LEEPER v. BELTRAMI IOOF IOOF IOOF (1959)

This is an appeal taken by plaintiffs from a judgment dismissing their action following an order sustaining demurrers to their complaint as amended without leave to amend further.

The demurrers of the various defendants were general. They also pleaded various statutes of limitations and laches.

The complaint and the amendments thereto are prolix, but for the purposes of this appeal may be summarized as follows: During the lifetime of Frank Weber, plaintiff Thomas B. Leeper, hereinafter called Thomas, who was an attorney at law, borrowed from Weber $10,150 and to secure the payment of his note therefor mortgaged two different ranches owned by him, one being in Sutter County and the other in Sacramento County. During Weber's lifetime, Thomas served Weber as his attorney and the fees so earned were, by agreement between the two, applied by Weber to the payment of Thomas' note which, by said applications, was completely paid, although Weber never executed any satisfaction of the mortgage. During the year 1951, plaintiff Abbie F. Leeper, hereinafter called Abbie, executed an undertaking for the appearance of one Greene for trial in a criminal action. He failed to appear, his bond was forfeited, and demands were made upon Abbie and her fellow bondsman which were not responded to. An action was brought to obtain judgment for the amount of the forfeiture. Judgment was obtained and execution was levied on Abbie's home. Thereupon, Thomas deeded the two ranches to Abbie and her fellow bondsman for the purpose of enabling them to raise the money necessary to discharge the bond judgment. William Beltrami and Hazel Scarlett, defendants in this action and respondents herein, were executor and special administratrix respectively of the estate of Weber, who had died. Notwithstanding that they knew the $10,150 debt had been paid and that Thomas had become thereby entitled to a satisfaction of the mortgage, these two plotted together to compel Thomas to pay the debt a second time and to that end brought an action in Sacramento County to foreclose the mortgage, recording notice of action in that county and in Sutter County. The complaint was filed August 18, 1952, and the notices were recorded at about that date. October 28, 1952, Abbie and her fellow bondsman procured a purchaser for the Sutter County ranch for the sum of $18,000 which would have yielded money sufficient to pay off the bond judgment and release Abbie's home from the levy. But the suit to foreclose the mortgage clouded the title to the Sutter County ranch and prevented the consummation of the sale. Beltrami and Scarlett were informed of the prior payment of the obligation on which they had sued and yet refused to dismiss the action or otherwise clear the title except only on payment to them for the estate of Weber of the amount they claimed to be owing on the mortgage debt. The result was that Abbie, unable by the sale of the Sutter County ranch to obtain sufficient moneys to clear her home, was compelled to make a forced sale of the Sacramento ranch to defendant and respondent LaVerne Charles Scheidel. Acting under the compulsions created by the wrongful acts of Beltrami and Scarlett she proceeded to sell the Sacramento County ranch to Scheidel for $10,760, about one-third of its value. Both sales were consummated. Abbie and her fellow bondsman conveyed the two ranches, the bond judgment was paid off, Beltrami and Scarlett for the Weber estate were paid $12,500 in settlement of their claims and there was left for Abbie over and above all demands the sum of about $4,000. Abbie and Thomas began this action November 30, 1957.

The relief prayed for was for the recovery of the money paid to Beltrami and Scarlett under the compulsions created by their wrongful conduct and also for the recovery from Scheidel of the Sacramento County ranch. Various remedies as to interest, rents, profits and the like, incidental to the main relief asked, were also contained within the prayer. The residuary legatees under the will of Weber were made parties defendant and by the prayer plaintiffs sought to recover from each the portion of the $12,500 which each had received.

Appellants contend that the action was an action to regain title to the Sacramento County ranch and that the right to bring it is to be measured by the five-year statute of limitations. Respondents contend that the action was to recover for fraud and that the right to bring it is to be measured by the three-year statute.

We shall first treat of the issues presented by the demurrer based on the statute of limitations. Although the alleged wrongful conduct of Beltrami and Scarlett forms the basis of the action in the sense that the allegations as to what wrongful conduct must be proved before any relief can be obtained, nevertheless by the action plaintiffs seek the recovery of the possession and the quieting of their title to the Sacramento County real property and to that extent the action is for the recovery of the possession of real property within the meaning of Section 318 of the Code of Civil Procedure and is governed by the five-year limitation provided in that section. Murphy v. Crowley, 140 Cal. 141, 73 P. 820. Clearly the action to recover the Sacramento real property is not barred. Beltrami and Scarlett are proper parties to the action for the recovery of that property, for it was their wrong which gives rise to the cause of action which eventuated in the sale at sacrifice of the Sacramento property and its transfer to Scheidel. It may be that equitable considerations may defeat the plea of the plaintiffs that the transfer be set aside and the property restored to them, in which event equity can give the alternative relief of money damages. If such relief be not sufficiently prayed for by the prayer for general relief a simple amendment will suffice to cover the matter. If appellants have stated a cause of action for the wrong alleged to have been committed by Beltrami and Scarlett then the fact that plaintiffs also seek the recovery of the $12,500 obtained by them through their wrongful conduct does not convert the action to one governed by Section 338, Subdivision 4, Code of Civil Procedure, as argued by respondents. There is but one count in the complaint. The demurrer seeking to raise the bar of the statute is general in the sense that it asserts that on the face of the pleading the action is wholly barred. If it be contended by a defendant that the action is barred in part, the defense of the statute must be raised by answer. 31 Cal.Jur.2d, p. 660, sec. 244; Lewis v. Fahn, 113 Cal.App.2d 95, 103, 247 P.2d 831. The demurrers, therefore, of Scheidel and of Beltrami and Scarlett which seek to raise the bar of the statute of limitations ought to have been overruled.

Six residuary legatees under the will of Weber, made parties hereto, are alleged to have received equal parts of the $12,500 paid into the estate of Weber by virtue of the wrongful conduct of Beltrami and Scarlett. Plaintiffs seek to follow the funds into their hands. These distributees also plead the bar of the statute of limitations, arguing that the relief demanded as to them is governed by Section 338, Subdivision 4, Code of Civil Procedure. What has been heretofore said disposes of this contention. Their demurrers likewise ought to have been overruled.

Each of the defendants, respondents here, demurs generally to the complaint. No special demurrers were interposed. If there be more than one cause of action stated without being separately stated, no demurrer has been addressed to that defect. The same must be said as to any objection that might have been raised by demurrer upon grounds of misjoinder. By failing to object to the pleading upon such special grounds, the parties are deemed to have waived their right to do so and to have consented to go to trial upon the pleading as drawn as being sufficient to enable the court and the parties to fully try all issues presented. Smith v. McLaughlin, 81 Cal.App.2d 460, 462–463, 184 P.2d 177; Shahabian v. Najarian, 14 Cal.App.2d 435, 441, 58 P.2d 396.

We will first consider the demurrers of Beltrami and Scarlett. As to them plaintiffs relied upon the concept of illegal business compulsion, which is a type of duress. The doctrine is stated and discussed in McNichols v. Nelson Valley Building Co., 97 Cal.App.2d 721, 218 P.2d 789; Lewis v. Fahn, supra, Wake Development Company v. O'Leary, 118 Cal.App. 131, 4 P.2d 802, and Young v. Hoagland, 212 Cal. 426, 431, 298 P. 996, 75 A.L.R. 654. We think the complaint states a cause of action. It alleges the plot or conspiracy between Beltrami and Scarlett to compel a payment over again of the debts secured by the mortgage upon the ranches; that they acted with knowledge that the debt had been paid; that they implemented their scheme by filing a suit to foreclose the discharged mortgage, and clouded the title to the ranches by recording lis pendens in the counties where the land lay; that when the need of Abbie arose to save her home from forced sale under the bond judgment they exerted the compulsion inherent in the defect in the title to the ranches which they had created by refusing, although knowing her situation, to withdraw from their illegal demands; that they continued to exert their wrongful compulsion, knowing all the circumstances until thereby they received $12,500 as a condition of their relinquishment of their false claims.

It is alleged that the effect of their unlawful compulsion upon Abbie was to so frighten and confuse her that she sold the Sacramento County ranch to Scheidel for some $20,000 less than its value. If these things be true, and we must at this stage in the proceedings take it that they are, then a cause of action for duress is stated. Whether or not there was in the alleged wrongful acts of Beltrami and Scarlett sufficient illegal compulsion to make them responsible for the loss arising is a question for the trier of fact. McNichols v. Nelson Valley Building Co., supra. It is stated in 17A American Jurisprudence, ‘Duress and Undue Influence’ pages 571–572:

‘Under the modern view, there is no legal standard of resistance with which the person acted upon must comply at the peril of being remediless for a wrong done to him, and no general rule as to the sufficiency of facts to produce duress. The question in each case is, Was the person so acted upon by threats of the person claiming the benefit of the contract, for the purpose of obtaining such a contract, as to be bereft of the quality of mind essential to the making of a contract, and was the contract thereby so obtained? Hence, under this theory duress is to be tested, not by the nature of the threats, but rather by the state of mind induced thereby in the victim. The means used to produce that condition, the age, sex, state of health, and mental characteristics of the alleged injured party, are all merely evidentiary of the ultimate fact in issue, of whether such person was bereft of the free exercise of his will power. Obviously what will accomplish this result cannot justly be tested by any other standard than that of the particular person acted upon. His resisting power, under all the circumstances of the situation, and not any arbitrary standard, is to be considered in determining whether there was duress.’

As this court said in Lewis v. Fahn, supra, 113 Cal.App.2d at page 101, 247 P.2d at page 835, ‘given an unlawful demand, a threat of groundless litigation unless the unlawful demand be met presents a situation where courts should not too readily listen to a claim by the party extorting the payment that his victim ought to have been a braver man and should have resisted his attack.’ The complaint states a cause of action in duress.

As to Scheidel it is alleged that he dealt with Abbie, knowing the compulsions under which she labored and under those circumstances negotiated a deal with her whereby, for one-third the value of a $30,000 ranch, he obtained the ranch. It is fairly inferable, even if not expressly stated by the pleader, that from the very circumstances of Abbie's willingness to make so great a sacrifice she was in no condition to be bargained with fairly. If knowing all these things, Scheidel drove the harsh bargain alleged, a court of equity would be justified in declaring that he be compelled to suffer a cancellation of the deed he so procured.

We come now to the general demurrers interposed by the six distributees. They are the beneficiaries of the tortious conduct of Beltrami and Scarlett, who represented their interests in the handling of the estate of Weber. They have received the fruits of extortion. Their very resistance against a demand that they account places them in the position of being accessory to the extortion. In equity and good conscience they ought to give back what they have thus obtained.

The rule is stated in Restatement, Restitution, Section 123, as follows:

‘A person who, non-tortiously and without notice that another has the beneficial ownership of it, acquires property which it would have been wrongful for him to acquire with notice of the facts and of which he is not a purchaser for value is, upon discovery of the facts, under a duty to account to the other for the direct product of the subject matter and the value of the use to him, if any, and in addition, to:

‘(a) return the subject matter in specie, if he has it;

‘(b) pay its value to him, if he has non-tortiously consumed it in beneficial use;

‘(c) pay its value or what he received therefor at his election, if he has disposed of it.’

See California Annotations to Restatement of Restitution, citing inter alia People v. Houghtaling, 7 Cal. 348; Curran v. Kennedy, 89 Cal. 98, 26 P. 641; Freitas v. Freitas, 31 Cal.App. 16, 159 P. 611.

Respondents all argue that the payment of $12,500 to Beltrami and Scarlett in settlement of the foreclosure suit was an adjudication that the claims therein presented by the plaintiffs in that action were valid. We do not agree. There was no real adjudication of any issue in that action. Abbie was under the same compulsions which compelled her to sell the Sacramento County ranch. The tortious conduct of the plaintiffs in the foreclosure suit operated extrinsically and the same equitable principles that invalidate the land transfer are equally potent to strike through the purported settlement of the false claims. 29 Cal.Jur.2d 109.

Finally, respondents contend that the action is barred by laches. Their argument runs in this way: The deed to the real property was not void, but only voidable; the sale and the deed must therefore be rescinded or the real property cannot be recovered; to obtain rescission an aggrieved party has a positive duty to act promptly; the complaint shows that plaintiffs were guilty of unwarranted delay in seeking rescission; therefore plaintiffs failed to state a cause of action for rescission; since the sale and the deed cannot be set aside plaintiffs cannot and do not state a cause of action for the recovery of real property; therefore the action can only be for the recovery of money paid or for damages; any such cause of action is barred by the statute of limitations.

This is not an action upon a unilateral rescission. It is an action in equity to have a deed cancelled and to have the grantee execute a deed conveying the property back to plaintiffs, coupled with allegations and a prayer that if such is done then the grantee receive by the decree all equitable considerations. This is an action for rescission by judicial decree. The distinction is a well-recognized one. An action upon a rescission is an action at law. An action to have rescission by judicial decree is an action in equity. In the one case the contract no longer exists, having been terminated by prior rescission. In the other the contract continues to exist until set aside by the equity decree. The distinction is statutorily recognized. Unilateral rescission is provided for in Sections 1688, 1689 and 1691 of the Civil Code. Rescission by equitable decree is provided for in Sections 3406 and 3408 of the Civil Code. The distinction is recognized by decision law. Philpott v. Superior Court, 1 Cal.2d 512, 36 P.2d 635, 95 A.L.R. 990; McCall v. Superior Court, 1 Cal.2d 527, 36 P.2d 642, 95 A.L.R. 1019. Notice of rescission and offer to restore is not a necessary antecedent to the equitable action for restitution of property wrongfully obtained. Seeger v. Odell, 18 Cal.2d 409, 417–418, 115 P.2d 977, 136 A.L.R. 1291. Restoration of benefits received is necessary but can be accomplished in the action itself. It is stated in the Seeger case, 18 Cal.2d at page 418, 115 P.2d at page 982:

‘* * * [A] court granting equitable relief has the power to make its decrees contingent upon compliance by the plaintiff with certain conditions. * * * The interests of the defendants can thus be well protected by a decree making any relief granted to plaintiffs conditional upon their paying the mortgage debt. Plaintiffs' offer in their complaint to ‘do and perform all things of them in equity required by the court to be done by them in the premises' and to subtract the amount of the mortgage debt from any sum awarded them from Mary Gibbs is a sufficient offer of restitution.’

Herein appellants pleaded as follows: ‘That in the event that said sale of said Sacramento County ranch is set aside and said LaVerne Charles Scheidel is forced to reconvey the title of said property to Abbie F. Leeper, said LaVerne Charles Scheidel should be repaid the sum of $10,760 so paid by him for said property; that he should also be reimbursed for any legitimate expenses relating to said sale and should receive interest on said sum of $10,760. If interest is so allowed by him said Scheidel should account and pay to Abbie F. Leeper for any income from said property; that the amounts recovered by Plaintiffs herein should be paid first to said Scheidel and the remainder to Abbie F. Leeper.’ The prayer contained the same request for equitable consideration of Scheidel. On the authority of Seeger v. Odell, supra, we hold that the foregoing constituted a sufficient offer of restoration. In connection with the foregoing and particularly as to the distinctions between an action at law upon a unilateral rescission and an action to obtain an equitable decree adjudging rescission or restitution see California Law Review, Vol. 36, page 606 et seq. and Alder v. Drudis, 30 Cal.2d 372, 384, 182 P.2d 195, 202, wherein the court said:

‘In granting to plaintiffs the remedy of restitution and in ordering the delivery to them of the polyscopes and letters patent, the court should have made its decree for this specific restitution conditional upon the return by plaintiffs to defendants of the $5,000 received. The purpose of restitution as a remedy for breach is the restoration of the status quo ante as far as is practicable, and in the absence of qualifying circumstances, the plaintiff must return any consideration he has received in order to obtain specific restitution. While there is no literal rescission of the contract, the result reached by the restitutionary remedy approximates that reached by rescission. It is not necessary that plaintiff should have made an offer to return the consideration, but the decree for specific restitution may be made conditional upon such return. Rest., Contracts, sec. 349, p. 596; sec. 354, p. 611; 5 Williston on Contracts, rev. ed., sec. 1460A, pp. 4082 et seq. California authorities dealing with the rescission of contracts illustrate this rule.’

As to laches or stale claim, another name for laches, the doctrine is defensive in nature and cannot be raised by demurrer unless the facts claimed to constitute proof of laches as a matter of law appear on the face of the complaint. Under such circumstances alone laches can be raised by demurrer. Otherwise it is a defense which must be pleaded. The rule is similar to the rule permitting the statute of limitations to be raised by demurrer if the facts constituting or showing limitation as a matter of law appear on the face of the pleading. In Meigs v. Pinkham, 159 Cal. 104, 111, 112 P. 883, 886, the court said:

‘As to laches. Under our law, as the statute of limitations is applicable to both legal and equitable actions, there can be no laches in delaying the bringing of an action if it is brought within the period of limitations [citing cases], unless there are some facts or circumstances attending the delay which have operated to the injury of the defendants. Nothing of the kind appears here. It is neither alleged nor asserted that defendants have in any way been injured, or at all affected, with respect to the relation of their lands to this dam and ditch by anything the plaintiff did or did not do.’

In Zakaessian v. Zakaessian, 70 Cal.App.2d 721, 725, 161 P.2d 677, 680, the court said:

‘However, it is a well-settled rule of law that the defense of laches can be raised by a general demurrer. [Citing cases] It remains to be determined if the statement of facts constituting this cause of action shows such delay in the assertion of plaintiff's rights that the defense of laches can be said to exist as a matter of law. The most recent expression of the Supreme Court on the matter of laches is in Maguire v. Hibernia Savings & Loan Soc., 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062. At page 736, of 23 Cal.2d, at page 681 of 146 P.2d the court said: ‘The policy of this state with respect to lapse of time is embodied in statutes applicable to both legal the equitable actions, and mere lapse of time, other than that prescribed by such statutes, does not bar relief. * * *’ * * *

‘The only possible prejudice to the defendants which might give rise to an estoppel in the set of facts being considered now, which appears from the face of the complaint other than that present in mere lapse of time, is presented in the death of Karkin Zakaessian, the predecessor in interest of defendants and the other party to the misunderstood transaction. The earlier cases in California, where laches has been held to appear on the face of the complaint and wherein there is no discussion of the necessity that prejudice to the defendant appear on the face of the complaint, involve much greater periods of time than that here shown, generally more than half of a normal lifetime. * * * Here there is a delay of 16 years without any increase in value being shown on the face of the complaint. * * * If the defendants in their answer and proof show a great increase in value and improvements to the property, plus possession for the elapsed 16 years, the plaintiff's cause may be barred by laches, but it can not be said as a matter of law on the basis of the facts now before us that there is such prejudice to defendants shown on the face of this complaint as to permit the assertion of that defense by general demurrer. * * * For the foregoing reasons the demurrer to the complaint here under consideration should not have been sustained on the ground that laches appeared from the face of the complaint.’

On the authority of the foregoing decisions we hold that laches does not appear on the face of the complaint in this case, and therefore the defense cannot be raised by demurrer.

For the reasons given, the judgment appealed from is reversed.

VAN DYKE, Presiding Justice.

SCHOTTKY and PEEK, JJ., concur.