weisman as a partnership business.

After the purchase of the Woodward Hotel and in September, 1920, Pink, Weisman and Toplitzky were together in Toplitzky’s office. Both Toplitzky and Weisman told Fink that the Chandler Hotel could be bought for $235,000 with a payment of $75,000 in cash and Toplitzky said that “each of the partners” could pay $37,500. After this conversation Weisman left Los Angeles and before going told Pink that Toplitzky would handle the deal. The property was purchased, the seller deeding to Weisman and Weisman in turn deeding a one-half interest to Pink. The deed from Weisman to Pink contained a recital with regard to revenue stamps similar to that quoted above. By reason of the false representations of Weisman and Toplitzky,

In October of the same year Toplitzky and Weisman suggested to Fink that Fink and Weisman buy the Weymouth apartments. Both Weisman and Toplitzky said the price would be $180,000 or $185,000 depending upon whether the seller or the buyers paid the commission. Later, Toplitzky stated that “the partnership” was to pay the commission. Weisman himself closed the deal with the owner who lived in Billings, Montana. The actual purchase price was $130,000 and Fink paid $25,000 in excess of one-half that amount. Fink again received a deed from Weisman to a one-half interest, the deed reciting:

“This deed is made to complete the transaction wherein William Weisman and Benjamin Fink purchased said property of O. W. Bair and wife and the title thereto was taken in the name of said William Weisman alone; and since no further consideration has been paid by said Benjamin Fink, to said first parties or either of them for this deed no internal revenue stamps are required hereon.”

In June, 1921, while Weisman was away from Los Angeles, Toplitzky told Fink that Fink and Weisman could buy the Leonide Hotel for $250,000 and that the deal could be handled by a $35,000 down payment by Fink and a like payment by Weisman. Toplitzky further stated that he had discussed it with Weisman and that Weisman would be willing to go into the deal. The property was purchased by Fink and Weisman, Fink paying on the basis of the price stated though in fact the price was $30,000 less, as a result of which Fink paid $15,000 in excess of one-half the purchase price. •

The judgment is for the sum of $75,000, the total of Fink’s payments in excess of one-half the purchase price of the several properties, with interest on the various sums making up this total from the dates of their payment.

It is first contended on behalf of appellant Weisman that under the evidence Fink and Weisman were not general partners for the purchase of real estate, but that in each case Weisman first contracted to buy the several properties and then in turn sold a one-half interest to Fink. On t.he basis of these facts it is then argued that an owner of property who was not a fiduciary at the time that he pur

In Humburg v. Lotz, 4 Cal. App. 438 [ 88 Pac. 510 , 511], the defendant had an agreement with the owner of a patent giving him the exclusive right to buy for $5,000 said patent rights in a certain territory or to sell the same for $8,000 and receive a $3,000 commission. While this agreement was in force defendant entered into an agreement with plaintiff by which each purchased a one-half interest in such patent, the plaintiff paying $4,000. The court said:

“The defendant concealed from the plaintiff that he could purchase the letters patent and devices for $5,000, and

by such concealment procured the plaintiff to pay $3,000 more into the business than the defendant paid. . . .

“When the plaintiff and defendant agreed to enter into ■ the common enterprise together, each one became the agent of the other in regard to the purchase of the property and the management of the business. They occupied fiduciary relations to each other, and neither one could take advantage of the other for his own benefit by dealings in the name of both and in furtherance of the common enterprise. Defendant was bound to act in the highest good faith to plaintiff. He will not be allowed to obtain any advantage over him by misrepresentation or concealment.”

In Thimsen v. Reigard, 95 Or. 45 [ 186 Pac. 559 , 562], the Supreme Court of Oregon quotes the following from Sandoval v. Randolph, 222 U. S. 161 [ 32 Sup. Ct. Rep. 48 , 56 L. Ed. 142 ]:

“Where one agrees to act as agent to purchase property at not exceeding a specified price, he cannot avail himself of an unexpired option antedating the employment to purchase the property at a less price himself and make the difference.”

We are satisfied that where one has merely an executory contract to purchase property and associates another with him in such purchase under an agreement by which the other advances his share of the purchase price toward the performance of the contract that they assume toward one another a fiduciary relation and that the concealment or misrepresentation of the purchase price becomes an actionable wrong. “Joint adventurers in the purchase and sale of property must act in the highest good faith toward each other and may not make any secret profits out of the transaction not shared by the others.” (Tufts v. Mann, 116 Cal. App. 170 , 183 [ 2 Pac. (2d) 500 ]; Menefee v. Oxnam, 42 Cal. App. 81 [ 183 Pac. 379 ]; Keyes v. Nims, 43 Cal. App. 1 [ 184 Pac. 695 ] ; Stenian v. Tashjian, 178 Cal. 623 [ 174 Pac. 883 ].)

It is further claimed that the first four counts in the complaint stated equitable causes of action and that the failure of the court to make findings thereon is reversible error. The first four counts are in substantially similar language and the first count may be taken as the pattern of all. It is alleged in the first count that in July, 1920,

Under the authorities this clearly stated a cause of action for damages for deceit. (Keyes v. Nims, 43 Cal. App. 1 [ 184 Pac. 695 ]; King v. Wise, 43 Cal. 628 ; Tufts v. Mann, 116 Cal. App. 170 , 183 [ 2 Pac. (2d) 500 ]; Stenian v. Tashjian, 178 Cal. 623 [ 174 Pac. 883 ].) The parties had disposed of all the properties and settled all their accounts long before the action was commenced, the amounts to be recovered were definite and certain and there was no necessity for recourse to equity. The situation was no different from that in King v. Wise, supra, where the court said, at pages 634, 635:

“The rule, which requires a rescission of the contract upon the discovery of fraud, has no application to this case. The contest is not between a vendor, who has made fraudulent misrepresentations in regard to the property sold, and the vendee who has been misled and injured by the fraud. The plaintiffs may have been willing to purchase the land at the price they paid, or at even a larger price, and may not wish to rescind the sale; but they are none the less entitled to hold the defendant to a strict observance of the trust confided to him, and to enjoy their proportionate benefit of any bargain he may have made. They do not complain that they were induced to pay more than the land was worth, but that they would have paid less if the defendant had been faithful to his trust. By their affirmance of the contract, after knowledge of the fraud, they lost any right they may have had to rescind the sale and recover back the purchase money; but it was not a release of their right of action against the defendant for damages resulting from

the fraudulent acts. We are of the opinion that the plaintiffs should have judgment upon the facts as found by the court.

“It is not difficult to arrive at the exact measure of damages which plaintiffs are entitled to recover. The actual value of the land is not an element in the estimate. The plaintiffs should have from the defendant the difference between the price of the land purchased by him for the plaintiffs and the amount paid by the plaintiffs.”

The case of King v. Wise, supra, has been frequently cited and received the full approval of the Supreme Court as late as Langford v. Thomas, 200 Cal. 192 , 199 [ 252 Pac. 602 ].

Both as to the right to maintain an action at law in such a case and the proper measure of damages the rule announced in King v. Wise, supra, accords with the general rule stated in 33 C. J., pages 857, 858, section 53, in the following language:

“But the defrauded member is not bound to rescind. He may, if he chooses to do so, retain his interest in the contract, and recover damages for the fraud and deceit, the measure thereof being the difference between the amount actually paid by plaintiff and what he would have paid had defendant dealt honestly with him; and the fact that the actual value of the property was greater than the price paid for it does not defeat the action.”

The decisions from other jurisdictions to this effect are legion: Allen v. Barhoff, 90 Conn. 183 [ 96 Atl. 928 ]; Lowe v. Hendrick, 86 Conn. 481 [ 85 Atl. 795 ]; Jones v. Kinney, 146 Wis. 130 [ 131 N. W. 339 , Ann. Cas. 1912C, 200]; Bergeron v. Miles, 88 Wis. 397 [ 60 N. W. 783 , 43 Am. St. Rep. 911 ]; Davenport v. Buchanan, 6 S. D. 376 [ 61 N. W. 47 ]; Johnson v. Gavitt, 114 Iowa, 183 [ 86 N. W. 256 ]; Pendergast v. Reed, 29 Md. 398 [ 96 Am. Dec. 539 ]; Hampson v. Spong, 103 Kan. 400 [ 173 Pac. 909 ]; Jameson v. Kempton, 52 Wash. 106 [ 100 Pac. 186 ]; Mayo v. Wahlgreen, 9 Colo. App. 506 [ 50 Pac. 40 ]; Hindle v. Holcomb, 34 Wash. 336 [ 75 Pac. 873 ].

The complaint asked for no equitable relief but simply for a money judgment. We conclude that it was an action at law and after a jury trial findings were unnecessary.

It is further argued that the fifth count of- Fink’s amended complaint stated no cause of action because it did not allege a fiduciary relation between Fink and Weisman. The fifth count pleaded a conspiracy between Weis.man and Toplitzky to misrepresent the purchase price of all four properties and thereby induce Fink to pay more than one-half thereof. It did not allege in terms a partnership or joint adventure between Fink and Weisman and might have been subject to demurrer, but no demurrer was interposed. The trial proceeded on the theory that it charged a conspiracy to defraud Fink in partnership transactions. Having made this issue on the trial appellants cannot now attack the insufficiency of the complaint in that regard. (Slaughter v. Goldberg, Bowen & Co., 26 Cal. App. 318 [ 147 Pac. 90 ]; Snyder v. City Bond & Finance Co., 106 Cal. App. 745 [ 289 Pac. 859 ]; Asnon v. Foley, 105 Cal. App. 624 , 629 [ 288 Pac. 792 ]; Bridges v. Price, 95 Cal. App. 394 [ 273 Pac. 72 ].)

By stipulation the appeal of Weisman was submitted on the briefs filed on behalf of Toplitzky. We have covered those points in Toplitzky’s briefs which we think fairly relate to Weisman’s appeal. This has been somewhat difficult, since Toplitzky’s counsel have confined their argument in greater part to Toplitzky’s right and only incidentally, where they conceived that Toplitzky’s rights were also involved, have they referred to any claimed error as to Weisman. In view of the manner in which Weisman’s appeal was submitted a needless and onerous burden not contemplated by the law has thus been cast upon us to go through Toplitzky’s brief and cull out those parts which we considered might, if decided in Toplitzky’s favor, inure to the

Toplitzky, in his brief, makes many claims of errors in instructions. Some of the instructions complained of by Toplitzky were given at Weisman's request, many of them concern only Toplitzky’s liability, and as to the rest we are satisfied that the jury was fairly instructed as to the facts upon which Weisman might be held liable.

Having discovered no prejudicial error as to Weisman, we conclude that as to him the judgment should be affirmed.

The Toplitzky Appeal.

In so far as the points discussed hereinabove are common to both appellants we will not restate them in the consideration of Toplitzky’s appeal.

Toplitzky complains of a variance between pleading and proof as to the first four counts because of the allegations therein that Toplitzky and Weisman secured the contracts to purchase the several properties whereas the proof showed Weisman secured the contracts and Toplitzky’s only interest was that of a broker. The trial proceeded on the theory that Toplitzky was a broker and not a principal and the jury was instructed on that theory. Toplitzky, having tried the case on that theory in the trial court, cannot complain of the variance on appeal.

To Toplitzky’s claim that the first four counts do not state a cause of action against him because there is no allegation that Toplitzky knew of the confidential relation between Weisman and Fink there are two answers. Toplitzky did not demur and the counts at least inferentially charged such knowledge by alleging that Toplitzky represented to Fink that “the partnership” between Fink and Weisman could purchase the properties at certain prices. Second, the trial proceeded on the theory that Toplitzky’s knowledge was in issue and the jury were instructed that if Toplitzky did not know of the confidential relationship he could not be held liable.

These cases are a complete answer to Toplitzky’s claim that as to him the statute of limitations must be held to have run because the actions against him are not based on fraud. If Toplitzky made fraudulent misstatements to Fink as a result of which Fink was damaged by the payment for one-half the properties of more than one-half their price, the action against Toplitzky sounds in fraud and the measure of the damages is the difference between what Fink 'paid and what he would have paid but for Toplitzky’s fraud.

However, Toplitzky denied having made any statements to Fink as to the price of the properties or any of them and the court undertook to instruct the jury as to Toplitzky’s liability for concealment as well as active misrepresentation. It seems obvious that Toplitzky could be liable for a failure to disclose to Fink the true purchase price of the properties only if Toplitzky occupied a fiduciary relation to Fink in the transactions. If he actively misrepresented to Fink the purchase prices he would then be making himself a party to Weisman’s fraudulent conduct and by aiding and abetting Weisman’s fraud he would render himself liable to Fink

It was the claim of Toplitzky that in none of the transactions did he represent Fink, that in two he represented the sellers, in one Weisman, and in one that Weisman handled the details himself and that at no time did he misrepresent to Fink the prices at which the properties were being purchased. With this evidence in mind we now approach the instructions given to the jury in relation to Toplitzky.

The court instructed the jury: “If the defendant Toplitzky, at the time when he acted as broker in any of these deals, knew that the property was being purchased for Mr. Fink and Mr. Weisman jointly, then he owed the duty to divulge to Mr. Fink all he knew with respect to the transaction, including the purchase price. ’ ’

It is to be observed of this instruction that it placed upon Toplitzky the duty of disclosing all he. knew with respect to the transaction at the time when he acted as broker if he knew the property was being purchased jointly for Fink and Weisman. This could not be the law in those transactions in which Toplitzky was acting as broker for the seller unless he also undertook to act as broker for Fink and Weisman. And yet under this instruction the jury could find Toplitzky liable, even though they might find that in the transaction Toplitzky owed no fiduciary duty to Fink and was acting entirely for the seller, if Toplitzky, knowing Fink was interested in the purchase, did not tell him the purchase price. Why should he be legally bound to do so if, as the jury might have found, he was representing the seller and dealing with both Fink and Weisman at arm’s lengthi It is also to be observed of this instruction that it put the absolute duty upon Toplitzky to disclose to Fink all that he knew of the transaction

“Now, Ladies and Gentlemen, with reference to the liability, if any, of the defendant, Joseph Toplitzky, I want to restate an instruction with reference to that, and if the other instructions which I have given you, or any which I may hereafter give you, in respect to his liability may seem to jmu to be incompatible with the instructions I now give you, you will disregard the other instructions, because the instructions I give you now, are an explanation of what the Court considers the law in regard to his liability.”

The instruction hereinabove discussed and held to be erroneous followed immediately. Thus the jury were told that in respect to Toplitzky's liability this particular instruction embodied the court’s idea of the law and was to be followed by the jury and any other instruction which might seem incompatible with it was to be by them disregarded. In the face of this there is no room for the claim that this instruction could have been cured by any other instruction or instructions or that the instructions taken as a whole were correct. The trial judge was at great pains to single out this erroneous instruction and tell the jury that it and it alone was the correct rule by which to determine Toplitzky’s liability.

Other instructions are complained of but they are not likely to be repeated in their present form in a trial against Toplitzky alone.

It results from what we have said above that the judgment against defendant Toplitzky must be reversed.

The judgment against appellant "Weisman is affirmed.

The judgment against appellant Toplitzky is reversed and the cause as to him remanded for a new trial,- with directions to the trial court to allow the amended complaint to

Nourse, P. J., and Sturtevant, J., concurred.

A petition for a rehearing of this cause was granted by the District Court of Appeal, on February 27, 1933, as to defendant Joseph Toplitzky alone; on June 23, 1933, the District Court of Appeal rendered an opinion readopting the foregoing opinion, and thereafter, on August 21, 1933, the Supreme Court denied a petition for hearing after judgment in the District Court of Appeal.