Landis v. Superior Court

• Decision Date: 26 February 1965
• Citation: 232 Cal.App.2d 548,42 Cal.Rptr. 893
• Court: California Court of Appeals Court of Appeals
• Parties: John LANDIS, Petitioner, v. SUPERIOR COURT, Respondent, Albert WAXENBERG and Dean Waxenberg, Real Parties in Interest. Civ. 29044.

Page 893

42 Cal.Rptr. 893

232 Cal.App.2d 548

John LANDIS, Petitioner, v. SUPERIOR COURT, Respondent Albert WAXENBERG and Dean Waxenberg, Real Parties in Interest.

Civ. 29044.

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

Feb. 26, 1965.

Hindin, Sterling, McKittrick & Powsner and Richard D. McClain, Beverly Hills, for petitioner.

Sandler & Rosen, Nelson Rosen and Charles L. Birke, Beverly Hills, for the real parties in interest.

No appearance for the respondent.

KINGSLEY, Justice.

This is a petition for a writ of mandate to compel the respondent superior court to grant leave to file an amended complaint. For reasons hereinafter set forth, we conclude that the writ should issue as prayed.

On March 23, 1962, petitioner filed a complaint in respondent court (proceeding No. WEC 1576 in the files of said court), seeking damages and declaratory relief. That complaint alleged that, on or about the last week of August, 1961, the parties, who were the stockholders of three corporations, orally agreed that the defendants (the Real Parties in Interest here) would sell their stock in said corporations to the petitioner for $1,200,000, subject to the condition that he consummate a then tentative sale to third parties of all of the stock in said corporations on the terms that said stock would be transferred to the third parties on August 31, 1961, with payment by the third parties as follows: $100,000 down payment already received by petitioner and instalments of $1,200,000 each on August 31, 1961, and February 2, 1962; petitioner, having paid defendants one-half of the down payment ($50,000), to pay them one-half of each instalment on the dates stated; defendants to receive their stock back if third parties defaulted. It is further alleged that, on August 31, 1961, petitioner agreed to permit Albert Waxenberg to take the total instalment of $1,200,000 paid by the third parties for deposit in his bank account at Union Bank for a period of three days and Albert agreed to return petitioner's one-half at the end of three days.

As a first cause of action it is additionally alleged that defendants failed to pay back to petitioner his one-half ($600,000) after three days and that petitioner retained all of the final instalment to offset; that he was damaged by the withholding in the amount of $17,500 as interest at 7 per cent on $600,000 from September 4, 1961, to February 1, 1962.

As a second cause of action it is additionally alleged that it was also agreed that the parties would bear the federal income tax liabilities of the corporations through August 31, 1961, equally (allocation between defendants to be in proportion to their holdings); Albert estimated the tax would be $80,000; defendants agreed to pay petitioner $40,000 on August 31, 1961, and one-half of any excess tax thereafter; defendants paid $40,000; thereafter accounts determined the tax liability to be $135,860; petitioner paid the tax; defendants' total obligation was $67,930, leaving a balance due of $27,930; defendants have refused to pay; petitioner seeks $27,930 with interest at 7 per cent from February 15, 1962.

As a third cause of action it is additionally alleged that, pursuant to the agreement, petitioner agreed 'to use his best efforts to cause' the buyers to employ Albert for a two-year term commencing February 1, 1962, at an annual salary of $35,000; a controversy has arisen; petitioner contends Albert breached the agreement and left the employment in October, 1961, thereby preventing petitioner's performance. He seeks a declaration of rights and obligations under this provision.

On April 24, 1962, defendants filed their joint answer and a cross-complaint by Albert incorporated in one document. The answer denies all of the allegations of the complaint and sets forth as to counts one and two affirmative defenses: Civil Code section 1624 (statute of frauds); and failure to state a cause of action.

The portion of the pleading denominated 'cross-complaint' alleges that the parties entered into a written agreement on June 21, 1961. The writing was incorporated by reference and sets forth an agreement covering the same subject matter as the agreement alleged in the complaint, but which provides: (1) the sale to third parties to be consummated by September 30, 1961, and petitioner to pay defendants one-half of any advance payment made to him upon receipt by him and the balance at the time the sale was consummated as provided (one instalment on September 30, 1961, rather than two instalments ending February 2, 1962); (2) liability to be divided for taxes through August 31, 1960 (rather than 1961); and (3) petitioner to 'cause' the buyers to employ Albert (rather than petitioner to 'use his best efforts to cause' same). The cross-complaint further alleges, on information and belief, that the sale to third parties was consummated on October 1, 1961, and that petitioner has breached the employment provision. It seeks $70,000 damages.

A second amended cross-complaint by Albert was filed on October 5, 1962. This pleading alleges that, through mistake and inadvertence, the original cross-complaint alleged on information and belief that the sale to third parties was consummated on October 1, 1961, and should have alleged September 1, 1961. It further alleges that petitioner paid defendants the full price for their stock on August 31, 1961, and if the sale to third parties was not consummated by September 30, 1961, petitioner waived the condition in the written agreement that the agreement would not be effective if he had not consummated the sale by September 30, 1961. The other allegations therein state evidentiary details regarding the employment issue.

On November 1, 1962, petitioner filed his answer to the above mentioned amended cross-complaint. This answer sets forth, as a fifth affirmative defense, that the written contract had expired by its terms because the sale was not consummated until February 1, 1962. Otherwise, it appears to refer only to the employment issue.

On March 29, 1964, petitioner moved for leave to file an amended complaint. It alleges an oral agreement between the parties made between June 15, 1961, and June 21, 1961, among the terms of which it was agreed that the parties would share the taxes through August 31, 1961. As a second cause of action, it is further alleged that a written memorandum thereof was executed on June 21, 1961 (the agreement incorporated in the cross-complaint) and that, through a typographical error and mistake on the part of petitioner, it incorrectly stated the year 1960 instead of 1961 in respect to tax liability. As a third cause of action, it alleged that petitioner's agreement with the third parties was changed to provide that it be consummated in two equal instalments payable on August 31, 1961, and February 1, 1962; an oral agreement was made the last week of August, 1961, between petitioner and defendants for payment to defendants in two instalments one on August 31, 1961, for their one-half share less share of estimated taxes of $40,000, and the second, on February 1, 1962, for the balance, rather than all on August 31, 1961; on August 31, 1961, petitioner agreed to permit Albert to take the full amount paid by third parties on August 31, 1961, (less $40,000 for taxes) for a period of three days; Albert failed to return the sum of $600,000 as petitioner's share. As a fourth cause of action, it alleges that petitioner, under the agreements alleged in the first two causes of action (apparently the oral agreement between June 15 and June 21 and the written agreement of June 21), agreed to 'use his best efforts to cause' the employment of Albert. Also alleged are other terms of the proposed employment provision; that controversy has arisen; that petitioner contends Albert breached. The prayer seeks damages for breach based on taxes and 7 per cent interest for defendants' failure to return $600,000 after three days, and declaratory relief in respect to the employment provision.

This pleading thus reflects that petitioner then relied: (1) on the written agreement after reformation to support his claim for taxes; (2) on the oral agreement of August, 1961, alleged in his original complaint to support his claim that he was to pay defendants only part of the total sale price on August 31, 1961, and loaned the balance of the sum transferred; and (3) on both the oral and written agreements of June, 1961, to support his claim as to the provision for employment.

A declaration in support of the motion for leave to file this proposed amendment, made by petitioner's counsel, declares that extensive depositions had been taken and that facts revealed therein disclosed contentions of defendants which were not fully understood by him prior to the depositions; that defendants will not be prejudiced; and that ample time before pretrial conference and trial remains to permit them to prepare their defense.

Defendants objected on the ground that the allegations of a prior oral agreement in June, 1961, stated a new cause of action which was barred by the statute of limitations, and in any event, the further allegations of the second cause of action showed that it was merged in the written agreement of June 21, 1961. They also contended that the motion should be denied for lack of diligence and prejudicial delay to them. They argued that extensive depositions had been taken, the amendment would require new discovery, causing inconvenience and expense, and no excuse for delay had been shown. The motion for leave to file was denied on April 17, 1964.

On September 25, 1964, petitioner again moved for leave to file an amended complaint. This proposed pleading (the one involved in this proceeding) alleges: (1) a claim for petitioner's share of taxes based on reformation of the written agreement of June 21, 1961, to conform to the prior oral agreement on the ground of mutual mistake in...