Bernson v. Bowman

With the complaint sounding in equity and the defense of fraud in law, the court submitted the entire ease to a jury and propounded to them a series of interrogatories “so that we may determine quite definitely how the jury regards the weight of the evidence, the credibility of witnesses, and what facts are found on which your verdict is based.” The two interrogatories which are presently pertinent and the answers thereto are as follows:

“Interrogatory No. 1: Did Theodore Bernson, on or prior to March 25, 1953, make false material misrepresentations that the Continental Hotel was a ‘clean’ hotel, and did said representations imply that the said hotel had not to his knowledge been used as a place where prostitution was openly and notoriously practiced and such fact was of general public knowledge affecting the reputation of said hotel, so as to make the leasehold of materially less value than would have been agreed to between seller and buyer, had such facts been made known to the buyer? Yes 9. No 3”; “Interrogatory No. 3 : If you answer both or either of Interrogatories No. 1 and No. 2 in the affirmative, you will answer the following question: Did George E. Bowman, Jr., and Gladys M. Bowman rely upon false and material misrepresentations and were thereby in

duced to execute the note dated March 25, 1953 ? Yes 7. No 4.' ’ Numbers 2 and 4 also failed to receive 9 votes, pro or con. Number 5, relating to ambiguity in the note received a 10 to 2 negative vote and therefore the 6th one needed no answer. General verdict for defendants being returned at the same time as the interrogatories, no objection was made to receiving the verdict or the interrogatories; all were filed and judgment for defendants entered upon the verdict.

Essentially the jury found that a false representation had been made as to a “clean” hotel, but failed to agree upon the question whether the Bowmans relied thereon. Failure to answer any interrogatory does not vitiate the general verdict when filed in such circumstances (Benson v. Southern Pacific Co., 177 Cal. 777 , 781 [ 171 P. 948 ] ; California Well Drilling Co. v. California Midway Oil Co., 178 Cal. 337 , 340 [ 177 P. 849 ]; Van Damme v. McGilvray Stone Co., 22 Cal.App. 191 [ 133 P. 995 ] ; 48 Cal.Jur.2d, § 268, p. 275). The general verdict and the interrogatories are to be read and construed together. (Morgan v. Nesbitt, 14 Cal.App. 747 , 749 [ 113 P. 125 ] ; 48 Cal.Jur.2d, § 267, p. 274.) “The purpose of special interrogatories is therefore to test the validity of the general verdict by determining whether all of the facts essential to the support of the general verdict were established to the satisfaction of the jury.” (2 Witkin, California Procedure, § 81, p. 1812.)

Plyer v. Pacific etc. Cement Co., 152 Cal. 125 , 130 [ 92 P. 56 ], is pertinent here: “It is of course true, but no truer today than it always has been, that a general verdict implies a finding in favor of the prevailing party of every fact essential to the support of his action or defense, and the very purpose of special findings is to test the validity of the general verdict by ascertaining whether or not it may have been the result of a misapplication of the law to actual findings in material conflict with the findings which in their absence would be implied from the general verdict. In other words, the response of the jury to the special issues or particular questions of fact may show that no judgment can properly be entered in favor of a plaintiff upon a general verdict because the jury has not found in his favor upon some material issue, or has found against him as to some fact fatal to his cause of action, and in ease of a general verdict for a defendant the special findings, together with the facts admitted on the record may show that the plaintiff is entitled to a judgment notwithstanding the general verdict against him. ’ ’

It is true that appellants likewise rely upon fraudulent concealment of the fact that a red light abatement action had been filed against the hotel in 1951, during the Bernsons’ occupancy (which was from November 15, 1950, to March 25, 1953) ; apparently an injunction had been granted but the hotel was not closed; the injunction was not “lifted” until the Bernsons

For another reason it seems clear that the trial judge’s handling of the fraud issue upon the motion for new trial was proper. The leasehold was sold to the Bowmans about March 25,1953. D’Orazi says that Bowman began to complain to him in May, 1953, but it does not appear that any such complaint was ever made to the Bernsons. Bowman and D’Orazi continued together in the operation of the hotel until Bowman’s interest in the lease was sold by him to D’Orazi on January 1, 1957, for $10,000. D’Orazi continued to operate until he sold to one Arnold in late 1957 for an undisclosed consideration. No rescission of the deal was ever attempted or claimed in the amended answer or at the pretrial conference. The first amended complaint was filed on June 4, 1957; the original answer of July 18, 1957, said nothing about fraud; that defense was first raised by amendment to answer which was filed on August 12, 1958. There was no showing of actual damage at the trial; non constat but that appellants received for their respective interests sums which precluded the existence of damage, which is of the essence of the defense of fraud as well as an action therefor. “Fraud without damage furnishes no ground for action; nor is fraud without damage a defense.” (Holton v. Noble, 83 Cal. 7 , 9 [ 23 P. 58 ].) See also Hunter v. McKenzie, 197 Cal. 176 , 183 [ 239 P. 1090 ]; Wood-

Counsel for appellants now argue that defendants D’Orazi in no event can be personally liable to plaintiffs because the “hold harmless” agreement did not constitute plaintiffs third party creditor-beneficiaries with respect to the note obligations upon which suit is based.

The complaint does not allege breach of obligations of the lease, but nonpayment of installments due on the purchase money note and chattel mortgage given to plaintiffs Bernsons when they sold their existing leasehold to Bowmans. It is alleged and denied that the D’Orazis “undertook and promised, under the terms of the said agreement, to pay the installments on the said note as they came due, aud to fulfill all other executory conditions of said agreement of sale, and to pay the entire balance of said note if at the option of the holder thereof upon default in the payments thereon the entire remaining balance of said note became and were declared by the holder to be due aud payable immediately together with interest accrued to the date of payment. ’ ’ No parol evidence to the effect that the agreements encompassed payment of the obligations on the note was received; when proffered it was excluded by the trial judge and counsel for plaintiffs expressed agreement Avith the ruling. The written agreements are not ambiguous; they cover obligations under the lease but not those of the promissory note and chattel mortgage. This point was raised by defense counsel upon motion for directed verdict. The court remarked: “The case has been tried upon the theory that if the Bowmans were liable that D’Orazi Avould be liable. Had you pressed that point at the beginning, I would have insisted that there was a conflict of interest and that the parties should be represented by separate counsel. ... I am inclined to feel that the theory on which the case was tried and the evidence presented to the jury has been in effect a AA'aiver of such a plan [sic] that D’Orazi was not bound even though the Bowmans

“ It is the general rule that a party to an action may not, for the first time on appeal, change the theory of the cause of action. (Ernst v. Searle, 218 Cal. 233 , 240 [ 22 P.2d 715 ] ; Gray v. Janss Investment Co., 186 Cal. 634 , 641 [ 200 P. 401 ].) There are exceptions but the general rule is especially true when the theory newly presented involves controverted questions of fact or mixed questions of law and fact. If a question of law only is presented on the facts appearing in the record the change in theory may be permitted. (See Schirmer v. Drexler, 134 Cal. 134 [ 66 P. 180 ].) But if the new theory contemplates a factual situation the consequences of which are open to controversy and were not put in issue or presented at the trial the opposing party should not be required to defend against it on appeal.” (Panopulos v. Maderis, 47 Cal.2d 337 , 340-341 [ 303 P.2d 738 ].)

In American Auto. Ins. Co. v. Seaboard Surety Co., 155 Cal.App.2d 192 , 200 [ 318 P.2d 84 ], this court said: “If it be said that the views herein expressed depart from the theory upon which the ease was tried the answer is that the rule confining the parties upon appeal to the theory pursued below does not apply to a question which is one of law only (Panopulos v. Maderis, 47 Cal.2d 337 , 341 [ 303 P.2d 738 ]), and that an appellate court is never bound by concessions of counsel as to the applicable law (Desny v. Wilder, 46 Cal.2d 715 , 729 [ 299 P.2d 257 ]) or by the interpretation of documents made by the trial court upon the basis of the terms of the written instrument without the aid of other evidence (Estate of Platt, 21 Cal.2d 343 , 352 [ 131 P.2d 825 ] ; Continental Cas. Co. v. Phoenix Constr. Co., supra, 46 Cal.2d 423 , 429-430 [ 296 P.2d 801 , 57 A.L.R.2d 914 ]).”

Ward v. Taggart, 51 Cal.2d 736 , 742 [ 336 P.2d 534 ], states: ‘‘ Although this theory of recovery was not advanced by plaintiffs in the trial court, it is settled that a change in theory is permitted on appeal when ‘a question of law only is presented on the facts appearing in the record. . . .’ (Panopulos v. Maderis, 47 Cal.2d 337 , 341 [ 303 P.2d 738 ] ; American Auto. Ins. Co. v. Seaboard Surety Co., 155 Cal.App.2d 192 , 200 [ 318 P.2d 84 ].)”