KEIDATZ v. ALBANY

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District Court of Appeal, Second District, Division 3, California.

KEIDATZ et al. v. ALBANY et al.

Civ. 18681.

Decided: May 09, 1952

D. Wendell Reid, Los Angeles, for appellants. William T. Selby, Ventura, for respondents.

Action for damages allegedly resulting from fraudulent representations of defendants whereby plaintiffs were induced to purchase real property. Defendants' motion for summary judgment was granted. Judgment was that the complaint be dismissed, that plaintiffs take nothing and that defendants recover costs. Plaintiffs appeal from the judgment.

On May 6, 1949 (prior to filing the present action), plaintiffs commenced an action (No. 35238) against these defendants. In the second amended complaint in that action there were two purported causes of action. In the first cause of action therein it was alleged that defendants sold and conveyed certain real property (house and lot) to plaintiffs for $6,500; that at the time plaintiffs agreed to buy the property the house was incomplete; that defendants promised to complete the house according to recognized building standards; defendants failed to complete the house; defendants fraudulently made said promises to induce plaintiffs to purchase the property; plaintiffs were damaged in the sum of $2,775, being the amount paid on the purchase price; plaintiffs relied upon said promises; plaintiffs demanded rescission of said contract and offered to restore to defendants everything of value they had received from defendants; defendants refused to rescind the contract. In the second cause of action it was alleged that defendants fraudulently represented to plaintiffs that defendants were expert builders and that the house was constructed in a superior manner with good grade materials and in accordance with standard practice; plaintiffs relied upon said representations; that within about one and one-half years after the property was purchased plaintiffs discovered several latent defects in the construction of said house (which defects were specified in the second amended complaint); plaintiffs relied upon said representations; that plaintiffs offered to rescind said contract and to restore to defendants everything of value they had received from defendants; defendants refused to rescind the contract. In the prayer therein plaintiffs asked that the contract be rescinded. Defendants demurred to the second amended complaint therein on the grounds that it did not state facts sufficient to constitute a cause of action; that the purported causes of action were barred by laches; and that the complaint was uncertain. The record on appeal does not include the order which was made upon the hearing of the demurrer. An affidavit of the attorney for defendants, in support of the motion for summary judgment, states that the demurrer was sustained with leave to amend; that on November 1, 1949, judgment was entered in favor of ‘defendant and against plaintiff’; that attached to the affidavit is a ‘correct copy’ of the judgment. (According to said copy, the judgment was not signed.) The judgment stated that the demurrer to the second amended complaint was sustained on September 12, 1949, with leave to amend within 10 days, and that plaintiffs had not filed an amended complaint; and that plaintiffs take nothing and that defendants recover costs. Plaintiffs' motion to set aside the judgment, made under section 473 of the Code of Civil Procedure, was denied. No appeal was taken from the judgment or the order denying said motion.

Thereafter, said defendants (Albany) purchased the property at a trustee's sale under a trust deed given to secure the payment of the purchase price.

Subsequently, on December 15, 1949, an action was commenced by the defendants herein (Albany) against the plaintiffs (Keidatz) to recover possession of said property. Judgment by default was entered against Mr. Keidatz on February 17, 1950. The judgment was that Mr. Keidatz restore possession to plaintiffs, that plaintiffs recover $300 damages for detention of the premises, and recover costs.

On February 20, 1950, plaintiffs herein (Keidatz) commenced the present action for damages resulting from fraudulent representations of defendants (Albany) in connection with the sale of said property. There were three causes of action in the first amended complaint. In the first cause of action it was alleged that in July, 1947, defendants sold real property (house and lot) to plaintiffs for $6,500; that defendants fraudulently represented that the house was built according to the best approved building standards, the workmanship on the house was all first-class, and only the best materials had been used therein; that plaintiffs relied upon said representations; said representations were not true and defendants made them for the purpose of inducing plaintiffs to buy the property; the concrete part of the house was not properly constructed; the structure was inadequate to support the roof; the roofing material had not been installed properly; the tile in the kitchen fell to such an extent that a portion of the kitchen was unusable; as a result of said false representations plaintiffs were damaged in the sum of $2,775 (the total amount paid by them on the purchase price); the property conveyed by the defendant was worth no more than $3,500. In the second cause of action it was alleged that in July, 1947, defendants sold said real property to plaintiffs for $6,500; that prior to said sale defendants, with intent to induce plaintiffs to buy the property, represented that they were the owners of the land on which the house was built and that the house was located on the land purchased by plaintiffs; said representation was false in that the house was not on said land but, with the exception of a minute portion, was on an adjoining parcel of land not owned by defendants; prior to learning the facts as to the location of the house, plaintiffs paid $2,775 to defendants; and plaintiffs were damaged in said sum. In the third cause of action it was alleged that in February, 1949, defendants received $2,775 for the use of plaintiffs, and defendants have paid no part thereof. In the prayer plaintiffs asked that they recover damages in the sum of $2,775.

Defendants filed an answer in which they denied the material allegations of the amended complaint herein, and they alleged as separate defenses to each cause of action: (1) that on November 2, 1949, in an action in said court, wherein these plaintiffs were plaintiffs and these defendants were defendants, ‘for the same cause of action as that set forth in the complaint herein,’ judgment was duly made that plaintiffs take nothing, and the defendants recover costs; (2) that on February 17, 1950, in an action in said court between said Albanys, as plaintiffs, and said Robert and Marion Keidatz, as defendants, ‘for the possession of the same property’ as that described in the amended complaint herein, judgment was duly made in favor of said plaintiffs Albany against said defendants Keidatz; (3) that each cause of action is barred by the provisions of section 339, subdivision 1, of the Code of Civil Procedure (within two years).

Thereafter, the defendants herein (Albanys) filed a notice of motion for summary judgment wherein they stated that said motion would be made on the ground that ‘plaintiff has no cause of action against defendant’; and that the motion would be be based upon the affidavit of defendants' attorney, the files in the present action and the files in the other said actions. The affidavit of said attorney, in support of the motion, states in part: that on May 6, 1949, an action (No. 35238) was commenced in said court by plaintiffs Keidatz against defendants Albany (referring to the action wherein plaintiffs Keidatz asked for rescission); the second amended complaint therein ‘to recover purchase money and for rescission of contract’ was the last complaint filed in the action; defendants' demurrer to the second amended complaint was sustained with leave to amend; thereafter, on November 1, 1949, judgment was entered ‘in favor of defendant and against plaintiff’; no appeal was taken from said judgment and it became final; plaintiffs' motion to set aside the judgment was denied, and no appeal was taken from that order; the facts alleged in said action (No. 35238) filed on May 6, 1949 (wherein plaintiffs Keidatz asked for rescission), and in the present action ‘are the same facts and the relief sought is essentially the same’; the ‘former action is res judicata of all matters' in the present action.

In opposition to said motion, the attorney for plaintiffs filed his affidavit which stated in part: that plaintiffs Keidatz in said action No. 35238 (wherein they asked for rescission) pursued what they thought was their proper remedy, that is, to enforce rescission of the contract; that plaintiffs herein were unable to redeem the property at the time of the foreclosure, and the foreclosure was a subsequent action which had no bearing on the transaction in which the fraud was committed and which is the subject of the instant action.

Defendants' attorney filed his supplemental affidavit which stated in part: that the said demurrer in the former action (No. 35238) was sustained on the grounds that said complaint did not state a cause of action and that the rights of plaintiffs therein ‘were barred by the laches of the Plaintiffs.’

The first action (No. 35238) was for rescission of the agreement to purchase the property. In that action the plaintiffs were not standing on the contract and seeking damages for a breach of it or damages resulting from fraudulent representations made in connection with the execution of it, but they were attempting to disaffirm the contract, were offering to return everything they had received under it, and seeking the return of the money they had paid. The only judgment that could have been rendered therein was one determining whether or not the agreement was rescinded. A judgment for damages, resulting from the alleged fraudulent representations, could not have been rendered therein. The demurrer was sustained upon the grounds that a cause of action was not stated and the rights of plaintiffs were barred by laches. That ruling, in view of the allegations of the complaint, is to be interpreted to mean that a cause of action for rescission was not stated and the right of plaintiff to rescind was barred by laches.

Respondents (Albany) assert that the present action is ‘on’ the same cause of action as the first action, and that under their plea of res judicata the judgment in the first action is a bar to this action. The causes of action are not the same. The first cause of action was for rescission and the present one is for damages. The judgment against plaintiffs in said action for rescission is not res judicata as to the issues in the present action for damages. The fact that plaintiffs, acting under the erroneous belief that the remedy of rescission existed, attempted unsuccessfully to maintain an action for such relief does not preclude them from pursuing a different remedy which does exist, namely, an action for damages. In Herdan v. Hanson, 182 Cal. 538, 189 P. 440, which was an action for damages based upon fraudulent representations made in the exchange of property, the plaintiff recovered judgment, but previously the plaintiff therein had commenced an action to rescind the transaction, and the judgment against plaintiff in that prior action had become final. On appeal in that damage action it was contended that since plaintiff had elected to proceed in an action for rescission, he was precluded from resorting to an action for damages. The court therein said, 182 Cal. at page 542, 189 P. at page 442: ‘[W]here a party makes a mistake in election of remedies, he is not estopped by his abortive election from subsequently resorting to and pursuing a remedy to which he was really entitled.’ In Papenfus v. Webb Products Co., 48 Cal.App.2d 631, 120 P.2d 60, which was an action to declare a trust in the assets of defendant, judgment in the trial court was for defendant upon the theory that plaintiff had elected his remedy in a former action. In the former action plaintiff had sought rescission of a contract whereby he had transferred his assets to the defendant, and judgment therein was against plaintiff on the ground that the remedy of rescission was not available to him. On appeal in said action to declare a trust the judgment for defendant was reversed, the court stating, 48 Cal.App.2d at page 634, 120 P.2d at page 61: ‘It is clear that the remedy of rescission was not available to plaintiff when he instituted his former action. As he mistook his remedy in his former action the doctrine of election of remedies cannot bar this action.’ In Kulawitz v. Pacific Woodenware & Paper Co., 25 Cal.2d 664, at page 672, 155 P.2d 24, at page 29, it was said: ‘The fact that he [plaintiff] filed to establish his right to rescission did not preclude him from any other relief that might be open to him.’

The judgment is reversed.

WOOD, Justice.

SHINN, P. J., and VALLÉE, J., concur.