Metcalf v. Drew

The events leading up to this litigation consist of the adjudication in bankruptcy of the F. P. Newport Corporation, Ltd. on January 12, 1937, and the appointment of the respondent, H. F. Metcalf as trustee on March 19, 1937. At the time of adjudication the Newport Corporation owned certain North Hollywood acreage described in the complaint, together with other tracts thereto adjoining. The trustee Metcalf and appellant Charlesworth were both licensed real estate brokers and during the times involved herein occupied the same offices at 115 West 7th Street in Los Angeles under an “informal” arrangement, acting, however, independently of each other. An oral agreement was entered into under which Charlesworth was to receive a commission of 5 per cent upon finding a buyer for the acreage, and on November 28, 1941, Charlesworth submitted to the trustee a written offer to purchase the property for $625 per acre, or a total purchase price of $87,135, the proposed purchaser being John Drew. The offer was" accepted by the trustee and thereafter the sale to Drew was confirmed in the bankruptcy court on January 29, 1942, resulting in an escrow whereby Drew was to pay $10,000 down and execute a trust deed for the balance. The trust deed contained provisions for a subdivision program to be carried out on the property.

The cause was duly dismissed as to all defendants other than Drew and Charlesworth, and was tried by the court without a jury, resulting in a judgment for the plaintiff-respondent. The trial court found that the Hagge offer of $174,270 was not communicated to the trustee or to the bankruptcy court, and that Drew and Charlesworth had conspired to conceal such offer for the purpose of deriving a secret profit from the sale at $87,135 to Drew as confirmed by the bankruptcy court. It was further found that the trustee had no knowledge of the larger offer; that the trustee had not been guilty of laches; that it was the duty of the appellant Charles-worth “to promptly and fully disclose to plaintiff (trustee) each and every offer received for said property or brought to his attention,” and that “both defendants knew of the duty”;

Both Drew and Charlesworth gave notice of appeal, but the defendant Drew failed to perfect the appeal. On May 28, 1946, one E. A. Biller, assignee of the judgment secured by the trustee Metcalf, moved to dismiss the appeal on the ground that the same had become moot due to the fact that the judgment had been satisfied. The consideration for the assignment of the $82,778.75 judgment to Biller was only $10,000. Thereafter appellant Charlesworth filed a motion “for dismissal of appeal and action” alleging that Biller was merely the nominal owner of the judgment, Charlesworth’s coappellant Drew being the real party in interest; further that if the appeal alone was dismissed, leaving the fraud judgment standing as against Charlesworth, the latter’s real estate broker’s license would probably be revoked on an order to show cause then pending. The District Court of Appeal denied both motions to dismiss, leaving the Charlesworth appeal to be “determined upon its merits,” (Metcalf v. Drew, 75 Cal.App.2d 711 [ 171 P.2d 488 ] (August 8, 1946)), on the theory that Charlesworth had not acquiesced in the satisfaction of judgment, and that a mere dismissal of the appeal would amount to an affirmance of the judgment which would preclude the broker from defending against the charges of the Real Estate Commissioner. The merit of the Charlesworth appeal is the matter now under consideration.

According to the opening brief, “Appellant’s attack on the finding is upon the failure of evidence to support it, and its failure to find upon the material issue, raised by the evidence, that the Trustee, having the means of knowledge, was possessed of that knowledge which he would have actually known had he investigated.” In support of this contention appellant points to evidence tending to show that the trustee had been in the real estate business for forty years; that Hagge was known “to be in the deal in some way,” and that the broker Charlesworth had stated that Hagge was to be the builder who was to improve the property. It is urged that the above and similar circumstances were such as to advise the trustee that Hagge was an interested party and

The matter of constructive notice on the part of the trustee has received extended attention in appellant’s brief. None of the cases cited, however, present sufficient analogy to the present situation to constitute authority for appellant’s contentions. In West v. Great Western Power Co., 36 Cal.App.2d 403 , 407 [ 97 P.2d 1014 ], is stated what appellant denominates as “the true rule to follow in cases of this character.” Quoting from 46 Corpus Juris, pages 546, 547, the court in the West case said: “As to what will be a sufficiency of facts to ex

“The merit of Appellant’s complaint,” quoting the opening brief, “lies not only in the attack on the finding as unsupported by the evidence but its silence upon whether or not the Trustee was put sufficiently upon his notice to have discovered the existence of Hagge’s interest. The trial court ignored every circumstance that plainly pointed out to the trustee that some contract was in the offing.” Appellant then cites Powell v. Johnson, 50 Cal.App.2d 680 [ 123 P.2d 875 ], and other eases holding that where a trial court renders judgment without making findings upon all material issues, the judgment cannot be sustained. Without disputing such rule, an examination of the findings fails to support appellant’s contention as to its application in the instant case. The findings appear to cover all material issues in considerable detail,

In reference to the matter of damages, appellant argues two points: (1), that “The evidence is wholly insufficient to show in what manner the trustee was damaged by the alleged conspiracy”; and (2), that “The damages awarded in this case were based solely on the possibility that a third party would bid a certain amount for the property involved and that the trustee would sell the same for that figure. ’ ’ There is merit in neither contention. What has already been said concerning the sufficiency of the evidence answers the first point,—namely, the record discloses substantial evidence to support the findings that by reason of the fraud and conspiracy of the defendants, the trustee and the bankruptcy estate suffered damage in the amount of $82,778.75. Nor does the record reveal anything to justify appellant’s point that such damages were based solely, or at all, upon a possibility. On the contrary, the judgment was based upon a definite mathematical computation. The trial court found “That had plaintiff known the falsity of such representations and statements he would not have filed a petition for authority to sell or a petition for confirmation of sale (in the bankruptcy court) of said real estate to John Drew at any price below said sum of $174,270 (offered by Hagge),” and the trustee had so testified. It is quite true that “An award must be predicated on something more than mere speculation,” as quoted by appellant from Caspary v. Moore, 21 Cal.App.2d 694 [ 70 P.2d 224 ], but the present case does not present a situation of that nature.

It is further urged that “The Court erred in finding that a confidential relationship existed between the appellant and trustee. ’ ’ In reference to this point appellant avers that there was no written contract between the trustee and Charles-worth and therefore no relation of principal and broker existed; that Charlesworth was Drew’s broker; that “there was a dual agency, of which Metcalf was advised”; and that “ Since the trial court treated the oral contract hiring Appellant as one that obeyed the statute, the Trustee having sold his property, is estopped from insisting that a confidential relationship existed between himself and the Trustee.”

Under the heading, “The evidence is insufficient to prove a conspiracy or any overt act committed in consummation thereof,” appellant again argues that the trustee “was entirely lacking in that degree of diligence entitling him to claim damages,” and avers that “His failure to investigate the particulars in Hagge’s ‘building contract’ falls into the category of gross negligence.” Since this point has already received attention herein, contrary to the present contention, it is only necessary to add that an approval of appellant’s position would, in effect, place upon the trustee, almost an absolute burden of detecting fraud and conspiracy, and excuse the perpetrators thereof in the event that the nefarious scheme was not discovered prior to its consummation. Obviously, such is not the law.

The judgment and order appealed from are therefore affirmed.

York, P. J., and White, J., concurred.