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

GUERIN et al. v. KIRST.

Civ. 16104.

Decided: January 12, 1948

Latham & Watkins, of Los Angeles (Richard W. Lund and James W. McNabb, both of Los Angeles, and John G. Evans, of San Francisco, of counsel), for plaintiffs and appellants. Frank P. Doherty, William R. Gallagher, Frank W. Doherty, and James A. Doherty, all of Los Angeles, for respondent.

By this action in claim and delivery appellants sought recovery of a caterpillar tractor which they had sold to one Vergil Grove in November, 1945. In May, 1946, they found it in the possession of respondent who asserted title as an innocent purchaser from Grove. The case was tried to a jury which rejected appellants' demands in toto. The grounds for reversal of the judgment are: (1) Insufficiency of the evidence; (2) misapplication of the Emergency Price Control Act, 50 U.S.C.A.Appendix, § 901 et seq.; (3) errors in admitting evidence; (4) misconduct of respondent's counsel, and (5) erroneous instructions to the jury.

On November 5, 1945, appellants as contractors were engaged in a general grading business and bought, used, repaired and sold tractors and kindred equipment. On that day one of the partners called upon Grove at Santa Monica and sold to him a used tractor bearing serial number 1H7401, herein referred to as tractor 7. The sale was evidenced by a conditional sale agreement whereby a second tractor and a carryall were included. The total payments for all, with the $2500 cash payment, aggregated $23,500, with 8 per cent on deferred payments. That agreement was written in longhand and signed by both parties. It is herein referred to as exhibit A.*

It was evidently intended by the parties that exhibit A should be reduced to typewritten form. After Grove had rejected two typed drafts of the agreement as prepared in the office of appellants, about December 15 they forwarded to him a third instrument (herein referred to as exhibit B) dated November 7, 1945, entitled ‘Agreement of lease of personal property (with option to buy),’ and required that he sign it or return the equipment delivered to him in November. The pertinent portions of exhibit B are as follows:

‘1. The lessor hereby agrees to lease to the lessee, and the lessee hereby agrees to rent from the lessors all of that certain personal property described as follows:

‘2. The period of this lease shall be for ten months commencing on the seventh (7th) day of November, 1945, and ending on the seventh (7th) day of August, 1946, and receipt of payments totaling the sum of $3,500.00 is hereby acknowledge to have been received up to December 14, 1945.

‘3. The agreed monthly rental shall be the sum of $2,000 per month payable monthly in advance, commencing on the seventh (7th) day of November, 1945, and continuing on the seventh (7th) day of each and every succeeding month up to and including the seventh (7th) day of July, 1946, and the Balance of $1,075.00 shall be paid on the seventh (7th) day of August, 1946, and the total rentals for said period shall be the sum of $19,075.

‘4. The lessor hereby grants to the lessee the option to purchase said equipment at the expiration of said rental period for a price of $4,425.00 provided that the lessee shall give notice in writing of his intention to exercise said option and which notice must be given to the lessor on or before the seventh (7th) day of August, 1946, and provided further that the lessee's right to so purchase said equipment shall be conditional upon a complete and full performance of his undertakings as herein provided, and also conditional upon the full payment by him to lessor of the rental herein above provided.

‘5. That should lessee exercise said option to purchase said personal property, he shall pay to lessor, in addition to the other sums herein provided, interest at the rate of eight (8) per cent per annum on the sum of $21,000.00 from the seventh (7th) day of November, 1945, to and including the seventh (7th) day of August, 1946 on the basis of the monthly deferred balances, and provided further that in the event of such election, lessee will pay to lessor the amount of repairs and maintenance incurred or paid by lessor in connection with said personal property during the term of this lease.

‘6. Payments shall be made to the lessors at their office at 208 South Linden Avenue, South San Francisco, California.’

At the trial appellants proved without contradiction that they had purchased tractor 7 from Oilfields Trucking Company of Bakersfield on November 10, 1941, and received its bill of sale on the same day. Such document was received in evidence without objection. It was established also without contradiction that appellants had never sold tractor 7; that it was completely equipped; that they had had no transaction with respondent; that they had located it May 31 in the latter's possession with the plate containing its serial number removed and the holes filled in and painted; that the value of tractor 7 is $6000 or $7000. The answer admitted that its reasonable rental value was $825 per month.

Upon the foregoing evidence appellants were entitled to judgment for the possession of the tractor or in lieu of its return the reasonable value thereof with damages for its detention. Oakland Bank of Savings v. California Pressed Brick Co., 183 Cal. 295, 297, 191 P. 524; Pacific Finance Corporation v. Hendley, 103 Cal.App. 335, 338, 284 P. 736, 285 P. 1048. Under such circumstances the conditional vendor is entitled to recover even though the subsequent purchaser had no knowledge of the reservation of title by the original vendor until payment in full, and the surreptitious sale by the conditional vendee constituted a conversion. First National Bank in Richmond v. Thompson, 60 Cal.App.2d 79, 82, 140 P.2d 75; Merrill Lodge No. 299, Independent Order of Good Templars, v. Ellsworth, 78 Cal. 166, 168, 20 P. 399, 2 L.R.A. 841.

Also appellants were entitled to recover damages for the detention of the tractor, the reasonable rental value of which was proved to the $11,770. In a claim and delivery action the owner may recover the value of the use of his property if the amount thereof exceeds the interest on such value. Drinkhouse v. Van Ness, 202 Cal. 359, 379, 260 P. 869.

Despite such state of the proof and the applicable law the trial court adopted respondent's special defenses, to wit: (1) That both exhibits A and B together, and each of them, constitute a contract of conditional sale; (2) that they are void in that they were in violation of the ‘Emergency Price Control Act of 1942, as amended, and the Rules and Regulations issued pursuant thereto.’

(1) Conceding, arguendo, it to be a fact that both writings constitute one agreement for the purchase of tractor 7 such fact could not avail respondent. Apparently his contention was made for the purpose (a) of defeating appellants' claim that the meaning and purpose of exhibit B were to make a lease out of the transaction instead of a contract of sale, and (b) of then maintaining (1) that as vendee in possession and not in default Grove could with impunity ‘sell his interest’ to respondent, and (2) that the latter could by parol establish that appellants' purpose was to evade the federal statutes by making the agreement into a lease. Respondent cannot thus dispose of exhibit B in the absence of appropriate pleading and proof. All of the conversations preceding the execution of exhibit A were merged in that document and all conversations and writings with respect to the sale or lease of tractor 7 prior to the execution of exhibit B were merged in that instrument. Therefore no testimony that would vary the terms of exhibit B was lawful, and no evidence of the terms of the agreement other than its own contents was admissible in the absence of a ‘mistake or imperfection [alleged] in the pleading.’ Code Civ.Proc., sec. 1856; In re Estate of Gaines, 15 Cal.2d 255, 264, 100 P.2d 1055; Mulrooney v. Pietro, 79 Cal.App.2d 311, 180 P.2d 62. Where the plain and unambiguous language of a contract permits its complete fulfillment and promotes its object, that construction is to be preferred over one derived by the elimination of or addition to its terms. Winship v. Wilkes, 121 Cal.App. 44, 50, 8 P.2d 502. It is not a just or proper application of the judicial function either to make a new contract for litigants or to rewrite the clear terms to which they have freely pledged their faith. Nourse v. Kovacevich, 42 Cal.App.2d 769, 772, 109 P.2d 999. It follows that all of the hearsay testimony concerning respondent's purchase of another tractor from Grove and the asserted payment to appellants by the latter of the balance due on tractor 7 out of the money received from respondent was erroneously admitted.

This leads to respondent's second contention whereby he undertook to establish that appellants, having placed Grove in possession of the tractor and held him out as the owner of the machine, are precluded from now disputing respondent's title which they allowed Grove to transfer to him by allowing Grove to appear to be in complete possession, citing Martin v. Hollins, 118 Cal.App. 561, 5 P.2d 899. But the successful maintenance of such contention involves more than the mere possession of the chattel. 10 Cal.Jur., p. 641. In the Martin case the plaintiff as original vendor had sold four generator sets on a conditional sale agreement to Hollins and Arrousez and thereafter consented to their sale of two of such sets. About six months later, without the knowledge of plaintiff, Hollins and Arrousez sold to appellant Waldorf Productions, Inc., the set involved in the action for $7000. The original vendees having become insolvent defaulted in making the final payment of $500 to plaintiff, who sued to replevin the set which was in the possession of Waldorf Productions. While the court found against the ‘subsequent purchaser on the defense of authorization of said sale by plaintiff and also on the defense of estoppel,’ yet it was determined that since Woldorf Productions, Inc., believed that Hollins and Arrousez were the actual owners of the set they had sold to it, and since also the corporation had no knowledge of the fact that plaintiff was the owner, the subsequent purchaser was entitled to possession in event it made the final payment of $500.00. Such equitable disposition of the controversy was approved by the appellate court. The effect of that holding is to forestall a vendor from depriving an innocent purchaser of a chattel bought from the original vendee, if payment of the balance due the original vendor will effect justice to the latter and at the same time prevent hardship upon the subsequent vendee. Of course where the amount due the vendor is the equivalent of the value of the chattel in dispute the innocent purchaser is without a remedy if, as in the instant case, the facts do not warrant an estoppel.

The case of United States Machinery Company v. International Metals Development, Inc., 74 Cal.App.2d 5, 168 P.2d 37, cited by respondent, is distinguished in that the defendant vendee under a conditional sale agreement established that it was entitled to damages for breach of warranty. Such sum when added to payments already made constituted substantially the balance due on the contract of purchase, thereby making applicable the equitable remedy announced in the Martin case. See Civil Code, section 1789.

Since appellants did no act calculated to lead a reasonable person to believe that Grove was title owner of the tractor the thesis of respondent has no support in law. Grove was in the position of a mere possessor and could convey no title, however, innocent his vendee. Oakland Bank of Savings v. California Pressed Brick Company, 183 Cal. 295, 297, 191 P. 524; Pacific Finance Corporation v. Hendley, 103 Cal.App. 335, 338, 284 P. 736, 285 P. 1048.

(2) Respondent claims that appellants should be denied recovery on the ground that they based their right to possession of tractor 7 upon exhibits A and B which he contends are violative of the Emergency Price Control Act. Such claim is without lawful basis. While it is true respondent proved (1) that appellants sold the tractor to Grove for $8500; (2) that the maximum price to be charged for such used tractor not rebuilt and guaranteed is 55 per cent of its ‘base price’ (Maximum Price Regulations, No. 136 of the United States Office of Price Administration, sections 12(e)(g), 4) which is the price f.o.b. the manufacturer's plant, and (3) that the base price of tractor 7 was $10,171.21, exclusive of sales tax, yet such proof was wholly immaterial and incompetent by reason of the fact that appellants did not rely upon their contracts with Grove to establish their right to possession. Respondent acquired no rights by virtue of appellants' violation of the federal statute or of the regulations pursuant thereto.

In view of the conclusions above announced discussion of appellants' other points would be supererogatory.

It is therefore ordered that the judgment and the order denying plaintiffs' motion for judgment notwithstanding the verdict be and each is reversed with instructions that judgment be entered in favor of plaintiffs as follows:

‘It is ordered, adjudged and decreed that plaintiffs have and recover of and from defendant the sum of $11,770 as damages for the detention of the tractor involved herein;

‘It is further ordered, adjudged and decreed that plaintiffs have and recover possession of the tractor bearing serial number 1H7401 or, in the event possession cannot be restored, the value thereof in the sum of $6000.00;

‘And costs, which are hereby taxed in the sum of $_____.’


FOOTNOTE.  Exhibit A reads as follows:‘11–7–45.‘I Hereby agree to Buy one cat. & unit Serial 7401—to be bought as rent at Terms of $1,000 down and 1,000 each month for 7 months & one payment of $500, one cat. unit & ‘A’ frame Serial No. 1–H–9491–H–949and one R-U-Carry all for payment of $1,500 down and 13 payments of $1,000 and one payment of $500. R-U–7747—after Said payments have been made in full Said buyer H-T- and Guerin Bros' are to furnish me with Bill of Sale to all this Equipment. Interest of deferred payments at 8%.‘Guerin Bros.‘By H. T. Guerin‘Vergil Grove’

MOORE, Presiding Justice.

McCOMB and WILSON, JJ., concur.

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