Bank of America Nat. Trust & Sav. Ass'n v. Lamb Finance Co.

Decision Date09 November 1956
CourtCalifornia Court of Appeals Court of Appeals
PartiesBANK OF AMERICA NATIONAL TRUST and SAVINGS ASSOCIATION, a national banking association, et al., Plaintiff, Cross-Defendants and Respondents, v. LAMB FINANCE COMPANY, Inc., a corporation, and Leah Lamb Poyet, also known as L. L. Poyet, Leah D. Lamb and Leah Lamb, Defendants, Cross-Complainants and Appellants. Civ. 21775.

J. W. Ehrlich, San Francisco, N. E. Youngblood, Beverly Hills, and Robert M. Maslow, Hollywood, for appellants.

Samuel B. Stewart, San Francisco, Hugo A. Steinmeyer, Robert H. Fabian and Richard G. Rypinski, Los Angeles, for respondents.

FOX, Justice.

In an action to enforce payment of a promissory note, defendants appeal from a money judgment rendered upon a directed verdict of the jury in favor of plaintiff.

The fundamental issue presented is whether the court erred in not permitting certain defenses based on fraud to be tried by the jury. Other questions raised are (1) the propriety of the dismissal of defendants' cross-complaints at the time of trial without affording leave to amend, and (2) whether parol evidence is admissible to show an agreement between the payee of the note and a guarantor thereof, by which the former promised not to enforce the latter's liability thereon.

Plaintiff bank instituted the within action for the unpaid balance on a promissory note executed by defendant Lamb Finance Company. In its second count, the bank sought recovery against co-defendant Leah Lamb Poyet, who had guaranteed, by a writing on the reverse side of the note, to pay the indebtedness evidence by said note. Defendants answered with general denials and eleven affirmative defenses. Mrs. Poyet and the Lamb Finance Company filed cross-complaints against plaintiff, W. N. Newton, assistant manager of plaintiff's Hollywood Main Office, W. A. Angione, former president and director of the Lamb Finance Company, and F. J. McFarland, former accountant of the Lamb company. The cross-complaints primarily sought damages of $500,000 based on the alleged fraudulent activities of the cross-defendants in connection with certain transactions affecting the cross-complainants.

At the outset of the trial, while the parties were in the chambers of the court, the cross-defendants moved for dismissal of the cross-complaints on the ground that no cause of action was stated. Mrs. Poyet and the company moved for leave to amend. This latter motion was denied, the cross-defendants' motion was granted, and the cross-complaints dismissed. A motion to strike defendants' eleventh affirmative defense was likewise granted.

Prior to the impanelment of the jury, plaintiff bank moved for segregation of what it termed the legal and equitable issues. It requested that the court try without a jury the first, sixth, seventh and ninth affirmative defenses on the theory that these constituted equitable defenses on which defendants were not entitled to trial by jury. This motion was granted, the court directing that these defenses were to be tried by the court subsequent to the trial of the legal issues by the jury. After four days of trial, the jury was excused. Trial was then resumed before the court only on the four remaining defenses, two of which were grounded on fraud in the inducement or procurement of the note. At the conclusion of this phase of the trial, plaintiff moved for a directed verdict. The court granted said motion, recalled the jury and directed the return of a verdict for plaintiff. The court then signed and filed its findings and rendered judgment for plaintiff. 1 This appeal followed.

The main controversy involved in this appeal hinges on defendants' assertion that they were wrongfully deprived of their right to a jury trial on the issues raised in their first, sixth, seventh and ninth affirmative defenses. The right to a trial by jury is provided by Article I, section 7, of the Constitution of California. This section has been judicially construed as guaranteeing the right to a trial by jury in actions at law of issues which were triable by jury at common law in 1850. People v. One 1941 Chevrolet Coupe, 37 Cal.2d 283, 286-287, 231 P.2d 832.

In Ripling v. Superior Court, 112 Cal.App.2d 399, 247 P.2d 117, the court gives cogent expression to the principles determinative of a litigant's right to a trial by jury. These principles, as far as they are here germane, may be epitomized as follows: (1) If the gist of the action as framed by the pleadings is such that the issues raised were cognizable at law in 1850, a trial by jury is a matter of right; (2) even though the case involves equitable principles, if it is one where the common law courts could and would grant relief, trial by jury is preserved; (3) where law and equity possess concurrent jurisdiction to provide relief, the mere existence of a remedy in equity cannot operate to defeat a party's right to elect to proceed at law; (4) it is only where the issues to be tried are exclusively cognizable in equity that a suitor is deprived of the right to a jury trial; (5) those issues that are legal in nature are triable to a jury, 112 Cal.App.2d at pages 401-402, 407, 247 P.2d 117. Where an action presents issues of both a legal and equitable nature, a party is entitled to trial by jury of any legal issue remaining after the equitable aspects of the case have been determined by the court. Connell v. Bowes, 19 Cal.2d 870, 123 P.2d 456.

Adverting now to the essential allegations of the affirmative defenses which the court removed from the jury's consideration, it plainly appears therefrom that defendants rely on plaintiff's fraud in the inducement of the execution of the note to defeat their liability thereon. 2 Out of the prolix and indiscriminate welter of allegations which have been incorporated into the answers with a noticeable disregard for the niceties of pleading or the precepts of grammar, these significant facts may be culled: That defendant Leah Lamb Poyet was one of the incorporators and later sole stockholder in defendant Lamb Finance Company (sometimes referred to as the company) in January, 1952. W. A. Angione became president and a director of the company in March, 1952, and became acquainted with Mrs. Poyet's financial worth. Angione advised her to transfer certain personal bank accounts and the company's bank account to the Hollywood main office of plaintiff bank upon representations that he had known W. N. Newton, the assistant manager thereof, for many years and that Newton would deal fairly and honestly with her. Unknown to Mrs. Poyet at the time, Angione had informed Newton that he was advising Mrs. Poyet to transfer her deposits to his bank and it was arranged that Newton would ingratiate himself with Mrs. Poyet and Angione would induce her to establish her account in Newton's branch and under his control. On March 3, 1952, Angione introduced her to Newton at plaintiff's Hollywood branch office. Newton told her he would personally arrange to make her deposits in her account and would extend various courtesies to her. Mrs. Poyet thereafter opened her personal account at the Hollywood branch and also transferred $50,000.00 in cash in an account opened for defendant company, which Mrs. Poyet told Newton was not to be used until a permit was issued by the Corporation Commissioner. Newton assured Mrs. Poyet that he would see to it that she and the company would at all times be protected. He also advised her that Angione was extremely reliable and a man of integrity. Relying on such representations, she left the company's matters entirely in Angione's hands. Thereafter, pursuant to a conspiracy between them and unknown to Mrs. Poyet, Newton permitted Angione to overdraw the company's account in approximately $20,000. Thereafter, on Newton's representation that the company's business was good, that Angione was managing the business well and that the bank would approve a line of credit to the company in the amount of $200,000, a promissory note was executed by Mrs. Poyet on behalf of the company in favor of the bank in the sum of $50,000, Newton stating he would credit this sum to the company's account. Newton also procured her to sign the note as guarantor, stating the bank would never hold her personally liable but would liquidate the note out of the line of credit to be advanced. Newton failed to disclose that Angione had overdrawn the account at the time the note to the bank was executed. Thereafter, the note was periodically renewed upon maturity, Newton failing to advise her that Angione had again overdrawn the company account, and assuring her that the bank would extend the credit applied for although the application had in fact been denied. It is alleged that had defendants known the true state of affairs which Newton misrepresented and concealed, the various notes would not have been executed or renewed.

Before pursuing the principal questions postulated by this appeal, it is pertinent to observe that during a colloquy with the judge on the second day of the trial, defendants' counsel, in open court, unequivocally conceded the liability of the defendant company on the note. It is not contended that this express concession was made improvidently or in an unguarded moment, or that it should be given any other meaning or effect. In the absence of fraud, the admissions of an attorney in open court are binding upon the client. Bias v. Reed, 169 Cal. 33, 37, 145 P. 516; Taylor v. Randall, 5 Cal. 79, 80, 81; People v. Hammond, 26 Cal.App.2d 145, 150, 78 P.2d 1172. The effect of this admission was to eliminate from the case any issue of the company's liability on the note. Scafidi v. Western Loan & Bldg. Co., 72 Cal.App.2d 550, 561-562, 165 P.2d 260. Its liability being conceded, the company cannot on appeal be heard to say that it suffered prejudice in being denied trial by jury upon an issue that was removed from the...

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