Fink v. Weisman

We granted respondent’s petition for rehearing as to appellant Toplitzky to give further consideration to respondent’s claim that the instruction which we held prejudicially erroneous to Toplitzky was substantially similar to certain instructions requested by Toplitzky and hence the error was invited error of which Toplitzky could not complain. We are satisfied that there is nothing in this point. The instruction, the giving of which we held was prejudicial error, was as follows: “If the defendant Toplitzky, at the time when he acted as broker in 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.”

The proposed instruction, most strongly relied upon by respondent as substantially similar, read: “The defendant Toplitzky was under no duty or obligation to disclose to the plaintiff the purchase price of said properties, nor to disclose to plaintiff, Fink, any of the circumstances surrounding said purchase, .unless at or prior to the purchase

An examination of the instruction given and the instruction proposed will show that they are not substantially similar. The instruction given relates to the ease where the jury finds that Toplitzky knew of Fink’s interest. The proposed instruction relates to exactly the opposite ease, where the jury finds that Toplitzky did not know of Fink’s interest. A perfectly correct statement of law is involved in the proposed instruction. Unless Toplitzky knew of Fink’s interest he could owe no duty of disclosure to Fink. But that is not the same thing at all as saying, as the court did in the instruction given, that if Toplitzky did know of Fink’s interest he owed Fink a duty of disclosure. We have held that Toplitzky would only owe Fink a duty of disclosure: 1. If he knew of Fink’s interest; 2. If he was acting for Fink in the transaction; and 3. If he had reason to believe that Weisman, if Weisman had knowledge of the facts, was concealing them from Fink. Toplitzky might have proposed instructions negativing each of these conditions separately and advising the jury that in the absence of such condition he owed no duty of disclosure to Fink. That would not justify the court in giving an instruction that given one of such conditions only, without the other two, Toplitzky would owe Fink a duty of disclosure.

A simple example will make this clear. Suppose A is on trial for the murder of B and proposes an instruction that unless B died within a year and a day after receiving the fatal wound A should not be found guilty of murder. That would not justify the court in instructing the jury that if B did die within a year and a day they should find A guilty of murder. The two cases seem to be exactly parallel.

Respondent’s further claim that it does not appear from the record that the instruction held erroneous was not given at Toplitzky’s request seems frivolous and is only noticed because it was again urged in his petition for rehearing. The record lists the instructions requested by Toplitzky and this instruction does not appear among those so listed. We are satisfied that this is a sufficient showing on this point.

Lastly respondent claims in his petition for rehearing that the instruction held erroneous was properly applicable to the fifth count of the complaint which charged a conspiracy. It is a complete answer to this that we can-hot know whether the jury found a conspiracy under the fifth count or merely a breach of duty as alleged in the first four counts of the complaint.

We are satisfied with the disposition of Toplitzky’s appeal in our opinion filed herein on January 28, 1933, and readopt that opinion in all respects.

The judgment against appellant Toplitzky is reversed and the cause remanded for a new trial as to Toplitzky, with directions to the trial court to allow the amended complaint to be further amended, if plaintiff so desires, to correct the defects therein attacked on this appeal.

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

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

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 making the following statement of facts, although as to some of them there was a sharp conflict in the evidence:

Fink 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, Fink and Weisman discussed the matter of buying real estate together. Thereafter Weisman told Fink that the Woodward Hotel could be purchased for $245,000, $210,000 for the building and $35,000 for the furniture, and suggested that Fink 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 Fink 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 Fink 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 Fink had made his payments. Weisman deeded a one-half interest to Fink, 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 Fink and Weisman as a partnership business.

After the purchase of the Woodward Hotel and in September, 1920, Fink, 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 con

In O'ctober 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 C. 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.

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

“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. 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 ].)

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

“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. Kempion, 52 Wash. 106 [ 100 Pac. 186 ]; Mayo v. Wahlgreen,

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.

After the entry of judgment and while motions for new trial were pending Fink procured an alternative writ of prohibition from the District Court of Appeal of the Second Appellate District, Division Two, by which he attempted to prohibit the trial court from passing on the motions for new trial. The writ was quashed (Fink v. Superior Court 105 Cal. App. 540 [ 288 Pac. 124 ]) and the superior court afterward acted on the motions for new trial and denied them. In his points and authorities in the prohibition proceeding Fink argued that his action was in equity. It is claimed that by taking that position he has estopped himself from now urging the contrary on this appeal. We fail to see any ground for estoppel. A necessary element of estoppel is prejudice to the party invoking it. If Fink had succeeded in his attempt to prohibit the court from acting on the motion for new trial prejudice to appellants would have resulted and it might well be held that he would be estopped to take a different position now. But he did not succeed in that attempt. He failed, and the trial court acted upon the motions. How, then, can he be estopped to urge the correct construction as to the nature of his action because he misconceived the law in a collateral proceeding from which he gained no benefit and appellants suffered no detriment ?

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 Weisman 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

The transactions which are the basis of Fink’s recovery occurred in 1920 and 1921. The action was not commenced until 1928. In order to bar the application of the statute of limitations, by an amendment to his amended complaint Fink alleged that he did not discover the misrepresentations until May, 1927, at which time he first learned of them through an investigation of the partnership books by an investigator for the Internal Revenue Department who was investigating their income tax returns together with facts showing his complete reliance upon Weisman and Toplitzky up to that time and entire trust in them and lack of suspicion of their conduct. As to Weisman, there is no claim in the briefs that these facts, if true, were not sufficient to bar the running of the statute of limitations until the date of discovery. There was a sharp issue on the trial as to when the discovery was made, several witnesses testifying that at a much earlier date Fink told them that Weisman had defrauded him in these transactions. The issue was fairly submitted to the jury and by them decided in favor of Fink. On motion for new trial appellants produced, as newly discovered evidence, the affidavits of several additional witnesses to similar conversations with Fink long prior to 1927. This evidence was merely cumulative and no sufficient explanation was given of the failure to discover it earlier. Under settled principles the granting or denying of a new trial on that ground lay peculiarly in the discretion of the trial'court and we are not justified in re-examining the question under the facts appearing here.

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 rights and only incidentally, where they conceived that Toplitzky’s rights were also involved, have they referred to any claimed error as to Weis

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

As to the fifth count Toplitzky urges that it stated no cause of action against him because it was an action for deceit and since the value of the properties was neither alleged nor proved there can be no recovery. However, as we have said above, the trial proceeded on the theory that the fifth count involved a conspiracy to defraud Pink while he occupied a confidential relation with Weisman and the jury was instructed on that theory. One who knowingly aids and abets a fiduciary to make secret profits may be held liable jointly with the fiduciary for such secret profits. (Jackson v. Smith, 254 U. S. 586 [ 41 Sup. Ct. 200 , 65 L. Ed. 418 ]; Lomita Land & Water Co. v. Robinson, 154 Cal. 36 [ 97 Pac. 10 , 18 L. R. A. (N. S.) 1106 ]; Victor Oil Co. v. Drum, 184 Cal. 226 [ 193 Pac. 243 ]; Smith v. Blodget, 187 Cal. 235 [ 201 Pac. 584 ].) There was ample evidence from which the jury might have found that Toplitzky, knowing that Pink was interested jointly with Weisman in the purchase of the properties, actively misrepresented their price to Pink to enable Weisman to make a secret profit. In such circumstances Toplitzky under the above authorities would be jointly liable with Weisman although he himself may not have profited by the perfidy.

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 Pink as a result of which Pink 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 Pink paid and what he would have paid but for Toplitzky’s fraud.

However, Toplitzky denied having made any statements to Pink 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

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

"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 you 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.

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 be further amended, if plaintiff so desires, to- correct the defects therein attacked on this appeal.

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

A petition by respondent to have the cause heard in the Supreme Court, after judgment in the District Court of Appeal, was denied by the Supreme Court on August 21, 1933.