BARD v. KENT

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District Court of Appeal, Second District, Division 2, California.

BARD v. KENT.

Civ. No. 13186.

Decided: August 15, 1941

Bautzer & Ryan, Gregson Bautzer, and G. Bentley Ryan, all of Hollywood (Bertin Weyl, Jr., of Los Angeles, of counsel), for appellant. Paul Vallee and Jerome H. Kann, both of Los Angeles, for respondent.

This action was commenced by the special administrator of the estate of Ruth Roland Bard to cancel and set aside a purported option to extend a lease on the ground that the option was fraudulently obtained and was without consideration. Defendant has appealed from a judgment in plaintiff's favor.

For many years prior to the death of Mrs. Ruth Roland Bard, who will be herein referred to as Roland, her business name, defendant had managed her business affairs, acting in a fiduciary capacity as her confidential agent under a general power of attorney. On February 20, 1933, defendants as agent for Roland leased a parcel of real property owned by her to a Mr. Odums and a Mr. Berkson for a period of five years. Odums and Berkson constructed a building on the property and entered into conditional sales contracts for the purchase of fixtures and equipment to be used in conducting a restaurant business on the premises. The restaurant, which operated under the fictitious name of The Cat and the Fiddle, was a failure and Odums and Berkson were forced to abandon the venture. Later in 1933 defendant and a Mr. Hastings and a Mr. Carpenter, as the sole stockholders, organized a corporation known as The Cat and the Fiddle Company, which assumed the obligations of Odums and Berkson relative to the improvements, fixtures and equipment. The corporation as a tenant of Roland unsuccessfully endeavored to conduct a restaurant business on the premises in question. When this second venture proved unprofitable, defendant bought all of the stock of Hastings and Carpenter in The Cat and the Fiddle Company and continued to pay off the obligations which the company had assumed. Various sub–lessees who thereafter tried to operate a restaurant on the premises were also unsuccessful.

Roland executed on August 21, 1935, a lease of the premises in question to The Cat and the Fiddle Company for a term of five years. By the terms of the lease the lessee agreed to pay the lessor five per cent of the weekly gross receipts with a minimum guarantee of $70 per week. On August 29, 1935, The Cat and the Fiddle Company obtained an extension of the lease for an additional year ending August 31, 1941, and also written authority from Roland to sub–lease the premises to a Mr. McDonnell. On August 30, 1935, The Cat and the Fiddle Company sub–leased the premises to McDonnell for a term of five years ending August 31, 1940, with an option to renew the lease for a period of one year. The lease from The Cat and the Fiddle Company to McDonnell included the right to use the equipment and fixtures on the premises and provided for a rental of ten per cent of the gross receipts up to $6,000 and eight per cent of receipts over that amount, with a minimum rental of $450 per month. The restaurant which McDonnell operated on the premises proved to be very successful and McDonnell erected additional improvements on the real estate at an approximate cost of $30,000. Defendant, having dissolved the corporation and distributed its assets to himself, was then doing business under the fictitious name of The Cat and the Fiddle Company. He contributed more than $6,250 toward the cost of such improvements. All of the foregoing facts had been fully disclosed to Roland by defendant.

During the latter part of 1936 defendant, McDonnell and Roland on several occasions discussed the possibility of adding certain improvements which McDonnell desired to make at a cost of approximately $10,000. McDonnell at that time stated that he did not wish to make the improvements unless he was assured that his lease would be extended for an additional period of four years. Roland indicated in subsequent conversations with defendant that she would be willing to grant the desired option provided the cost of the contemplated improvements would be approximately $10,000. After further negotiations Roland agreed to give The Cat and the Fiddle Company an option to extend its lease for an additional four–year period in order that it in turn could give McDonnell an extension of his lease. The option under dispute was executed on August 17, 1937, and was signed for Roland by defendant as her attorney in fact. The option recited that “For and in consideration of Ten Dollars ($10.00) and other valuable consideration” The Cat and the Fiddle Company was granted an option to extend its lease for an additional period of four years. On September 22, 1937, and before the option was exercised, Roland died. It was stipulated that the sum of $10 was not in fact paid to Roland and that none of the contemplated improvements were ever made. Based upon these facts the trial court found that defendant had made a full and complete disclosure of all of the foregoing transactions to Roland and that defendant was not guilty of any fraud or wrongdoing in his dealings with her, but it also found that there was no consideration for the option. The court concluded that the option was revoked and terminated by the death of Miss Roland.

It is contended on this appeal that there is no evidentiary support for the court's finding that there was no consideration for the option. Although it is admitted by defendant that the $10 mentioned in the option was not actually paid, it is urged that there is substantial evidence of other valuable consideration sufficient to support the option. During the negotiations between Roland, McDonnell and defendant, which led to the signing of the option, Roland was informed that if the contemplated improvements were made the amount of rental which she would receive would be substantially increased. She told defendant that she did not desire to spend any money on the improvements and, according to defendant's testimony, “suggested that Mr. Kenneth McDonald be hired as the architect and that we check the figures––or, rather, I check the figures on the cost of the improvement, and if McDonnell's figures were approximately $10,000, then in that event an extension would be granted on his present lease.” After the option was signed defendant consulted with Kenneth McDonald and the latter at defendant's request prepared sketches of the proposed improvements. McDonald died shortly after Roland's death and the representative of his estate submitted a bill of from $50 to $75 to defendant for McDonald's services in preparing the sketches. This bill was paid by defendant. It is argued that as a matter of law either the detriment suffered by defendant by reason of the payment of the architect's bill or the contemplated benefit by way of increased rentals which would have inured to Roland was sufficient consideration for the option.

Plaintiff, on the other hand, contends that the evidence as to the consideration for the option is not conclusive and that the most that can be argued is that it created a conflict with the presumption arising under the provisions of section 2235 of the Civil Code. That section provides: “All transactions between a trustee and his beneficiary during the existence of the trust, or while the influence acquired by the trustee remains, by which he obtains any advantage from his beneficiary, are presumed to be entered into by the latter without sufficient consideration, and under undue influence.” It cannot be successfully contended that the presumption of no sufficient consideration provided by section 2235 does not apply, for by section 2219 of the Civil Code it is provided that “everyone who voluntarily assumes a relation of personal confidence with another is deemed a trustee.” That defendant obtained an advantage from Roland is apparent, for the option, if valid, assured him an additional four years' rental which, he operating as The Cat and the Fiddle Company, would otherwise be compelled to forego upon the termination of the existing lease.

Unless the presumption as to the insufficiency of the consideration can be said to be dispelled as a matter of law, we must hold that the evidence afforded by such presumption is sufficient to support the judgment even though there be evidence to the contrary. Pitt v. Southern Pacific Co., 121 Cal.App. 228, 233, 9 P.2d 273. Defendant's contention that the presumption as to the insufficiency of the consideration was dispelled as a matter of law must be determined in the light of the following principles as enunciated in Engstrom v. Auburn Auto Sales Corp., 11 Cal.2d 64, at page 70, 77 P.2d 1059, at page 1063: “Generally speaking, however, it may be said that a presumption is dispelled when a fact which is wholly irreconcilable with it is proved by the uncontradicted testimony of the party relying on it or of such party's own witness, when such testimony was not the product of mistake or inadvertence. Smellie v. Southern Pac. Co. [212 Cal. 540, 553, 299 P. 529]; Mar Shee v. Maryland Assur. Corp., 190 Cal. 1, 8, 210 P. 269; Pitt v. Southern Pac. Co., 121 Cal.App. 228, 232–235, 9 P.2d 273; Peters v. California Bldg.–Loan Ass'n, 116 Cal.App. 143, 154, 2 P.2d 439; Fortier v. Hogan, 115 Cal.App. 50, 56, 57, 1 P.2d 23. However, a presumption is not dispelled by evidence produced by the opposite party but remains as evidence in the case sufficient to support a judgment, except in rare cases in which the rebutting evidence is absolutely conclusive. Smellie v. Southern Pac. Co., supra.”

The sole evidence tending to rebut the presumption as to the insufficiency of the consideration is found in the testimony of defendant and his witnesses. Since defendant is the party against whom the presumption operated, the rebutting evidence must be absolutely conclusive before it can be held that the presumption is dispelled as a matter of law. Far from being conclusive, the character of the evidence relating to the alleged consideration is weak and unsubstantial. The most that can be said for such evidence is that it shows that Roland suggested that an architect be employed to check McDonnell's figures on the proposed improvements. Such testimony cannot be construed as a representation or promise on the part of Roland that she would grant the option if defendant employed an architect. Considered in its most favorable light, the testimony merely created a conflict in the evidence which was for the trial court to determine. The issue having been determined against defendant on conflicting evidence, an appellate court will not interfere.

Defendant asserts that under the doctrine of promissory estoppel the judgment must be reversed. He relies on the proposition that where one has led another to incur substantial detriment in reasonable reliance on his representation of fact, he cannot thereafter deny the truth of the representation in litigation between the two. That such doctrine is inapplicable is evident from the fact that Roland did not promise that she would grant the option upon the condition that defendant employ an architect. Roland was the owner of the land and defendant was the owner of an interest in the building erected thereon and of its equipment. By adopting the method of a lease from Roland to defendant and a sublease from defendant to McDonnell, with the provision that the percentage of the gross receipts payable as rent in the sublease be approximately double the percentage fixed in the original lease, Roland and defendant put themselves in position for each to receive approximately one–half of the rent paid by the tenant in possession. In handling the combined property defendant acted for himself and as general agent for Roland but each in effect was leasing property to McDonnell. When Roland executed the option in question and defendant accepted it they together took a step in the direction of an extension of the tenant's lease, a step which was rendered ineffective by the death of Roland. When defendant at Roland's suggestion engaged in the services of the architect who checked the proposed improvements he was acting in the interest of Roland and of himself. If he had desired contribution from Roland for part of the $50 or $75 paid to the architect he could have filed a claim with the administrator of Roland's estate. It follows that the supposed detriment suffered by defendant in hiring the architect could not have been incurred in reasonable reliance upon any representation or promise made by Roland.

The judgment is affirmed.

WOOD, Justice.

We concur: MOORE, P.J.; McCOMB, J.