Cummins v. Gates

• Decision Date: 02 July 1965
• Citation: Cummins v. Gates, 235 Cal.App.2d 532, 45 Cal.Rptr. 417 (Cal. App. 1965)
• Court: California Court of Appeals
• Parties: Richard L. CUMMINS and Milton R. Roth, Plaintiffs, Cross-Defendants and Respondents, v. Earl F. GATES, Defendant, Cross-Defendant, and Respondent, and Margaret M. Gates, Defendant, Cross-Complainant, and Appellant. Richard L. CUMMINS and John D. Miller as Special Administrator, Plaintiffs and Respondents, v. Earl F. GATES, Defendant, Cross-Complainant, and Respondent, and Margaret M. Gates, Defendant, Cross-Defendant, and Appellant. Civ. 27553, 28645.

Page 417

45 Cal.Rptr. 417

235 Cal.App.2d 532

Richard L. CUMMINS and Milton R. Roth, Plaintiffs, Cross-Defendants and Respondents, v.Earl F. GATES, Defendant, Cross-Defendant, and Respondent andMargaret M. Gates, Defendant, Cross-Complainant, and AppellantRichard L. CUMMINS and John D. Miller as Special Administrator, Plaintiffs and Respondents, v.Earl F. GATES, Defendant, Cross-Complainant, and Respondent andMargaret M. Gates, Defendant, Cross-Defendant, and Appellant.

Civ. 27553, 28645.

District Court of Appeal, Second District, Division 4, California.

July 2, 1965.

Rehearing Denied July 20, 1965.

Hearing Denied Aug. 25, 1965.

[235 Cal.App.2d 534] John D. Gray, Los Angeles, for appellant Margaret M. Gates.

Ames Crawford, Los Angeles, for respondentEarl M. Gates.

John D. Miller, Long Beach, for respondents Cummins, Roth and Miller.

KINGSLEY, Justice.

These consolidated appeals involve a dispute over the validity and enforcement of a contract for the sale of real property, with collateral disputes between the vendors, who formerly were husband and wife.Milton R. Roth, one of the original plaintiffs, died after one appeal was taken but before the second appeal.We have captioned the appeals as the parties have done, showing the substitution of Dr. Roth's administrator in the second appeal but not in the first.For convenience, we refer to Dr. Roth as 'plaintiff.'

As we point out below, both appeals are submitted on Clerk's Transcripts.We set out, in the preliminary statement of facts, the background of the dispute as it appears from uncontradicted statements in the pleadings and briefs.

AppellantMargaret M. Gates(hereinafter 'Mrs. Gates') and respondentEarl F. Gates(hereinafter 'Dr. Gates') formerly were husband and wife.In connection with divorce proceedings between them, they executed a property settlement agreement.Insofar as herein pertinent, that agreement provided that Mrs. Gates could continue to reside in the residence on a six-acre ¹ tract owned by them in joint tenancy, until that property was sold to a 'bona fide' buyer.Dr. Gates agreed that, so long as Mrs. Gates resided on the property, he would pay the taxes thereon and keep up the payments on a trust deed thereon, with a right of recoupment out of the proceeds of the property when, as and if so sold.It was also provided that, if either party produced a 'bona fide buyer' for the property, the other party'either agrees to go along with sale or to buy out the party who wishes to sell.'Another provision of the property settlement agreement obligated Mrs. Gates to join in executing and filing a joint income tax return for the year 1961.

In 1961, Dr. Gates presented to Mrs. Gates a proposal from his accountant, respondent Cummins, to purchase the residence and a one-acre tract surrounding it, together with a proposal from Cummins and respondent Roth (a close friend of Dr. Gates') to purchase the remaining acreage of approximately five acres.After some negotiations, on March 20, 1961, the parties entered into two escrows, one (No. 61-22) for the sale of the residence and one-acre to Cummins, the other (No. 61-23) for the sale of the other five acres to Cummins and Roth.

EscrowNo. 61-22, relating to the residence and one-acre (hereinafter 'the residence'), called for a purchase price of $50,000 payable $5,000 out of Cummins' funds, $30,000 out of the proceeds of a loan to be placed on the property, with the balance of $15,000 represented by notes secured by second and third trust deeds on the property sold.

EscrowNo. 61-23, relating to the sale of the acreage, called for a purchase price of $60,000, all to be represented by a purchase money note and trust deed.The terms of this note and certain provisions in the escrow agreement relating to a subordination clause form one of the issues in this case and are considered in detail at a later point in this opinion.

The escrow relating to the sale of the residence closed in due course.Shortly thereafter, and after Mrs. Gates had removed from the property, Dr. Gates and his new wife moved into the residence and a deed to them from Cummins was executed and recorded.

By its terms, the escrow relating to the acreage was not to close until five and one-half months after it was opened.Shortly before the closing date, Mrs. Gates notified the escrow agent not to close the escrow and served a demand (purportedly pursuant to the 'go along or buy out' provision above mentioned) seeking to purchase the acreage property on the same terms as those provided in the projected sale to Cummins and Roth.

Eventually, and after a formal demand on Mrs. Gates to deposit her deed in the escrow and allow it to be closed had been ignored, plaintiffs sued for specific enforcement of the escrow agreement.²Dr. Gates answered, in effect joining in the prayer for specific performance, and also cross-complaining against Mrs. Gates, seeking (a) to recover over against her any damages that might be recovered from him by Cummins and Roth in the specific performance action; (b) for his costs of defending the Cummins and Gates action; (c) for damages by way of lost interest on the purchase price and by way of expenses in maintaining the property and paying taxes thereon because of the delay in closing the escrow; (d) for damages occasioned by Mrs. Gates' refusal to join in a joint income tax return for 1961; and for punitive and general damages for her allegedly malicious refusal to allow the escrow to close according to its terms.³

Mrs. Gates answered the complaint and Dr. Gates' cross-complaint and also filed a cross-complaint.As ultimately amended, her third amended cross-complaint contains four causes of action: (1) for rescission on the ground of fraud, of the contract for the sale of the acreage; (2) for rescission, on the same ground, of the sale of the residence or damages in case such rescission is not granted; (3) for damages, in case rescission is not granted under the second cause of action, based on a claim that Dr. Gates had not properly divided the proceeds of that sale; and (4) to set aside the property settlement agreement on the grounds of fraud and duress.Demurrers to the amended cross-complaint were sustained without leave to amend and a judgment of dismissal in favor of Dr. Gates was entered.Mrs. Gates appealed from the judgment of dismissal.While proceedings for the preparation of the transcript on appeal were pending, the action proceeded to trial, resulting in findings of fact and conclusions of law adverse to Mrs. Gates and in favor of Cummins and Roth on the complaint and in favor of Dr. Gates on his cross-complaint.Mrs. Gates has appealed from the judgments so entered.

After the case had thus been concluded in the trial court, but before any transcript on the appeal from the judgment had been prepared or filed, respondents moved to dismiss the appeal relating to Mrs. Gates' cross-complaint, on the ground that the issues of fraud had, in fact, been litigated by consent in the trial of the complaint and of Dr. Gates' cross-complaint and the appeal from the judgment dismissing Mrs. Gates' cross-complaint had, thus, become moot.We dismissed the appeal insofar as it related to Mrs. Gates' cross-complaint against Cummins and Gates, since, as to them, it was not a final judgment; we denied without prejudice the motion of Dr. Gates to dismiss the appeal as to him, on the ground that, although there was a separate and final judgment as to him, we could not determine, on the record then before us, how far our decision on the appeal from the final judgment might affect the earlier appeal.⁴

Thereafter, proceedings to secure a settled statement on the appeal from the judgment having failed, that appeal was perfected and is before us on a judgment roll record.

It follows that we now have before us, for determination: (a) Mrs. Gates' appeal from the final judgment in favor of Cummins and Roth in the action for specific performance, which appeal also brings before us the interlocutory order sustaining their demurrers to the causes of action in Mrs. Gates' cross-complaint which relate to Cummins and Roth; (b) Mrs. Gates' appeal from the judgment dismissing, as to Dr. Gates, the causes of action in her cross-complaint which relate to Dr. Gates; and (c) Mrs. Gates' appeal from the judgment in favor of Dr. Gates on his cross-complaint against her.

The issues which the parties seek to have us determine are thus: (1) the validity and enforceability of the agreement of March 20, 1961, relating to the sale of the acreage; (2) the correctness of the relief granted to Dr. Gates on his cross-complaint against Mrs. Gates; (3) the correctness of the order sustaining, without leave to amend, Mrs. Gates' third amended cross-complaint.

I

We need not consider the contentions that the trial court improperly sustained the demurrer to the first two causes of action in Mrs. Gates' cross-complaint, which causes of action sought rescission of the agreement to sell the acreage and of the sale of the residence.Although the pleadings are no model, and the pre-trial statement no help, an examination of Mrs. Gates' second amended answer to the complaint, on which the case went to trial, ⁵ discloses that she therein raised, both expressly and by incorporating by reference her cross-complaint, all of the matters on which she now relies to rescind the two agreements on the ground of fraud.In brief, her claim is that Cummins acted in purchasing the residence, and that Cummins and Roth acted in purchasing the acreage, as agents of and as dummies for Dr. Gates and that the two plaintiffs and Dr. Gates had conspired to deceive her into believing that the plaintiffs were buying for their own account and were, therefore, 'bona fide' buyers within the meaning of the property settlement agreement.However, with this claim put in issue, the trial court found as follows:

'XX.No conspiracy or unfair...