Mercer v. Elliott

Citation208 Cal.App.2d 275,25 Cal.Rptr. 217
Decision Date09 October 1962
Docket NumberNo. 26156,26156
PartiesD. W. MERCER, Defendant, Cross-Complainant, and Appellant, v. Amos W. ELLIOTT et al., Cross-Defendant and Respondent. AVIATION FINANCE, a California corporation, Plaintiff, v. D. W. MERCER, D. W. Mercer doing business as Mercer Enterprises, Ruby C. Morgan, One Doe, Two Doe, One Doe Company and One Doe Corporation, Defendants.
CourtCalifornia Court of Appeals

Older, Cazier, Preston & Hoegh, Charles H. Older, Los Angeles, for appellant.

Fain & Lavine, Richard A. Lavine, Beverly Hills, for respondent.

FOURT, Justice.

This is an appeal by the cross-complainant (hereinafter referred to as 'Mercer') from a judgment of dismissal after the trial court sustained, without leave to amend, cross-defendant's (hereinafter referred to as Elliott) demurrer to the third count of the fourth amended cross-complaint. The judgment dismissed the third count and Elliott from the action and awarded costs to Elliott. The demurrer was sustained on the grounds that the third count failed to state facts sufficient to constitute a cause of action, and that it appeared to be barred by Code of Civil Procedure section 338, subdivision 4 (three year statute of limitations).

The allegations of the third count of the fourth amended cross-complaint are set forth in pertinent part in footnote 1.

In addition to the items set forth in paragraph XXIII (a) though (e), Mercer prayed for 'interest on the above amounts at the legal rate' and for 'costs of suit and for such other and further relief as to the Court seems just.'

Mercer's first contention is that a cause of action for fraud and deceit is alleged. This aspect of the appeal will be discussed without regard to the possible application of the statute of limitation.

The rules relating to the trial court's determination of a demurrer on the ground that a pleading does not state facts sufficient to constitute a cause of action and which govern a reviewing court in considering an appeal from a judgment entered on the sustaining of a demurrer on that ground are in general as follows: the allegations of the complait must be regarded as true. It is assumed that plaintiff can prove all the fact as alleged; defects in the pleading which do not affect the substantial rights of the parties are disregarded; pleadings must be reasonably interpreted; they must be read as a whole and each part must be given the meaning that it derives from the context wherein it appears; the allegations must be liberally construed with a view to substantial justice between the parties and that the administrtion of justice shall not be embarrassed by technicalities or useless forms. (Hill v. City of Santa Barbara, 196 Cal.App.2d 580, 585 .)

The complaint (i. e. cross-complaint in the case at bar but hereinafter sometimes referred to as 'complaint') in an action founded on false representations must allege facts showing the following elements of the cause of action: first, representations of material facts by defendant; second, the representations were not true third, defendant either did not believe them to be true, or knew them to be false, at the time they were made; fourth, defendant intended to induce action or conduct by the plaintiff; fifth, plaintiff justifiably acted in reliance upon the representations; and sixth, plaintiff sustained damage as a proximate result thereof. (Gagne v. Bertran, 43 Cal.2d 481, 487 .) It therefore follows that the absence from the complaint of any one of the six essential elements renders it defective and insufficient to state a cause of action. (Gonsalves v. Hodgson, 38 Cal.2d 91, 100-101, 237 P.2d 656.)

Testing the complaint in light of the above set forth principles, the first question is whether Mercer has made factual allegations showing that he in fact acted in reliance upon the representations, and that under the circumstances his reliance was reasonable and prudent. Mercer does allege reliance upon Elliott's representation in paragraph IX.

Elliott (i. e. respondent) contends that Mercer's inspection of the aircraft on August 1, 1957 (paragraph XI, cross-complaint) negates reliance on facts pertaining to the condition of the aircraft that are inconsistent with the opportunity that he had to inspect the aircraft for himself and to rely on what he or his agents did or could have discovered--that where a person having the opportunity to do so undertakes an inspection of obvious conditions such as the condition of an aircraft, such person is chargeable with such information and knowledge as would ordinarily flow from such inspection, and such person cannot claim reliance upon mere representations alone.

In paragraph XI Mercer does allege that he made 'a cursory inspection of the exterior of the aircraft * * * on or about July 5, 1957, for the purpose of detecting any damage to the exterior of the aircraft prior to the flight of the aircraft from El Paso to Burbank, California * * *.' (Emphasis added.) This 'cursory inspection' was made subsequent to the time that Mercer paid the $5,000.00 for the option to purchase (June 12, 1957--paragraph VI) but prior to the date of purchase (July 6, 1957--paragraph VIII) and prior to the date that Mercer entered into an oral lease agreement with cross-defendants Tuttle, Koenen, and Aviation Finance (July 26, 1957--paragraph IX).

It is only where a party to whom a representation is made has the means at hand for determining its truth or falsehood and resorts to such means, without interference by the other party, and after investigation learns that the statement was false, that he is precluded from asserting that he relied upon the representation. The rationale for this is that the investigation and ascertainment of the facts exclude the idea that any reliance was placed upon the falsehood. (Harper v. Silver, 200 A.C. A.2d 102, 19 Cal.Rptr. 78; Blackman v. Howes, 82 Cal.App.2d 275, 279, 185 P.2d 1019, 174 A.L.R. 1004.)

Since the allegations of the complaint must be regarded as true (Hill v. City of Santa Barbara, supra, 196 Cal.App.2d 580, 16 Cal.Rptr. 686) the pleading shows that Mercer did not discover the true condition of the aircraft until August 1, 1957 (paragraph XI) and therefore was justified in relying upon the representations made by Elliott.

Mercer's action for fraud is not predicated upon the representations concerning the condition of the aircraft. The alleged fraud which serves as the basis for this action consists of the representations by Elliott that the aircraft 'as modified had been approved for commercial aviation operations by the F.A.A., and that * * * Elliott had all of the aircraft records * * * to substantiate the fact that said modifications had been made, and that said modifications had been approved by the F.A.A. Cross-defendant further represented that said aircraft records would be delivered to the buyer with the aircraft; (c) that all said aircraft required in order to obtain a certificate of airworthiness for commercial flight operations from the F.A.A. was an 8,000 hour airframe inspection.' (Paragraph VII.)

Elliott asserts that his representation that 'all said aircraft required in order to obtain a certificate of airworthiness for commercial flight operations from the F.A.A. was an 8,000 hour airframe inspection' is merely a 'statement of non-actionable opinion, for which respondent may not be charged as liable in an action for fraud and deceit.' Elliott further asserts that Mercer may not justifiably rely upon such expression of opinion.

The line between opinion and fact is not a distinct one; hence if the opinion is rendered under circumstances such that it may be regarded as amounting to a positive affirmation of fact, it will be treated as a representation of fact for purposes of a deceit action. (See Gilbert v. Corlett, 171 Cal.App.2d 116, 339 P.2d 960; Clar v. Board of Trade, 164 Cal.App.2d 636, 331 P.2d 89; Pearson v. Allen, 150 Cal.App.2d 638, 310 P.2d 688; Friedberg v. Weissbuch, 135 Cal.App.2d 750, 287 P.2d 785.) In any event it is clear that Elliott's representations to the effect that the modifications made to the aircraft had been approved for commercial aviation operations by the F.A.A., and that he had all the records to substantiate the fact that the modifications had been made and that they had been approved, constituted representations of fact. The falsity of the representations is set forth in paragraph X of the complaint.

An examination of Mercer's cross-complaint sufficient to constitute a cause of action.

Mercer's next contention is that the action is not barred by the statute of limitations.

An action for relief on the ground of fraud or mistake must be brought within three years. The 'cause of action in such case not to be deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.' (Code Civ.Proc., § 338, subd. 4.)

The allegations set forth in paragraph XI of the cross-complaint show that a few days after August 1, 1957, Mercer discovered for the first time that the aircraft did not require an 8,000 hour airframe inspection as represented by Elliott; that the prior modifications to the aircraft had not been approved by the F.A.A.; and that the F.A.A. at Burbank refused to issue a certificate of airworthiness for the aircraft until such time as the aircraft records relating to the prior modifications, including the detailed engineering drawings and specifications relating thereto, were furnished to it, and the design, type and qualify of the modifications were approved by the F.A.A. at Burbank.

Mercer first filed his first amended crosscomplaint against Elliott on or about February 9, 1961, more than three years after discovery of the above facts. This serves as the basis for Elliott's contention that the action is barred by the statute of limitations.

Mercer has attempted to circumvent the bar of ...

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