GHIRARDELLI v. PENINSULA PROPERTIES CO

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

GHIRARDELLI v. PENINSULA PROPERTIES CO.*

Civ. 10959

Decided: January 26, 1940

Carlyle Miller, of San Francisco, for appellant. Oliver Dibble and Samuel I. Jacobs, both of San Francisco, for respondent.

The trial court rendered a judgment against the defendant on a common count to recover a balance due for goods sold and delivered. From that judgment the defendant has appealed.

It makes several different points but in view of the conclusions we have reached on its second point it will not be necessary to discuss the others. That point is that by virtue of a supplemental agreement the plaintiff waived his rights to maintain an action against the defendant in the form of the one he has pleaded.

On August 1, 1930, plaintiff's assignor, hereinafter called the seller, and the defendant, executed an ordinary conditional sales contract for the sale and delivery of the furniture and furnishing of the Hotel Rio Del Mar. Of the purchase price, $31,440.55, the sum of $780 was paid in cash and the balance was evidenced by four promissory notes (1) for $3,660.55, payable October 1, 1930; (2) $6,000, payable December 1, 1930; (3) $6,000 payable in monthly instalments of $500 each; and (4) $15,000, payable in monthly instalments of $1,000 each. The provisions of said notes are not set forth in the record. As both parties have called the document first mentioned the agreement, we will do so, and by the use of the words “conditional sales agreement” we will be understood as referring to the first document.

A controversy as to performance by the seller arose. The record shows that fact but does not show the details. On June 16, 1931, a supplemental agreement was executed by the parties. It recites that the note first mentioned had been paid. It provides for certain weekly payment of principal and interest on notes (2) and (4) above mentioned. It also contains provisions settling the controversy regarding breaches by the seller. The document contains nothing else purporting to modify the original contract. On February 26, 1932, a second supplemental agreement was executed. After reciting that on January 1, 1932, there was due $11,845 and that the parties desired to provide a method of payment, the agreement designated Harold E. Haven as a trustee. Other provisions material to the present controversy were as follows:

“Now, Therefore, the parties hereto do agree as follows:

“1. The Second Party agrees to forthwith transfer and assign to First Party all membership notes of the Rio Del Mar Country Club, upon which the makers thereof are in default in the payment of any installment for a period of thirty (30) days or more and hereafter to transfer and assign all such notes as soon as the makers thereof shall have defaulted in the payment of any instalment for a period of thirty days. * It is further understood and agreed that there shall be transferred by the aforesaid assignment a minimum of three hundred (300) notes.

“2. It is agreed that said Haven shall be employed to collect all of said notes and shall have supervision over the collections of said Ayer and shall receive therefor twenty-five (25%) per cent of all sums collected, which percentage, in the case of collection by Ayer, shall include the percentage paid to Ayer. Said Haven is authorized to deduct said commissions from the sums so collected and also to deduct all moneys advanced or paid for court costs, service of papers, credit reports, sheriff's fees and private investigations and costs for the purpose of locating property subject to attachment or execution or levying thereon.

“3. All moneys in the hands of said Harold E. Haven after the aforesaid deductions, shall be paid by him to First Party and said First Party agrees to look solely to the moneys so received as long as said Harold E. Haven continues to collect said notes. In this connection it is understood and agreed that if Harold E. Haven shall deliver a written opinion to the Second Party that he is unable to collect any further sums on the notes so assigned, shall fully account for all moneys collected and with the consent of First Party shall return all uncollected notes to Second Party, then First Party shall be restored to all rights it has under the original conditional sales agreement as to any moneys that may then be due to it.

“4. It is further agreed that if the sum of Eleven Thousand ($11,000.00) Dollars is not paid through the aforesaid collections or by second party prior to March 1st, 1933, then upon a full accounting and the return of all uncollected notes, the first party shall be restored to all rights it has under the original conditional sales agreement as to any moneys that may then be due to it.

“5. The First Party further agrees that if and when there has been collected upon the aforesaid assigned notes a sum sufficient so that after the aforesaid authorized deductions there remains a balance payable to it of Eleven Thousand ($11,000.00) Dollars, that it will execute a bill of sale of the aforesaid furniture and furnishings and release the Second Party from all obligations on the aforesaid conditional sales agreement.” (Italics ours.)

No accounting was had until January 22, 1937. On that date Harold E. Haven rendered an account showing a balance due plaintiff, January 1, 1937, of $5,680.29. That account also shows that on May 30, 1932, the balance due had been reduced to $10,916.45. The seller assigned its claims to the plaintiff and he filed his complaint pleading a common count for a balance due on the sale of goods. He alleged said balance to be $5,680.29 as of date April 27, 1937, and for that sum he prayed for judgment, together with interest thereon, and for costs of suit, including an attorney fee.

The fifth paragraph sustains the second point made by the defendant. It is admitted that the collections made by the trustee under said agreement reduced the indebtedness below $11,000. They so reduced it May 30, 1932. After the account had been so reduced the seller should have executed “a bill of sale of the aforesaid furniture and furnishings”. Furthermore, after the date last mentioned it should have released the buyer “from all obligations on the aforesaid conditional sales agreement”; that is, the seller's remedy thereafter was on the notes it held and not on the agreement. True it is that the bill of sale and the release were never executed. But that which ought to have been done is to be regarded as done, in favor of him to whom, and against him from whom, performance is due. Civ.Code, sec. 3529. However, the plaintiff contends: “The language is ambiguous on its face and must be read with paragraphs 3 and 4. See Civ.Code, sec. 1641. The only conclusion that can be reached is that in paragraph 5 the words ‘has been paid’ should have been used instead of the words ‘remains a balance payable’. Any other construction would render the language in paragraphs 3 and 4 meaningless. Any other construction would mean that if the sum of $845.00 was paid within a year, an obligation of $11,845.00 would be discharged! The preamble of the agreement provides that the parties ‘desire to provide for a method of payment of said balance’ (recited to be $11,845.00) and not for a fraction of that balance.” That contention may not be sustained. It gives no effect to the words, “remains a balance payable to it of”. But an interpretation which gives effect should, if possible, be adopted. Civ.Code, sec. 1643. It then requires the insertion “had been paid to it”, words that are not written in the agreement. To do so would be to violate another statutory rule. Code Civ.Proc., sec. 1858. The plaintiff argues that any construction other than the one for which he contends makes the contract “meaningless”. We think not. Paragraph 3 mentions no date and is a general covenant authorizing the seller, under certain facts, to proceed under the conditional sales contract. Paragraph 4 provides that if $11,000 is not collected by March 1, 1933, the seller may return “all uncollected notes”, make a complete accounting, and be restored to all rights under the conditional sales agreement. As the debt was reduced to $10,916.45 on May 30, 1932, the contingency therein expressed never arose. Paragraph 5 is a special limitation in favor of the buyer. It provides that if and when the buyer has reduced the balance to $11,000, the seller will “execute a bill of sale of the aforesaid furniture and furnishings and release the second party (the buyer) from all obligations under the aforesaid conditional sales agreement”. As so construed every paragraph is lawful, operative, definite, reasonable and capable of being carried into effect.

In opposing the foregoing interpretation the plaintiff asserts that the interpretation puts him in the position of releasing $11,000 of the debt owing to him. That is a strained construction. On the basic agreement either an action for the price of the goods sold or an action to replevy might have been maintained under certain facts. Holt Manufacturing Co. v. Ewing, 109 Cal. 353, 42 P. 435. Paragraph 5 as above set forth clearly limits the plaintiff, under the contingencies therein named, to remedies provided by law and constituted a waiver of the rights to proceed under the terms of the conditional sales contract. Nothing to the contrary being said, the seller still retained and held three of the original notes made by the buyer and which were of the face value of $27,000. It also held three hundred collateral notes executed by the members of Peninsula Properties Company which were of the face value of $35,000. In actions brought on the notes the law provides the remedies and on that subject paragraph 5 did not purport to speak. It follows that the plaintiff's rights provided by law, as distinguished from those provided in said conditional sales agreement, remain unimpaired, that the plaintiff has released no part of its debt but has waived some remedies it theretofore had. Such facts do not show that paragraph 5 is “meaningless” if interpreted just as it is written. But, on the contrary, it would seem to be more than reasonable, from the seller's point of view, as it held nearly $50,000 in promissory notes to secure the payment of some amount less than $11,000, namely, $5,685.13—the amount sued for.

Nor can we agree with the plaintiff's contention that the agreement dated February 26, 1932, was, when read in its entirety, ambiguous. To us it seems to be free from ambiguity. But if it was ambiguous that fact does not help the plaintiff. Mr. Haven was the attorney for the seller. He wrote the agreement. If it was ambiguous the ambiguity must be resolved against the seller and its assignee. Nerski v. Hammond Lumber Co., 202 Cal. 643, 262 P. 755. A more exact statement of the plaintiff's position is that he contends the agreement contains a clause which was inserted by mistake and it should be reformed. But there was no such issue presented by the pleadings.

The plaintiff prayed for judgment for the balance of the purchase price, interest thereon at seven per cent per annum, and for attorney fees. The trial court awarded judgment in his favor as prayed. Each item contained in the judgment is attacked by the defendant. These matters if supported by anything are evidenced by the original notes. But said notes were not introduced in evidence and, apparently are still outstanding. What award they would justify the record does not disclose. But the record does show there has been a miscarriage of justice.

The judgment appealed from is reversed.

I dissent as I cannot agree with the majority opinion in the construction to be placed upon paragraph 5 of the second supplemental agreement or with the conclusion reached in said opinion that the judgment should be reversed.

At the time said second supplemental agreement was executed in 1932, the notes given by the buyer to the seller had matured and the balance due from the buyer to the seller was in excess of $11,000. The parties recited the existence of said balance and their desire to provide a method for its payment. It was then agreed that certain membership notes held by the buyer should be assigned to the seller (par. 1); that Harold E. Haven should be employed to collect said membership notes, to account for the proceeds and, after making certain authorized deductions, to pay the balance over to the seller. (Pars. 2 and 3.) The authorized deductions consisted of deductions authorized in payment for services in the agreed amount of twenty-five per cent of the collections made, and also deductions authorized in payment of certain expenses. (Par. 2.) It was further agreed that the seller would “look solely to the moneys so received as long as said Harold E. Haven continues to collect said notes” and that if Mr. Haven should deliver his written opinion to the effect that he would be unable to collect any further sums and should account for the moneys collected and return the uncollected notes to the buyer, then the seller would be restored to all its rights under the original conditional sales agreement as to any moneys then due. (Par. 3.)

Then followed paragraphs 4 and 5 of said agreement in each of which paragraphs an amount of $11,000 was mentioned. It was agreed that “if and when there has been collected upon the aforesaid assigned notes a sum sufficient so that after the aforesaid authorized deductions there remains a balance payable to it” of $11,000, the seller would execute a bill of sale and release the buyer from “all obligations on the aforesaid conditional sales agreement”. (Par. 5.) It was further agreed that if the sum of $11,000 had not been paid as provided in said second supplemental agreement prior to March 1, 1933, then upon a full accounting and return of the uncollected notes, the seller would be restored to “all its rights under the original conditional sales agreement as to any money that may then be due to it.” (Par. 4.)

When all of the provisions of said agreement are considered together, it seems obvious that the parties intended that the seller should forego temporarily his rights under the original conditional sales contract and should temporarily look solely to the net amount to be paid to it as the result of the collections made upon the membership notes under the terms of said second supplemental agreement; that the parties contemplated that the entire transaction should be completed and all rights and obligations should be extinguished in the event that the seller should receive the sum of $11,000 as therein provided; and that if the sum of $11,000 had not been received by the seller prior to March 1, 1933, then upon an accounting and the return to the buyer of the uncollected membership notes, the seller should be restored to all its rights under the original conditional sales contract as to any balance remaining due. It seems to me that any reasonable construction of paragraph 5, when read in the light of the other provisions, shows this to be the intention. The majority opinion relates the word “balance”, as found in said paragraph 5, to the balance due from the buyer to the seller. I am of the view that this construction is not in accord with the obvious intention of the parties, that it is unreasonable and that it leads to the startling conclusion that the seller agreed to part with title to the furniture and agreed to release the buyer from “all obligation” under the conditional sales contract whenever the sum of $845 might be received by the seller from Mr. Haven upon an admitted balance of $11,845 due from the buyer to the seller. It seems to me that the only reasonable construction is that the “balance” referred to in said paragraph 5 was the balance payable by Mr. Haven to the seller under the agreement “if and when there had been collected upon the aforesaid assigned notes a sum sufficient so that after the aforesaid authorized deduction” such balance equalled the sum of $11,000. In other words, the “balance” mentioned there was the net amount payable by Mr. Haven to the seller under the agreement after making his “authorized deductions” from the collections made upon the membership notes.

The remaining contentions of defendant appear to be without merit. They are practically all based upon the theory that the plaintiff did not declare upon the written contract of the parties. Defendant states that the action was “in no way grounded on the written contract”. The complaint may not be a model pleading but plaintiff alleged therein that defendant became indebted to plaintiff, as assignee of the seller, “in the sum of $5,685.12, balance due for goods, wares and merchandise sold and delivered to defendants * under and pursuant to a written contract *; that subsequent to the making of said written contract”, plaintiff's assignor assigned to plaintiff “all of its right, title and interest under said contract and all of its right to have and receive the balance of moneys due thereunder; that at all times since said assignment last above mentioned, plaintiff has been and now is the owner and holder of said contract and entitled to have and receive all moneys due and owing from defendants thereunder”. An amendment to the complaint was filed by leave of court and it declared upon “the terms of said written contract of sale above referred to, dated August 1, 1930”. It is therefore apparent that plaintiff's action was grounded upon the written contract. Defendant's plea of the statute of limitations was properly found to be unavailing as the second supplemental agreement temporarily suspended the rights of the seller under the conditional sales contract and the action was brought promptly after the restoration of said rights as provided in said second supplemental agreement.

I cannot agree that the record shows a miscarriage of justice. On the contrary, I am of the opinion that the action was properly brought for an admitted balance remaining unpaid upon the original conditional sales contract, that the judgment accorded to plaintiff only the relief to which plaintiff was entitled and that said judgment should be affirmed.

STURTEVANT, Justice.

I concur: NOURSE, P.J.