Harding v. Will

• Decision Date: 10 August 1972
• Docket Number: No. 42202,42202
• Citation: 500 P.2d 91,81 Wn.2d 132
• Parties: Hugh W. HARDING and Doris M. Harding, his wife, Respondents/Cross-Appellants, v. Oscar K. WILL and Jane Doe Will, his wife, et al., Respondents/Cross-Appellants, George L. Schafer and Jane Doe Schafer, his wife, et al., Appellants/Respondents.
• Court: Washington Supreme Court

Page 132

81 Wn.2d 132

500 P.2d 91

Hugh W. HARDING and Doris M. Harding, his wife Respondents/Cross-Appellants, v. Oscar K. WILL and Jane Doe Will, his wife, et al Respondents/Cross-Appellants George L. Schafer and Jane Doe Schafer, his wife, et al Appellants/Respondents.

No. 42202.

Supreme Court of Washington, En Banc.

Aug. 10, 1972.

Benn R. Agor, Seattle, for appellants.

Brown & Oswald, Ramon E. Brown, Seattle, for respondents.

UTTER, Associate Justice.

George Schafer appeals a decree of specific performance on a real estate contract, as well as an award against him of attorney's fees and a real estate commission. This is a case where the parties and issues were in an entirely different alignment at the conclusion of the trial than they were at the beginning.

The two issues presented are: (1) Was it error for the trial court to grant direct recovery against one joined initially by the original defendant as an additional party to a counterclaim? (2) Did the court below err in setting aside an agreement which purported to be a compromise and settlement of a dispute between appellant and respondent? We find no error and affirm the trial court.

Hugh Harding, assignor of a lease interest in a nursing home, brought this action against Oscar Will and Glen Olels, realtors, to recover damages which allegedly resulted when Olels prematurely delivered a signed acceptance of an earnest money agreement to George Schafter, the purported agent of a corporation which was to be the assignee of the lease.

The complaint alleged that the defendant realtors failed to secure permission from the owner of the subject property prior to delivery of the acceptance. As a result, Harding became bound on a contract which he could not perform. The complaint further alleges that the owner of the leasehold agreed to the assignment of the lease only after Schafer, purported agent of the assignee corporation, agreed to assume personal liability on the assignment. It is further alleged that Schafer did agree to assume personal liability, but only after a substantial reduction in the price of the assignment. This reduction formed the basis of Harding's prayer for damages.

The realtors, Will and Olels, counterclaimed to recover their commission and joined Schafer and the corporation he purported to represent as third-party defendants to the counterclaim.

The case was heard without a jury. The court found that the corporation which Schafer purported to represent did not exist during any time material to the agreement to assign the lease, a fact known to Schafer but not known to the other parties. It further found that Schafer knew of the necessity to obtain the owner's permission prior to the lease assignment and had agreed to personally assume liability on the assignment if necessary to secure the owner's consent.

On the basis that the issues and the status of the parties as set forth in the pleadings, did not conform to the evidence as presented, the trial judge proceeded to realign both parties and issues.

Harding, the assignor of the lease, was continued as plaintiff. Will and Olels, the realtors, were dismissed as defendants. Schafer, the purported agent, was substituted as a defendant to Harding's claim. The court found Schafer personally bound as assignee of the lease subject to the original agreement because he held himself out to be an agent for a nonexistent corporation.

The second agreement, in which Schafter agreed to personally assume liability for the lease assignment on condition that Harding agree to a reduced price on the original agreement, was set aside by the court on four alternative grounds: (1) that there was mutual mistake by the parties as to their rights under the previous agreement; (2) there was no consideration for the second agreement since Schafer had not agreed to do anything he was not bound to do already; (3) there was a mistake of material fact, namely, the existence of the corporation which Schafer purported to represent, which mastake was the result of Schafer's intentional or negligent misrepresentation; (4) enforcement of the second agreement against Harding would be cause for an unconscionable and inequitable result. In addition, Schafer was found liable for attorney's fees and for the commission of the realtors, Will and Olels.

After considerable argument, the court allowed Harding to amend his pleadings to conform to the evidence and reopened the trial to allow presentation of further evidence. After three more days of trial, the original judgment was reinstated.

Schafer's assignments of error fall into two categories. He first contends that when a defendant to one cause of action joins a third party as third-party defendant to a counterclaim, the court may not grant the plaintiff direct recovery against the third-party defendant. ¹ It is next contended the court erred in setting aside the second agreement and in holding Schafer liable on the first inasmuch as the second agreement was a compromise between the parties.

The first issue presented can be divided into three parts. (1) At the conclusion of the trial, may the court, pursuant to CR 15, change the status of one who began the action as an additional defendant, on a counterclaim joined pursuant to CR 13(h), to the status of defendant to the original plaintiff? (2) May one cause of action be substituted for another? (3) May judgment be granted against the new defendant on the new cause of action? ²

If the trial court has power to proceed, as it did, to realign issues and parties, that power is found in CR 15(b). ³

CR 15(b) is applicable in general terms to those occasions when the course of the trial departs so materially from the image of the controversy pictured in the pleadings that it becomes necessary to adjust the pleadings to reflect the case as it was actually litigated in the courtroom. 6 Wright and Miller, Federal Practice and Procedure, § 1491 (1971). CR 15(b) is designed to avoid the tyranny of formalism that was a prominent characteristic of former practice and to avoid the necessity of a new trial which often follows a deviation from the pleadings. Rosden v. Leuthold, 107 U.S.App.D.C. 89, 274 F.2d 747 (1960); Falls Indus., Inc. v. Consolidated Chem. Indus., Inc., 258 F.2d 277 (5th Cir. 1958); Trantham v. Canal Ins. Co., 117 F.Supp. 241 (E.D.Tenn.1953), aff'd per curiam, 220 F.2d 752 (6th Cir. 1955).

This court has stated that an underlying purpose of CR 15(b) is to avoid a multiplying of lawsuits. O'Kelley v. Sali, 67 Wash.2d 296, 407 P.2d 467 (1965).

To specifically apply CR 15(b) no the instant case, it is clear that under CR 15(b) pleadings may, in the discretion of the trial court, be amended to conform to the evidence at the conclusion of a trial, indeed even after judgment. CR 15(b) allows a new cause of action, tried without objection, in the discretion of the trial court to be a basis for recovery. Strand v. Librascope, Inc., 197 F.Supp. 743 (E.D. Mich.1961); Nester v. Western Union Tel. Co., 25 F.Supp. 478 (S.D.Cal.1938), aff'd on other grounds, 106 F.2d 587 (9th Cir. 1939), rev'd on other grounds, 309 U.S. 582, 60 S.Ct. 769, 84 L.Ed. 960 (1940).

A trial court in its discretion may, pursuant to CR 15(b), change the status of a third-party defendant, brought in by the original defendant pursuant to CR 14(a), to that of defendant to the original plaintiff and may grant recovery against him. Wasik v. Borg, 423 F.2d 44 (2d Cir. 1970); Falls Indus., Inc. v. Consolidated Chem. Indus., Inc., 258 F.2d 277 (5th Cir. 1958).

The reasoning of Falls Indus., Inc. and Wasik which allows change of status and recovery against third parties joined pursuant to CR 14(a) is applicable to persons joined pursuant to CR 13(h), as in the present case, unless it can be shown that there is prejudice to the parties.

CR 13(h) is to be construed liberally to dispose of an action in its entirety and to grant complete relief to all parties before the trial court. 6 Wright and Miller, Federal Practice and Procedure, § 1434 (1971).

A court may amend the pleadings to realign parties and issues as was done here. However, amendment under CR 15(b) cannot be allowed if actual notice of the unpleaded issue is not given, if there is no adequate opportunity to cure surprise that might result from the change in the pleadings, or if the issues have not in fact been litigated with the consent of the parties. Kuhn v. Civil Aeronautics Bd., 87 U.S.App.C.C. 130, 183 F.2d 839, 841 (1950).

The record here shows no prejudice to Schafer. All issues were adequately litigated during the three days of trial subsequent to the amendment of the pleadings and realignment of the parties. There is no indication that defendant needed further time to prepare. No continuance for that purpose was requested. When the second portion of the trial commenced, the attorney for the defense announced he was ready.

Absent a showing of surprise or prejudice, it is not error for a trial court upon perceiving both the issues and parties before it to be other than as pleaded, to realign parties and redefine issues pursuant to CR 15(b).

Appellants further assign as error the setting aside of the January 1968 agreement between Harding and Schafer. They do this on several grounds, the chief being that the agreement was a compromise and settlement of a bona fide dispute occasioned by Harding's inability to perform his agreement. Appellants contend the burden of proof necessary to overcome a general settlement must be clear, cogent and convincing.

A compromise is a settlement of a disputed claim by mutual concession to avoid a lawsuit. Newsom v. Miller, 42 Wash.2d 727, 258 P.2d 812 (1953). Compromise and settlement is a subcategory of the more inclusive term 'accord and satisfaction'. It differs from the latter in that any claim whether disputed, unliquidated or undisputed and liquidated may be discharged by an accord and satisfaction,...