Anglo California Nat. Bank v. Lazard

• Decision Date: 28 October 1939
• Docket Number: No. 8975.,8975.
• Citation: 106 F.2d 693
• Parties: ANGLO CALIFORNIA NAT. BANK OF SAN FRANCISCO v. LAZARD et al.
• Court: U.S. Court of Appeals — Ninth Circuit

106 F.2d 693 (1939)

ANGLO CALIFORNIA NAT. BANK OF SAN FRANCISCO v. LAZARD et al.

No. 8975.

Circuit Court of Appeals, Ninth Circuit.

September 7, 1939.

Rehearing Denied October 28, 1939.

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McKinstry, Haber & Coombes and J. C. McKinstry, all of San Francisco, Cal., and Cosgrove & O'Neil, T. B. Cosgrove, and John N. Cramer, all of Los Angeles, Cal., for appellants.

Hanna & Morton, Harold C. Morton, and Leon B. Brown, all of Los Angeles, Cal., for appellees.

Before WILBUR, GARRECHT, and HANEY, Circuit Judges.

WILBUR, Circuit Judge.

This is an appeal from a judgment entered January 11, 1939, in favor of appellees in the sum of $651,579.71, with costs taxed at $2,110.31. The action was originally brought as a suit in equity to recover property which had belonged to appellees or their predecessors in interest, alleged to have been fraudulently purchased from appellees and for an accounting of the oil and gas produced therefrom. The appellees at all times here involved resided in the Republic of France. At the conclusion of the appellees' case on motion of certain defendants who had purchased the property, the cause was dismissed by the court with prejudice as to these defendants upon the ground that the California statute of limitations (Calif. C.C.P. Sec. 338, subd. 4) had run as to appellees' cause of action against them. The judgment in favor of the purchasers of the property left the appellees no recourse except for damages and from then on the action proceeded as one of law for the recovery of damages for fraud in procuring the consent of appellees to such sale. The parties consented to the transfer of the case to the law side of the court and waived a trial by jury.

The appellees alleged in their complaint that appellant Herbert Fleishhacker was president of the appellant bank at the time of the alleged fraudulent transactions complained of and that the appellant bank was agent and trustee of certain parties (hereinafter referred to as the owners; see note¹) who owned about 15,000 acres of land in California, including the 150 acres of land located in Kern County, California, in the east half of Section 24, Township 26 South, Range 20 East, M.D.B. & M. It was alleged that the appellant bank at all times mentioned herein had full power and authority to act for the owners with respect to the properties and to do all acts which the principals might do. The alleged fraudulent acts complained of had to do with sales of portions of the property (alleged to have been sold for a grossly inadequate price, about one-tenth of its value) with the acquiescence of the owners whose consent, it was alleged, was obtained by fraudulent misrepresentations to them as to its value and character as oil land. Those sales involved in all 150 acres of land. The first sale of 110 acres was made in 1915. In respect to this transaction it was alleged that the appellants for several years prior to 1915 represented to the owners of the property that appellant Herbert Fleishhacker was generally well informed on matters and activities in the oil fields in California, was watching for developments in the vicinity of their property and would advise them of matters affecting their property. It was alleged that appellant Herbert Fleishhacker was in fact well informed on activities in the oil fields in California, particularly in Kern County. It was alleged that for several years prior to 1915 oil developments had taken place in the vicinity of Section 24 so that most of the 150 acres subsequently sold had become a part of the proven oil territory of the Lost Hills Oil Field; that such development had established that that field extended across the northeast corner of Section 24 and that a large part of the 150 acres was land from which oil production could be had in large and paying quantities; that the greater part of the 150 acres was of a value in excess of $3,000 per acre; that these facts were known at that time to the appellants but unknown to the owners. It was alleged that the appellants did not advise the owners of these facts before the sale but to the contrary represented to them by cablegram that it was doubtful if the land was productive of oil, informed them they had found a buyer for 100 acres of the land at a price of $300 per acre and strongly recommended a sale at that price stating that it was a very good price for the property. It was alleged that these representations were false and known to appellants to be false and were made for the purpose and with the intent of deceiving the owners into believing them; that the owners did believe the representations and in reliance thereon consented to the sale of 100 acres; that except for such reliance they would not have consented to such sale and that thereupon the appellant bank caused 110 of the 150 acres to be conveyed to certain parties, who were original defendants in this suit as to whom the cause was dismissed, for a price of $300 per acre, $33,000 in all, whereas the property at that time had a value of more than $300,000.

In respect to the sale in 1917 of the remaining 40 acres of the 150 acres it was alleged that in order to induce the owners to consent to the sale of this property the appellants immediately after the sale of the 110 acres represented that land of the same general character as the 110 acres previously sold had been selling for from $12 to $50 per acre and that they had been offered 2,000 acres of land practically identical therewith at a price of $12 per acre. Appellees alleged that appellants represented that the price they received for the 110 acres was a top price for such undeveloped and unproven oil lands but at the time of these representations they were aware of the fact that the property was proven oil land of great value and that the representations were false and known to appellants to be so. It was further alleged that on or about September 2, 1916, appellants represented to the owners that the sale of the 110 acres had been a "chance" sale and that the property had shown to be valueless; that there were no indications of oil in the vicinity thereof and that the same property could be repurchased for $20 to $25 per acre; that these representations were false and known by appellants to be false and that at the time of these representations appellants knew that there were eight wells already drilled on the 110 acres which had been sold by the owners which were wells producing oil in large and paying quantities. It was also alleged that appellants represented to the owners that the sale of the 110 acres had only been possible because the purchaser thereof had other holdings in the immediate vicinity and desired to increase its acreage; that appellants were aware that at the time of such sale the purchasers of the property had no other holdings in the vicinity. Appellees alleged that the remaining 40 acres which immediately adjoined the 110 acres previously sold were thereafter sold by appellants on behalf of the owners at a price of $13,500 although most of the land at the time of the sale was proven oil land and of a value of at least five times the amount of the purchase price; that at the time of the sale twenty one wells had been drilled on the 110 acres sold in 1915 and were producing oil in paying quantities and many offset wells had been drilled immediately adjacent to that property; that the appellants had full knowledge of these facts but notwithstanding that knowledge represented to the owners that no production had been had therefrom; that the representations of appellants were made with the intent of defrauding the owners; that the owners acquiesced in the sale of the 40 acres solely because of the false representations made to them and that except for the representations made would not have acquiesced therein. It was alleged that appellees did not know what remuneration appellants received as a result of their breach of trust and fraudulent conduct but alleged on information and belief that appellants did in fact receive rewards.

Appellees alleged that the owners and appellees had no knowledge of the fraudulent conduct of the appellants prior to 1931; that because of certain proposed transactions by appellants, who were still acting as their agents in 1930, they became suspicious and in 1931 and 1932 investigated the matter of the sales of the 150 acres of property and as a result of these investigations commenced this action.

By the amendment to conform to proof the appellees alleged damage in the amount of $253,500 with interest of the same amount.

The findings of fact on the question of fraud were substantially in accord with the allegations of the complaint and amply support the judgment rendered.

Appellants' first point is that the District Court was without jurisdiction because of lack of the required diversity of citizenship. This contention is based on the following facts: David Cahn, holder of the record title of Section 24 in 1915 and alleged and found to be one of owners in that year, died in August 1916. Certain of the appellees claim as his successors. In the complaint, the appellees alleged the death of David Cahn, the administration of his estate and that his estate had become vested in his widow and five children. There were also allegations concerning the death of certain of his children and his widow and the vesting of their estates in certain of the appellees. In the amendment to conform to proof, the French law applicable to the vesting of these interests was pleaded and allegations were made explaining the allegations in the original bill, above referred to, concerning the due and proper administration of the estate of David Cahn and his successors in interest, as referring to the fact that under the law of the Republic of France upon the death of a person, title to his property vests in his heirs or successors specified by law or by will. The...