Metcalf v. Drew

On August 16, 1943, plaintiff and respondent herein, H. F. Metcalf, as trustee of F. P. Newport Corporation, Ltd., a corporation, bankrupt, instituted an action in the Superior Court of Los Angeles County against appellants, J. A. Charlesworth and John Drew, and other defendants not now parties, to recover secret profits, for damages and for other equitable relief.

After setting forth that the F. P. Newport Corporation, Ltd., a corporation, was adjudicated a bankrupt on January 12, 1937, by the District Court of the United States for the Southern District of California, Central Division, and that plaintiff was duly appointed the trustee in bankruptcy of the estate of said bankrupt corporation, qualified as such trustee, and at the time of the commencement of the action was qualified and acting trustee in bankruptcy of the estate of said bankrupt corporation, the complaint alleged that plaintiff, since his appointment as such trustee in bankruptcy, was the owner and in possession of certain real property situate in the city of and county of Los Angeles. It was then alleged that the defendant J. A. Charlesworth was at all times a duly licensed real estate broker under the laws of the State of California and was actually engaged in the transaction of a real estate brokerage business. During the month of November, 1941, plaintiff informed the defendant Charlesworth that as such trustee he had for sale a 300-acre tract of unimproved land in the San Fernando Valley, of which the property described in the complaint was a portion; that such property was an asset of the bankrupt estate and that a sale of said property would be made to the highest and best bidder, subject to the approval of the court having jurisdiction of the bankrupt estate. It is then alleged that during the month of November, 1941, and prior to the 28th day thereof, plaintiff as such trustee and defendant Charlesworth in his capacity as a licensed real estate broker made and entered into an agreement whereby it was mutually agreed that defendant Charlesworth should undertake to procure an offer for said entire tract or some part thereof, and it was also agreed that if any sale was made to any purchaser found by Charlesworth, upon approval and confirmation of any such sale by the bankruptcy court, plaintiff would pay Charlesworth for his ser

The complaint then alleges on information and belief that on or about December 11, 1941, defendant Charlesworth had received from the defendants H. H. Hagge and Lilly J. Hagge an offer in writing to purchase said real property for a total consideration of $174,270, and that prior to the confirmation of the sale to John Drew the defendant Charlesworth received from the defendants Hagge a revised offer to purchase said property for the last-mentioned sum, a copy of which revised offer was attached to and made a part of the complaint ; that said offer was purportedly accepted and approved by defendant John Drew as alleged owner on or about January 16. The complaint then alleges that defendant Charles-worth did not communicate to plaintiff the said offers of December 11, 1941, and January 16, 1942, or either of them, and did not inform plaintiff or the court having jurisdiction of the bankruptcy proceeding of the said offers or either of them, and that plaintiff had no knowledge of the same until about August 4, 1943.

The complaint ■ then alleged on information and belief that the $20,000 allegedly paid to plaintiff on account of the purchase price of said property by John Drew was in fact, without the knowledge of plaintiff, paid by the defendants Hagge, and that said defendants Hagge had executed their promissory note in the sum of $164,270, dated March 7, 1942, and that certain of the payments, to wit, $10,000, credited on said note, constituted a portion of the $20,000 paid to plaintiff as above mentioned. The complaint further alleged on information and belief that defendant Charlesworth had an interest in the note executed by defendants Hagge to the extent of $87,135, which amount was to be paid to bim out of payments made on said note by defendants Hagge through an escrow which had been established. It was further charged that defendant Charlesworth had received on account a sum in excess of $10,000.

It was further alleged that prior to the confirmation of the sale of said property in the bankruptcy proceeding to defendant John Drew and subsequent to December 17, 1941, the defendant Charlesworth represented and stated to plaintiff that the offer made by defendant John Drew to purchase the property was the highest and best offer that Charlesworth had received or had been able to obtain for said property;

It is further alleged in the complaint that defendant Charlesworth falsely represented to plaintiff that the offer to purchase said property made by defendant John Drew was in fact made by him and that said John Drew was a responsible person and had the financial ability to carry out the offer, when in truth and in fact “said John Drew was merely a dummy or agent or tool for the defendant Charles-worth ; and that said defendant Charlesworth was in reality the party making said offer in the name of John Drew and that the defendant John Drew was not a man of responsibility and was without financial ability to carry out the said offer.” It was further alleged that plaintiff believed and relied upon the representation and statement of Charlesworth and had he known the falsity thereof he would not have filed the petition for authority to sell or for confirmation of sale of said real property to defendant John Drew.

The defendants J. A. Charlesworth and John Drew, with whom we are here concerned, by their answers denied each and every allegation of fraud contained in plaintiff’s complaint, denied the receipt of any secret profit by defendant Charlesworth, denied that the offer of sale was not actually made by John Drew or that John Drew was “merely a dummy or agent or tool of the defendant Charlesworth,” or that defendant Charlesworth was in reality the party making such offer in the name of John Drew.

The cause proceeded to trial before the court sitting without a jury, at the conclusion of which findings of fact were filed wherein the court found that plaintiff’s allegations of a conspiracy and the purposes thereof were true; that the charges of fraud and deceit made in plaintiff’s complaint were also true; that defendant Charlesworth violated his duty and obligation to disclose fully to plaintiff each and every offer received for said property, and that in disregard of their duty and obligation the defendants, including defendant Charlesworth, “fraudulently and corruptly entered into

From such judgment the defendant J. A. Charlesworth perfected his appeal and caused to be filed in this court the reporter’s and clerk’s transcripts. Subsequent thereto, on May 2, 1946, said appellant Charlesworth filed in this court his opening brief. The record reflects that while defendant John Drew gave due notice of appeal in the trial court, he failed to perfect the same.

On May 28, 1946, E. A. Filler, the assignee of H. F. Met-calf as trustee of F. P. Newport Corporation, Ltd., bankrupt, plaintiff and respondent, filed in this court a notice of motion to dismiss the appeal filed herein. Said motion to dismiss was predicated on the following grounds: “1.. That said judgment against the appellants, J. A. Charlesworth and John Drew was on the 24th day of May, 1946, satisfied in full by the filing of a satisfaction of judgment signed by the attorney for E. A. Filler, the present judgment creditor in said case. 2. By reason of the said judgment being satisfied, the appeals have become moot.” The motion to dismiss was based upon the affidavit of said E. A. Filler, filed concurrently with the motion, in which affidavit it was averred that, as the assignee of said H. F. Metcalf, trustee, on the 4th day of May, 1946, he caused his attorney to file the aforesaid satisfaction of judgment in said cause. There was also filed in this court, as part of the record on the motion to dismiss the appeal, a certified copy of an assignment of judgment executed by the aforesaid plaintiff and respondent H. F. Met-calf as trustee, under date of October 26, 1945, whereby, pursuant to an order made by the referee in bankruptcy in the matter of F. P. Newport Corporation, Ltd., bankrupt, said H. F. Metcalf as trustee in bankruptcy and as plaintiff and judgment creditor, assigned, transferred and set over unto Emanuel A. Filler all right, title and interest of said trustee in bankruptcy in and to the judgment made and entered in this action in favor of plaintiff and against the defendants John Drew and J.

Appellant Charlesworth then sets forth that he filed his notice of appeal in the instant case, and duly prosecuted the same at a cost of more than $1,200 for preparation of the transcripts and printing of a brief; that said John Drew also filed his notice of appeal, but took no steps to perfect the same. It is then set forth that subsequent to the rendition of the judgment in the instant ease a copy of the findings of fact and conclusions of law were filed with the Real Estate Commissioner of the State of California, who issued an order to show cause directed to appellant Charlesworth to appear before said Real Estate Commissioner and show cause why his real estate broker’s license should not be revoked; that said order to show cause in part alleges, “That on the 25th day of June, 1945, a fraud judgment was obtained by H. F. Metcalf, as trustee of the H. P. Newport Corporation, Ltd., a bankrupt, in the Superior Court of Los Angeles County in the sum of $82,778.75 and that Joseph W. Vickers, Judge of the Superior Court of Los Angeles County, signed the findings of fact and conclusions of law in the aforementioned action.” Appellant Charlesworth then sets forth “that the hearing under the order to show cause above referred to has been continued from time to time awaiting the disposition of said appeal prosecuted, as aforesaid, by your movant.”

Appellant Charlesworth’s notice of motion further sets forth in Paragraph VI thereof the following;

“That on or about February 25, 1946, and at a time when the appeals referred to herein were pending, this Movant

was approached by Samuel DeGroot, attorney for John Drew, who, at that time, suggested to this Movant that he and John Drew compose their differences by dismissing all pending litigations between them irrespective of the amounts involved.

“That as the attorney for John Drew he controlled the appeal in the instant ease and if Movant would agree to the dismissal of all pending litigations, he, DeGroot, would stipulate with Movant’s counsel that the appeal in the instant case would be reversed and subsequently dismissed and Movant would avoid the effect of the fraud charged against him as alleged herein. ’ ’

Appellant Charlesworth further states in his notice of motion that at all times prior to the conversation just referred to he had no knowledge or information that defendant John Drew was the real party in interest in the ownership of said judgment and that E. A. Filler was but the nominal holder thereof; and further, that he refused the aforesaid request and informed the attorney making the same that “he was in no manner guilty of the fraud found against him . . . and intended to prosecute his appeal to secure his vindication of the fraud. Thereafter, and in good faith, he served and filed his opening brief in said appeal. ’ ’

On the hearing in this court at the time the motions to dismiss were made pursuant to the aforesaid notices, Attorney Samuel DeGroot appeared before the court, and with reference to the foregoing conversation allegedly held on February 25, 1946, between himself and appellant Charlesworth, said:

“My only purpose in being here this morning is in connection with the allegations contained in Paragraph VI of the motion” (hereinbefore set forth). . . .

“At that particular time there was a judgment against Mr. Drew by this movant, Mr. Charlesworth, in the sum of thirty or thirty-one thousand dollars, then on appeal. That judgment was reversed in the greatest portion, leaving a judgment of between four and-five thousand dollars, with interest and costs. I did approach Mr. Charlesworth and Mr. Hagge at that time in the nature of a compromise only, that if we satisfied one judgment against the other I would cooperate and see that this appeal was dismissed and that they would not have anything to worry about so far as the judgment is concerned, or words to that effect.

“I have not any interest in the motion before the court

that Mr. Wood (Charlesworth’s attorney) has just presented, because I am not a party to the action any more. I am only interested in making my position clear, that in a spirit of compromise I suggested that to these gentlemen when I met them on the street accidentally. . . .”

In his notice of motion to dismiss appellant Gharlesworth further sets forth “that the satisfaction of said judgment referred to in respondent Filler’s motion to dismiss said appeal was directed to be entered by John Drew or his counsel with his consent. That the said Filler received no money or other thing of value from John Drew for the issuance of said satisfaction and the filing thereof. That the motion to dismiss this appeal, heretofore served upon this movant, was not filed in good faith, and the dismissal of said appeal is sought for the purpose of giving said judgment a finality and making same and the facts and conclusions thereof res adjudicata against this movant in the matter of the revocation of movant’s license as a real estate broker.”

When, pursuant to the foregoing notices of motion to dismiss, the parties appeared in court to make their respective formal motions, E. A. Filler, the assignee of respondent H. F. Metcalf, trustee, moved that the appeal be dismissed, while appellant Gharlesworth moved “to dismiss said appeal No. 15357 pending in this honorable Court, and when said dismissal is remitted to the lower court an order be made to enter a judgment of dismissal.”

Appellant Charlesworth’s contentions that E. A. Filler, assignee of the judgment creditor, H. P. Metcalf, trustee, was but a nominal holder of the assigned judgment, and that the real party in interest in the ownership of said judgment was the codefendant John Drew, are not controverted, nor is the claim of Gharlesworth that he recovered a judgment against the codefendant in another action in the total amount of $36,699.62 in the Superior Court of Los Angeles County, disputed. (Except by the foregoing statement of Attorney DeGroot that it was reduced to four or five thousand dollars.) There is no denial of the claim that the findings of fact and conclusions of law in the instant case were filed with the Real Estate Commissioner of the State of California and that the latter issued an order to show cause directed to said appellant Gharlesworth to appear and show cause why his real estate broker’s license should not be revoked because of the fraud judgment obtained against him in the instant ac

We are therefore confronted with a situation wherein a fraud judgment has been obtained against the holder of a real estate broker’s license and a codefendant; the codefendant purchases such judgment, allegedly in the name of another party, but himself being the real party in interest; the real estate broker has a judgment in another action against his codefendant; when said eodefendant in the instant action purchased from the judgment creditor therein all right, title and interest in and to such judgment, he caused a satisfaction thereof to be entered in the superior court, and thereupon, as successor in interest of the original respondent, in the name of the nominal assignee of said respondent, he causes to be made a motion to dismiss an appeal taken by the codefendant real estate broker upon the ground that by reason of the satisfaction of the judgment the appeal presents a moot question; and where the real estate broker is faced with charges preferred against him by the Beal Estate Commissioner on the basis of the findings of fact made against him in the trial of the case in which he has taken and prosecuted an appeal to this court.

All present parties to this litigation concede that when a question on appeal becomes moot the appeal should be dismissed, but appellant Charlesworth contends that in a case presenting the facts here set forth substantial justice requires a consideration of the consequences to follow a mere dismissal of the appeal; that in the instant case a mere dismissal would give the judgment a finality binding on him and would preclude him from defending himself against the charges made against him by the Beal Estate Commissioner as a basis for the revocation of his license. In other words, were this appeal to be dismissed and the judgment of the court below to become final, a denial by appellant of the charges made against him before the Beal Estate Commissioner would be of no avail. He therefore requests that in our order of dismissal we direct a dismissal of the action in the court below, thereby enabling him to present a defense to the charges made against him before the Beal Estate Commissioner.

In support of his motion to dismiss the appeal with direc

“It appears that the question presented in this appeal is moot.

“Ordinarily, in such cases, it would be sufficient to dismiss the appeal. To do so in this case, however, would leave the judgment appealed from intact, so that it could be pleaded in future as res adjudicata of the right, authority, and power of the city of San Antonio to legislate by ordinance relating to the use and occupation of public places such as that here involved, to the prejudice of one or both parties.

“In such cases the better practice seems to be to dismiss the cause from the court below as well as this court. . . . (Citing Texas cases.) ”

However, we do not deem it necessary to here determine the question of whether the appellate tribunal can dismiss an appeal with directions to the trial court to dismiss the action, because it is the established law in this state that the general rule that the voluntary satisfaction of a judgment deprives a party of the right of appeal is subject to certain well established principles of law. (Hartke v. Abbott, 106 Cal.App. 388 , 391 [ 289 P. 206 ].) In a case of voluntary satisfaction, deprivation of the right to appeal ensues only when it is shown that the payment of the judgment was by way of compromise or with an agreement not to take or prosecute an appeal. (Warner Bros. Co. v. Freud, 131 Cal. 639 [ 63 P. 1017 , 82 Am.St.Rep. 400 ].) In the instant case we are not confronted with a voluntary satisfaction of a judgment in the superior court, but a case wherein, without either the consent or knowledge of appellant Charlesworth, the judgment was satisfied by the substituted respondent. Under circumstances such as we have here, clearly showing as they do that the judgment was satisfied against the will of appellant Charlesworth, section 1049 of the Code of Civil Procedure cannot be invoked to impair or destroy his right of appeal. (Harthe v. Abbott, supra, p. 391.)

In the case before us the superior court judgment was not final when it was satisfied, because an appeal was pending. Were we to dismiss this appeal and such dismissal become final, it would amount to an affirmance of the judgment. By such affirmance, appellant Charlesworth would be forever

The motion of E. A. Filler, judgment creditor and substituted respondent, to dismiss the appeal, and the motion of appellant J. A. Charlesworth to dismiss the appeal with directions to the superior court to dismiss the action therein, are, and each is, denied.

York, P. J., and Doran, J., concurred.

Bespondent’s petition for a hearing by the Supreme Court was denied October 1, 1946.