Larson v. Union Inv. & Loan Co.

• Decision Date: 19 April 1932
• Docket Number: 23523.
• Citation: 10 P.2d 557,168 Wash. 5
• Court: Washington Supreme Court
• Parties: LARSON et al. v. UNION INVESTMENT & LOAN CO.

10 P.2d 557

168 Wash. 5

LARSON et al. v. UNION INVESTMENT & LOAN CO.

No. 23523.

Supreme Court of Washington

April 19, 1932

Department 2.

Appeal from Superior Court, King County; Robert M. Jones, Judge.

Action by Gustav Larson and another against the Union Investment &amp Loan Company, now known as the Union Guaranty Company. From a judgment in favor of plaintiffs, defendant appeals.

Affirmed.

Peters Evans & McLaren, of Seattle, for appellant.

Louis E. Shela, of Seattle, for respondents.

BEALS J.

This action was originally instituted by Gustav Larson as sole plaintiff, the complaint setting forth two causes of action the first for damages for breach of an alleged agreement whereby defendant, for $200 paid by plaintiff and other consideration, orally agreed to make to plaintiff a loan in the sum of $36,500, to be secured by a first mortgage on real estate in King county. Plaintiff further alleged the refusal of defendant to make the loan, and that plaintiff had been compelled to accept a less advantageous loan, to his damage in the sum of $10,000. In his second cause of action plaintiff sued for the return of the $200 paid as part consideration for the agreement above referred to. Later, plaintiff moved for an order making Gustav Larson, Incorporated, a corporation, an additional party plaintiff to the action, which motion the court granted. An amended complaint was filed, in which it was alleged that Gustav Larson, individually, and the corporation jointly agreed with defendant for the making of the loan above referred to. Defendant answered the amended complaint, denying the material allegations thereof, and the action was tried to a jury, which returned a verdict in plaintiffs' favor upon the first cause of action in the sum of $1,001.95. As to the second cause of action, the court instructed the jury to return a verdict in plaintiffs' favor for the sum of $200, the amount demanded. The court reduced the verdict on the first cause of action to the sum of $768.36, for which amount, together with $200 on the second cause of action, judgment was entered against defendant, from which judgment defendant appeals.

In the first place, appellant contends that the trial court erred in permitting the filing of the amended complaint and in overruling appellant's special appearance and motion to quash, appellant contending that, in view of appellant's objection and special appearance, the trial court had no jurisdiction to proceed under the amended complaint. Appellant argues that, after the institution of the action, the addition of a joint party plaintiff operated as a substitution of a new plaintiff, to the exclusion of the original plaintiff, and that, under these circumstances, the amended complaint, together with a summons thereon, should have been served upon appellant, and that, in the absence of such service, the court had no jurisdiction to proceed. Under rules 2 and 3 of the rules of pleading, procedure, and practice, adopted by this court January 14, 1927 (Rem. Comp. St. Supp. 1927, §§ 308-2, 308-3), the trial court did not err in directing the addition of the corporation as an additional party plaintiff. This case clearly falls within the rules, and the rule-making power of this court pursuant to Rem. Comp. Stat. Supp. 1927, §§ 13-1 and 13-2, has been upheld in the cases of State ex rel. Foster-Wyman Lumber Co. v. Superior Court, 148 Wash. 1, 267 P. 770; State v. Pavelich, 153 Wash. 379, 279 P. 1102; State v. Williams, 156 Wash. 6, 286 P. 65; and other cases.

In this action the amended complaint stated no new or additional cause of action; the same breach of the same contract referred to in the original complaint was relied upon. The order adding the corporation as an additional party plaintiff was well within the authority of the superior court. Under the rules of practice hereinabove referred to and the circumstances disclosed by this record, no occasion existed for service of process on the amended complaint upon the defendant in the action, appellant here. The amended complaint was served upon appellant's counsel, and the trial court did not err in overruling appellant's objection to being required to plead thereto.

Prior to the calling of the case for trial, appellant moved that respondents be required to elect between the two causes of action set forth in the amended complaint. The trial court overruled appellant's motion, which ruling is assigned as error. Appellant argues that the second cause of action is one for rescission, and that, the first cause of action being for damages for breach of contract, the two are incompatible, and an election should have been required. The second cause of action is rather one for recovery of money paid as part consideration for a contract which has been breached. This cause of action is not for a rescission, and the cases cited by appellant in support of this assignment of error do not support this contention.

In the first of these cases, Houser & Haines Mfg. Co. v. McKay, 53 Wash. 337, 101 P. 894, 27 L. R. A. (N. S.) 925, it was held that the purchaser of a harvester could not, in an action against him for the purchase price of the machine, recover on a counterclaim both the money paid, as upon a rescission, and also damages to his crops by reason of the breach of a warranty as to the performance of the harvester. He had the machine in his possession, and, by asserting a counterclaim for damages, he impliedly elected to accept the machine, thereby rendering the vendor, the plaintiff in the action, entitled to the purchase price, against which the purchaser could offset such damages as he could prove on account of any breach of warranty. In the case at bar, respondent did not receive the mortgage which he alleged it was agreed between him and appellant he should receive, which left appellant in possession both of the money which was to be loaned and the $200 which respondent paid as part consideration for the making of the loan. Under these circumstances, respondents' claim to the return of the $200 is not an action for rescission.

The other case cited by counsel in support of this argument is that of Blake-Rutherford Farms Co. v. Holt Mfg. Co., 70 Wash. 192, 126 P. 418, in which the plaintiff sought rescission of a contract of purchase of a traction engine and the return of the purchase price paid, while in the second cause of action it sought damages for loss of profits suffered because of the failure of the engine to perform on accordance with warranties made by the vendor. It was held that the two causes of action were inconsistent, but the case is distinguishable upon the facts for the reasons above stated.

The most serious question presented on this appeal is the basic one of whether or not, as to their first cause of action, respondents introduced evidence which will support any verdict for damages in their favor. Appellant contends that the damages claimed are entirely speculative in their nature, and that the evidence under this cause of action is not sufficiently definite to support the verdict. It is the law that a breach of a contract to loan money, unaccompanied by elements of special damage, may not be made the basis of an action. Avalon Construction Corporation v. Kirch Holding Co., 256 N.Y. 137, 175 N.E. 651, infra. It is the law, however, that certain items of special damage may be recovered. In the case of Culp v. Western Loan & Building Co., 124 Wash. 326, 214 P. 145, a recovery was allowed for items of expense in connection with making another loan, including title insurance, postage, notary's and attorney's fees. The items for which recovery was allowed by way of special damage had, however, all been actually disbursed by the plaintiff, and the amount thereof was definitely established, if legal liability to recover the same existed.

In the case at bar, respondents contended, and the jury found, that appellant agreed to make to, or procure for, respondents a loan, to be secured by a first mortgage, in the sum of $36,500, upon which no payment to be applied to the reduction of the principal should be required for four years, and that thereafter monthly payments should be made which would reduce the principal at the rate of not to exceed 7 per cent. annually until the same should be completely liquidated. At this time there was a construction mortgage on the property in the sum of $30,000, and respondents signed an alternative application to appellant for a $5,000 second mortgage. A loan was finally procured, payable in its entirety at the end of five years, for the procurement of which loan respondents paid a commission, one-third of which went to appellant.

The trial court rule that respondents could recover under their first cause of action no more than the cost of one renewal of the mortgage, including a commission, the expense of title insurance, and recording fees, and the verdict of the jury on the first cause of action was in accord with this ruling of the court. The verdict being somewhat in excess of the amount which the trial court felt was sustainable under the evidence, respondents were offered the alternative of accepting a reduction thereof or a new trial....