Gherman v. Colburn

• Citation: 72 Cal.App.3d 544,140 Cal.Rptr. 330
• Court: California Court of Appeals
• Decision Date: 10 August 1977
• Parties: Dr. E. M. GHERMAN, M.D., et al., Plaintiffs and Respondents, v. Richard D. COLBURN et al., Defendants and Appellants. Civ. 45176.

Page 330

140 Cal.Rptr. 330

72 Cal.App.3d 544

Dr. E. M. GHERMAN, M.D., et al., Plaintiffs and Respondents, v. Richard D. COLBURN et al., Defendants and Appellants.

Civ. 45176.

Court of Appeal, Second District, Division 1, California.

Aug. 10, 1977.

Rehearing Denied Sept. 7, 1977.

Hearing Denied Oct. 20, 1977.

[72 Cal.App.3d 553]

Beardsley, Hufstedler & Kemble, Abbott Professional Corporation, Jackson & Goodstein, Los Angeles, for defendants and appellants

Ball, Hunt, Hart, Brown & Baerwitz, Joseph A. Ball, Laurence F. Jay, Beverly Hills, Williams & Williams and Ernest George Williams, Los Angeles, for plaintiffs and respondents.

LORING, ^* Associate Justice (Assigned).

Dr. E. M. Gherman, M.D. (Gherman), John A. Patterson (Patterson), and Laurie Lane Corporation, a California corporation, filed (on October 13, 1970) a third amended complaint ¹ against Richard D. Colburn (Colburn), Rolled Alloys, a Delaware Corporation, and Big Bear Properties, Inc., a Delaware

Corporation, and other defendants ² for: '(1) Damages for tortious exclusion of joint venturer and punitive damages; (2) For dissolution of joint venture, accounting and a receiver; (3) For declaratory relief; (4) Fraud.' On August 31, 1973, plaintiffs filed ³ a request for partial dismissal requesting the dismissal of the second cause of action ('For dissolution of joint venture and a receiver') and the third cause of action ('For declaratory relief'). Trial commenced on October 2, 1973 and on that date defendants filed a written motion requesting leave to file a cross-complaint seeking a judicial dissolution and accounting, which was denied on October 4, 1973. After 34 days of trial and 4 days of deliberation, the jury returned a verdict in favor of the named plaintiffs against the named defendants in the sum of $1,256,845, with interest at 7 per cent per annum from June 1, 1969, which amounted to an additional $395,906.18. The jury assessed punitive damages against Colburn at zero dollars. Defendants appeal from the judgment

[72 Cal.App.3d 554]

ISSUES

In their closing brief on appeal, appellants state (C.B. p. 7, fn. 1): 'Defendants do not dispute the existence of evidence to support a finding of joint venture, but do vigorously urge that but for the errors here urged a different result would have obtained.' ^3a The alleged errors referred to consist of the denial of defendants' motion to file a cross-complaint for a non-jury judicial dissolution and an accounting, errors in the admission and rejection of evidence and erroneous instructions and failure to correctly instruct the jury on the law applicable to the case. These alleged errors will be hereafter defined and discussed in detail.

FACTS ⁴

In 1968 Bear Valley Mutual Water Company decided to sell approximately 2,600 acres of land owned by its wholly owned subsidiary, Big Bear Development Company, located at Big Bear Lake, California. The property had been appraised at $5,019,350 (Exh. A). On November 17, 1968, Big Bear Development Company entered into an escrow with Deane Bros., a division of Occidental Petroleum Corporation, to sell the acreage. Gherman and Patterson negotiated with Colburn to form a joint venture to purchase 1,400 of the 2,00 acres from Deane Bros. Under the terms of the joint venture, title to the 1,400 acres was to be taken in the name of a corporation to be formed for that purpose, which would be a subsidiary of a corporation owned by Colburn. The proposed price for the 1,400 acres was $5,450,000 payable on certain time payments. Laurie Lane, a corporation controlled by Gherman, was to guarantee Colburn against loss and to market the property after it was acquired. Profits were to be split 75 per cent to the Colburn group, 25 per cent to the Gherman/Patterson group. Colburn made an offer on that basis to Deane with a $50,000 deposit.

[72 Cal.App.3d 555]

That proposed purchase was never consummated because Deane's escrow with Big Bear Development Company was terminated before completion and Deane Bros. never acquired title

The parties to the joint venture then undertook negotiations with Big Bear Development Company to directly purchase the entire 2,600 acre parcel for $4,000,000 cash. Since Colburn was required to put up $4,000,000 cash, he requested that the terms of the joint venture be changed to provide him with additional consideration. The parties to the joint venture mutually agreed that after deduction of expenses Colburn should receive 20 per cent per annum after taxes from first profits and that the remaining profits should be split 50 per cent to the Gherman/Patterson group and 50 per cent to the Colburn group. In order to keep the 20 per cent factor as low as possible it was agreed that after acquiring title the property would be marketed as soon as possible which hopefully would be within one year.

On January 7, 1969, the escrow to acquire the 2,600 acre parcel for $4,000,000 was closed and title to the 2,600 acre parcel was taken in the name of Big Bear Properties, Inc., a Delaware corporation, a wholly owned subsidiary of Rolled Alloys (wholly owned and controlled by Colburn), which Colburn had formed on December 30, 1968, for the purpose of taking title. While the escrow was pending and after it was closed, Gherman/Patterson formulated plans for marketing the property, which were presented to and approved by Colburn. Plaintiffs expended $10,000 of their own money in efforts to subdivide and market the property and devoted approximately 40 hours a week of their time and effort for several months. Plaintiffs also attempted to wholesale the property or portions of the property to large developers. Plaintiffs ultimately obtained a firm offer from G.F. Industries, a Dallas conglomerate, to purchase 1,423 acres of the total 2,600 acre parcel at a price of $8,600,000 payable over a 10 year period with interest at 8.5 per cent. There was evidence that plaintiffs had generated interest in Macco Corporation to obtain an option to purchase the same 1,423 acres at a purchase price of $8,400,000. About March 17, plaintiffs also outlined to defendants the terms of a proposed sale to Rancho Bernardo which would have produced a profit of $5,000,000 to the joint venture. Shortly thereafter defendants denied the existence of a joint venture and denied that plaintiffs had any interest in the 2,600 acres of land. The parties then dealt with each other through their respective lawyers.

[72 Cal.App.3d 556] Thereafter several lawsuits, ⁵ including the instant lawsuit were filed.

DISCUSSION

Both sides impliedly invite us to join them in a quagmire of erudite, esoteric quicksand searching for the abstract philosophical theories and labels of law and equity applicable to this action. We decline to do so because in the trial court both sides joined in requesting the court to submit an instruction to the jury defining the factual issues to be tried in simple concise language devoid of the complexity now created. That Joint instruction reads: 'In this action the plaintiffs have the burden of establishing by a preponderance of the evidence all of the facts necessary to prove the following issues: ( ) No. 1. That plaintiffs and defendants entered into an oral agreement of joint venture with respect to the acquisition and sale of certain property located at or near Big Bear Lake, California, including a provision that if the property was sold the proceeds of such sale or sales, including the profits, if any, were to be distributed as follows: ( ) First, payment of the costs and expenses of the venture including the costs of such sale or sales. ( ) Next, payment to the defendants of all sums advanced by them to the venture in respect to the cost of purchase or acquisition of the property. ( ) Next, payment to defendants of a sum equal to 20 percent per annum net after taxes on their outstanding investment. ( ) Next, the balance, if any, to be paid in equal shares to plaintiffs and defendants. ( ) No. 2. That plaintiffs performed what was required of them by the terms of said agreement, or that they were prevented or excused from doing so by the wrongful act of defendants in repudiating or breaching said agreement. ( ) No. 3. That defendants wrongfully repudiated or breached the agreement and converted all of the joint venture assets to themselves and excluded plaintiffs therefrom. ( ) No. 4. That as a result of the foregoing plaintiffs suffered damages.' ⁶

By that joint instruction the parties impliedly agreed that there was no issue on which defendants had the burden of proof. In our view a Jointly requested jury instruction defining the issues to be tried and decided by the jury ought to have at least the same legal stature and dignity of a joint pre-trial statement of the issues to be tried.

When the jury rendered a verdict in favor of plaintiffs under that jointly requested instruction, the jury impliedly made an affirmative finding on each of the four issues of fact set forth in the joint instruction. The jury, therefore, found as a fact that there was a joint venture agreement between plaintiffs and defendants; that by the terms thereof, the proceeds therefrom were to be divided in the manner indicated; that defendants wrongfully repudiated or breached the agreement And converted all of the joint venture assets to themselves and excluded plaintiffs therefrom which caused plaintiffs damage in the sum of $1,256,845. Those implied findings of fact, which appellants now admit are supported by substantial evidence, support the judgment herein whatever legal or equitable theory or labels may be applied to the action. The judgment should be affirmed if the trial was free from prejudicial error, which is the point to which we now address ourselves.

1. Did the court err in denying defendants' motion for leave to file a cross-complaint?

Appellants contend that there can be but one form of action between partners ⁷--an action for judicial dissolution and accounting under...