Majority
Plaintiffs Richard J. Bice and Leila M Bice, appeal from a judgment for defendants rendered pursuant to an order granting defendants’ motion to exclude all evidence, followed by a denial of plaintiffs’ motion to amend to cure the alleged defects in their complaint.
The complaint is captioned “Rescission — Damages — Injunction.’’ It alleges fraud in an exchange of plaintiffs’ Glendora property known as the Daniel B. Motel for certain Ocean Boulevard property in Long Beach which the defendants James Stevens and Mabel Stevens claimed to own and which they did acquire and convey to plaintiffs. Defendants Thompson, Morrison and Hoagland were sued as real estate brokers" representing the Stevenses and making the alleged false representations. Defendant Farmers and Merchants Bank of Long Beach was sued as escrow holder alleged to be guilty of negligence, not fraud. The issues as to the bank require separate discussion. Those relative to the Stevenses
The complaint alleges that plaintiffs were owners of the Daniel B. Motel and were induced to exchange it for the Ocean Boulevard property through false representations made by or on behalf of each of the defendants other than the bank; that this was accomplished through an escrow at defendant bank. All of the elements of deceit are alleged; also that plaintiffs learned before close of escrow of the falsity of representations made to them and gave notice of rescission prior to occurrence of that event; that after service thereof and before suit defendants Stevens sold the motel and that they thereby made it impossible to bring about a rescission and restoration of the positions occupied by the respective parties before the close of escrow. Then follows an allegation that the Long Beach property would have been worth $180,000 if the representations had been true, but in fact same had a value of no more than $100,000; that plaintiffs had been damaged in a sum not less than $80,000, for which sum they prayed judgment together with further and other relief. The complaint was plainly drawn upon the theory that plaintiffs had a right of rescission which they had exercised, but that same had been rendered fruitless by defendants’ conveyance of the motel to third persons, and that therefore they were entitled to the alternative remedy of damages. But the complaint did not allege the value of plaintiffs’ motel, and counsel for defendants moved to exclude evidence upon the ground that plaintiffs’ allegation of damages based on loss of the bargain was incorrect, that section 3343, Civil Code,[2] prescribes out-of-pocket loss as the exclusive measure of damages and absence of any such allegation rendered the complaint fatally defective. Counsel relied upon Bagdasarian v. Gragnon, 31 Cal.2d 744 , 759-762 [ 192 P.2d 935 ], and Oliver v. Benton, 92 Cal.App.2d 853 , 855 [ 208 P.2d 375 ], as establishing out-of-pocket loss as the exclusive measure of damages in an action for damages for deceit, and they do so hold. There were also cited certain authorities to the effect that
1 "One defrauded in the purchase, sale or exchange of property is entitled to recover the difference between the actual value of that with which the defrauded person parted and the actual value of that which he received, together with any additional damage arising from the particular transaction. “Nothing herein contained shall be deemed to deny to any person having a cause of action for fraud or deceit any legal or equitable remedies to which such person may be entitled.’’
Concerning the nature of a motion to exclude evi
2 The complaint alleged a representation that the second trust deed on the Long Beach property was payable at the rate of $5,000 per annum with first payment due on July 1, 1950, and that in fact the sum of $5,000 was payable semi-annually, the next one being due on September 9, 1949. The proffered amendments were these: “ ‘That if the representations and warranties made by the defendants as aforesaid were true, that said property would reasonably have been worth the sum of $180,000, and that the payments on the aforementioned second trust deed were in fact due on July 1, 1950, plaintiffs would have been able to maintain said payments and would have been able to have readily sold said property at the reasonable market value which defendants alleged said property to have.’ ”... “ ‘That as a direct and proximate result of the false and fraudulent representations as aforesaid, the said plaintiffs were foreclosed of any and all rights to the Long Beach property by foreclosure sale, and that plaintiffs herein suffered loss, injury and damage, in that they have lost their equity in the aforementioned Daniel B. Motel, which plaintiffs allege to be worth the sum of $90,000.’ ” (Later corrected to $40,000.)
Appellants now insist that the ruling excluding evidence was erroneous even if the action be considered one at law (which they do not concede), because the complaint shows the fact of damage and an averment of the wrong measure is not fatal to statement of a cause of action; that that goes to the remedy and not the right of recovery. This is the established rule. Facts must be alleged which show the existence of damage (King v. Mortimer, 37 Cal.2d 430 , 436 [ 233 P.2d 4 ]), but if that is done and a prayer for a specific sum inserted in the pleading it is sufficient even though there is no specific allegation of damage in any stated sum, or if the pleading states facts invoking a wrong measure of recovery. Referring to a claim that a complaint was defective for failure to meet the requirement of section 3343, the court in Sutter v. General Petroleum Corp., 28 Cal.2d 525 , 534 [ 170 P.2d 898 , 167 A.L.R. 271 ], said: “Certainly it cannot be doubted that there is a sufficient showing of injury to plaintiffs. Whether the precise and correct measure of damages was pleaded is not important in the face of a general demurrer.” Warfield v. Basso, supra, 62 Cal.App. 47 , 49: “In support of the judgment, one of the objections which is urged against the complaint is that the damages claimed therein are not such as are provided by the statutes
The complaint at bar did show imperfectly the fact of damage. The buildings on the Ocean Boulevard property were represented to have been erected at a cost of $350,000, whereas they cost only $75,000; the property was stated to have been bought for $180,000, but was in fact being acquired contemporaneously by defendant for $100,000 and was worth no more than that sum; the furnishings (included in the exchange) were represented to have a market value of $20,000
“It has been held that although ‘Anticipated revenue from the property is not “additional damage” within the meaning of section 3343 ... It is an element to be considered in determining the actual value of the property . . .’ (Oliver v. Benton (1949), 92 Cal.App.2d 853 , 856 [ 208 P.2d 375 ].) There was also evidence that defendants Thomas, from whom plaintiffs purchased the motel for $43,000 on October 19, 1948, had themselves purchased it only the previous day (October 18, 1948), for the sum of $40,000. Evidence of ‘sales of the identical property in question, whether realty or personalty’ is also a proper indicium of value. (Bagdasarian v. Gragnon (1948), supra, 31 Cal.2d 744 , 758.)” At page 136: “By the complaint on file it is clear that plaintiffs were attempting to state a cause of action for damages for fraud. Their allegations as to the fact and substance of the fraud, and their reliance on it to their actual detriment, were adequate. They did not specifically allege damages under the theory and method of computation authorized by section 3343 but even under the limitations held to be imposed by that section the facts alleged tended at least inferentially to show that the actual value of the property purchased was less than the price paid. The defendants do not appear to have been misled or in anywise prejudiced by the failure of
The foregoing discussion proceeds upon the assumption that this is an action at law, which was the basis of the exchange of views between counsel and court. But appellants now argue further that the complaint sounds in rescission, belongs on the equity side, and that therefore the rule of section 3343 is inapplicable. There is considerable ground for this contention. It is unnecessary for us to decide this question, for, whether the action is one at law for damages or one in equity to adjudge the effectiveness of plaintiffs’ unilateral rescission, it was error to grant the motion to exclude evidence.
Counsel for defendants contend, however, that the court has broad discretion in the matter of allowing amendments presented for the first time at the trial and that there was no abuse of that discretion in denying leave to amend in this case. The proffered amendments would have cured the defect which the court deemed to exist in that they showed an equity of $40,000 belonging to plaintiffs had been exchanged for one of $16,700, thus working damage of $23,300.[4] Defense counsel claimed that this would inject a new issue which they were not prepared to meet and that plaintiffs had inexcusably delayed any amendment after being apprised of the necessity of one. He stated, without contradiction, that plaintiffs’ attorney had asked him a year or more before trial for a stipulation consenting to an amendment of the complaint and that he had said he would give one upon condition that he receive the amendment at least 30 days before trial, but that plaintiffs’ counsel had never presented one until the argument upon motion to exclude evidence. Plaintiffs’ attorney upon his presentation gave no explanation of the delay and relied principally upon the proposed amend
3 Value of Long Beach property $100,000 plus furnishings worth $11,500, total $111,500, less trust deeds aggregating $94,800, leaves equity of $16,700, to he compared with plaintiffs' equity of $40,000.
It further appeared from an affidavit of plaintiff Leila M. Bice, which was in the file and a proper subject of judicial notice, that the present attorneys were substituted into the case on October 7, 1954, depositions were taken and thereupon “a serious question arose as to the sufficiency of the complaint as to the mode of pleading the element of damages, and therefore by agreement of counsel in open court, the matter was put off calendar, the first delay occasioned at the instance of Plaintiffs and affiant for the purpose of giving this problem further study, with a possible view to amendment of the complaint; That such a study was given, and after a perusal of the facts, it was decided that the complaint was sufficient. ’ ’ An affidavit of Mr. Poppler, one of the attorneys, was presented on motion for new trial; it said that after taking of depositions he and Mr. Devitt weighed the problem of inadequacy of the pleadings, researched the law on the question of pleading damages for fraud, consulted other attorneys, and, relying on Feckenscher v. Gamble, supra, 12 Cal.2d 482 , “concluded that the pleadings filed by plaintiffs’ original counsel of record sufficiently pleaded the elements of damages for fraud and negligence and were adequate to bring the cause to trial on the merits. ...” Counsel for plaintiffs insist upon this appeal that the complaint is good as an equity action for rescission and that section 3343 is not the applicable measure of damages. It does not appear that their failure to amend prior to the judge’s ruling at the trial was due to negligence or mere obduracy. Counsel then seemed to believe, and now seems to believe, that the complaint is sufficient to state a cause of action. And it does not appear that counsel for defendants were surprised, misled or prejudiced in any way.
The court ruled as follows: “The Court: That much is true. Even if I permitted the amendment, I couldn’t try the case because it raises some new and different issues upon which we could not expect the defendants to be prepared for trial at this time; namely, the value of the property
4 Counsel for defendants asserted without denial that one of plaintiffs testified upon deposition that she had the money and could have made the trust deed payment. The transcript is a bit obscure at this point, but the matter is clarified by the affidavits on motion for new trial. The judge seemed to pay little attention to this proposed amendment, probably reasoning that it was a synthetic plea born of the exigencies of the lawsuit.
“Weighed over and against that is the fact that if the plaintiffs had been injured or damaged they should have their day in court at some time or other and be permitted to present their evidence to the Court. However, we come up some four years after the complaint is filed with a complaint that does not state a cause of action and then we want to interject some entirely new and different elements into the ease that are not set up at all in the original complaint. The motion to amend is denied.”
Defendants seek to justify the ruling upon the authority of cases such as Vogel v. Thrifty Drug Co., 43 Cal.2d 184 [ 272 P.2d 1 ]; Moss Estate Co. v. Adler, 41 Cal.2d 581 , 586 [ 261 P.2d 732 ]. Appellants rely upon Eatwell v. Beck, supra, 41 Cal.2d 128 , 135; MacIsaac v. Pozzo, 26 Cal.2d 809 , 815 [ 161 P.2d 449 ], and similar cases. The Moss Estate case involved a belated amendment to an answer; the ruling is summarized in this language (p. 586): “The trial court was thus presented with a situation wherein defendant sought to file an amended answer alleging a new defense based on different facts on the eve of the trial more than a year after the original answer was filed and more than two months after she had notice of the date set for trial. Defendant was aware of the facts at the time the original answer was filed, but she gave no excuse for her delay. The original answer gave no inkling of the facts alleged in the proposed amended answer, and a continuance would have been required had leave to file been granted. "Under these circumstances we cannot say that the trial court abused its discretion in. denying defendant leave to file her proposed amended answer.” Numerous eases are then cited*in support of the holding. The Vogel case presented an attempt to inject into a negligence action a new count alleging breach of warranty. Denial of leave to amend was affirmed because of long delay in asserting known facts followed by an attempt to inject new issues into the case at the trial. There was also the element that the proposed amendment did not state a good cause of action for breach of warranty. The basis for differentiation of the two lines of cases—those holding it to be error to deny leave to amend and those holding the contrary—seems to lie in this language at page 585 of the Moss Estate case: “In the present case we are not confronted
The plaintiffs’ charge against Farmers and Merchants
The averment is that the bank was acting as escrow agent of an existing escrow, opened March 9, 1949, between Stevens and Conover and the plain inference of the allegations is that the facts which defendant failed to disclose, or to call for in the instructions prepared by it, were learned from the Stevens-Conover escrow. The revealing to plaintiffs of information contained in that escrow would have been a violation of the escrow holder’s duty (Blackburn v. McCoy, 1 Cal.App.2d 648 , 654 [ 37 P.2d 153 ]) it would also have been a breach of defendant’s obligation to Stevens and Conover for it to contract (by escrow instruction in the Bice-Stevens deal) to disclose such confidential information; by the same token it could not be negligence merely to fail to call for such disclosure when preparing the Bice instructions. Appellants seek to avoid the effect of the Blackburn-Mc Coy case by urging that defendant bank had an interest in the subject matter of the escrow and as trustee had a duty of full disclosure. This hinges upon the allegation that one of the representations made to plaintiffs was that a first trust deed “in favor of the Farmers and Merchants Bank of Long Beach, California, with an unpaid principal balance of approximately $51,800.00”
The judgment is affirmed as to defendant Farmers and Merchants Bank of Long Beach and reversed as to all other defendants.
Shinn, P. J., and Vallée, J., concurred.
A petition for a rehearing was denied November 7, 1955, and the petition of respondents James and Mabel Stevens, Earl and Florence Morrison, Keystone Realty Co., and Roland Hoagland for a hearing by the Supreme Court was denied December 14, 1955.
Footnotes
- * Assigned by Chairman of Judicial Council.
Cases cited
- Bagdasarian v. Gragnon 31 Cal.2d 744 at 759-762, at 758 p. 371, p. 375
- Oliver v. Benton 92 Cal.App.2d 853 at 855, at 856 p. 371, p. 375
- Warfield v. Basso 62 Cal.App. 47 at 49 p. 372, p. 373, p. 374
- Feckenscher v. Gamble 12 Cal.2d 482 at 500 p. 372, p. 377
- Miller v. McLaglen 82 Cal.App.2d 219 at 223, at 228 p. 373, p. 379
- King v. Mortimer 37 Cal.2d 430 at 436 p. 373
- Sutter v. General Petroleum Corp. 28 Cal.2d 525 at 534, at 532-533 p. 373, p. 374
- W. C. Cook & Co. v. White Truck & Transfer Co. 124 Cal.App. 721 at 726 p. 374
- Eatwell v. Beck 41 Cal.2d 128 at 136, at 135 p. 374, p. 378
- Gallagher v. California Pacific Title & Trust Co. 13 Cal.App. 2d 482 at 486 p. 374, p. 379
- Bonde v. Bishop 112 Cal.App.2d 1 at 5 p. 374
- Barr v. Southern California Edison Co. 24 Cal.App. 22 at 25 p. 374
- Riser v. Walton 78 Cal. 490 p. 374
- Hartzell v. Myall 115 Cal.App.2d 670 at 677 p. 374
- Breakers Holding Co. v. Josebra Co. 122 Cal.App.2d 741 at 747-748 p. 374
- Hefferan v. Freebairn 34 Cal.2d 715 at 721 p. 376
- Vogel v. Thrifty Drug Co. 43 Cal.2d 184 p. 378, p. 379
- Moss Estate Co. v. Adler 41 Cal.2d 581 at 586 p. 378, p. 379
- MacIsaac v. Pozzo 26 Cal.2d 809 at 815 p. 378, p. 379
- Burns v. Scooffy 98 Cal. 271 at 276 p. 379
- Chatfield v. Williams 85 Cal. 518 at 520-521 p. 379
- Hopkins v. Hopkins 116 Cal.App.2d 174 at 180-185 p. 379
- City of Pasadena v. City of Alhambra 33 Cal.2d 908 at 925-926 p. 379
- Perry v. Futch 119 Cal.App.2d 556 at 559 p. 379
- Ser-Bye Corp. v. C. P. & G. Markets, Inc. 78 Cal.App.2d 915 at 917 p. 379
- O'Connor v. Mennie 169 Cal. 217 at 222 p. 380
- Preston v. Hubbell 87 Cal.App.2d 53 at 61 p. 380
- Blackburn v. McCoy 1 Cal.App.2d 648 at 654 p. 380