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

George E. TRAFTON, Plaintiff and Respondent, v. N.E. YOUNGBLOOD, Defendant and Appellant.

Civ. 30606.

Decided: December 19, 1967

Ball, Hunt & Hart, Joseph A. Ball, Joseph D. Mullender, Jr., Bernard A. Murray, Long Beach, for appellant. Marvin Gross, Los Angeles, for respondent.

Youngblood, a lawyer, was sued by Trafton, his client, for $7464 of moneys wrongfully withheld by Youngblood.

Trafton's complaint pleaded two causes of action: the first, a common count for money had and received; the second, a count for conversion of $7464 of Trafton's money which Youngblood had obtained from Title Insurance and Trust Company to satisfy third-party claims against Trafton.

Youngblood answered the common count with a general denial and an affirmative defense of an account stated. His answer to the conversion court admitted the receipt of Trafton's money from Title Insurance and Trust Company and pleaded his authority to apply it to his own claims for legal services, which he had done under an account stated, a copy of which was attached to his answer. This accounting set forth charges for legal services and costs in excess of $7000. Youngblood also filed a cross-complaint against Trafton seeking judgment for a balance of $609 owed him on the same account.

The parties went to trial on these pleadings, and the trial court found (1) Youngblood had received trust moneys belonging to Trafton, (2) Youngblood had not been authorized to apply these moneys to claims of his own, and (3) no account had been stated. The court entered judgment in favor of Trafton for $7386.

On a motion for a new trial Youngblood sought to amend his pleadings in order to plead and prove the reasonable value of his legal services as an equitable setoff to the moneys the court found he owed Trafton. The motion was denied on the ground the amendment was no longer timely and its delay had not been excused. Youngblood appeals.

We discuss the strategy of the parties, the basic rules of pleading which apply to the cause, and the exercise of judicial discretion in problems of pleading and proof.

Strategy of the Parties

Youngblood had been authorized to withdraw Trafton moneys from an escrow with Title Insurance and Trust Company for the purpose of discharging lien claims against Trafton's building. Youngblood proceeded to withdraw approximately $11,800, of which $4500 was used to settle lien claims of third parties and the balance of $7300 was kept by Youngblood. To justify his refusal to pay over these moneys, Youngblood pointed to his claims for legal fees and costs, which, he pleaded, were no longer matters of dispute or negotiation, but had become items in an account stated. By this strategy in the litigation it would appear Youngblood sought to make the value of his services an accomplished fact, whose amounts were frozen in an account stated and no longer subject to judicial review or evaluation. If this was the Youngblood strategy, it backfired badly when the court found there had never been an account stated. Youngblood, instead of having pocketed fees whose amounts were insulated from all judicial examination, discovered that he had collected no fees at all and faced the prospect of the statute of limitation on his claims for legal services. His attempt to retrieve his position by a motion for a new trial was unsuccessful.

Analysis of the Pleadings

On appeal Youngblood principally argues that his general denial of the common count for money had and received permitted him to prove any setoff or counterclaim he might have had against Trafton. Although during the trial he himself specifically agreed with the statement of the trial judge that the reasonable value of his services was not an issue in the cause and although he presented no testimony and offered no proof on this subject, he argues he should have been permitted to re-open his case-in-chief in order to present evidence of the reasonable value of his services, since the subject was comprehended within the pleadings before the court.

Our reading of the pleadings does not lead us to the same conclusion. Clearly, the gravamen of the complaint is the conversion of $7464 of Trafton's money which Youngblood had gotten from Title Insurance and Trust Company. The common count for money had and received is wholly ancillary to this specific grievance. Equally clearly, the answer admits the receipt of the money from Title Insurance and Trust Company but pleads its retention by Youngblood under general authorization from Trafton and its application as specified in the account stated. Youngblood's crosscomplaint likewise refers to the account stated and claims a balance owed by Trafton on the account.

Under these pleadings the burden rested on Trafton prove (1) that moneys from his account came into Youngblood's possession; and the burden rested on Youngblood to prove (2) he was authorized to apply these moneys to his own claims and (3) had done so in accordance with the account stated. On the evidence presented the court found that (1) was true, and (2) and (3) were false, and consequently gave judgment for Trafton.

We think these were proper findings under the pleadings before the court. Plaintiff pleaded and proved the receipt of money by Youngblood on his behalf. Youngblood's defense of his authorization to retain the moneys for his own claims and his disposition of them under his accounting failed, and judgment was properly entered against him. We evaluate the common count of the complaint in the light of the other more specific count pleaded, and we interpret its contribution to the formulation of the issues in like fashion. (Orloff v. Metropolitan Trust Co., 17 Cal.2d 484, 489, 110 P.2d 396; South v. Wishard, 123 Cal.App.2d 642, 650, 267 P.2d 827.) In this case the common count adds nothing to what is elsewhere pleaded in the complaint.

If Youngblood wanted to put in issue the reasonable value of his legal services, he should have done so by an affirmative pleading. Under any conceivable theory the burden of proof rested on him to establish the reasonable value of his legal services. In general the party having the burden of proof on an issue is required to plead that issue. (Witkin, Calif. Evidence, p. 180.) We think Code of Civil Procedure, section 437, which states that the answer of the defendant shall contain a statement of any new matter constituting a defense or a counterclaim, directly applies to the pleadings here. A setoff against trust moneys for the reasonable value of legal services is certainly new matter constituting a defense which Youngblood should have pleaded. We conclude that the trial court correctly and properly ruled an all issues technically before it under the pleadings.

Motion for New Trial—Judicial Discretion

Yet although the issues were properly decided under the specific pleadings before the trial court, we should still consider whether the present cause was an appropriate one for relief from improvident pleading. The basic aim of litigation is to settle controversies between parties, and the machinery of legal procedure should operate with sufficient variable drive to achieve this result. Courts possess considerable discretion in determining when and under what circumstances to grant relief from earlier procedures which have turned out badly for a litigant and produced misfortunes which may not be wholly deserved. A court should keep in mind its basic function of effecting substantial justice between the parties. (Code Civ.Proc. § 452.) Even if we assume that Youngblood attempted to forestall any examination of the value of his services and came to grief as a consequence of his own overreaching, still we should avoid a result which denies him legitimate compensation for work performed, concededly of some value, if it is possible to do so without imposing a hardship on the opposing party. No real hardship would have been worked on Trafton had Youngblood been permitted to amend his pleadings in order to plead and prove the reasonable value of his services as a setoff against moneys owed Trafton. Since the nature of the services and the amount of Youngblood's claims had already been identified and itemized in the account stated, Trafton would not have been surprised by an amended pleading. On the other hand, the refusal to permit Youngblood to amend might be seriously prejudicial to him, since his claim for services might be wholly lost if he were forced to file a new suit and overcome both the defense of compulsory counterclaim (Code Civ.Proc. § 439) and the defense of the statute of limitation. We think the policy of liberal amendment in furtherance of justice should have prevailed on the motion for a new trial (Code Civ.Proc. § 576) and Youngblood been permitted to plead and prove the reasonable value of his services in supplemental proceedings after trial under Code of Civil Procedure, section 662.

The judgment is vacated with directions to the trial court to permit Youngblood to plead the additional defense of setoff for the reasonable value of his services and both parties to present evidence on that issue. However, we find Youngblood's pleadings and presentation in the trial court sufficiently disingenuous to charge him with his share of the responsibility for the course of events in the trial court. Accordingly, each party will bear its own costs on appeal. (Stromerson v. Averill, 22 Cal.2d 808, 141 P.2d 732.)

FLEMING, Associate Justice.

ROTH, P. J., and HERNDON, J., concur.

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