Nathanson v. Murphy

• Decision Date: 19 April 1955
• Citation: 132 Cal.App.2d 363,282 P.2d 174
• Court: California Court of Appeals Court of Appeals
• Parties: Rose NATHANSON, as Administratrix of the Estate of Joseph Nathanson, Deceased, Plaintiff, Respondent and Appellant, v. May MURPHY and Barbara Baglietto, Defendants, Appellants and Respondents. Civ. 16329.

Page 174

282 P.2d 174

132 Cal.App.2d 363

Rose NATHANSON, as Administratrix of the Estate of Joseph Nathanson, Deceased, Plaintiff, Respondent and Appellant, v. May MURPHY and Barbara Baglietto, Defendants, Appellants and Respondents.

Civ. 16329.

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

April 19, 1955.

Hearing Denied June 16, 1955.

Morgan V. Spicer, H. R. Whiting, San Francisco, for plaintiff-appellant.

William Klein, Toland C. McGettigan, San Francisco, for defendants-appellants.

BRAY, Justice.

In an action for deceit and false representation plaintiff recovered judgment of $5,000 and interest from June 11, 1947. Thereafter the trial court made an 'Order Modifying Findings of Fact and Conclusions of Law Heretofore Signed' and an 'Order Modifying Judgment.' Defendants appeal from the judgment. ¹ Plaintiff appeals from the two orders.

Questions Presented.

Defendants' Appeal.

I. Sufficiency of the evidence and of allegations of the complaint.

II. Was Joseph Nathanson a real party in interest?

III. The correct measure of damage.

IV. Error in denying admission of evidence concerning claimed conversion of defendants' property by Nathanson.

Plaintiff's Appeal.

Power of court to change findings and judgment.

I. Sufficiency of the Evidence and of Allegations of the Complaint.

Defendants contend that neither the facts as alleged in the complaint, found by the court nor shown by the evidence, made out a ground for recovery. As the evidence supports the allegations of the complaint it is unnecessary to consider the pleading separately but only to determine whether the facts as found entitle plaintiff to the judgment.

Defendant May Murphy is the mother of defendant Barbara Baglietto. They owned a ranch in the counties of Tehama and Shasta. ² In 1946 Joseph Nathanson ³ approached Mrs. Murphy in regard to purchasing the ranch, stating that he was interested in promoting a corporation to take it over. She was interested in selling and told him the ranch contained 960 acres. A corporation was formed called the Community Cooperative Development Company. The corporation applied to the corporation commissioner for a permit to sell stock to make 'a down payment on a going stock ranch and for the acquisition of an auto court.' It stated that a number of ranches were under consideration but that it was the present purpose of the directors to acquire a ranch of more than 900 acres in the vicinity of Cottonwood (defendants' ranch). In April, 1947, Nathanson persuaded Mrs. Murphy to go with him to the office of Mr. Penaat, a director of the company, and an attorney. There, they went over a proposed memorandum for the purchase of the property by the corporation. This required a payment of $5,000 by June 9th at which time the owners were to deed the property to the corporation and receive back a note for the balance of the purchase price secured by a deed of trust on the property. In the early part of June, Nathanson from his own money paid defendant the $5,000. Defendants executed the deed to the corporation and the corporation executed the note and deed of trust. The property was described by metes and bounds without reference to acreage. The next day the permit to sell stock was issued, referring to the ranch to be purchased as containing 960 acres. The corporation then solicited sales of stock for approximately two months, when it stopped doing so because it discovered that the ranch contained not more than 770 acres. The tax bill for the period July 1, 1947, to June 3, 1948, which became a lien in March, 1947, showed the acreage as 757 acres. Negotiations were had with Mrs. Murphy to reduce the purchase price because of the discrepancy in acreage. These came to naught and the $5,000 was never restored. The corporation commissioner finally terminated the permit to sell stock. The corporation has no assets and in 1948 defendants foreclosed the deed of trust. Thereafter Nathanson sued for the recovery of $5,000 damages plus additional damages of $10,000 for loss of commissions on sale of corporation stock, $5,000 for the reasonable value of his services, $2,500 for the reasonable value of time expended, and $500 for expenses incurred, all based on the charge of misrepresenting the acreage.

The court found that defendants knew that Nathanson was interested in organizing and promoting the corporation to purchase the ranch; that the corporation permit was granted to purchase defendants' '960 acre ranch'; that after discovering defendants' false representations as to acreage the corporation could not lawfully issue its stock; that Nathanson paid $5,000 of his own money as partial consideration for the conveyance by defendants to the corporation; that defendants knew said representations to be untrue and made them with intent to deceive Nathanson and to induce him to pay said sum to them; that the representations were false and untrue; that the ranch only contains 763 acres; that Nathanson did not know the representations to be false, but believed and relied upon them and would not have paid the $5,000 had he known the truth; that because the corporation could not issue its stock, it could not fulfill the contract of purchase; that the corporation has no assets from which to repay Nathanson.

Both as to pleading and as to evidence all the facts necessary to establish a case of deceit and false representation appear here. The elements required are succinctly set forth in Hobart v. Hobart Estate Co., 26 Cal.2d 412, 422, 159 P.2d 958, 964: 'In general, to establish a cause of action for fraud or deceit plaintiff must prove that a material representation was made; that it was false; that defendants knew it to be untrue or did not have sufficient knowledge to warrant a belief that it was true; that it was made with an intent to induce plaintiff to act in reliance thereon; that plaintiff reasonably believed it to be true; that it was relied on by plaintiff; and that plaintiff suffered damage thereby.'

1. A material representation was made. Nathanson testified Mrs. Murphy told him the ranch contained 960 acres. Defendants owned a real estate broker's business. Under its name on two occasions newspapers advertised the property as containing 950 acres and on two occasions as 940 acres. The advertisements were seen by Nathanson. Mrs. Murphy gave Nathanson a description of the ranch on her firm's stationery 'About 950 acres more or less * * *' Mrs. Murphy stated to Nathanson and Penaat that the acreage was 950. A letter to the corporation commissioner prepared by Penaat, signed by Mrs. Murphy and seen by Nathanson, described the ranch as containing 900 acres. The memorandum of sale reviewed by Nathanson and Mrs. Murphy referred to the ranch as containing 950 acres. Misrepresentation of acreage may be a material fact. Morey v. Bovee, 218 Cal. 780, 25 P.2d 2 (18 acres of orange trees represented as 23 acres); Quarg v. Scher, 136 Cal. 406, 69 P. 96 (23 1/2 acres represented as 40); Mosher v. Lack, 41 Cal.App. 23, 181 P. 813 (55.64 acres represented as 80); Dohrman v. J. B. Roof, Inc., 108 Cal.App. 456, 291 P. 879 (90 foot lot represented as 100). Here it was material.

2. The representations were false. There can be no question under the evidence that the ranch contained no more than 765 acres.

3. Defendants knew the representations to be untrue or did not have sufficient knowledge to warrant a belief that they were true. There is no direct evidence that defendants knew the exact acreage. However, the evidence shows that defendants never had the ranch surveyed to determine its size. They introduced no evidence as to what they based their representations on. Therefore they did not have sufficient knowledge to warrant a belief that they had 950 acres.

A case very much in point is Gagne v. Bertran, 1954, 43 Cal.2d 481, 275 P.2d 15. It was an action for deceit against a test hole driller who was not a party to the contract of sale but who represented to the plaintiff the amount of fill on the property, as a result of which representation the plaintiff entered into the contract. 'To be actionable deceit, the representation need not be made with knowledge of actual falsity, but need only be an 'assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true' [citations] and made 'with intent to induce (the recipient) to alter his position to his injury or his risk * * *.' [citations].' 43 Cal.2d at pages 487, 488, 275 P.2d at page 20.

4. Made with intent to induce plaintiff to rely thereon. Defendants contend that the facts that some of the representations were made a year prior to the transaction, that there were six other incorporators besides Nathanson, that the sale was to the corporation and that the down payment was to be paid by the corporation from proceeds of stock sales, negative any intent to defraud Nathanson. There is no legal requirement that to constitute grounds for recovery the misrepresentations be made at any particular moment during the negotiations. Here the transaction was the product of months of negotiations. The representations and the formation of the corporation were steps that finally consummated in the sale. Defendants knew that Nathanson was vitally interested in the formation of the corporation and the purchase of the ranch. At Penaat's office, Mrs. Murphy inquired from where the down payment was to come. Nathanson explained that he was going to put it up. 'She was satisfied when she learned that the $5,000.00 that was offered was definitely available and would not have to be raised through the sale of stock.' An action for deceit does not require privity of contract. Here the representations were made directly to Nathanson to induce him to pay the $5,000 to defendants for the benefit of the corporation.

Assuming, however, the representations were made directly to the corporation and merely indirectly to Nathanson, Mrs....