Foreman & Clark Corp. v. Fallon

• Decision Date: 19 January 1971
• Citation: 3 Cal.3d 875,479 P.2d 362,92 Cal.Rptr. 162
• Court: California Supreme Court
• Parties: , 479 P.2d 362 FOREMAN & CLARK CORPORATION, Plaintiff, Cross-Defendant and Appellant, v. Madeleine FALLON et al., Defendants, Cross-Complainants and Appellants; Phillip Lyon, Cross-Defendant and Respondent. L.A. 29742.

Page 162

92 Cal.Rptr. 162

3 Cal.3d 875, 479 P.2d 362

FOREMAN & CLARK CORPORATION, Plaintiff, Cross-Defendant and Appellant, v. Madeleine FALLON et al., Defendants, Cross-Complainants and Appellants;

Phillip Lyon, Cross-Defendant and Respondent.

L.A. 29742.

Supreme Court of California,

In Bank.

Jan. 19, 1971.

Gibson, Dunn & Crutcher, John L. Endicott and Samuel O. Pruitt, Jr., Los Angeles, for plaintiff, cross-defendant and appellant.

Ball, Hunt, Hart, Brown & Bearwitz, Clarence S. Hunt, Michael F. Richman, Henry C. Rohr and Floyd H. Norris, Long Beach, for defendants, cross-complainants and appellants.

O'Melveny & Myers and Louis T. LaTourrette, Los Angeles, for cross-defendant and respondent.

SULLIVAN, Justice.

In this action for damages for breach of a lease, plaintiff and cross-defendant Foreman & Clark Corporation (hereafter plaintiff) and defendants and cross-complainants Madeleine Fallon, Floyd H. Norris and Martha B. Norris (hereafter defendants) separately appeal from a judgment entered after a nonjury trial awarding plaintiff certain amounts as damages and denying defendants all relief upon their cross-complaint. ¹

Plaintiff was engaged in the business of selling wearing apparel at retail. Defendants were the owners of a building in downtown Los Angeles. On October 20, 1964, after approximately seven months of negotiations, plaintiff as lessee and defendants as lessors entered into a written lease ² of a portion of the ground floor, mezzanine, and basement of the building for a 15-year term beginning on January 1, 1966 and ending on December 31, 1980. The lease provided for a fixed minimum rental of $3,750 per month ($45,000 per year) plus an additional rental per year of five percent of all gross receipts in excess of $900,000 in any lease year. Defendants failed to deliver possession of the premises to plaintiff on January 1, 1966, because one of the tenants then occupying a portion of the premises, whose lease expired December 31, 1966, refused to vacate.

Plaintiff commenced the instant action seeking specific performance and damages in separate counts. However, after leasing new premises elsewhere, it filed an amended complaint deleting the specific performance count and praying only for damages for breach of lease, attorney fees and costs. Defendants filed a cross-complaint seeking relief for rescission of the lease based on plaintiff's misrepresentations, together with consequential damages, including the recovery from cross-defendant Lyon of the commission paid the latter as the broker in the transaction.

A bifurcated trial was held in which the court first heard evidence on the claims of misrepresentation contained in the cross-complaint. The trial court found that cross-defendant Lyon was the agent of plaintiff in negotiating the terms of the lease. After also finding as to each alleged misrepresentation that it was not material and not relied upon, and that there was no intention on the part of plaintiff or of cross-defendant Lyon to defraud defendants, the trial court heard evidence on the issue of the damages to be awarded plaintiff.

The trial court, in addition to making the above-mentioned findings on the issue of plaintiff's alleged fraud, also found that the difference between the lease rental and the fair rental value of the leased premises for the term of the lease at the time of the breach was the sum of $25,000; and that defendants failed to pay cross-defendant Lyon the balance of $5,750 of the agreed commission as broker in procuring a lessee for the space provided. The court awarded plaintiff $25,000 in general damages, $3,991.03 in special damages for amounts spent by plaintiff in preparing the premises for its use, and $20,000 in attorneys fees. Cross-defendant Lyon was awarded the remainder of his commission together with interest and costs. Defendants were denied relief on their cross-complaint. ³

These appeals followed. Plaintiff, although appealing from the entire judgment, complains of only the inadequacy of the general damages awarded it. Defendants appeal from the entire judgment. We first consider defendants' appeal.

DEFENDANTS' APPEAL

Defendants' contentions may be summarized as follows: (1) That the evidence does not support the finding that certain representations made to defendants by plaintiff's agent Lyon during the negotiations for the lease were neither material nor relied upon; (2) that cross-defendant Lyon breached his duty of good faith to defendants; and (3) that plaintiff, having initially filed an action for specific performance, must prove that the agreed rent was fair and adequate before it may recover any general damages.

The crucial question in considering defendant's first contention is whether there is any substantial evidence to support the trial court's findings. 'When a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate court Begins and Ends with the determination as to whether there is any substantial evidence contradicted or uncontradicted which will support the finding of fact.' (Primm v. Primm (1956) 46 Cal.2d 690, 693, 299 P.2d 231, 233; Estate of Bristol (1943) 23 Cal.2d 221, 223, 143 P.2d 689.)

'It is well established that a reviewing court starts with the presumption that the record contains evidence to sustain every finding of fact.' (Tesseyman v. Fisher (1952) 113 Cal.App.2d 404, 407, 248 P.2d 471, 473; Pacific Paving Co. v. Mowbray (1899) 127 Cal. 1, 3, 59 P. 205; Green v. Green (1963) 215 Cal.App.2d 31, 35, 30 Cal.Rptr. 30; Davis v. Lucas (1960) 180 Cal.App.2d 407, 409, 4 Cal.Rptr. 479; Gold v. Maxwell (1959) 176 Cal.App.2d 213, 217, 1 Cal.Rptr. 226; Cooper v. Cooper (1959) 168 Cal.App.2d 326, 331, 335 P.2d 983.) Defendants' contention herein 'requires defendants to demonstrate that there is No substantial evidence to support the challenged findings.' (Italics added.) (Nichols v. Mitchell (1948) 32 Cal.2d 598, 600, 197 P.2d 550, 552; Green v. Green, Supra; Davis v. Lucas, Supra; Gold v. Maxwell, Supra; Cooper v. Cooper, Supra.) A recitation of only defendants' evidence is not the 'demonstration' contemplated under the above rule. (Green v. Green, Supra.) Accordingly, if, as defendants here contend, 'some particular issue of fact is not sustained, they are required to set forth in their brief All the material evidence on the point and Not merely their own evidence. Unless this is done the error assigned is deemed to be waived.' (Italics added.) (Kruckow v. Lesser (1952) 111 Cal.App.2d 198, 200, 244 P.2d 19, 20 and cases there collected; Sutro Heights Land Co. v. Merced Irr. Dist. (1931) 211 Cal. 670, 688--689, 296 P. 1088; Kanner v. Globe Bottling Co. (1969) 273 Cal.App.2d 559, 564, 78 Cal.Rptr. 25; Haynes v. Gwynn (1967) 248 Cal.App.2d 149, 151, 56 Cal.Rptr. 82; Green v. Green, Supra; Davis v. Lucas, Supra; Gold v. Maxwell, Supra; Cooper v. Cooper, Supra.) With these basic rules in mind we turn to a consideration of defendants' first contention. ⁴

Defendants alleged three misrepresentations: (a) that the gross sales of plaintiff would be in excess of $1,500,000 at some time in the future after plaintiff had moved into the leased premises; (b) that certain alterations to be undertaken by plaintiff would cost approximately $250,000, whereas, in fact the cost was only about $81,000; and (c) that plaintiff, at its own cost, would demolish the mezzanine floor.

Since the lease provided for an additional rental of five percent of gross yearly sales over $900,000, the first alleged misrepresentation might have been of some importance. However, there is sufficient evidence to support the trial court's finding that any statements as to future sales were mere expressions of opinion, not material and not relied upon. Of the four witnesses who testified on behalf of plaintiff as to expected sales in the new premises, the highest estimate was approximately $1,052,500. Only defendant Norris testified that the representation as to $1,500,000 of future gross sales had been made, and cross-defendant Lyon, who, according to Norris, had made the representation, testified that he had said that In his opinion sales would be in excess of$900,000. Defendants were represented in the negotiations, which extended over a 7-month period, by defendant Norris, a lawyer with 33 years experience. The trial court could have properly concluded that had the representation as to gross sales been material and relied upon, such an experienced lawyer would have required the representation to be included in the written lease. As was stated in French v. Freeman (1923) 191 Cal. 579, 585, 217 P. 515, 517: 'What amounts to an expression of opinion as compared with a positive statement of fact depends upon all the circumstances of the case, and is a question for the trial court to determine.'

There was substantial conflict in the evidence as to whether the second alleged misrepresentation (as to the cost of alterations) had in fact been made. The testimony of defendant Norris was internally inconsistent as to whether the broker Lyon had made this representation or whether Norris had obtained the figure as a rough estimate from a contractor. The trial court also heard testimony that the actual cost of alterations would have been $137,000, not $81,000. In addition, the trial court could have inferred that the representation, if made, was not material or relied upon since the lease contained no such provision although, as the trial judge said, 'it would have been very simple to put it in the lease.' The trial court properly weighed the conflicting evidence and in the words of the court found it 'probably more likely that * * * there wasn't any figure mentioned but that (the defendants) assumed it would cost that much from the description of the work.'

The final misrepresentation claimed was that plaintiff would demolish the mezzanine floor at its own cost. While it was...