Lenchner v. Chase

• Decision Date: 08 August 1950
• Court: California Court of Appeals Court of Appeals
• Parties: LENCHNER et al. v. CHASE et al. Civ. 14253.

Page 921

220 P.2d 921

98 Cal.App.2d 794

LENCHNER et al. v. CHASE et al.

Civ. 14253.

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

Aug. 8, 1950.

John F. O'Sullivan, Frank J. Perry, San Francisco, for appellant Nona Harwick.

H. Ward Dawson, Jr., San Francisco, for appellants L. F. Chase, Roy C. Czerny, L. F. Chase Co. (a copartnership).

Raymond H. Shone, Harold B. Lerner, San Francisco, for respondents.

GOODELL, Justice.

This is an appeal from a judgment against two sets of defendants, namely, Nona Harwick and Chase and Czerny, a copartnership known as L. F. Chase Company.

The trial judge, Hon. Preston Devine, filed an opinion wherein the facts are fairly and fully stated. With a few deletions and additions it reads as follows:

'This is an action for money had and received in the sum of Fifteen Thousand Dollars ($15,000.00) plus interest. Plaintiffs, Ruth Lenchner and Isadore Miller, were prospective purchasers of a tavern in the Mission District of San Francisco, known as 'The Armory'. The owner and licensee of said tavern was Nona Harwick, one of the defendants herein. On July 22nd, 1946, plaintiffs deposited with L. F. Chase and L. F. Chase Company, copartnership, $15,000.00; said Chase Company is a licensed business opportunity broker. At the time of making the deposit, plaintiffs signed an agreement to purchase the 'Armory Tavern' for the sum of $22,000.00; the balance of $7,000.00 to be supplied by a loan from the Bank of America. The Morris Plan Company was later substituted as the lender, apparently with everyone's consent, and it agreed to make the loan. It was stated in the agreement that the Chase Company should act as escrow agent under the supervision of Bank of America, but later the Chase Company alone acted as such escrow agent, with the express oral consent of the seller, at least. The agreement signed by plaintiff provided, in respect of failure on the part of plaintiffs, as follows:

"Said sum of $15,000.00 deposited as above is to be applied to the settlement of all damages sustained by reason of said breach if I do not complete the purchase, and L. F. Chase Company may retain from said sum the amount of any commission or compensation which would be due it upon sale of said property at above price under the terms of said owner's contract, as if it had made said sale to me at said price. The above sale is subject to the approval of the owner.'

'Although a space for the acceptance of the seller was provided on the document, there was no signature of the owner.

'However, the owner, Nona Harwick, had signed a listing with the Chase Company on July 22nd, 1946, in which she had agreed to sell 'Armory Tavern' for the sum of $20,000.00; anything above that amount to be retained by Chase Company. It was provided that any sale would be contingent on the purchase of 'The Dungeon', a tavern in the Marina District, in which Mrs. Harwick preferred to be located, for her home was in that district. On July 26th, the owner of 'The Dungeon' signed and agreement to sell that tavern for $10,000.00; an amount satisfactory to Mrs. Harwick. The fact that 'The Dungeon' transaction was tied in with that of 'The Armory' so far as Mrs. Harwick was concerned, was not commmunicated to Lenchner or Miller.

'A partnership agreement was executed between Ruth Lenchner and Isadore Miller on July 31st, 1946, which was witnessed by Mr. Czerny of the Chase Company; and although it was not legal for Miller to have any interest in a liquor establishment, he being an alien, that fact had no bearing upon the later events.

'On August 7th, 1946, Nona Harwick and Ruth Lenchner applied for transfer of the Harwick license to Lenchner. The application, signed by both parties, called attention to that part of Rules and Regulations issued in pursuance of the Alcoholic Beverage Control Act, Gen.Laws, Act 3796, which requires that the transferor shall be responsible for the conduct of the business until a new certificate is issued, and that 'the transfer of the licensed business shall coincide with the transfer of the license'.'

On August 9 the Chief of Police protested the granting of the application on grounds which arose in the years from 1938 to 1941. However in 1945 respondent Lenchner was granted a liquor license to operate the 'Montana Club', another tavern in San Francisco, under the name Ruth Davis, and her operation of that tavern seems to have been unobjectionable. Testimony was given by an agent of the State Board of Equalization that he had recommended that her application for the transfer of 'The Armory' license be granted. That application was denied by the Board on November 1, following a recommendation to that effect made by the Board's hearing officer on October 21.

An agent of the Board informed appellant Harwick of the denial and warned her that she must resume operation of 'The Armory' personally or her license would be in jeopardy. She promptly went there on November 13, discussed with respondent Lenchner the Board's action, and repossessed the place. Appellant Harwick had known for some time of the matters of 1938-1941 but had been informed by a responsible agent of the Board that there was likelihood the application for the transfer of 'The Armory' license would be granted probably because of the satisfactory operation of the 'Montana Club' in the intervening years. Appellant Harwick had not known of the 1938-1941 matters at the outset of the negotiations.

To resume the quotation from the opinion:

'Chase Company meanwhile, and on August 12th, 1946, had paid to itself and to its salesman, Edward Riley, commissions on the sales of the 'Armory' and the 'Dungeon' taverns, amounting to some $3,800.00, on the theory, as testified by Chase's agent, Mr. Czerny, that buyers had been produced for both places. On November 7th, 1946, Chase Company requested Mrs. Harwick to make a written demand upon Chase (an agent of Chase prepared the demand) to pay Emile Hennette, seller of the 'Armory' [should be 'Dungeon'], $10,000.00 from the escrow fund, and Mrs. Harwick did so demand. Thereupon, and on November 7th, 1946, Chase Company paid from the escrow fund $10,000.00 to Mr. Hennette.

'Lenchner and Miller made demand upon defendants for return of the $15,000.00 deposited, and this was refused, whereupon the present action was brought. Plaintiffs contend that no contract of purchase of the 'Armory' was completed; that if there was a contract to purchase (they do not admit this because there existed no single document or set of identical documents signed by all parties), it was a contract to pay only if the license could be transferred; that assuming that were not so, there was a mutual rescission when Mrs. Harwick repossessed the tavern.

'I am of the opinion that by all the papers signed by the parties and by their conduct, it was contemplated that the $15,000.00 would be payable only if the license could be transferred; that the failure to go ahead with the purchase on the part of the prospective buyers was not a voluntary failure, and this distinguishes the case from the cases cited in defendant Harwick's brief, * * * and that the deception practiced by plaintiff Lenchner in attempting to get the license does not justify the forfeiture of the $15,000.00 deposit.

'Defendant Harwick contends that plaintiffs 'undertook to have the license transfered to them' * * *. No such undertaking is contained in their agreement to purchase. There is no provision for forfeiture in event of failure to receive a license. There was no express warranty in the agreement to purchase that plaintiffs had no police record. In the only paper signed by Mrs. Lenchner and Mrs. Harwick (the affidavit required by the Board of Equalization) it was expressly provided that title must remain with the vendor until a transfer would be approved. And in the agreement to purchase, the sentence relating to applying the $15,000.00 to damages sustained by failure to complete the purchase does not state whose damages are referred to, the owner's, the agent's or both.

'These being the facts, I believe the case does not come under the rule of those decisions which permit a vendor, when the vendee wrongfully refuses to go ahead with a contract of purchase, to retain any deposit made, regardless of the amount of damage, cases such as Glock v. Howard, etc. Co., 123 Cal. 1, 55 P. 713, 43 L.R.A. 199, 69 Am.St.Rep. 17; Tomboy Gold etc. Co. v. Marks, 185 Cal. 336, 197 P. 94; Rayfield v. Van Meter, 120 Cal. 416, 52 P. 666; Arkelian v. National Bank, 103 Cal.App. 764, 284 P. 933.

'I believe the cause comes under the rule of such cases as Green v. Frahm, 176 Cal. 259, 168 P. 114; Thomas v. Anthony, 30 Cal.App. 217, 157 P. 823, namely, that the penalty provision in the last paragraph of plaintiffs' Exhibit One is void. Even if it were not so, said provision would not be contractual between the vendor and vendees, but between prospective vendees and the Chase Company.

'The next question is: How much are plaintiffs entitled to recover; Plaintiffs concede that the profits of the business during the term they operated it should be deducted from the $15,000.00 but they contend that in ascertaining the amount of profit, allowance should be made to them for their personal services in and about the tavern. I believe they are not entitled to charge for such services. There was no express contract calling for payment of wages to them, and a promise can be implied only to enforce a manifest equity or to reach a result which the unequivocal acts of the parties indicate that they intended to effect. Taylor v. National Supply Co., 12 Cal.App.2d 557, at 563, 56 P.2d 263. Had the police record of Mrs. Lenchner been brought to the attention of Mrs. Harwick, it is probable the latter would not have agreed to pay wages to her and her partner, if, indeed, she would have consented to any part of the negotiations with them. I do not believe there is a ...