Holland v. Nelson

• Decision Date: 12 March 1970
• Citation: 5 Cal.App.3d 308,85 Cal.Rptr. 117
• Court: California Court of Appeals Court of Appeals
• Parties: Helen M. HOLLAND, Plaintiff and Respondent, v. Glenda Davis NELSON and Arthur Murray, Inc., a corporation, Defendants and Appellants. Civ. 26393.

Page 117

85 Cal.Rptr. 117

5 Cal.App.3d 308

Helen M. HOLLAND, Plaintiff and Respondent, v. Glenda Davis NELSON and Arthur Murray, Inc., a corporation, Defendants and Appellants.

Civ. 26393.

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

March 12, 1970.

As Amended on Denial of Rehearing April 9, 1970.

Hearing Denied May 6, 1970.

Watson, Hoffe & Fannin, Richmond, for Glenda Davis Nelson.

Gibson, Dunn & Crutcher, John H. Sharer, Los Angeles, for Arthur Murray, Inc.

Edward A. Friend, San Francisco, for Helen M. Holland.

CHRISTIAN, Associate Justice.

Defendants Glenda Davis Nelson and Arthur Murray, Inc. appeal from a judgment for treble damages awarded against them under the Dance Act. ¹

Beginning in 1959, respondent for a 3-year period took dance lessons at 'Arthur Murray Dance Studio' in San Francisco. On April 13, 1963 appellant Nelson, the operator of the studio, assisted by her employee, Bob Kelly, persuaded respondent to sign a contract for $9,700 worth of further dance lessons; respondent paid for these lessons in advance the same day. Subsequently, on April 19, Kelly and another of appellant Nelson's employees, Dan Caldwell, persuaded respondent to purchase an additional $1,000 worth of services. Caldwell and Kelly were assisted in this by one Andrew Dayton, who was skilled in 'closing' large transactions and was present for the purpose of persuading respondent to purchase the additional services. Respondent later received 226 1/2 hours of instruction, valued at $10 per hour. Upon respondent's request, appellant Nelson later made refunds on these contracts between November 1962 and February 1965, in a total amount of $2,640. No refunds were made after February 1965.

In a nonjury trial it was established, without dispute, that, of the amount originally paid by respondent under the contract, $5,795 remained after deduction of the value of lessons already taken by respondent and the amounts previously refunded by appellant Nelson. Pursuant to Civil Code, section 1812.94 (reinacted as § 1812.62) the court entered judgment for treble the amount of actual damages and for attorneys' fees in the amount of $2,500.

Appellants contend that the 1-year statute of limitations in Code of Civil Procedure, section 340, subdivision (1) (action to recover statutory penalty or forfeiture), bars recovery at least of the treble damages and that recovery of actual damages is barred either by the same section or by Code of Civil Procedure, section 339, subdivision (1), (action upon oral contract). Appellants further contend that, even if the 3-year statute of limitations indicated by Code of Civil Procedure, section 338, subdivision (1), (action on liability created by statute), is applicable, the action is barred because the statute began to run in April 1962, when the contract was executed.

Section 339, subdivision (1), is not the statute of limitations applicable to this case; respondent is pursuing a remedy which was created not by contract, but by statute. Appellants contend that section 338 is nevertheless inapplicable because the action is for recovery of a penalty or forfeiture. The question is whether the provision of the Dance Act authorizing discretionary treble damages should be considered a penalty or forfeiture within the meaning of Code of Civil Procedure, sections 338 and 340.

No case has been found dealing with the period of limitation applicable under the Dance Act. It appears to us, however, that the provision in Civil Code, section 1812.62, allowing to the court the option of granting judgment for treble damages, is not to be construed as converting the statutory right of action into one for penal damages. To adopt the contrary construction would either apply a shorter period of limitation than that established by Code of Civil Procedure section 338, subdivision (1), for actions on other statutory liabilities or would put a plaintiff in the position of being unable to determine which statute of limitations applies to his cause until, after trial, the court determined in its discretion whether to allow treble damages. No reason or statutory language has been pointed to by appellants suggesting that the Legislature can have intended either result. The statute now under consideration is in clear contrast to the several species of actions for penal damages recognized in Civil Code, sections 3344--3347. For example, in an action for holding over by a tenant (sections 3344 and 3345) the allowance of treble damages is, by terms of the statute, mandatory. Several cases have held statutorily-provided recoveries analogous to that here in question not to be penalties or forfeitures. In Culver v. Bell and Loffland (9th Cir. 1945) 146 F.2d 29, the court determined that under the Fair Labor Standards Act (29 U.S.C.A., § 216, subd. (b)) additional recovery allowed to employees not paid the required minimum wage for overtime work did not constitute a penalty or forfeiture under Code of Civil Procedure, sections 338 and 340. Similarly in Farris v. San Diego Federal Sav. & Loan Assn. (D.C.1956) 140 F.Supp. 703, it was held that a veteran's action to recover treble damages for excess consideration charged for his home was not to be considered a penalty or forfeiture and that Code of Civil Procedure, section 338 applied. And in Burnham Chemical Co. v. Borax Consol. (9th Cir. 1948) 170 F.2d 569, and Aero Sales Co. v. Columbia Steel Co. (D.C.1945) 119 F.Supp. 693, a similar conclusion was reached with regard to an action for treble damages under the Sherman Act. We conclude therefore that this is an action 'upon a liability created by statute, other than a penalty or forfeiture' and the applicable period of limitation is three years, under Code of Civil Procedure, section 338.

Appellants argue that even if section 338 applies the statute runs from the date of execution of the contract, April 1962; therefore, it is argued, the action is still barred as the complaint was not filed until March 1967. However, during a period from November 1962 to February 1965, appellant Nelson made several refunds of portions of the monies paid under these contracts, the last just before the period of limitations had expired according to appellants' theory. The circumstances in which these refunds were made, over a 2-year and 4-month period, support the trial court's determination that respondent reasonably expected further refunds to be made and that appellants are therefore estopped to plead the statute of limitations. 'One cannot justly or equitably lull his adversary into a false sense of security, and thereby cause his adversary to subject his claim to the bar of the statute of limitations, and then be permitted to plead the very delay caused by his course of conduct as a defense to the action when brought.' (Carruth v. Fritch (1950) 36 Cal.2d 426, 433, 224 P.2d 702, 706, 24 A.L.R.2d 1403.)

Upon a finding that appellant Murray exercised 'substantial control' over appellant Nelson, the trial court held Murray liable. California courts have, under comparable facts, already held agency relationship to exist between Arthur Murray, Inc. and its licensees. (Porter v. Arthur Murray, Inc. (1967) 249 Cal.App.2d 410, 57 Cal.Rptr. 554; Nichols v. Arthur Murray, Inc. (1967) 248 Cal.App.2d 610, 56 Cal.Rptr. 728, and Beck v. Arthur Murray, Inc. (1966) 245 Cal.App.2d 976, 54 Cal.Rptr. 328. These holdings were based upon the control features of the arrangements between Murray and its licensees. The same features are present in the case before us; the trial court's determination that an agency relationship existed must be upheld.

Appellant Nelson contends that responsibility for causing respondent to execute the April 1962 contract should rest not with her, but with her employees. Citing Civil Code, section 2351, appellant Nelson argues that the employees' wrongs should be imputed directly to Murray as the ultimate principal and not to her as the agent who lawfully appointed them. ² Even if this theory were sound, it would not apply to the facts of the present case. The evidence shows that appellant Nelson herself participated in the execution of both contracts.

Appellant Murray cites Beck v. Arthur Murray, Inc., Supra, 245 Cal.App.2d 976, 982, 54 Cal.Rptr. 328, for the principle that statutory penalties imposed in consequence of the conduct of an agent are not imputed to the principal. But such liability does attach...