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District Court of Appeal, Third District, California.


Civ. 5474.

Decided: December 11, 1936

Keyes & Erskine, of San Francisco, Butler, Van Dyke & Harris, of Sacramento, and Rich, Weis & Carlin, of Marysville, for appellant. J. Oscar Goldstein, of Chico, DeLancey C. Smith, of San Francisco, and Ray Manwell, of Marysville, for respondents.

This is a third appeal growing out of the transactions between A. P. Hunt and Gladys G. Hunt, his wife, who will be herein referred to as the Hunts, and United Bank & Trust Company of California, a corporation, the predecessor of Bank of America National Trust & Savings Association, to be referred to hereafter as the bank.

It is not necessary to again recite the facts applicable to the issues here presented, as a statement of the dealings between the parties to this appeal will be found in the case tried in Butte county (Hunt v. United Bank & Trust Co., 210 Cal. 108, 291 P. 184), wherein a judgment entered in favor of the Hunts upon its complaint was affirmed and the judgment entered in favor of the bank, pursuant to the action of the trial court in granting defendant's motion for a judgment notwithstanding the jury's verdict, upon its counterclaim was reversed, and judgment ordered in plaintiffs' favor upon their counterclaim without further proceedings in the trial court; and in an appeal taken from the superior court of the county of Yuba, wherein, upon the issues raised by the cross–complaint the court granted a nonsuit against the Hunts, and which in United Bank & Trust Co. v. Hunt, 1 Cal.(2d) 340, 34 P.(2d) 1001, was returned for further proceedings upon the issues presented by the counterclaim and cross–complaint, whereupon judgment was rendered in favor of the Hunts, and from that judgment this appeal is now taken.

Among the many points presented by the bank for consideration is the contention that the judgment in the Butte county case was res judicata with respect to the claim of wrongful foreclosure of the trust deed. The bank claims that as the pleadings in the Butte case raised the issue of wrongful foreclosure there is a conclusive presumption that it was there litigated. Price v. Sixth District Agricultural Association, 201 Cal. 502, 258 P. 387; Elm v. Sacramento Suburban Fruit Lands Co., 217 Cal. 223, 17 P.(2d) 1003. However, an examination of the record and the opinion of the first appeal (210 Cal. 108, 291 P. 184, 187) clearly indicates all concerned considered the action solely as one “to recover damages in the sum of $20,000 from defendant [bank] by reason of the loss of the crop,” and elsewhere in the same opinion it was said:

“The trial proceeded on the theory that defendant [bank] was obligated to furnish the amounts as contended for by plaintiffs, defendant's defense being merely that certain advancements had been made which exhausted the credit.”

In the first appeal taken in this Yuba county case it became necessary to construe the pleadings in the Butte county case and it was there contended that the prior judgment from that county was a bar, but the Supreme Court said in answer to that claim [1 Cal.(2d) 340, 34 P.(2d) 1001, 1004] that the issue decided in the Butte county case was the single issue of damages through loss of a rice crop by reason of a breach of contract, and the bank waived its right to raise the question of res judicata by its opposition to defendants' motion in the Butte case to include therein the various causes of action set forth in the cross–complaint, and the denial of that motion was tantamount to an express determination by the court with the consent of opposing counsel to reserve those issues for future adjudication. The bank further claims that the record on this appeal is different from the former appeal from Yuba county and therefore the doctrine of the law of the case does not apply, but the only difference is the introduction of the judgment roll in the Butte action which was introduced only to show that the question of value was attempted to be injected into the former trial, but such reference does not vary the record upon the principal issue here before us, that is, as to the conduct of the bank in attempting to limit the issues to one item of damage only, and even as to value it was admitted only over the objection of the bank, and the court said in United Bank & Trust Co. v. Hunt, supra:

“Counsel who were successful in preventing the consolidation of the issues cannot be heard later to object to a trial of the related matters upon the ground of res judicata. The course pursued by the court and counsel in the Butte county case was tantamount to an express determination on the part of the court with the consent of opposing counsel to reserve the issues involved for future adjudication. Asher v. G. F. Stearns, etc., Co., 241 Ky. 292, 43 S.W. (2d) 1012. Litigants cannot successfully assume such inconsistent positions.”

It is the claim of the bank that, having recovered damages for the breach of the contract, the Hunts cannot now in a second action recover further damages for the breach of the same contract. However, as before pointed out, by the actions of this appellant the issues in the Butte county case were definitely limited to one item of damages, that was for failure to supply to the Hunts sufficient money with which to raise a crop, and that was the only matter directly adjudged. The bank, having in the former action treated the contract between itself and the Hunts as divisible, is now estopped to assert the contrary view to the detriment of the Hunts.

It is also claimed that the bank did not violate its promise to postpone the foreclosure of the deed of trust. The Supreme Court in its opinion on the appeal in the Yuba county case said:

“In April of that year [1924] the parties met and adjusted their financial relations, which resulted in the execution of the following instruments: * * *

“(4) A written agreement whereby the bank was to make the future advance referred to; to suspend foreclosure under the trust deed for a reasonable time.”

It will thus be seen that the agreement to refrain from foreclosure was an agreement to suspend foreclosure for a reasonable time, and what that reasonable time was became a question of fact for the jury. It is also a matter of evidence that the rice crop of 1924 yielded a very substantial sum, with which money the Hunts could have carried out their part of the contract so that foreclosure would have been prevented, and therefore it is apparent that, as a result of the loss of the rice crop through fault of the bank, the damage to the Hunts occurred. In this connection the Supreme Court in the case of Hunt v. United Bank & Trust Co., supra, said:

“Because of its [the bank's] unjustified act in refusing to advance the money which defendant [the bank] had obligated itself to do, plaintiffs [the Hunts] were in no position to acquire the necessary funds, for they were at the end of their financial resources.”

And later, in the same opinion, the court said:

“The loss of the prospective profits was the natural and direct consequence of the breach, plaintiffs [the Hunts] being in no financial position to borrow elsewhere, they having been stripped of all control of their property by defendant bank to secure it for the very advances it had obligated itself to furnish.”

The bank, therefore, having terminated the contract, the Hunts were released from further obligation upon their part. In support of this rule the court relied upon the cases of McConnell v. Corona City Water Co., 149 Cal. 60, 85 P. 929, 8 L.R.A.(N.S.) 1171; Walker v. Price, 163 Cal. 617, 126 P. 482; Alderson v. Houston, 154 Cal. 1, 96 P. 884.

An action in ejectment had also been filed by the bank against the Hunts to recover the possession of the home place. To this the Hunts filed an answer, and thereupon, upon default of defendants, a judgment was entered holding the bank was the owner and entitled to the possession of the property described in the complaint. It is the claim of the bank that the judgment estopped the Hunts from asserting that the foreclosure of the deed of trust was wrongful. However, as said in 9 California Jurisprudence 1020, “There is no estoppel as to an equitable defense not set up.”

The precise question here presented was before the Supreme Court in Ayres v. Bensley, 32 Cal. 620, where the court held that a defendant in an action in ejectment is not bound to set up or litigate new matter constituting a cause of action in his favor.

Criticism is made of certain instructions, but if what we have already said is correct, no fault can be found with the instructions. An instruction was given in which, after summarizing the first cause of action of the Hunts covering the loss of the rice crop, the court told the jury that the Hunts had been compensated for this loss in their action in Butte county and therefore they could not recover any further damages on this claim, but the instruction sets up the three other breaches alleged, namely, failure of the bank to lease the Adobe ranch to Bayless; foreclosure of the trust deed, and the conversion by the bank of the personal property covered by the chattel mortgage. We find no fault with the instructions complained of and they are consistent with the theory upon which the case was tried, and in accordance with the principles herein set forth.

We might discuss at length the various other points urged by the bank, such as the claim that the testimony shows without dispute the bank did not violate its promise to postpone the foreclosure of the deed of trust; that as a matter of law the bank did continue the sale for a reasonable time and therefore did not breach the contract; that in other particulars the bank performed its full duty toward the Hunts, and several other alleged errors, and we have noted the specifications, but to comment upon them would extend this opinion unduly. All we can say is we have carefully studied and examined the points and the authorities cited in support thereof, but do not find they carry sufficient weight for this court to change the conclusions reached by the trial court.

The judgment is affirmed.