CARPENTER v. FROLOFF (1938)

A judgment of nonsuit was entered in the action in chief herein, in which Samuel W. Carpenter, as plaintiff, sued Basil Froloff and Jeanette M. White, as defendants, for damages for breach of an agreement for the sale and purchase of the Rising Sun Placer Mine. The said Jeanette M. White filed her cross-complaint against the said Basil S. Froloff and Stefa Froloff, his wife, and judgment was rendered thereon in favor of said Jeanette M. White.

This is an appeal by the said Basil S. Froloff and Stefa Froloff from the said last named judgment and comes to this court upon the judgment roll alone. From such record it appears that on May 19, 1934, said appellants, Basil S. Froloff and Stefa Froloff, entered into an agreement (filed herein and identified as exhibit “A”) by which they agreed to sell to one Charles A. Dutro the Rising Sun Placer Mine, consisting of 190 acres of land, for the agreed purchase price of $18,000, and to place in escrow a quitclaim deed to the property in question, which deed was to be delivered to said Dutro or his assigns upon his or their compliance with all the terms and conditions of said agreement. On October 19, 1934, said Dutro assigned his interest in the property covered by the agreement to Jeanette M. White, respondent here, and said White in turn assigned her interest in said agreement to Samuel W. Carpenter for the agreed purchase price of $45,000.

On July 9, 1935, said Carpenter brought action against said Jeanette M. White and Basil S. Froloff and Stefa Froloff for damages for breach of contract, alleging that said Basil S. Froloff had prevented his entry upon the said mining property and the commencement of his mining operations thereon, all to his damage in the sum of $51,000. Respondent Jeanette M. White thereupon filed her cross-complaint against the Froloffs alleging that through a mistake known to the said Froloffs, the agreement of May 19, 1934, failed to express the true intention of the parties thereto, and that the quitclaim deed deposited in escrow did not accurately describe the mining property which the Froloffs had exhibited to the said Dutro and said respondent White, and of which said Froloffs represented themselves to be the owners, to-wit: 190 acres of land, known as The Rising Sun Placer Mine, lying along the contiguous channel of Rush creek for a distance of two miles; that the quitclaim deed dated June 2, 1934, did not refer to the Rising Sun Placer Mine by either name or acreage, but instead referred by legal description to two parcels of land, one comprising 90 acres and the other 100 acres, and did not include in its provisions any description of the other lands embracing the channel of Rush creek for two continuous miles and the territory along the shores of Rush creek contiguous thereto, which the said Froloffs had represented to said respondent White comprised the Rising Sun Placer Mine consisting of 190 acres; that in truth and in fact said mining property consisted of 90 acres only, and the Froloffs' representations that it contained 190 acres and that it included lands embracing the channel of Rush creek for two continuous miles, and the territory along the shores of Rush creek and contiguous thereto, were false and fraudulent and were made to cheat and defraud said Charles A. Dutro and his assigns; that the said Froloffs with a further intention to defraud and cheat said Dutro and his assigns and to breach their contract made with said Dutro for the sale of the lands embracing the channel of Rush creek for two continuous miles and the territory along the shores of Rush creek and contiguous thereto, said lands being represented to be gold bearing and worth over $18,000, did include in said quitclaim deed other lands which were mountainous and of practically no value and which they (the Froloffs) had not exhibited to said Dutro or to said respondent White. It was further alleged by the cross-complaint that the said lands embracing the channel of Rush creek for two continuous miles and the territory contiguous thereto and which the Froloffs represented they were selling to said Dutro, are located in sections 21, 22, 26 and 27, township 34 north, range 9 west, M.D.M., but are different lands than those described in the quitclaim deed; that the failure to include in the said quitclaim deed all of the lands which the said Froloffs exhibited to respondent White and which the said Froloffs represented they were selling to the said Dutro, was a breach of the agreement of May 19, 1934, and was done with the express purpose and intention of deceiving and cheating the said Dutro out of the most valuable portion of the lands included in the mining property, all to the damage of said Jeanette M. White, as follows:

1. $500 expended in the erection of buildings at a site and location which appellant Basil Froloff pointed out to the employees and agents of Charles A. Dutro as being part of the land and property which he was selling to the said Dutro; that after Dutro assigned his contract to respondent, said respondent attempted to occupy the said buildings constructed by said Dutro, but appellant Basil Froloff occupied the said buildings himself and refused to permit respondent as the assignee of Dutro to occupy or use the same, claiming that they were located upon property not described in the quitclaim deed hereinbefore referred to. That by reason of appellant's claiming the said buildings were located on his property, whereas in truth and in fact they were located on the property which appellant agreed to sell to Dutro, and that by reason of the deprivation of the use of said buildings, respondent has been damaged in the amount of the value of said buildings, to-wit, $500.

2. The sum of $27,000, in that respondent on the 24th of November, 1934, did assign all her right, title and interest in the contract of sale of said mining property to one Samuel W. Carpenter for an agreed consideration of $45,000; that the said Carpenter was ready, able and willing to comply with all of the terms and conditions of said contract; that one of the conditions of the assignment was that respondent should put said Carpenter in peaceable possession of all of the land and property exhibited by appellants to respondent; that when respondent went upon the land accompanied by said Carpenter, mining engineers and surveyors for the purpose of putting said Carpenter in possession of the premises and permitting him to mine gold thereon, the appellant Basil S. Froloff forbade and prevented such entry upon the land by either Carpenter, respondent, or any one accompanying them, and by reason of appellant's threats and interference, made it impossible for respondent to fulfill the terms of her contract with Carpenter; that by such acts and by the fraudulent representations hereinbefore referred to, appellants Froloff breached their contract with respondent, causing respondent to suffer damages in the further sum of the net profits to which she would have been entitled had she been permitted to carry out her contract with the said Carpenter, to-wit, the sum of $27,000, which is the difference between the purchase price of said property, $18,000, and the price contracted to be paid to respondent by said Carpenter of $45,000.

3. The sum of $4,500 which was paid by respondent and her assignor upon the purchase price of $18,000 and which appellants converted to their own use and benefit.

4. The sum of $5,000 for money and labor expended in the development of said mining property.

Respondent White also set up in her cross-complaint a second cause of action seeking to recover $10,000 for money had and received by appellants Froloff for their use and benefit, and upon which no finding of fact was made by the trial court.

In her amendment to her first amended cross-complaint, filed by leave of the court for the purpose of conforming to the proofs and evidence adduced at the trial, respondent White in addition to the above enumerated items of damage, prayed for “the reformation of the contract, Exhibit ‘A’ herein”, referring to the original agreement of May 19, 1934, between appellants Froloff and Charles A. Dutro.

The trial court found in favor of respondent White on the issues presented by her cross-complaint, specifically finding that she had expended $500 in the erection of buildings on the mining property; that she sustained damage in the sum of $27,000 for loss of net profits to which she would have been entitled had she been permitted to carry out her part of the contract of assignment with her assignee, Carpenter, to-wit, the difference between the purchase price of $18,000 and the price of $45,000 which Carpenter had agreed to pay her for her interest in the agreement of sale; that she and her assignor had paid $4,500 to appellants Froloff on account of the purchase price of the said mining property, which sum appellants Froloff received and converted to their own use and benefit, notwithstanding the fact that they had by their actions, including their false and fraudulent representations, breached their said contract with respondent's assignor; that respondent White had expended money and labor in the development of the said mining property in the sum of $5,000.

The court further found that respondent White was entitled to have the contract (exhibit “A”) reformed, “because of mistake on the part of the cross-complainant (White) and of her assignor (Dutro), said mistake being known to the cross-defendants (Froloff), and as a result said contract failed to express the true intention and meaning of the parties, and the deed deposited in escrow did not accurately describe the lands which the Froloffs had exhibited to respondent White and to her assignor, and of which they represented they were the owners and were selling to the said Charles A. Dutro”; and that as reformed the said agreement should contain the description of certain property, particularly describing the same.

Judgment was thereupon entered in favor of respondent White for the recovery from Basil S. Froloff and Stefa Froloff of the sum of $27,000 in damages, plus interest and costs of suit, and for the reformation of the agreement of sale (exhibit “A”), said agreement as reformed to contain a description of certain property, as particularly described in said judgment.

We find ourselves in accord with the first contention of appellants, that the findings do not sustain the conclusions of law nor the judgment as to the amount of damages awarded to respondent. In her amendment to her first amended cross-complaint, respondent alleged that “she had an opportunity to and did, assign all of her right, title and interest in and to the contract set out and described herein as ‘exhibit A’ to one Samuel W. Carpenter, the plaintiff herein, for an agreed consideration of Forty-five Thousand Dollars ($45,000.00); that the said Samuel W. Carpenter was ready, willing and able to comply with all of the terms and conditions of said contract as set out in said Exhibit ‘A’ for the said consideration of $45,000 * the cross-defendants Basil S. Froloff and Stefa Froloff, his wife, have breached their contract made and entered into with Charles A. Dutro, cross-complainant's assignor, and have by their said acts and the breach of said contract caused this cross-complainant to suffer damages in the further sum of the net profits to which she would have been entitled had she been permitted to carry out her part of her contract of assignment to said Samuel W. Carpenter, to-wit, the difference between the purchase price of said property and the price contracted to be paid to cross-complainant by said Carpenter of $45,000.00, said difference amounting to the sum of Twenty–Seven Thousand Dollars ($27,000.00).”

In this connection the court found the allegations aforesaid to be true. Thus we here find a judgment awarding damages for the breach of an agreement to convey real property based upon the profit respondent alleges she could have made upon a resale. This is not an allowable measure of recovery in a case of this character. Gross v. Bank of America, N.T. & S.A., 4 Cal.App.2d 353, 355, 41 P.2d 178. Under section 3343 of the Civil Code, the measure of damages for one who is defrauded through false and fraudulent representations in the purchase of property is “the difference between the actual value of that with which the defrauded person parted and the actual value of that which he received, together with any additional damage arising from the particular transaction”. In short, the measure of damages in such cases is the difference between the purchase price and the actual value of the property received, plus special damages, if any. There is no finding as to the actual value of the property received, nor is there any finding as to the value the property would have had if it had been as allegedly represented. The findings therefore fail to furnish a basis upon which to predicate a calculation of the amount of damages. Prior to the adoption in 1935, St.1935, p. 1612, of Civil Code section 3343 the measure of damages in such cases was the difference between the actual value of the property received and the value it would have had if it had been as represented. 12 Cal.Jur. 843, sec. 88. Under neither theory do we find any legal support in the findings for the award of $27,000 in damages to respondent. This sum being the difference between the purchase price of $18,000 agreed to be paid by respondent and the sum of $45,000 which is the amount respondent claims she could have sold the property for had it been as represented, the award of damages was erroneously based upon the amount of profit respondent contends she could have made upon a resale.

Appellants' contention that the findings fail to sustain that portion of the conclusions of law and of the judgment which grants to the respondent the remedy of reformation of the contract, is without merit. The allegations of the amendment to the amended cross-complaint clearly state a cause of action alleged to have arisen when through a mistake on the part of respondent as to the description of the property contained in the agreement of sale, and which mistake was known to appellants, the other party to the contract, the instrument in question did not truly express the intention of the parties. The cause of action thus stated is authorized by section 3399 of the Civil Code, while section 3402 of the Civil Code provides for a revision of such contract and its specific enforcement as revised. Bound as we are on appeal where the judgment roll alone is before us, to assume that sufficient evidence was introduced at the trial to support such allegations and the findings based thereon, we conclude that the court was correct in ordering the contract revised or reformed.

For the reasons last stated, we must also assume, upon the judgment roll alone, that the evidence supports the findings on the issue of breach of the contract as reformed. Findings need not amount to a transcript of the evidence. Conceding that from some of the probative facts found by the trial court different inferences might be drawn, it will be assumed upon appeal that the inference made by the trial court was the one that will uphold rather than defeat its judgment. Estate of Berry, 195 Cal. 354, 233 P. 330. We do not have the record before us. Assuming error in the findings, the burden of showing prejudice is on the appellant; and since the appeal is on the judgment roll alone, no prejudicial error is shown.

However, the damages in the sum of $27,000 awarded by reason of the breach of the contract as reformed are not supported by such findings, because of the erroneous measure by which they were determined, viz., the difference between the purchase price of the property and the amount that allegedly could have been made on a resale. Manifestly, if appellants are compelled to specifically perform the contract and deliver to respondent the property she intended to and did purchase, she should not in equity and justice receive both the property and the profit she alleges she could have made on a resale. True, she might be entitled to damages, but the measure thereof is not the difference between what she paid for the property and the resale price. Losses and expenses incurred in connection with the attempted resale, and which losses were occasioned by the fraud of appellants, can be recovered, but respondent cannot recover the property and at the same time receive and retain the sale profit, which profit of course would only arise by reason of respondent's dispossessing herself of the property, and which profits therefore she is not entitled to if she keeps the property and can again sell it. On the other hand, if appellants are unable to conform to the contract as revised, then of course respondent would be entitled to damages, including the difference, not between the value of the property at the time of purchase and the amount of the resale price, but the difference between the value of the property at the time she purchased it and its value at the time she contracted to sell it; but respondent cannot recover the property she purchased from appellants and while retaining the property also receive from appellants the profits she claims she would have made had she disposed of the property by sale.

Other points raised do not require discussion.

While the judgment must be reversed as to the $27,000 award in damages, the new trial should be so limited as not to require respondent to assume the unjustified burden of reestablishing the matters referred to in the findings which we have held to be supported by the evidence. Such retrial should be confined to the issue of damages, if any, to which respondent is entitled.

The judgment is reversed and the cause remanded, with directions to the trial court to proceed in accordance with the views herein expressed.

WHITE, Justice.

We concur: YORK, P.J.; DORAN, J.