BAGDASARIAN v. GRAGNON

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District Court of Appeal, Fourth District, California.

BAGDASARIAN v. GRAGNON et al.

Civ. 3559.

Decided: May 26, 1947

L. Kenneth Say, Conley, Conley & Conley, and Phillip Conley, all of Fresno, for appellant. Frank C. Lerrigo and Galen McKnight, both of Fresno, for respondents.

Action to foreclose crop and chattel mortgage. In June, 1944, plaintiff sold defendants, for $68,000, 160 acres of farming land in Fresno County improved with vineyards, orchards, necessary tools and implements, a dwelling house and barn, together with growing crops thereon. Defendants paid $10,000 in cash and executed a trust deed on the real property to secure the payment of a note for $34,000 plus interest, payable $5,000 per annum beginning December 1, 1945. The balance of the purchase price was evidenced by a note for $24,000 payable on or before December 1, 1944, secured by a crop and chattel mortgage covering the farm implements and the 1944–1945 crops (excepting the alfalfa).

At the time this action was filed on January 1, 1945, plaintiff claimed that defendants were delinquent in their payments on the chattel mortgage and that there had been paid thereon as principal and interest the sum of $14,960.15.

Defendants admitted generally the execution of the crop and chattel mortgage, notes and trust deed, and by way of cross-complaint alleged that the note upon which this action was based was given as part payment upon the purchase price of the property; that the sale and purchase was induced by fraud on the part of plaintiff and that they were damaged in the sum of $19,987.50 on account of the sale of the real property and in the sum of $12,113.92 on account of the sale of the crops.

The trial court found in favor of defendants on the allegation of fraud and refused to foreclose the crop and chattel mortgage. It ordered damages in favor of defendants and cross-complainants in the sum of $27,916.23 and that the sum due upon the promissory note for $24,000 secured by the crop and chattel mortgage be offset against the amount of damages and that the balance of damages ($16,233.51) be credited upon and set off against the first payments of principal and interest to become due on the $34,000 promissory note and trust deed; that the crop and chattel mortgage and the note given to secure the same be declared paid and satisfied. Plaintiff and cross-defendant appealed from the judgment excepting paragraph 3 thereof, containing the provision allowing $1,700 attorneys' fees.

In April, 1944, Bagdasarian, a farmer, was approached by one Dickey, a real estate broker, about the sale of his ranch. Plaintiff signed a listing with the agent at $68,000, and also gave a statement of the crops produced upon the property in the preceding year. Dickey reduced the statement to typewriting and a copy of that statement was used in the escrow when the sale was consummated. Dickey tried to sell the property and on May 10, 1944, approached a friend of his, P. G. Gragnon (hereinafter referred to as Gragnon), a cotton merchant, on the subject. Dickey told Gragnon that the property was a first class buy and that according to the production figures furnished him by plaintiff, it appeared to him that the ranch was worth the money. Gragnon told Dickey that he did not know anything about a vineyard. Dickey gave Gragnon a duplicate copy of the production record (Exhibit B). Harry Bagdasarian, son of plaintiff, helped with the sale and he gave Gragnon figures on anticipated tonnage and value of crops for the year 1944 (Exhibit E). Later, plaintiff discussed these figures and the 1943 crop production record with Gragnon and Dickey. Dickey attempted to obtain a loan for Gragnon without success. Finally, Bagdasarian said he would make the loan himself because he was ‘not afraid of the crop * * * it would make what they represented’. On June 5, 1944, the escrow was set up and $10,000 was paid down. On June 6th, Gragnon took possession. He testified and the court found that he believed and relied upon the representations made by the two Bagdasarians and their agent Dickey; that those representations induced him to make the purchase although he did in fact make some inspection and also made some inquiry as to the value of the property. The records of the packing companies which purchased the 1943 crops grown on the property were received in evidence. A few of the discrepancies between the figures contained in the statements furnished by plaintiff and those contained in the packer's statement may be thus illustrated: Plaintiff represented that 600 tons of grapes were produced during the year 1943 when in fact, according to the production record, only 252 tons were grown on the property. Similar variances resulted as to other crops grown during that year. The vineyard produced 167 tons of grapes in 1944 at a value of $10,362, rather than the 540 tons with a revenue of $45,000, estimated by plaintiff.

There is evidence that defendants failed to farm and care for the property in a good and farmerlike manner and that the crop failure was due to this fact. However, there is evidence to the contrary and the court found in favor of defendants on this issue.

The net proceeds from the farm were turned over to plaintiff as payment on the note. It lacked $9,039.85 of meeting the obligation then due on December 1, 1944. There was evidence produced as to the reasonable or market value of the property at the time of the sale to defendants.

On November 28, 1944, plaintiff made written demand for the payment of the note in full. On December 8, 1944, his attorney also demanded payment and threatened suit. On January 5, 1945, this action was instituted. Defendants contend that they then consulted an attorney and learned that they had a legal right of redress against plaintiff and it was then when an inspection was made and they then learned the true nature and extent of the fraud. After trial, the court found that the sale was induced by fraud; that the actual and reasonable market value of the real property was $28,220.92, as against $44,000 paid for it; that the actual and reasonable market value of the growing crops was $10,362.85, as against $22,500 paid for them. Judgment was entered as heretofore mentioned.

Plaintiff now contends, on appeal, as he did during the trial and on a motion for new trial: (1) that actionable fraud was not established; (2) that defendants did not rely upon any alleged misrepresentations made by plaintiff; (3) that defendants knew, or should have known, the exact facts with regard to the property; that they inspected the farm and growing crops prior to sale and received independent advice in relation thereto; (4) that no damages have been proved and that the reasonable market value of the property at the time of the sale was $68,000; (5) that under the principles of waiver, estoppel and laches, the defendants cannot now assert fraud or claim damages; (6) that the findings are defective and erroneous; (7) that the pleadings and proof of cross-complainants were deficient in that the cross-complainants did not offer to do equity; that the court erroneously ordered that the offsets be made against the first monies due and to become thereon, and has not treated the cross-defendant equitably; and (8) that the trial court committed prejudicial error in rulings on the admissibility of evidence, particularly in relation to the attempted proof of values of the property, and that the cumulative effect of the repeated errors is as follows: ‘In Medico Legal Jurisprudence’ it is said that ‘small doses of arsenic, relatively harmless in themselves, may, by their cumulative effect, prove fatal;—although some of the errors in rulings on the evidence, if taken alone, might not require a reversal of the judgment, the cumulative effect is fatal to respondents' case.’

We will endeavor to answer plaintiff's contentions numbers 1, 2, 3 and 5 under our first conclusion. Plaintiff contends that P. G. Gragnon attended the University of Mississippi for three years, had been in the cotton business for 30 years and operated ranches at Yuma with his brother, growing flax, cotton and alfalfa, and that he had more than a general knowledge of farming values, and that since he went to the plaintiff's ranch two or three times before the sale he could not claim that he was misled by the representations made as to its production record or value; that since plaintiff denied making the representations set forth on the compilation prepared by Dickey, Dickey must have been confused as to what plaintiff actually told him and therefore defendants were obligated to rely upon their own investigation and judgment rather than any claimed representations made by plaintiff or his agent. Many cases are cited in support of this argument, as well as the general rule set forth in 12 Cal.Jur. 756, sec. 33 et seq.

The evidence is clear that the 1943 crops produced were far short of the representations made on the agent's typewritten exhibit. Plaintiff concedes that fact but denies he made such representations to his agent. The representations made to defendants as to crop productions both in 1943 and 1944 were, no doubt, false. Plaintiff had 42 years of experience as a vineyard grower, and had considerable experience in estimating crops. He was thoroughly familiar with the farm's productivity, and was thoroughly familiar with the record of production. He produced and sold the 1943 crop and had produced the 1944 grape crop which, at the time of sale, was in being and on the vines. There is substantial evidence that plaintiff did make these misrepresentations to his agent; that his agent conveyed that information to defendants; that plaintiff, his son, and the agent talked over these figures with Gragnon and that they were submitted as a part of the escrow. The trial court, apparently, believed this evidence. These facts alone may have been misrepresentations of a material fact on which defendants were entitled to rely. Bickel v. Munger, 20 Cal.App. 633, 637, 129 P. 958; Harris v. Miller, 196 Cal. 8, 13, 235 P. 981; Stumpf v. Lawrence, 4 Cal.App.2d 373, 377, 40 P.2d 920.

It is then argued that since defendants did not claim any fraud on the part of plaintiff until after the filing of the cross-complaint, and since they had become thoroughly familiar with the property and its production record, had sought advice from plaintiff in connection with the farming of the ranch, and had sought a deferment of the payment of interest on the note and had made payments on it, they were estopped from claiming, and waived, any fraud.

It is a general rule that a recovery, on the grounds of fraud, may not be authorized to one who has actually investigated the truth of the representations, and instead of relying upon the representations made, relies on his own judgment for knowledge or on the advice of third persons. However, it must be shown that such knowledge or information is possessed, either actually or constructively, by the party claiming to have been defrauded. It does not follow as a matter of law that a party is precluded from recovery because he obtained information from others in regard to the subject matter of the representations, since such information might not have been of a character to influence him and he might have relied upon the original misrepresentations. Where one conducts an investigation he may still be entitled to rely upon certain representations as to conditions to which the investigation does not extend. Discovery of the fraud and deceit after the consummation of the transaction and after the party defrauded has been prejudiced, cannot defeat the right to recover. Del Vecchio v. Savelli, 10 Cal.App. 79, 82, 101 P. 32; Seeger v. Odell, 18 Cal.2d 409, 414, 115 P.2d 977, 136 A.L.R. 1291; Benner v. Hooper, 112 Cal.App. 53, 58, 296 P. 660; Shearer v. Cooper, 21 Cal.2d 695, 702, 134 P.2d 764; Anderson v. Berger, 101 Cal.App. 728, 730, 282 P. 416; 12 Cal.Jur. 761, sec. 35.

Waiver has been defined as the intentional relinquishment of a known right with knowledge of the facts. Alden v. Mayfield, 164 Cal. 6, 11, 127 P. 45; In re De Neef, 42 Cal.App.2d 691, 694, 109 P.2d 741. The burden of proving waiver and estoppel is upon the party raising the defense. Aronson v. Frankfort Accident & Plate Glass Ins. Co., 9 Cal.App. 743, 99 P. 537. Gragnon did not claim a rescission of the sale. He therefore was legally bound to make payments on the notes. Such actions cannot be held, as a matter of law, to constitute a waiver of the fraud. Hines v. Brode, 168 Cal. 507, 143 P. 729. There is evidence that Gragnon was never aware of his legal rights until he went to his attorney and that he never knew all of the facts concerning production records for 1944 until the latter part of November, and that he never knew any of the facts concerning the production records for 1943 until those records were obtained for him by his attorney after this action had been commenced. Whatever assistance was furnished by Bagdasarian may have been furnished for his own self-interest as the holder of the crop mortgage.

To us it appears, from an examination of the entire record, that the evidence produced on this matter was in conflict and was accordingly a factual question for the trial court to determine. Chichester v. Seymour, 28 Cal.App.2d 696, 83 P.2d 301; Bechtold v. Bishop & Co., 16 Cal.2d 285, 291, 105 P.2d 984.

The fourth and sixth specifications of error, i. e., that no damages had been proved and findings thereon were erroneous, involves, mainly, the testimony of expert witnesses and the use by them of the term ‘actual value’ of the property at the time of the sale rather than the term ‘reasonable market value’.

At the suggestion of agent Dickey or defendant Gragnon, the $68,000 purchase price was split up for income tax purposes so as to show a valuation of $44,000 for the real property and $24,000 for the personal property. This segregation was approved by plaintiff and Gragnon by marginal initials of both parties on the escrow agreement. The trial court segregated the damages as to the real property and the personal property transactions. Many pages of transcript are taken up with the description of the property and with evidence pertaining to those things which go to make up value. Gragnon, as owner, testified that in his opinion the ‘actual value’ of the real property was $24,000. As agent of the Growers' Service Corporation qualified as an expert on values. He fixed the ‘actual value’ at $24,000. A farmer in the same district estimated its value at $20,000. Others, equally qualified, fixed the ‘actual value’ at between $24,000 and $28,000, as of June, 1944. Plaintiff produced expert witnesses who had the property listed at $68,000, a price fixed by plaintiff. They testified that in their opinion ‘the reasonable market value’ of the entire property was, as of the date of sale, at least $68,000.

The trial court found that the ‘actual and reasonable market value of said real property’ in June, 1944, was $28,220.92. The evidence presented a clear conflict, the facts of which the trial court was the final judge. Chichester v. Seymour, supra. Witnesses supplied sufficient qualifications to testify on the subject of values. The qualification of a witness to testify as an expert is a matter within the sound discretion of the trial court, and where there is no showing of a clear abuse of that discretion, the ruling of that court will not be disturbed on appeal. Where the witness has disclosed a sufficient knowledge of the subject to entitle his opinion to go to the jury, the question of the degree of his knowledge goes more to the weight of the evidence than to its admissibility. 10 Cal.Jur. sec. 220, p. 963; Eubanks v. Milton G. Cooper & Son, Inc., 68 Cal.App.2d 366, 156 P.2d 775.

Section 3343 of the Civil Code provides: ‘One defrauded in the purchase, sale or exchange of property is entitled to recover the difference between the actual value of that with which the defrauded person parted and the actual value of that which he received, * * *’. (Italics ours.)

Under the clear language of the statute, damages in a case of this kind are based upon ‘actual value’.

In Herzog v. Capital Co., 27 Cal.2d 349, 164 P.2d 8, 10, the appellant took exactly the same position as plaintiff takes in the case at bar, except that in that case the witnesses testified to ‘reasonable market value’ and appellant claimed that there was no proof of ‘actual value’. The court affirmed the judgment holding that while ‘reasonable market value’ and ‘actual value’ were not necessarily the same thing, a finding of either might be based upon evidence of the other. See, also, Kendrick v. Schwartz, 69 Cal.App.2d 171, 158 P.2d 405; Zinn v. Ex-Cell-O Corp., 24 Cal.2d 290, 149 P.2d 177.

Specifications numbers 7 and 8 deal with the question whether the trial court equitably disposed of the case in accordance with the above findings by applying the amount of the judgment for damages as a credit toward the payment of the two notes. They further deal with certain other claimed errors in relation to admissibility of evidence. The action from its inception was an equitable one, and where equity has acquired jurisdiction for one purpose it will retain it to the final adjustment of all differences between the parties arising from the cause of action presented, it being the duty of a court of equity where all the parties to a controversy are before it to adjust the rights of all and leave nothing for further litigation. Vice v. Thacker, 76 Cal.App.2d ——, 172 P.2d 930. Damages were awarded and were based upon competent evidence. We perceive no grave injustice in holding that the trial court was justified in declaring that the crop and chattel mortgage should be satisfied out of the amount of the recovery.

We withhold judgment as to the advisability of allowing $1,700 attorneys' fees in the foreclosure action under the circumstances related. However, since defendants have not appealed from this judgment, and plaintiff has specifically excepted this portion of the judgment in his notice of appeal, we refrain from passing upon that question.

The remaining portion of the judgment for damages was ordered applied as a credit on the first monies due and to become due on the note securing the trust deed. The foreclosure of that trust deed was not directly involved in plaintiff's complaint. It became directly involved, however, in the defendants' cross-complaint and the court had jurisdiction to order the balance of the proceeds of the judgment applied toward its payment. This order may have been prompted by the request of plaintiff (Clerk's transcript pp. 57–L to 57–Q) in submitting proposed findings, suggesting this procedure, but seeking the application of such credit to the last payments rather than the first payments due. The credit had the effect of an immediate payment and satisfaction of the judgment on the cross-complaint. This procedure cannot be held to be inequitable or unreasonable. Suffice it to say, we have thoroughly examined the remaining complaints advanced by plaintiff, particularly as to the claimed erroneous admission of evidence and the rulings of the court thereon. We do not find any errors, cumulative or otherwise, sufficient to constitute prejudicial error.

Judgment affirmed.

GRIFFIN, Justice.

BARNARD, P. J., and MARKS, J., concur.