WILLIAMS v. MARSHALL

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District Court of Appeal, Fourth District, California.

WILLIAMS et al. v. MARSHALL et al.

Civ. 4110.

Decided: November 04, 1950

Best, Best & Krieger and James H. Krieger, all of Riverside, for appellants. Thompson & Colegate and Robert D. Allen, all of Riverside, for respondents.

The evidence in this action for rescission, viewed in the light most favorable to plaintiffs, as we must do, Lindenbaum v. Barbour, 213 Cal. 277, 2 P.2d 161, shows that plaintiffs, both doctors, resided in Arizona. Neither had much, if any, ranching or farming experience. In 1944, they purchased four fruit ranches in the Hemet Valley, as short-term investments. They never resided upon them and had nothing to do with the care, operation or management of them. In 1930, defendant Frank D. Marshall and his wife bought 90 acres of land in Hemet, known as ‘Park Hill Ranch’, consisting of acreage planted to citrus, walnuts and apricots, together with a certain amount of unimproved land. They resided thereon and cared for its operation. A great portion of the citrus acreage was situated on hillside slopes and was not planted in continguous blocks but was divided and separated by roadways.

The sole source of water supply was through a local water company, i. e., water stock certificates appurtenant to the land, carried with it the contract right to 56 acre feet or 215.36 miner's inches of water each 30 days. About January 28, 1946, defendants were approached by one Steele, a real estate broker, father of plaintiff Mrs. Williams, in reference to a listing and sale of the property, and he obtained, in duplicate, an exclusive written listing for 60 days. The testimony is that defendants furnished the information, the agent wrote it down, and defendant Mr. Marshall signed it. It reads in part as follows:

‘Property location: Park Hill District. Price $130,000 ..... Total acres: 56 in trees—90A. total—6A. costs, 3A. Placentias, 1A. grapefruit, 23 Valencias, 23 Navals.’

Then follows 1942 to 1945 net returns from crops, followed by the statement: ‘Water 2.00 Lake Hemet on 56 A. Water any time, any amount.’

According to the agent Steele, Mr. Marshall told him that the ranch consisted of 56 acres in trees, with 23 acres of Naval oranges, 23 acres Valencias, one acre grapefruit, 6 acres apricots, 3 acres of walnuts, and that the ranch was entitled to ‘water any time, in any amount’. In February, 1946, the agent brought a prospective purchaser to the ranch and defendant Mr. Marshall repeated that the property contained 56 acres of trees, 47 of which were citrus. No sale was then made. In April, 1946, after the exclusive listing expired, plaintiff Mrs. Williams was visiting her father in Hemet. She learned of the propsed sale of the Park Hill Ranch. Steele showed her the written listing which she read and they drove to the property that day. Steele introduced her to defendants. With the listing in her hand, according to her evidence, she interrogated Mr. Marshall in detail concerning the various items appearing thereon, including the quantity of citrus acreage, the water situation and the income and expenses for the past years. Mr. Marshall verified the information contained in the listing and assured her there was an abundance of water running with the property to satisfactorily irrigate the orchard. She stated it was getting dark and that she and Mr. Marshall drove along the roads separating the various sections of the ranch but actually walked through only one quarter of it; that this was the only occasion upon which she visited the ranch and saw defendants until after the contract of sale had been executed. In April, 1946, her husband came to Hemet. In company with Steele he took the listing which he had read. He drove around the perimeter of the parcels in the ranch. The following morning he walked through one section and there met defendants. He claimed that was the only visit he made to the property until after the execution of the contract of sale.

After plaintiffs returned to Arizona they decided to purchase the ranch and on April 23 phoned Steele to arrange the escrow for them and informed him of the terms desired to be incorporated in it. The price was finally fixed at $123,500, including the crops. The escrow instructions were sent to Arizona for plaintiffs' signatures and they contained plaintiffs' agreement to pay $37,050 cash and to execute a trust deed for $86,450 on July 1, 1946. Defendants then engaged a resident manager for the property until November, 1947. Neither plaintiff ever resided upon the property but following their purchase they made brief visits thereto about four to six times a year. In March, 1947, through a rough estimate made by one witness, plaintiffs discovered that the acreage in citrus trees was less than 47 acres, as represented orally by defendants and as represented in the written listing. In May, 1948, a true survey was had which revealed that the actual acreage in citrus trees was only 38.15 acres and it was found that of this amount 1.29 acres were planted in the public right-of-way owned by the county; that instead of six acres planted to apricots there were only four acres, and of the three acres of walnuts, two acres were planted on the public right-of-way.

Plaintiffs testified that in August, 1947, they first became aware of the falsity of Mr. Marshall's representations that the ranch was ‘supplied with ample water’; that in that month they were unable to obtain certificate or any water from the water company and that no water was available from that source for the balance of that year or for the early part of the year 1948; that they were compelled to and did make arrangements to purchase water from near-by property owners with private wells but that the amounts obtained were not sufficient for irrigation requirements of the citrus trees; that in July, 1948, the same condition obtained and the citrus trees suffered considerable damage; that in an effort to augment their supply in 1947, they drilled a well on the property to a depth of 800 feet, at a cost to them of $10,000, but the well was non-productive. Defendants had employed a ‘water witcher’ to try to locate water on the land before its contemplated sale, but were informed that no water could be produced thereon. Although the evidence is conflicting as to this fact, defendants failed to inform plaintiffs of this and permitted them to proceed to drill a dry well.

Defenant Mr. Marshall testified that while there had always been water for the ranch, there were times during his ownership when there had not been sufficient water and that he had purchased additional water from near-by wells. He did not relate this fact to plaintiffs.

According to a citrus expert, the 56 shares of water was not sufficient during the summer and fall months to irrigate 38 acres of citrus but would only irrigate approximately 24 acres.

Following plaintiffs' claimed discovery of the claimed shortage of the citrus trees, an exchange of correspondence took place between defendants and plaintiffs in which a settlement of their differences was discussed. Plaintiffs claimed that an adjustment of $2,000 per acre was proper and defendants rejected this claim on the ground that they sold the property as ‘a ranch’ and ‘not as so many trees of one kind or another’. During these negotiations plaintiffs made payments on the trust deed, as required. In May, 1947, defendants went to Canada and remained there until October, 1947. Thereafter, on their return, further negotiations continued until March, 1948, when plaintiffs brought this action for rescission, claiming misrepresentation as to the number of acres of citrus trees and as to the sufficiency of available water supply.

Both plaintiffs testified that they believed and relied upon the written listing and the verbal representations made by Mr. Marshall and that they would not have purchased the property at the price agreed upon had they known the true facts. Evidence was produced that the reasonable market value of the property as it actually existed on January 28, 1946, was $78,590.

Defendants produced evidence quite in conflict with that related by plaintiffs. They argue that Steele was in fact agent for plaintiffs and that plaintiffs relied upon his recommendations and representations; that since the agent had purchased other properties in Hemet for plaintiffs and had managed those properties for them until their sale, and since Steele was familiar with the water company and its certificate rights to water, and since Steele knew that it took well water in addition to the certificate water to properly irrigate the surrounding ranches, plaintiffs were also charged with such knowledge. It is then argued that after the 60-day exclusive listing had expired, the agent was no longer authorized to use the representations therein set forth for the purpose of promoting the sale to his daughter and her husband.

It is then claimed by defendants that Mrs. Williams drove over the whole ranch and made an independent investigation of it and its acreage; that when Mr. Williams visited the ranch Mr. Marshall showed him a blueprint survey map and aerial photograph of the property and that the agent and Mr. Williams went out and ascertained the boundaries of the property. Mr. Marshall testified that he had never had a survey made of the actual net acres in citrus trees, that he bought it as containing 44 acres of citrus trees and that the various parcels were referred to as the ‘14 acres', ‘the 10 acres', ‘the 12 acres', ‘the six acres', and ‘the 2-acre piece.’

The evidence shows that the survey made by plaintiffs included only the ground actually planted to trees. Defendants' survey, made in 1948, showed 43.17 acres in citrus if the area adjoining the groves to the center of the adjoining streets was included.

Plaintiffs were dissatisfied with the management of the ranch and in November, 1947, Steele took over its operation. Interest payments on the trust deed were kept up to date.

After a lengthy trial the court found generally that plaintiffs were without experience in regard to the operation and the irrigation requirements of citrus groves, particularly in Hemet Valley; that defendants made certain statements regarding the amounts of citrus tree acreage of the property and regarding the waters from the water company, particularly in reference to the use of the term ‘water any time, any amount’. It found that these statements were false and untrue; that in truth and in fact there were only 38.15 acres of citrus trees and that this included 1.29 acres of citrus trees in a public right-of-way, and that the water plaintiffs were entitled to receive under their certificate was a limited amount and insufficient for the irrigation requirements of the acreage actually in citrus trees; that the water supply was uncertain and not constant, particularly during the summer months and that defendants failed to inform plaintiffs of the necessity of being obliged to obtain water from neighboring wells.

It was then specifically found that at the time of the making of the statements and representations defendants knew that said representations were false and untrue; that they were made for the express purpose of deceiving the plaintiffs and to induce them to purchase the real property; that prior to the purchase of said property plaintiffs made no investigation or survey as to the citrus acreage in trees nor of the water supply available to said acreage; that such falsity as to the citrus trees was not discovered until March, 1947, and the falsity as to the water supply was not discovered until the summer months of 1947; that during the negotiations, both plaintiffs and defendants believed that they could settle and adjust their difficulties without legal action; that plaintiffs offered to restore everything of value they received on condition defendants return the money paid by plaintiffs and that defendants refused such offer. The court then found that defendants were not entitled to recover from plaintiffs claimed damages to the grove and for the failure of the fruit crop, as prayed for in defendants' counterclaim.

Judgment was entered for rescission of the sale. The trust deed was declared void. Judgment was rendered in favor of plaintiffs against defendants for a balance of $37,668.64, on account of money paid on the contract of purchase and the trust deed. An additional sum of $3,250.66 was allowed for money expended by plaintiffs, over and above the profits received, for the care and protection of the property.

Defendants appealed and argue first that the evidence does not support the finding that plaintiffs were without experience in farming citrus groves and had no knowledge of citrus groves in the Hemet district and of the supply of water in that valley. There is evidence that plaintiffs purchased other ranches, merely for investment purposes in that valley and hired a manager to operate them, but it is disclosed that the plaintiffs lived in Arizona during this period. They testified themselves that they were unfamiliar with the matters discussed. Under the well-known rule the finding of the trial court in this respect cannot be disturbed on appeal. Chichester v. Seymour, 28 Cal.App.2d 696, 83 P.2d 301.

The next argument is that since Steele was plaintiffs' agent and had knowledge of the actual conditions, his knowledge was imputed to his principals, citing Bogart v. George K. Porter Co., 193 Cal. 197, 223 P. 959; Civ.Code sec. 2332. Further complaint is made because the trial court failed to find whether Steele was the agent of plaintiffs or of defendants. At the time of the making of the listing and the representations therein contained Steele was admittedly acting as agent for defendants. Although there is room for suspicion, there is no showing that Steele had knowledge of the true facts or that he was possessed of information which, by imputation to his principals, would debar them from relying on the fraudulent statements made by defendant Marshall. The finding of the trial court, at least impliedly, holds that Steele was not plaintiffs' agent at the time the representations were made. The evidence fails to disclose any knowledge on the part of the agent which, by imputation to plaintiffs, would preclude them from relying on the representations of defendants. The testimony is that plaintiffs did rely entirely on the representations made by defendants. The evidence supports such a finding. Bacon v. Bacon, 21 Cal.App.2d 540, 545, 69 P.2d 884.

Next, defendants challenge the sufficiency of the evidence to support the finding that defendants made a fraudulent representation as to the acreage in citrus trees. It is contended that the evidence only shows that the ranch was sold as a whole or ‘single unit’ for a stated sum and not on a technically measured representation of net acreage in citrus trees, and accordingly plaintiffs cannot be heard to complain in respect to the irregularity of net acreage, citing Nelson v. Colton, 36 Cal.App. 69, 171 P. 701; and Hefferan v. Freebairn, Cal.App., 207 P.2d 602. A hearing was granted in the latter case and subsequently decided contrary to defendants' contention in Hefferan v. Freebairn, 34 Cal.2d 715, 214 P.2d 386. This no doubt was the argument presented to the trial court. It found otherwise and there is sufficient evidentiary support for that finding. According to the testimony of defendant Marshall, at the time of the sale of the ranch to plaintiffs, the reasonable market value per acre of the citrus trees was $2,000. He further testified that in fixing the sales price of the ranch at $123,500, he multiplied the number of citrus acres by $2,000. Since the sales price was determined through the multiplication of acreage by a given price per acre, it could not be successfully maintained that the ranch was bought and sold as a unit without regard to the number of acres of citrus trees embraced therein. This is a factor strongly tending to show that the quantity of citrus tree acreage was of the essence of the contract. 55 Am.Jur. p. 600, sec. 125, and p. 610 sec. 124. The evidence also shows that some of the trees were located on a right-of-way owned by the county. These were represented as citrus trees on defendants' property. Misrepresentation as to the number of acres of citrus trees growing on the land owned by the seller is material and constitutes sufficient ground for rescission of the sale if the purchaser relied upon it and was thereby induced to enter into the bargain. 25 Cal.Jur. 554, sec. 74.

In Shearer v. Cooper, 21 Cal.2d 695, 134 P.2d 764, 769, which involved a claimed misrepresentation of the area of an alfalfa field, the court approved the holding in Dow v. Swain, 125 Cal. 674, 58 P. 271, reciting: “Every case must be judged for itself, and the circumstances which warrant or forbid relief cannot be scheduled. If the seller knows the facts (and to that should be added, or if he represents them as known to him), and the buyer is ignorant, and to the knowledge of the seller the buyer relies upon the representations,' there is no reason why relief should not be granted, ‘although an imperfect examination was made. It may have been imperfect because of the representations.” See, also, Harris v. Miller, 196 Cal. 8, 235 P. 981; Lombardi v. Sinanides, 71 Cal.App. 272, 235 P. 455.

The same contention is made regarding the representations as to the water supply. The same principles above announced apply to this argument. See, also, Hill v. Wilson, 88 Cal. 92, 25 P. 1105; Dvorak v. Latimer, 91 Cal.App. 664, 267 P. 578. There is sufficient evidence to support the finding.

It is then charged that the evidence does not support the finding that plaintiffs were not guilty of laches or unreasonable delay in rescinding. In this connection it is pointed out that it was plaintiffs' duty to rescind immediately upon discovery of the fraud, and by the making of payments of interest and principal on the trust deed, by the drilling of a well and from the apparent delay in giving notice of rescission, plaintiffs affirmed the contract and waived their right of rescission. It is further claimed that the court erred in failing to find on the question of waiver, citing Fabian v. Alphonzo E. Bell Corp., 55 Cal.App.2d 413, 130 P.2d 779; Brown v. Domestic Utilities Mfg. Co., 172 Cal. 733, 159 P. 163; Carpenter v. First Trust & Savings Bank, 11 Cal.App.2d 668, 54 P.2d 495; and Evans v. Duke, 140 Cal. 22, 73 P.2d 732.

There is no artificial rule as to the lapse of time or circumstances which will justify the application of the doctrine of laches. Each case, as it arises, must necessarily be determined by its own peculiar facts and circumstances. Whether the defrauded party has acted promptly is a question to be decided by the trial court upon the facts of the particular case. In the absence of a palpable abuse of discretion, the trial court's finding upon this issue will not be disturbed by a reviewing court. Hunt v. L. M. Field, Inc., 202 Cal. 701, 262 P. 730; Suhr v. Lauterbach, 164 Cal. 591, 130 P. 2; McDevitt v. Butte City Ranch, 7 Cal.App.2d 252, 254, 46 P.2d 290; 10 Cal.Jur. p. 526, sec. 64.

A defrauded vendee is entitled to a reasonable time to investigate the truth or falsity of the representation and the period of time consumed in this investigation or examination cannot be charged to the vendee as unreasonable delay. Dunn v. Security-First National Bank, 131 Cal.App. 541, 21 P.2d 647. Plaintiffs brought the matter to the attention of defendants through a letter written on March 31, 1947. An exchange of correspondence took place between the parties in an attempt to adjust their differences and to effect a compromise and settlement of the matter. There was a cessation of these negotiations due to the absence of defendants on their trip to Canada. It was during their absence that plaintiffs, for the first time, learned of the misrepresentation as to an ample supply of water. Upon their return settlement negotiations were resumed between the parties and they continued until March, 1948. Thereafter, notice of rescission was served, and defendant Marshall announced his surprise at receiving the notice of rescission and referred to a telephone conversation with plaintiffs ‘in which it was mutually agreed we would get together and iron out our difficulties'. In the light of this evidence it is plain that the trial court did not abuse its discretion in finding the plaintiffs not guilty of laches and unreasonable delay in disaffirming the contract. Where a vendee, upon discovering the vendor's fraud, promptly calls the matter to the attention of the vendor and then enters into negotiations in an effort to effect a compromise and settlement of the dispute, a rescission of the contract made within a reasonable time following the breakdown of settlement negotiations is not barred by laches or unreasonable delay. Gist v. Security Trust & Savings Bank, 218 Cal. 581, 24 P.2d 153; McMahon v. Grimes, 206 Cal. 526, 275 P. 440.

Defendants should have definitely pleaded ratification or waiver as a defense if they desired a specified finding on such an issue. Wood v. Jotham Bixby Co., 29 Cal.App.2d 294, 84 P.2d 204. However, the finding made clearly shows a holding against waiver and demonstrates that if a definite finding had been made it would have been adverse to defendants. The court properly concluded that such payments as were made, were for the purpose of preserving plaintiffs' interest in the property and to avoid default on the trust deed. Munson v. Fishburn, 183 Cal. 206, 190 P. 808; Hefferan v. Freebairn, supra.

While the evidence might support a contrary finding, it does support the implied finding that no waiver or ratification was established.

Lastly, it is claimed that the trial court erred in failing to compel plaintiffs to elect either the remedy of rescission or damages, citing Hjorth v. Bernstein, 44 Cal.App.2d 561, 112 P.2d 643; and Klinger v. Modesto Fruit Company, Inc., 107 Cal.App. 97, 290 P. 127. At different stages of the trial defendants unsuccessfully moved the court to compel plaintiffs to elect between the alternative remedies of rescission and damages. The complaint prays that the sale and trust deed be declared void for fraud, and that defendants return the purchase money or in the event of failure so to do, plaintiffs have judgment for said amount, and in case the court denies rescission plaintiffs pray that they may recover damages for the fraud. It is argued that the trial court did the electing for plaintiffs as to whether plaintiffs would affirm or disaffirm the contract and as a result thereof defendants were compelled to defend on both theories. It is, of course, inconsistent for a party defrauded to rely upon the contract and seek damages thereon for fraud, and in the event he is prevented from recovery to thereafter file an action for rescission. Bancroft v. Woodward, 183 Cal. 99, 190 P. 445. It has been definitely held that a defrauded purchaser may, in the same action, seek alternative relief by praying for rescission, or, in the event rescission cannot be obtained, then for damages for fraud. Bancroft v. Woodward, supra. There is nothing inconsistent in plaintiffs' asking for rescission and damages if rescission be denied. Murphy v. Sheftel, 121 Cal.App. 533, 9 P.2d 568; Bancroft v. Woodward, supra; 28 C.J.S., Election of Remedies, § 6, p. 1070. 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. Murphy v. Sheftel, supra. The trial court committed no error in refusing to compel plaintiffs to elect between the alternative remedies sought.

Judgment affirmed.

GRIFFIN, Justice.

BARNARD, P. J., and MUSSELL, J., concur.