People ex rel. Brown v. Barenfeld

• Citation: 203 Cal.App.2d 166,21 Cal.Rptr. 501
• Court: California Court of Appeals Court of Appeals
• Decision Date: 02 May 1962
• Parties: The PEOPLE of the State of California, on the relation of Edmund G. BROWN, Attorney General of the State of California, Plaintiff and Appellant, v. Jack BARENFELD, Irving J. Leff and Maurice H. Friedman, Defendants and Respondents. Civ. 25532.

Page 501

21 Cal.Rptr. 501

203 Cal.App.2d 166

The PEOPLE of the State of California, on the relation of Edmund G. BROWN, Attorney General of the State of California, Plaintiff and Appellant, v. Jack BARENFELD, Irving J. Leff and Maurice H. Friedman, Defendants and Respondents.

Civ. 25532.

District Court of Appeal, Second District, Division 2, California.

May 2, 1962.

Hearing Denied June 27, 1962.

Stanley Mosk, Atty. Gen., Victor Griffith and Gerald F. Carreras, Deputy Attys. Gen., for appellant.

Ball, Hunt & Hart, Long Beach, for respondents.

ASHBURN, Justice.

The State appeals from a judgment for defendants Jack Barenfeld, Irving J. Leff and Maurice H. Friedman, in an action brought by it to recover all rents paid as lessee plus the purchase price paid by it for 836-846 Santee Street, Los Angeles; it made no restoration of benefits received, offered none and insisted on retaining the benefit of occupancy without payment of any compensation from about June 22, 1949 (date of lease) to July 1, 1952, under a lease prescribing rental of $346,469.85 for that period; also to recover the sum of $900,000 purchase price paid for the property on the last mentioned date while retaining title to the premises so obtained. Quoting the findings: '[P]laintiff refused to claim damages for fraud or undue influence and plaintiff refused to pursue a remedy of damages for fraud or undue influence, and plaintiff elected to claim a forfeiture of all sums allegedly paid by plaintiff to defendants as alleged and prayed in said Third Amended Complaint.' As to rescission and amendment of the complaint the court said at the trial:

'[T]he State is according to the theory of the pleadings entitled to keep the building, recover back the entire purchase price paid for the building, and to recover back all of the payments made under the lease, which the Court, it appears to me to constitute a complete forfeiture of everything. I know of no such action cognizable under State law.

'We have discussed at length alternative theories that possibly could be supported under the pleadings, and I have been informed that there never has been an offer to restore the building. So, if the State at this time is in the position of an ordinary litigant before the Court, and for the alleged fraud perpetrated would be entitled to rescind or keep their bargain and sue for damages, and action for rescission would not be maintained because the requirements of the law with respect to rescissions have not been complied with so that the pleading could not be amended to show that you offered to restore it where the pleadings could be construed as being sufficient to state a cause of action for damages for fraud.

'As to the lease provisions, the Statute of Limitations has run on such fraud, and in the absence of allegations of discovery, time of discovery, circumstances of the discovery, and reasons why if any it was not sooner discovered, the Court has offered the Attorney General the opportunity of amending the pleadings to plead such discovery. The offer has been declined, as I understand it, on the grounds that it is the desire of the State through the Attorney General to proceed on the theory of forfeiture, if that is a proper designation of the cause of action as shown, that is shown by the pleadings.'

Plaintiff's third amended complaint alleges that the Department of Finance is the agency of the State having the duty of advising and approving or disapproving of purchase of leasing by the State and conducting negotiations to such end. Somo Corporation was the owner of the Santee property which had a fair market value of $312,500 and no more; '(a) That during the period of time covered by the allegations of this complaint, the defendants did combine, confederate and conspire among and between themselves and other persons unknown to plaintiff and this relator to defraud the People of the State of California by creating an artificial and inflated value for said real property in the manner hereinafter set forth and thereafter selling said real property to the State of California for a price commensurate with the artificial and inflated value so created. (b) That the actions hereinafter alleged to have been taken by the defendants were all taken pursuant and in furtherance of said conspiracy and for the purpose of accomplishing its objective.' (Emphasis added.) Defendants learned that the State Department of Education was interested in acquiring property [a new location for its Workshop for the Blind in Los Angeles]; they conferred with officials of the Department of Finance and the Department of Education about the purchase of the Santee property. About January, 1949, defendants secured from Somo an option to buy the property for $312,500, but this was done after defendants had persuaded the Department of Finance and the Department of Education to have the State lease it for ten years for an aggregate rental of $1,119,325.20; That 'it was provided in said lease that the terms thereof were to be considered in fixing the purchase price of said property in the event that the State of California should ever decide to acquire the same.' The lease obligated defendants to expend $237,000 for improvements on the property and this they did. After execution of the lease and before acquiring title to the property defendants obtained from Mutual Benefit Life Insurance Company a firm commitment for a loan of $600,000, to be secured by mortgage or trust deed on the property and assignment of said lease. Defendants purchased the property for $312,500 from the proceeds of the loan, leaving them approximately $288,000 our of which to make the improvements and have $50,500 left over. The State paid defendants a total of $346,469.85 as rental and purchased the property from them on July 1, 1952, for $900,000. (a) That during the period between January 1, 1949, and July 1, 1952, and in furtherance of the conspiracy hereinbefore set out and for the purpose of influencing the judgment of the officers and employees of the State of California hereinafter referred to, whose judgement was to be exercised in the transactions referred to in this complaint, the defendants expended large sums of money in making gifts to and for lavish entertainment of the officers and employees of the State of California who had the duty to negotiate, scrutinize, approve or reject transactions looking to the acquisition or leasing of real property by the State of California and the defendants during said period and in furtherance of said conspiracy employed lobbyists all for the purpose of influencing the judgment and action of said officers and employees concerning the transactions referred to in this complaint. (b) * * * [T]hat the defendants spent approximately $10,000 in making gifts to and providing entertainment for employees of the State of California for the purpose of influencing the judgment of said employees of the State of California who were charged with the duty of advising the agencies of the state in the leasing and purchasing of the real property herein referred to. (c) That the books and records of the defendants disclose the expenditure of said sum for said purposes, but do not disclose the name or identities of the recipients of the gifts or entertainment, and the defendants have refused to disclose to plaintiff and relator the names or identity of such recipients. (d) That by reason of the foregoing activity of the defendants, the action of the officers and employees of the State of California in approving the execution of said lease and the purchase of said real property was not the result of the exercise of their own individual judgment and volition, but was the result of the improper influence, direction, control and solicitation of the defendants, all of whom had a pecuniary interest in the effectuation of said transactions. [Emphasis added.] (e) That by reason of the foregoing activity of the defendants, there was no bargaining at arms-length between the officers and employees of the State of California on the one hand, and the defendants on the other hand. For said reasons, as well as for all of the reasons set forth in this complaint, all of said transactions were contrary to public policy, illegal, and void..' (Emphasis added.)

There is no room for doubt that this complaint shows a transaction between defendants and agents of the State which is contrary to public policy and to be condemned by all right-thinking persons. ¹

County of San Bernardino v. Gate City Creamery Co., 103 Cal.App. 367, 373, 284 P. 457, 459: 'It will be conceded that any influence brought to bear upon a public board or official which has the evil tendency to influence such officer or board in the discharge of its public duty by trammeling the judgment in matters about which these public representatives should be left free to act as the public interests alone may dictate or require, is against public policy, and if such vitiating element is present and has that tendency in the eyes of the law, it makes no difference what the actual motive of the public officials in the particular instance may be.'

Terry v. Bender, 143 Cal.App.2d 198, 206, 300 P.2d 119, 125: 'Since the officers of a governmental body are trustees of the public weal, they may not exploit or prostitute their official position for their private benefits. When public officials are influenced in the performance of their public duties by base and improper considerations of personal advantage, they violate their oath of office and vitiate the trust reposed in them, and the public is injured by being deprived of their loyal and honest services. It is therefore the general policy of this state that public officers shall not have a personal interest in any contract made in their official capacity. * * * A transaction in which the prohibited interest of a public officer appears is held void both as repugnant to the public policy...