WEINER v. ROOF

Reset A A Font size: Print

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

WEINER v. ROOF et al.†

Civ. S. C. 13.

Decided: March 12, 1937

Chandler, Wright & Ward, of Los Angeles, for appellant. Don Marlin and Isador Gralla, both of Los Angeles, for respondent.

Appeal by Citizens National Trust & Savings Bank of Los Angeles from a judgment in plaintiff's favor in an action for rescission of a contract for the purchase of real estate, and for the recovery of money paid thereon.

A brief outline of the facts will suffice for the purposes of this opinion. J. B. Roof, Inc., a corporation, agreed to purchase from one Connolly and to subdivide and sell a parcel of land. Title was conveyed to the Farmers & Merchants National Bank of Los Angeles as trustee under a subdivision trust, Connolly and the Roof company being the beneficiaries of the trust. The Roof company acted as sales agent and the trustee executed all contracts of sale in its own name and collected the sale prices of the lots. Plaintiff agreed to purchase a lot for the sum of $3,500, the purchase being evidenced by a contract between the trustee and plaintiff. This contract was subsequently assigned by the Farmers & Merchants Bank of Los Angeles to appellant Citizens National Trust & Savings Bank of Los Angeles, and thereafter plaintiff paid to the latter bank, as a part of the purchase price, the sum of $1,890. He later rescinded his contract upon the grounds of fraud and failure of consideration. His right to rescind was upheld by the court and is not questioned upon this appeal. Plaintiff was awarded judgment against J. B. Roof and J. B. Roof, Inc., jointly and severally in the sum of $3,807.01, and against Citizens National Trust & Savings Bank, as trustee, in the sum of $1,890. These were the only defendants. The appeal is by the bank from this portion of the judgment; and the other defendants do not appeal.

Citizens National Bank was not sued as trustee. It did not in its answer allege that it had acted as trustee nor did it receipt for the moneys paid to it in the capacity of trustee. There was no evidence that it was substituted for the Farmers & Merchants National Bank as trustee nor was the contract assigned to it in a trustee capacity. The court found as a fact that in making the sale to plaintiff, J. B. Roof, Inc., acted as the agent of Citizens National Trust & Savings Bank and Farmers & Merchants National Bank of Los Angeles. Nevertheless, the finding of the court was that the bank received the money paid to it as trustee, and judgment went against it in that capacity.

The briefs are devoted largely to a discussion of the question of the individual liability of Citizens National Trust & Savings Bank, and to the sufficiency of the evidence to support the finding that the Roof company acted as agent of both banks. It is assumed by the parties that the court found that the Roof company was agent of both banks in their individual, as distinguished from their trustee, capacities. If this is a correct construction of the findings as a whole, it is apparent that the finding on the question of agency went one way and the judgment went the other, for appellant was absolved of liability in its individual capacity, notwithstanding the finding that the representations were made by its agent. We would be unable to reconcile the finding that the Roof company acted as agent for both banks in their individual capacities with the finding that Citizens National Trust & Savings Bank received the sum of $1,890 as trustee, nor could we reconcile the judgment with the former finding. Plaintiff, however, is not appealing, and apparently is satisfied with the judgment against appellant in its capacity of trustee.

We proceed to an examination of the basis of the judgment against appellant as trustee. Certain fundamental facts are established by the record: J. B. Roof, Inc., acted as agent in the sale of the property; plaintiff's purchase was induced by the agent's fraud; appellant received the sum of $1,890, and some one was the beneficiary of these payments. Although the court found that the sums paid to appellant were received in its trustee capacity, the nature of the trust was not established by the findings nor was it shown by the evidence. Whatever may have been the terms of the trust, there were beneficiaries thereof and they would necessarily be the persons who were entitled to receive, eventually, the proceeds from sales of lots in the subdivision. The necessary implication from the finding that appellant received the money in the capacity of trustee is that the sum was received for the use and benefit of other persons, although there is no finding which identifies such persons. Appellant did not specify in its bill of exceptions, nor upon this appeal does it urge, the insufficiency of the evidence to support the finding that it received the sum of $1,890 in the capacity of trustee.

The judgment must be construed as one requiring the payment to plaintiff of the sum of $1,890 from funds held by appellant for the use and benefit of the person or persons who were entitled to receive the proceeds of the sales of lots in the subdivision. It is our conclusion, even in view of the confusing state of the record, that the judgment must be affirmed.

The law which governs the case is found in Restatement of the Law, Agency, §§ 259, 260, as set out and approved by the Supreme Court in Speck v. Wylie, 1 Cal.(2d) 625, 36 P.(2d) 618, 619, 95 A.L.R. 760, as follows: “Section 259. ‘A transaction into which one is induced to enter by reliance upon untrue and material representations as to the subject–matter, made by an agent entrusted with its preliminary or final negotiations, is subject to rescission at the election of the person deceived. * * * Comment: b * * * The rule stated in this section applies although the other party knows or has reason to know that the agent is not authorized to make the statement. By contract with the principal, however, he may agree that the principal is not to be liable because of unauthorized statements of an agent, as stated in section 260. * * * Sec. 260. * * * (1) A principal may, by contract with another, relieve himself of liability in deceit for prior or subsequent frauds of an agent to such other. (2) A contract obtained by an agent through fraudulent misrepresentations of facts may be rescinded by the other party although it provides that it shall not be affected by representations not contained therein.’ Without attempting further elaboration we therefore announce that we are in accord with the above statements of the rule which will, all other things being favorable to the complaining party, allow him to rescind and to pursue the principal far enough to secure a return of the consideration paid. But an action for fraud and deceit will not be allowed him under such conditions.”

Appellant relies upon the rule that by contract a principal may be released from liability because of unauthorized statements of an agent, contending that plaintiff by contract did release Farmers & Merchants National Bank, and that by reason thereof appellant also was released from liability. The writings relied upon are found in the contract, as follows: “17. While the party of the first part is in this instrument designated the Seller, it is not to be inferred therefrom that it is the beneficial owner of the property. It is understood and agreed by the party of the second part that the party of the first part simply holds legal title to said premises for the purpose of protecting the beneficial owner of the property, should party of the second part fail to perform its covenants herein contained, and also for the purpose of seeing that the party of the second part receives a clear and unincumbered title to the property which the purchaser has agreed to buy, upon fulfilling all the terms of this contract, and that no party engaged in selling said property is the agent of the party of the first part, and the party of the first part is not to be bound, or in any way held responsible for any statement or representation made by any such selling agent engaged in selling said property,” and in a separate writing signed by plaintiff, reading as follows: “I am signing the attached contract covering Lot 109 A & B Block Tract 10146 after a thorough understanding of its conditions. I agree that the seller or its agents are in no manner bound by promises not contained therein nor have they made any verbal promises of resale or other representations.”

It may be assumed for the purposes of this decision (disregarding for the moment the finding of agency) that the provisions quoted should be given the effect of releasing Farmers & Merchants National Bank, and appellant as well, from individual liability for the fraud of the agent. But no greater effect than this could be given to the purported release. The writings express no intention to release any one but the party of the first part under the contract, Farmers & Merchants National Bank. Even if the release were good as between plaintiff and the beneficiaries of the trust, as to liability for damages, it would not be good in an action to recover moneys paid to or for the use of the principals, after rescission of the contract procured by the fraud of the agent. Speck v. Wylie, supra; Wedge v. Security. First Nat. Bank, 219 Cal. 113, 25 P.(2d) 411; Curtis v. Title Guarantee & Trust Co., 3 Cal.App.(2d) 612, 40 P.(2d) 562, 42 P.(2d) 323; Lozier v. Janss Investment Co., 1 Cal.(2d) 666, 36 P.(2d) 620; Greenberg v. Du Bain Realty Corp., 2 Cal.(2d) 628, 42 P.(2d) 628. But the fact that neither bank was held individually liable renders it unnecessary to consider the effect of the release as affecting the individual liability of the banks, nor can the release be given effect as between plaintiff and the real principals in the transaction, who are the beneficiaries of the trust. The release does not purport to apply to them, nor does it purport to release the Farmers & Merchants National Bank in a trustee capacity, and if it did, it would be ineffective under the doctrine of the cases we have cited.

Strictly speaking, there is no finding that the Roof company was the agent of the beneficiaries of the trust, but this omission is not fatal to the judgment. The finding that the Roof company was the agent of appellant and that appellant received the sums paid to it in the capacity of trustee, will be construed, in support of the judgment, as a finding that the Roof company was the agent of appellant in its capacity of trustee. This is the logical construction and the only one which is consistent with the evidence. We find in the record the declaration of trust, executed by the Farmers & Merchants National Bank, in which certain beneficiaries are named. The terms of the declaration sufficiently show that J. B. Roof, Inc., was the agent of the beneficiaries in the sale of the lots in the subdivision. Appellant does not dispute this fact but on the contrary tacitly admits it, contending only that the Roof company was not the agent of either bank in its individual capacity.

As far as the record discloses, the sums paid by plaintiff to appellant may still remain in the latter's possession, as trustee for the benefit of those who are entitled to receive the selling price of the lots. Plaintiff is entitled to have his money returned by those who have been unjustly enriched by its receipt. Such, as we understand it, is the theory of the judgment, which limited appellant's liability to that of a trustee. The judgment against it in that capacity was a proper one if, as it contends, it acted throughout merely as trustee. Gist v. Security Trust & Savings Bank, 218 Cal. 581, 24 P.(2d) 153. We do not undertake to define the nature or the limits of appellant's liability as trustee. Appellant does not criticize the judgment because of the absence from the findings and judgment of any declaration as to the nature of the trust, nor does it seek a reversal upon the ground that the judgment is not more specific. The exact nature and extent of appellant's liability as trustee will appear in proceedings in which the facts will be fully disclosed to the court, from which the court will be able to determine what funds, if any, belonging to those who profited by the wrong perpetrated upon plaintiff, should be applied in satisfaction of the judgment.

As defendants J. B. Roof and J. B. Roof, Inc., did not appeal, the question is not before us whether the award against them, which is apparently based upon damages for fraud, is inconsistent with the judgment against appellant in rescission. Appellant does not raise the point of inconsistency in the judgment as affecting the award from which it has appealed.

The judgment is affirmed.

SHINN, Justice pro tem.

We concur: YORK, Acting P. J.; DORAN, J.

Copied to clipboard