Lortz v. Connell

• Citation: 273 Cal.App.2d 286,78 Cal.Rptr. 6
• Court: California Court of Appeals
• Decision Date: 23 May 1969
• Parties: M. E. LORTZ and Edward M. Lortz, Plaintiffs and Appellants, v. Richard J. CONNELL, Joan Connell, and C & L Logging Company, a California Corporation, Defendants and Respondents. Civ. 25212.

Page 6

78 Cal.Rptr. 6

273 Cal.App.2d 286

M. E. LORTZ and Edward M. Lortz, Plaintiffs and Appellants, v. Richard J. CONNELL, Joan Connell, and C & L Logging Company, a California Corporation, Defendants and Respondents.

Civ. 25212.

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

May 23, 1969.

Cooper & Cooper, Santa Rosa, for plaintiffs.

McKenzie, Arata & Maggini, Santa Rosa, for respondents.

SIMS, Associate Justice.

Plaintiff, Edward M. Lortz, who sought damages for breach of a contract under which he purchased a business in which he had been jointly interested with the defendants, has appealed from an adverse judgment ¹ resulting from the granting of defendants' motion for judgment on the pleadings. He contends that the trial court erred in granting the motion because the complaint states facts sufficient to constitute a cause of action; that the court erred in considering the defendants' motion without notice to plaintiff and in considering evidence and argument outside the scope of the complaint; and that the court erred in denying plaintiff's motion to amend his complaint.

As appears below, the crucial issue is whether or not the trial court abused its discretion in denying plaintiff's motion to amend his complaint. It is concluded that the complaint was insufficient on its face; that the trial court was not warranted in disregarding the record of a prior proceeding upon which plaintiff relied as establishing his performance under the contract; and that the court abused its discretion in denying the motion to amend. The judgment must be reversed.

Sufficiency of the Complaint

In the first amended complaint ², the plaintiff, Edward M. Lortz, alleged that on October 16, 1961 the defendants Connell entered into a written agreement with him for the sale and transfer to him of all of the Connells' interest in a logging company. Reference to the agreement reveals that the parties together with their attorneys, who now represent defendants, had incorporated the logging company some 22 months previously. The agreement provided for the sale to Lortz of the stock of the corporation which had all been issued to the Connells. The stock was to be held in escrow pending payment of a note to be executed for the $23,000 purchase price, due on or before December 31, 1962. The purchase price consisted of $10,000 which the Connells had paid on a logging contract, $1,992.38 which represented other advances made by them to the corporation, and the balance which was the price to be paid for the Connells' stock. Plaintiff's payments were integrated with the payments the corporation was obligated to make under the logging contract. Plaintiff, as purchaser, undertook to pay off loans that had been incurred for the purchase of equipment which had been transferred to the corporation, and on which Mr. Connell was personally liable. Other provisions dealing with the naming of officers to control the corporation, the maintenance of the corporate bank account, and other miscellaneous matters were designed to protect the rights of the sellers in the event of any default by the purchaser before the purchase price was paid in full.

The plaintiff alleged that the defendants breached the agreement on or about January 20, 1962 in that they retook and seized possession of the logging company and all of its assets from the plaintiff, and that they caused him to be arrested to prevent his possession and management of the company. Plaintiff claimed damages for loss of assets of the corporation in the sum of $350,000, and for loss of profits in the sum of $100,000.

It is hornbook law that the essential elements to be pleaded in an action for breach of contract are: (1) the contract; (2) plaintiff's performance of the contract or excuse for nonperformance; (3) defendants' breach; and (4) the resulting damage to plaintiff. (See Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 830, 69 Cal.Rptr. 321, 442 P.2d 377; Daum v. Superior Court (1964) 228 Cal.App.2d 283, 287, 39 Cal.Rptr. 443; Wise v. Southern Pacific Co. (1963) 223 Cal.App.2d 50, 59, 35 Cal.Rptr. 652; and 2 Witkin, Cal.Proc., Pleading, § 257, p. 1232.)

Plaintiff relies on the principle that prevention of performance by one party to a contract excuses performance by the other. (See, Pacific Venture Corporation v. Huey (1940) 15 Cal.2d 711, 717, 104 P.2d 641; Rains v. Arnett (1961) 189 Cal.App.2d 337, 347--348, 11 Cal.Rptr. 299; Unruh v. Smith (1954) 123 Cal.App.2d 431, 437, 267 P.2d 52; and Overton v. Vita-Food Corporation (1949) 94 Cal.App.2d 367, 371, 210 P.2d 757; Witkin, Op.cit., § 259, p. 1234.) In Rains v. Arnett, supra, the court stated, 'From the written agreement, the executed oral agreement and the statement of the trial judge, it well appears that the items that were paid for by plaintiff were to be paid from the profits, but it also appears, upon conflicting evidence, that defendant agreed to leave the equipment with plaintiff until the profits due defendant repaid the bills and advances in question. This he did not do. He personally took some of the equipment from plaintiff and allowed other equipment to be repossessed, thus preventing plaintiff from creating the fund out of which these sums were to be paid.

'A person cannot take advantage of his own act or omission to escape liability. If he prevents or makes impossible the performance or happening of a condition precedent, the condition is excused. (Citations.) We must assume, in support of the judgment, that the court found that the creation of the fund from which the bills were to be paid was frustrated by the acts of the defendant and accordingly the condition was excused.' (189 Cal.App.2d at pp. 347--348, 11 Cal.Rptr. at p. 305.)

Plaintiff, however, failed to allege any excuse for nonperformance. The allegation that defendants breached the agreement on January 30, 1962 must be taken as true for the purpose of evaluating the sufficiency of the pleading. (Davis v. City of Santa Ana (1952) 108 Cal.App.2d 669, 685, 239 P.2d 656.) Nevertheless, it does not indicate either that plaintiff performed all that he was obligated to perform prior to that date, or that defendants had prevented him from rendering such performance.

The pleadings must be liberally construed, and a motion for judgment on the pleadings should not be granted unless there is an entire absence of an essential allegation.) Code of Civ.Proc. § 452; Caras v. Parker (1955) 131 Cal.App.2d 141, 142, 280 P.2d 226; Stockton Morris Plan Co. v. Mariposa County (1950) 99 Cal.App.2d 210, 212, 221 P.2d 232. See also Wise v. Southern Pacific Co., supra, 223 Cal.App.2d 50, 59, 35 Cal.Rptr. 652.) The allegations of seizure of the corporation and its assets, and of the arrest of plaintiff show facts which might excuse his further performance, but they do not reveal what was done by plaintiff prior to the alleged breach by defendants. There was a failure to set forth an essential allegation and the complaint was defective.

Procedural Aspects of Defendants' Motion

The record indicates that the case first came on for trial on or about November 10, 1966. On that date the trial was suspended so that the court could consider and determine the effect of a prior judgment between the same parties on defendants' right to present evidence that plaintiff had failed to perform the agreement. After considering the records of the prior action which were submitted to it and made a part of the record in this case, the trial court concluded that the findings in the prior action precluded the defendants from urging any alleged breach by plaintiff prior to March 1, 1962 (the date the prior action was filed) as a defense in the present action. The matter was set down for further hearing on the question of plaintiff's damages. When the matter came on for hearing the court acknowledged that it believed the evidence adduced at the first hearing in this case showed that the plaintiff was guilty of a breach of the contract prior to the alleged breach by defendants. It reiterated that nevertheless it was bound to rule out any earlier breach by plaintiff because of the determination in the prior action.

Thereupon the defendants, in open court, interposed their motion for judgment on the pleadings. The defendants acknowledged that the defect in the amended complaint had not been discovered or urged earlier. The plaintiff observed that he had not had an opportunity to analyze the issue raised by the motion. He did not, however, object to the form or manner in which the motion had been made, nor did he request that the hearing on the motion be continued. He argued the merits of defendants' motion, and requested the court to permit an amendment of the complaint to conform to proof.

Under the circumstances related, plaintiff at this stage of the proceedings cannot complain of the manner or the form in which the motion was presented. He has not shown that he was denied an opportunity to be heard on the merits of the defendants' motion or on the merits of his motion to amend to conform to proof, or that he was prejudiced by the manner in which these motions were presented and argued before the court.

The argument on the two motions revolved about whether the plaintiff's proof of the prior judgment required the court to permit the amendment, or whether the evidence adduced at the earlier hearing of this case (not a part of the record on this appeal), which the court believed established a prior breach of the contract on the part of plaintiff, could be considered by the court on the issue of whether an amendment would be 'in furtherance of justice.' (See Code Civ.Proc § 473.) This issue was resolved against the plaintiff and is the crucial question in this case.

It is generally stated that on a motion for judgment on the pleadings the court cannot consider any matter outside the complaint. (Tracy v. Ferrera (1956) 144 Cal.App.2d 827, 829, 301 P.2d 905; Morris v. Harbor Boat...