AMERICAN ENTERPRISE v. VAN WINKLE

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District Court of Appeal, First District, Division 1, California.

AMERICAN ENTERPRISE, Inc. v. VAN WINKLE.

Civ. 14749.

Decided: November 06, 1951

Donahue, Richards, Rowell & Gallagher and George E. Thomas, all of Oakland, for appellant. Mancuso, Herron & Winn, San Francisco, for respondent.

This case involves a controversy between American Enterprise, Inc. and Walter S. Van Winkle. American Enterprise, Inc. owned certain improved real property in Oakland, which was leased to Van Winkle for a term expiring in June, 1950. The lease contains various provisions defining the rights of the parties in the event the leased premises should be condemned by the city during the term of the lease. Among other things, it provided that, in such event, the landlord, subject to certain conditions, could terminate the lease, and that the fixtures and personal property installed by the tenant could be bought by the landlord as provided in the lease. On May 9, 1946, while the lease still had over four years to run, American Enterprise, Inc. conveyed its entire interest in the property to Sam Neider, its president. Van Winkle, however, continued to pay rent to American Enterprise, Inc. No contention is made that this transfer to Neider was other than a bona fide transfer, nor is it contended that the corporation retained any interest in the property after such conveyance or that Neider was the alter ego of the corporation. In 1947 the city authorized the condemnation of the property, and other surrounding areas, as part of a public improvement. The city threatened to institute a condemnation suit against the property here involved and, by reason of such threat, Neider conveyed the property to the city on December 8, 1947. No proceeding was ever instituted to condemn this parcel, Neider deciding to sell under the threat of the filing of such an action. On January 3, 1948, American Enterprise, Inc., purporting to act under the ‘condemnation’ provisions of the lease, and as landlord, served upon Van Winkle a notice, dated December 31, 1947, to surrender possession within thirty days. The notice also purported to comply with those provisions of the lease in reference to the fixtures and personal property, and demanded a bill of sale of such property. Van Winkle refused to comply with this notice. On January 6, 1949, this action was instituted by American Enterprise, Inc. against Van Winkle. Neither Neider nor the City of Oakland is a party to this action. The action is for declaratory relief, and seeks a judgment declaring the rights and duties of American Enterprise, Inc. and Van Winkle under the lease. The two principal issues were whether the lease had been lawfully terminated, and whether AmericanEnterprise, Inc, was entitled to the fixtures and personal property installed by the tenant.

The trial court concluded that the lease was terminated by the notice dated December 31, 1947. This conclusion is based upon findings to the effect that although the property was not taken in condemnation it was sold to the city under threat of condemnation. The court concluded that this was such a sale as to give the landlord the right to terminate the lease under its terms. These findings and conclusions were, of course, favorable to American Enterprise, Inc., and in accordance with its contentions. The court also concluded, however, that Van Winkle was the owner of the fixtures and personal property. The judgment recites in paragraph 1 that the lease was terminated by the notice dated December 31, 1947, and that plaintiff (American Enterprise, Inc.) ‘was, since that date, and ever since has been, entitled to the possession of said premises.’ In paragraph 2 it is recited that ‘Van Winkle is the owner of and entitled to the possession of the bowling alley equipment, furniture and fixtures, and all of the personal property in and about said premises.’ From the second paragraph of this judgment American Enterprise, Inc. appeals. This notice is entitled ‘Notice of Appeal from Part of Judgment,’ and states that the appeal is taken from ‘that particular part of the judgment * * * rendered in the above entitled Court on the 12th day of April, 1950, to-wit: ‘2. That defendant Walter S. Van Winkle is the owner of and entitled to the possession of the bowling alley equipment, furniture and fixtures, and all of the personal property in and about said premises.’ Plaintiff does not appeal from other than the foregoing part of said judgment.' Van Winkle does not appeal from any portion of the judgment.

Because of the limited nature of the appeal we are faced with a most unusual situation. American Enterprise, Inc. is the appellant. It was the former owner of this property. Under date of May 9, 1946, it deeded the property to Sam Neider. Thereafter, so far as appears from the record, it had no further rights in the property, although it may have still been liable to Van Winkle under the covenants of the lease. In December, 1947, Neider conveyed to the city. But the trial court provided in its findings, conclusions, and judgment that the notice to terminate given by American Enterprise, Inc. and dated December 31, 1947 (that company then not being the owner of the property and presumably having no rights therein), terminated the lease, and that after that date American Enterprise, Inc. was and is entitled to possession of the property. Thus, a corporation, after it conveyed its interests in the property, is determined to be entitled to the possession of the property as against its tenant. No one appeals from that portion of the judgment. Right or wrong that portion of the judgment has long since become final. That portion of the judgment is necessarily predicated on the findings and conclusions to the effect that the sale to the city was such a sale as was contemplated by the condemnation provisions of the lease. It was for this reason that American Enterprise, Inc, appealed only from the portion of the judgment relating to the personal property. Its theory is that, since it has now been finally determined that the lease was terminated by the sale to the city, such findings also necessarily determined that the provisions of the lease in reference to the sale of the fixtures and personal property to the landlord, also made dependent on condemnation, came into play, and that the trial court's determination as to the personal property and fixtures is entirely inconsistent with its determination in reference to the termination of the lease. The respondent—Van Winkle—seeks to sustain the judgment in reference to the fixtures and personal property by attacking the part of the judgment (from which he does not appeal and which is final) to the effect that the lease was terminated by the sale to the city under the condemnation provisions of the lease. This, of course, the respondent cannot do.

It would appear that, on their face, and unexplained, the two portions of the judgment are inconsistent with each other. If there was a condemnation within the meaning of those provisions of the lease relating to its termination, then there would appear to be a condemnation within the meaning of those provisions of the lease relating to the sale to the landlord of the fixtures and personal property in the event of a condemnation. Certainly, no argument has been even suggested as to why a ‘condemnation’ for purposes of termination would not also be a ‘condemnation’ for the purposes of the sale of the equipment. The findings and conclusions do not disclose the theory upon which the court held that Van Winkle was the owner and entitled to the possession of the fixtures and personal property, after it had held that a condemnation within the meaning of the lease had taken place. Thus it would appear that the portion of the judgment appealed from is inconsistent with the portion of the judgment that has long since become final.

The parties argue at some length over whether the ‘sale’ provisions of the lease were fair and equitable and enforceable. There is no hint in the findings and conclusions that the trial court adopted these factors as the basis of its decision. This was an action for declaratory relief. In such an action it is the duty of the trial court to make a declaration of the rights and duties of the parties ‘including a determination of any question of construction or validity arising under such instrument or contract.’ § 1060, Code of Civ.Proc. In an action for declaratory relief brought to secure a construction of a document the trial court in its findings should fully disclose the basis of its construction. Otherwise the appellate court is left without any guide that might explain what otherwise appears to be inconsistent provisions of the judgment. Inasmuch as the trial court construed the word ‘condemnation’ to include the threat of condemnation in one part of the lease, if it concluded that such construction did not apply to another part of the lease it should have disclosed in its findings the theory upon which such conclusion rests. The two portions of the judgment are either inconsistent, or there was a failure to find on a material issue. In either event, a reversal is called for.

But that is not the only inconsistency that appears in the findings. It is there found that American Enterprise, Inc. leased the premises to one Russell in 1939, for a period of ten years, eight and one-half months; that in 1944 Russell assigned the lease, with the consent of the lessor, to Van Winkle. Thus, at that time American Enterprise, Inc. owned the property subject to the lease, and Van Winkle held under the lease. Then, it is found that ‘on May 9, 1946, plaintiff [American Enterprise, Inc.] granted to one Sam Neider all of plaintiff's right, title and interest in and to the real property involved herein.’ Thus, after that date, it would appear that American Enterprise, Inc. no longer had any interest in the property. Van Winkle, in his answer, set up as a special defense that American Enterprise, Inc. had voluntarily divested itself of all right, title and interest in and to the property, including the lease. The findings fail to disclose how one who is not the owner of a lease, who pleads and proves that it is not such owner, can be declared, as against a tenant, to certain rights under the lease. It may be that it was the theory of the trial court that, because it appears that the tenant has continued to pay rent to American Enterprise, Inc. since the date of the conveyance and after it knew of such conveyance, the tenant is estopped to question the title of his landlord. But, assuming that an estoppel could exist under such facts, a point we do not decide, there is no finding on that issue. Normally, of course, a grant deed, conveys not only the land, but all interests therein. Civil Code, §§ 1105 and 1106; Resh v. Pillsbury, 12 Cal.App.2d 226, 55 P.2d 264; Taylor v. Avila, 175 Cal. 203, 165 P. 533. It may be that the trial court concluded that the fixtures and personal property belonged to Van Winkle because it believed that American Enterprise, Inc. had conveyed away all of its rights under the lease. Such a theory might sustain the judgment. But, in any event, if it was the theory of the trial court that American Enterprise, Inc. had no interest, by reason of the conveyance, it should have set forth such holding in its conclusions of law. Such a theory would, of course, be totally inconsistent with the first part of the judgment determining that American Enterprise, Inc., by its notice dated December 31, 1947, not only terminated the lease but thereafter became entitled to the possession of the premises. Perhaps the trial court believed that Neider was the alter ego of the corporation. Such was neither pleaded nor found.

Thus we are faced with a situation where the portion of the judgment appealed from apparently is inconsistent with a portion of the judgment that has long since become final. No explanation of such apparent inconsistency appears in the findings, conclusions or judgment. On the other hand, there is a possibility that respondent can sustain the judgment on a theory not found or discussed in the findings, conclusions or judgment. In such an action it is incumbent upon the trial court, where the legal right of the plaintiff to maintain the action is challenged, to pass upon and make findings on that issue. Where a trial court interprets the same words in a contract differently in different parts of the contract the trial court is required to explain such apparent inconsistency in its findings. In the instant case the trial court has failed to find on basic, important and material issues. This requires a reversal.

The portion of the judgment appealed from is reversed. In the interests of justice it is ordered that each side bear its own costs on appeal.

PETERS, Presiding Justice.

BRAY and FRED B. WOOD, JJ., concur.

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