Pearson v. Norton

• Decision Date: 24 September 1964
• Citation: 230 Cal.App.2d 1,40 Cal.Rptr. 634
• Court: California Court of Appeals Court of Appeals
• Parties: Marjory M. PEARSON, individually and as Executrix of the Estate of Robert G. Pearson, deceased, Plaintiffs, Cross-Defendants and Appellants, v. Lalita NORTON, individually and as Executrix of the Estate of Philip Norton, deceased, Defendants, Cross-Complainants and Respondents. Civ. 7193.

Page 634

40 Cal.Rptr. 634

230 Cal.App.2d 1

Marjory M. PEARSON, individually and as Executrix of the Estate of Robert G. Pearson, deceased, Plaintiffs, Cross-Defendants and Appellants, v. Lalita NORTON, individually and as Executrix of the Estate of Philip Norton, deceased, Defendants, Cross-Complainants and Respondents.

Civ. 7193.

District Court of Appeal, Fourth District, California.

Sept. 24, 1964.

Rehearing Denied Oct. 16, 1964.

Dillavou & Cox, Los Angeles, for plaintiffs, cross-defendants and appellants.

Robert E. Sease, Los Angeles, for defendants, cross-complainants and respondents.

RALPH M. BROWN, Justice.

This appeal originated in a transaction for the sale, purchase and exchange of real and personal property giving rise to the complaint for damages based on fraud and deceit, on the one hand, and the cross-complaint for damages based on fraud and deceit, on the other hand. At the outset of trial the complaint was dismissed. The issues in the case are those raised by the cross-complaint, as amended, and the answers thereto.

Cross-complainants and respondents, Philip Norton and Lalita Norton, owned certain realty improved with duplex bungalows situated in Seal Beach. Dr. Robert G. Pearson and Marjory M. Pearson owned realty improved with a fully furnished and equipped hotel, known as the Casa Blanca, situated in Palm Springs.

Through Mildred Jackson, a real estate agent who represented both the Nortons and the Pearsons, a sale-exchange of the two properties was consummated. The Pearsons transferred the hotel realty and personalty, valued at $335,000, to the Nortons. The Nortons transferred to the Pearsons ten of the duplex bungalows valued at $235,000, and paid the remainder in cash and by the assumption of the obligations of two trust deeds. The escrow closed and the Nortons took possession of the hotel on January 11, 1957.

Prior to commencement of this action, Dr. Pearson died. On September 16, 1957, Marjory M. Pearson, individually and in her capacity as executrix of Dr. Pearson's estate, commenced this action by filing a complaint against the Nortons based on a theory of fraud and deceit. Divers pleadings were filed and motions made, culminating in an amended cross-complaint filed by Philip Norton and Lalita Norton containing three causes of action, all founded on the theory of fraud and deceit. Only the second cause of action is relevant here. The second cause of action is against Marjory M. Pearson, individually and as executrix of the estate of Robert G. Pearson, and Doe Company. It is alleged that a partnership relation existed between the Pearsons and that the partnership transacted business as Doe Company. By the prayer, cross-complainants sought a money judgment; that it be declared by the court that Marjory M. Pearson, individually and as executrix, holds the duplex bungalows in Seal Beach for the benefit of the partnership composed of the Pearsons and as trustee for the creditors thereof, and that the court decree that such property be sold and the proceeds of such sale be first applied to payment of the claim founding the cross-complaint.

At the commencement of trial and upon motion made by the cross-complainants, the cross-complaint was by order amended by substitution of the name 'Casa Blanca' for the name 'Doe Company.'

Upon a nonjury trial judgment was rendered in favor of the cross-complainants and against the cross-defendants, pursuant to the second cause of action based on the ories of fraud and partnership, in the sum of $53,800. It was decreed that the realty in Seal Beach was and is an asset of Casa Blanca, a partnership; that the estate of Robert G. Pearson owns no interest in such property; that such estate owns only an interest in the partnership; and that Marjory M. Pearson, individually, as executrix, and as surviving partner, holds such property to the second cause of action based on theories of the partnership. It was further decreed that the cross-complainants are creditors of the partnership to the extent of the money judgment; the duplex property was ordered to be sold and the proceeds first applied in satisfaction of the judgment, with interest and costs; and any surplus to be delivered to the cross-defendants. It was further ordered that such order of sale shall not preclude the cross-complainants from satisfying the judgment through any other available legal process, nor limit their recovery to the Seal Beach property or the proceeds of a sale thereof.

Intermediate submission of the cause at the close of trial and the subsequent entry of judgment, Philip Norton died and Lalita Norton, as executrix, was substituted in his place.

The cross-defendants' motion for a new trial was denied and this appeal followed. Appellants are here represented by counsel other than their trial counsel.

Appellants first contend that the evidence is insufficient to support a finding that they defrauded the respondents and a finding that Dr. Robert G. Pearson and Marjory M. Pearson were partners at the time of the real estate transaction.

The trial judge saw and heard the witnesses. Where disputed questions of fact are presented to the fact-finding entity and are passed upon, unless clearly erroneous, the findings of fact will not be disturbed by the reviewing court. It is not the province of an appellate court to substitute its judgment for that of the trial judge where there is a conflict in the evidence. It is his province alone to determine the weight of the evidence, the credibility of the witnesses and to resolve all conflicts and contradictions. On an appeal from a judgment, the evidence must be viewed in its aspects most favorable to the respondent, and all legal inferences must be drawn therefrom most strongly in respondents' favor; all contrary and contradictory evidence must be rejected and the findings of the trial court must be upheld if sustained by any substantial evidence. Nor will a judgment be reversed because the trier of facts could have drawn different inferences from the evidence or because the reviewing court might have drawn conclusions other than those drawn if it passed upon the evidence as upon original presentation. (Berniker v. Berniker, 30 Cal.2d 439, 444, 182 P.2d 557; Crawford v. Southern Pacific Co., 3 Cal.2d 427 429, 45 P.2d 183; VOGELSANG V. WOLPERT, 227 CAL.APP.2D 102 , 38 CAL.RPTR. 440¹.)

In its broad, general sense the concept of fraud embraces anything which is intended to deceive, including all statements, acts, concealments and omissions involving a breach of legal or equitable duty, trust or confidence which results in injury to one who justifiably relies thereon. The elements of actionable fraud are set out in Zinn v. Ex-Cell-O Corp., 148 Cal.App.2d 56, 58, 306 P.2d 1017. Without quoting exactly, they are: (1) a false representation, actual or implied, or the concealment of a matter of fact, material to the transaction, made falsely; (2) knowledge of the falsity, or statements made with such disregard and recklessness that knowledge is inferred; (3) intent to induce another into relying on the representation; (4) reliance by one who has a right to rely; and (5) resulting damage. All of these elements must be present if actionable fraud is found; one element absent is fatal to recovery. There is no absolute or fixed rule for determining what facts will constitute fraud; whether or not it is found depends upon the particular facts of the case under inquiry. Fraud may be proved by direct evidence or it may be inferred from all of the circumstances in the case. (Jorgensen v. Jorgensen, 32 Cal.2d 13, 18, 21, 193 P.2d 728.) 'Actual fraud is always a question of fact.' (Civ.Code, § 1574.)

The trial judge found, by adoption of allegations set forth in the cross-complaint, that there were six separate instances of fraud. Briefly restated, it was found that the Pearsons represented that the Casa Blanca Hotel, and particularly the bathrooms therein, were of the finest construction when in fact it was of cheap construction and many bathrooms contained metal tile rather than ceramic tile; that it was represented the gross annual income, based on the Pearsons' own operational experience, was between $80,000 and $85,000 when in fact the gross income for 1956, the one year of operation of the completed hotel, did not exceed $25,000 and the operation was not profitable; that it was represented that all furniture, equipment and effects in the hotel, save personal furniture in the Pearsons' apartment, were included in the sale when in fact the Pearsons never intended to transfer all of the furnishings and effects but intended to, and did, remove large quantities thereof during the pendency of the escrow. The remaining findings to which objection is made will be adverted to hereinafter.

All of the misrepresentations found to have been made were made by Dr. Pearson on December 20, 1956, when the Nortons inspected the hotel properties. On that occasion there were present Dr. Pearson, Mr. and Mrs. Norton, and the realtor, Mildred Jackson. There was testimony that both Dr. Pearson and Mrs. Pearson told the Nortons they had built the major portion of the hotel premises and that the hotel was 'well-built.' Respondents produced Herbert H. Foster, a licensed general contractor and qualified appraiser, who testified that he had inspected the newly constructed buildings; that the bathrooms therein were of cheap construction; that plywood instead of plaster, was used behind the tile; that the adhesive material which had been used was too thin to hold the tile in place and individual tiles had loosened and fallen; that the water pans under the showers were inadequate; that water seeped behind the tile into the walls and flooring and ran into the apartments below. Mrs. Norton testified that, when water was flowing in some of the showers in the second story apartments, stream of water about the size of a cigarette came from the ceiling fixtures in the...