HARDY v. ADMIRAL OIL COMPANY

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

William HARDY, Plaintiff and Respondent, v. ADMIRAL OIL COMPANY, a California corporation, Defendant and Appellant. *

Civ. 24701.

Decided: June 19, 1961

Theodore G. Lee, Long Beach, for appellant. Mitchell, Silberberg & Knupp and Howard S. Smith, Los Angeles, for respondent.

Plaintiff's demurrer to the third amended answer was overruled, then plaintiff's motion for a judgment on the pleadings was granted, and a judgment entered awarding him $25,000. Upon defendant's appeal we are reversing the judgment, both because the answer, fairly construed, suggests that defendant may have a good defense, in which event a judgment on the pleadings should not be ordered (Fabbro v. Dardi & Co., 1949, 93 Cal.App.2d 247, 252, 209 P.2d 91, 94; Barasch v. Epstein, 1957, 147 Cal.App.2d 439, 443, 305 P.2d 283, 285), and because the answer adequately denies an allegation of the complaint absolutely essential to plaintiff's cause of action.

The parties had entered into a contract by which plaintiff's alleged assignors, four in number, undertook to buy, the defendant to sell, certain described oil and gas leases and the wells and physical properties that went with them. A copy of the contract was attached to the complaint and by apt reference made a part of it. The purchaser agreed to open an escrow, immediately, and to deposit a down payment of $25,000 ‘* * * which shall be immediately released by the escrow holder to the order of the Seller herein.’

Among the many terms of the contract we find: ‘Seller does not make any warranty whatsoever, either express or implied, with respect to any of the leases, lands, properties, or other interests being sold herein, except that it is the owner of the leases, rights and properties described in Paragraph (1) hereof.’ Also, in paragraph (10), the seller undertakes to order promptly preliminary title reports, the buyer to pay the balance of the purchase price into the escrow within ten days after receiving them. The buyers further agreed to ‘* * * do everything necessary on [their] part to complete said escrow not later than ten days * * *’ after receiving the preliminary report. Then it is provided that if the buyers ‘* * * shall fail to pay the balance of said purchase price into said escrow within said period by reason of any defect of title disclosed by the Preliminary Title Reports or by reason of the discovery of any misrepresentations made to the Purchaser * * * then, at the election of the Purchaser this Agreement shall terminate forthwith and the $25,000.00 down payment shall be returned to the Purchaser less Purchaser's share of the ecrow expenses incurred therein.’ In the next section the parties agree to ‘* * * each pay one-half of the escrow charges * * *.’

Turning now to the pleadings, we find that the complaint alleges and the third amended answer, by express admissions and by its failure to deny, admits: I. That the defendant is a California corporation; II. That the contract already referred to was entered into; III. That the escrow was opened immediately as agreed and the $25,000 was deposited and paid over to the defendant; IX. That plaintiff's alleged assignors mailed a letter to the defendants demanding the return of the $25,000.

In addition, the complaint alleged in paragraph V that plaintiff's alleged assignors ‘ascertained and determined’ from the preliminary report ordered by the defendant, that it ‘* * * was not the owner of the leases, rights and properties * * *’ it had represented that it was, but that four named persons owned them, ‘with interests of an undescribed nature’ in a number of others. Many further faults, disclosed by the preliminary report, were alleged.

In paragraphs VI and VII a number of misrepresentations were claimed to have been made. Paragraph VIII began by declaring that plaintiff's alleged assignors, the purchasers, had performed all terms and conditions of said contract required on their part to be performed up to the time they discovered the faults revealed by the preliminary report. After discovering the title defects and misrepresentations, paragraph VIII continues, the buyers ceased to be that, and wrote the defendant a letter demanding that it return the $25,000 to the escrow holder so that it ‘* * * might deduct therefrom Purchasers' share of the escrow expenses and remit the balance thereto to Purchasers.’ In paragraph X the plaintiff gets into the picture. The purchasers, it is there alleged, assigned all rights to their cause of action against the defendant, to him, the plaintiff.

The third amended answer makes frequent use of the method of denial authorized by section 437, Code of Civil Procedure: ‘The denials of the allegations controverted may be stated by reference to specific paragraphs or parts of the complaint.’ For example, we read: ‘Answering Paragraph V on pages 2, 3, 4 and 5 of plaintiff's Complaint, defendant denies both generally and specifically each and every allegation contained therein * * *.’ We do not understand that either party questions the sufficiency of the denial to put in issue the allegations of paragraph V, but if they do, Hoelzle v. Fresno County, 1958, 159 Cal.App.2d 478, 482–483, 324 P.2d 74, 77, and cases cited, sufficiently answer the question; an issue is raised.

In like manner issues were raised as to the allegations of paragraphs VI VII, VIII and X, all of the allegations of those paragraphs being denied ‘except as follows:

‘Defendant admits and alleges:

‘1. That plaintiff's Assignors mailed a letter, dated October 30, 1958 demanding the $25,000 be returned.

‘2. That there were no defects of title and no misrepresentations.’

With the pleadings as we have sketched them, omitting for the moment some affirmative allegations found in the third amended answer, the plaintiff moved for a judgment on the pleadings upon the ground that the third amended answer ‘* * * does not state facts sufficient to constitute a defense to the First Cause of Action stated in the Complaint and that it appears from all the verified pleadings on file herein that plaintiff is entitled to judgment as prayed in the Complaint.’ The motion was granted and the judgment, from which defenant appealed, followed.

The defendant, in its only brief, of just over four pages, makes just two points: (a) The third amended answer ‘* * * placed in controversy i. e., by denial, its alleged breach of contract,’ and it raised an issue (b) by its affirmative allegation: ‘That there were no defects of title and no misrepresentations.’

Were the third amended answer defendant's only answer, the problem would be very simple. Unfortunately, for the position now taken by the defendant, it had filed an original and an amended answer in each of which, it had specifically and generally denied all of the allegations of paragraph V, with this admission: That the four persons named in paragraph V, as those disclosed as the owners of the leases being purchased, were such owners. The plaintiff, relying upon such cases as Slavin v. City of Glendale, 1950, 97 Cal.App.2d 407, 217 P.2d 984, argues that the defendant may not, after expressly admitting that the four named persons are the owners, now be heard, without explanation, to deny that they are the owners. To this argument the defendant has made no answer, and we are satisfied that none is to be made.

Must we, then, shut our eyes to other facts that clearly appear from the judgment roll itself, from which it is minifest that the motion for a judgment on the pleadings should not have been granted? The defendant would be in no position to complain if we contented ourselves with its inadequate presentation, but we are not bound to be content with it. Our courts have stated: ‘* * * we know of no hard and fact rule which prohibits the court from considering and deciding points of law which may not have been urged and argued in the briefs originally filed if it appears to the court that an important legal principle is necessarily involved in the newly discovered point * * *.’ Schubert v. Lowe, 1924, 193 Cal. 291, 294, 223 P. 550, 551. Again: ‘* * * the court is at liberty to decide a case upon any points that its proper decision may require, whether urged by counsel or not.’ Philbrook v. Randall, 1924, 195 Cal. 95, 105, 231 P. 739, 742. The words we first quoted were made use of, and the last case was cited in Kurlan v. Columbia Broadcasting System, 1953, 40 Cal.2d 799, 806, 256 P.2d 962, 967.

Applying, first of all, the principle recognized in the first paragraph of this opinion, for several reasons we are of the opinion that the answer, fairly construed, suggests that the defendant may have a good defense. We should remember that all of the allegations respecting misrepresentations remain denied, and all claimed defects of title remain controverted, save with respect to those who were owners at the time the contract was entered, the escrow opened and the preliminary report made. The exception comes about by the admissions of the original and the first amended answers. Tied in which those admissions there were affirmative allegations not mentioned, so far, that the four named as the owners of record ‘were under contract in writing to sell said property to Defendant Corporation and at said time, an escrow was opened and signed * * * to consummate said purchase. That said facts were known to Plaintiff's Assignor.’ Another affirmative pleading on defendant's part is found in connection with the express admission, in its last answer, concerning the payment out of escrow of the $25,000. It is there alleged: ‘* * * that the $25,000.00 deposited in said escrow was immediately released with the full knowledge and consent of plaintiff's assignors to enable the defendant corporation to hold open an existing escrow to purchase the subject property from the former owners.’ All this strongly suggest to us the possibility that the $25,000 was paid out of escrow with the consent of plaintiff's alleged assignors, to enable them to obtain that which they sought by the contract, a good title to the property. It is quite possible the defendant has a good defense.

The defendant may have a partial defense at another point. The contract provided that upon a rescission by the purchasers upon the ground relied upon in this action, the $25,000 would be returned, less the purchasers' half of the escrow charges, and that is what they demanded. The judgment awarded the plaintiff the entire $25,000.

At another point the defendant has a complete defense pleaded. The plaintiff makes no claim to a cause of action against the defendant except as assignee of the purchasers under the contract. Not only in the verified Third Amended Answer was the assignment specifically denied, but in each of the three previous answers. Plaintiff cannot claim prejudice by our reliance upon this situation although the defendant never mentioned it, for we relied upon it in the opinion first filed, and the plaintiff took advantage of his petition for a rehearing to attack our position. He does so by declaring that ‘The Allegations in the Complaint of Assignment of the Cause of Action to Respondent Were Admitted by Appellant.’ His basis for this amazing statement? The defendant's employment of plaintiff's term ‘plaintiff's assignors.’

In the first place, if this were an allegation in conflict with the express, explicit, denial of the assignment, we would have at most a conflict in the pleadings. In such a situation a judgment on the pleadings is not proper. Pimentel v. Hall Baker Co., 1939, 32 Cal.App.2d 697, 701, 90 P.2d 588, 590. But its use of the words ‘plaintiff's assignors' is not an allegation or admission of the assignment. The case of Cass v. Rochester, 1917, 174 Cal. 358, 362–363, 163 P. 212, 213-–214, is most in point. In there appears: ‘There is still a further ground of objection to the granting of judgment on the pleadings. Defendant denied the transfer and assignment of the automobile by the motor company to the plaintiff * * *. The fact that in the connerclaim the defendant may have made admissions inconsistent with this denial does not impair its effect. A defendant has the right to plead inconsistent defenses, and if one of them denies material allegations of the complaint, judgment cannot be rendered on the pleadings, even though the matter thus denied may be admitted in another defense. [Citing cases.] It is claimed by the respondent that the denial of the assignment is overcome by an admission contained in the same defense. But the supposed admission consists merely of an allegation that defendant refused to deliver the automobile for the reason ‘that the assignors of the plaintiff are indebted to this defendant in the sum of $204.’ This reference to ‘assignors of the plaintiff’ cannot be construed into an admission that an assignment had, in fact, been made * * *.'

The denial of the assignment was not hidden away somewhere; it was explicit, open for all to see. With it, a judgment on the pleadings was improper. MacIsaac v. Pozzo, 1945, 26 Cal.2d 809, 812–813, 161 P.2d 449, 451.

The judgment is reversed.

I concur in the judgment.

I do not agree that we should base a reversal upon a denial in the answer of the alleged assignment.

There was such a denial by reference to certain paragraphs of the complaint but the parties did not realize that the answer contained a denial of the assignment. It is not mentioned in the briefs. If the point had been made in the trial court the motion for judgment on the pleadings would have been denied.

No ‘important legal principle is necessarily involved in the newly discovered point.’ I think we should overlook the point, as the parties have done.

I concur in the judgment upon the sole ground that defendant had an offset under the contract of one-half of the escrow fee and that the judgment was therefore excessive to that extent.

BISHOP, Justice pro. tem.

FORD, J., concurs.