Addiego v. Hill

• Citation: 48 Cal.Rptr. 240,238 Cal.App.2d 842
• Court: California Court of Appeals
• Decision Date: 20 December 1965
• Parties: William B. ADDIEGO and Harry J. Love, Plaintiffs and Appellants, v. Richard HILL and Albert Bindi, Defendants and Respondents. Civ. 22539.

Page 240

48 Cal.Rptr. 240

238 Cal.App.2d 842

William B. ADDIEGO and Harry J. Love, Plaintiffs and Appellants, v. Richard HILL and Albert Bindi, Defendants and Respondents.

Civ. 22539.

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

Dec. 20, 1965.

As Amended on Denial of Rehearing Jan. 19, 1966.

Hearing Denied Feb. 16, 1966.

Dinkelspiel & Dinkelspiel, Alan A. Dougherty, Redwood City, for appellants.

Johnson & Harmon, San Francisco, for respondents.

TAYLOR, Justice.

Plaintiffs, William B. Addiego and Harry J. Love, appeal from a judgment of dismissal entered after a demurrer to their third amended complaint was sustained without leave to amend. We are here concerned with the sufficiency of the third amended complaint to state a cause of action for specific performance of an alleged agreement between the parties.

The complaint alleged that plaintiffs and defendants were the owners of all the 12,000 shares of stock of Bahl Corporation; the plaintiffs owning 5,000 shares or about 42 per cent; the defendants 7,000 shares or about 58 per cent; that on or about October 20, 1956, the parties executed an agreement which provided as follows: 'WHEREAS, each of the undersigned is desirous that ownership of said stocks and bonds shall be limited insofar as is practicable to the undersigned parties;

'NOW, THEREFORE, each party to this agreement, in consideration of the promise of each other party to this agreement, does promise each other said party as follows:

'Before he sells, pledges, or otherwise hypothecates any presently owned or later acquired stocks or bonds, or other interest in said corporation, he will first offer to sell, pledge or hypothecate said stocks or bonds, or other interest in writing, to each of the undersigned on the same terms, said offer to continue for a period of 30 days.

'In any such event, should more than one of the undersigned be desirous of purchasing said stocks or bonds, the buying rights of each undersigned shall be that portion of such offered stocks or bonds as will enable each of the undersigned to maintain the same proportionate ownership of said corporation as exists at the time of the signing of this agreement.'

The complaint further alleged that about March 6, 1962, plaintiffs were advised that defendants were contemplating a sale of their 7,000 shares to one J. C. Johnson for the sum of $125,000, minus 58 per cent of the corporation's tax liability, payable by the transfer of his equity of $105,000 in a certain undertaking parlor in Palo Alto, and a note for the balance of the purchase price, payable in two years, bearing 6 per cent interest, payable semi-annually. ¹

The complaint also alleged that on March 8, 1962, the parties entered into a written agreement whereby defendants agreed to sell to plaintiffs their 7,000 shares of stock for $125,000, less 58 per cent of the then existing and ascertained tax liability of the corporation, payable as follows: $105,000 in cash and the balance by a promissory note payable in two years, bearing 6 per cent interest, payable semi-annually; that defendants refused to transfer or deliver their shares to plaintiffs and on March 15, 1962, in violation of the agreement of October 1956 and the agreement of March 8, 1962, entered into the exchange agreement with J. C. Johnson. The court sustained defendants' demurrer to the third amended complaint without leave to amend.

On appeal from a judgment sustaining a demurrer, the allegations of the complaint must be regarded as true. A complaint will be held to state facts sufficient to constitute a cause of action if, upon a consideration of all of the facts stated, it appears that the plaintiff is entitled to any relief (Augustine v. Trucco, 124 Cal.App.2d 229, 268 P.2d 780). In passing upon the sufficiency of a pleading, its allegations must be liberally construed with a view to substantial justice between the parties (Buxbom v. Smith, 23 Cal.2d 535, 545, 145 P.2d 305). A demurrer does not, however, admit contentions, deductions or conclusions of facts or law which may be alleged in a complaint (Howard v. City of Los Angeles, 143 Cal.App.2d 195, 299 P.2d 294). The right to amend a complaint after a demurrer is sustained should not be lightly denied. It is, however, proper to sustain a demurrer without leave to amend when the complaint cannot be amended to state a cause of action (2 Witkin, California Procedure, p. 1498, § 506). With these well-defined rules in mind, we will proceed to examine the complaint in relation to the applicable law (Marin v. Jacuzzi, 224 Cal.App.2d 549, 552, 36 Cal.Rptr. 880).

The question here is whether, under the particular circumstances and the terms of the pre-emption agreement, plaintiffs' acceptance of March 8 was made on the same terms as the Johnson offer. Defendants argue that the agreement of October 20, 1956, contemplated trades, as well as cash sales, and that plaintiffs' acceptance offering cash instead of an equity in the property owned by Johnson was not binding on defendants. Plaintiffs argue that unless the words 'same terms' as used in the agreement are reasonably construed to mean 'the same or equivalent terms,' the agreement can be frustrated by any offer by a third party involving a unique interest.

Section 1656 of the Civil Code provides: 'All things that in law or usage are considered as incidental to a contract, or as necessary to carry it into effect, are implied therefrom, unless some of them are expressly mentioned therein, when all other things of the same class are deemed to be excluded.' The modern trend of the law is to favor the enforcement of contracts and, if feasible, to carry out the intentions of the parties. Neither law nor equity requires that every term and condition be set forth in a contract. The usual and reasonable terms found in similar contracts may be considered, unexpressed provisions of the contract may be inferred from the writing, external facts may be relied upon, and custom and usage may be resorted to in an effort to supply a deficiency if it does not deter or vary the terms of the agreement (Burrow v. Timmsen, 223 Cal.App.2d 283, 288, 35 Cal.Rptr. 668, 100 A.L.R.2d 544). The court should accord an interpretation which is reasonable (Civ.Code, § 1643) and which gives effect to the intent of the parties as it may be interpreted from their entire agreement rather than one which renders the contract void (Civ.Code, §§ 1650, 1652, 1655, 1656).

We recognize that courts cannot not make better agreements for parties than they themselves have been satisfied to enter into or rewrite contracts because they operate harshly or inequitably. It is not enough to say that without the proposed implied covenant, the contract would be improvident or unwise or would operate unjustly. Parties have the right to make such agreements. The law refuses to read into contracts anything by way of implication except upon grounds of obvious necessity. '[I]mplied covenants are not favored in the law; and courts will declare the same to exist only when there is a satisfactory basis in the express contract...