Raedeke v. Gibraltar Sav. & Loan Assn.

• Decision Date: 21 January 1974
• Citation: 111 Cal.Rptr. 693,517 P.2d 1157,10 Cal.3d 665
• Court: California Supreme Court
• Parties: , 517 P.2d 1157 John W. RAEDEKE et al., Plaintiffs and Appellants, v. GIBRALTAR SAVINGS AND LOAN ASSOCIATION, Defendant and Appellant. L.A. 30154.

Page 693

111 Cal.Rptr. 693

10 Cal.3d 665, 517 P.2d 1157

John W. RAEDEKE et al., Plaintiffs and Appellants, v. GIBRALTAR SAVINGS AND LOAN ASSOCIATION, Defendant and Appellant.

L.A. 30154.

Supreme Court of California In Bank.

Jan. 21, 1974.

William T. Brandlin, Los Angeles, for plaintiffs and appellants.

Kellett, Oksner Sapada, Los Angeles, Brazelton, Clifford, Smith & Oksner and Chester M. Oksner, for defendant and appellant.

BURKE, Justice.

Plaintiffs John and Alicia Raedeke appeal from a judgment of the Los Angeles Superior Court awarding them $14,000 against defendant Gibraltar Savings and Loan Association in an action based upon an alleged wrongful foreclosure of property owned by plaintiffs. Although the jury awarded plaintiffs $475,000 compensatory damages by reason of Gibraltar's conduct, the trial court treated the verdict as advisory only and reduced plaintiffs' award to $14.000. We have concluded that plaintiffs' suit was an action at law, not equity, and that the trial court erred in treating the jury verdict as advisory. Accordingly, we reverse the judgment with instructions to reinstate the jury verdict.

1. Plaintiffs' Complaint

In their third amended complaint, plaintiffs set forth four causes of action, namely, (1) to set aside a trustee's foreclosure sale of real property owned by them, (2) to recover damages for conversion of personal property, (3) to recover compensatory and punitive damages for fraud, and (4) to recover damages for breach of contract. In essence, the facts alleged to support recovery are as follows: In August 1964 plaintiffs executed and delivered an installment promissory note in the amount of $730,000 secured by a first deed of trust on the Parkview Motor Hotel and Restaurant in North Hollywood. Upon plaintiffs' subsequent delinquency, beneficiary Gibraltar recorded a notice of default and an election to sell the property, and scheduled a trustee's sale for March 29, 1966. At plaintiffs' request, and on March 22, Gibraltar orally agreed to postpone the sale until April 13. Subsequently, on April 8, Gibraltar allegedly orally agreed to a further postponement, after plaintiffs informed Gibraltar that they had been negotiating with other prospective purchasers and would be able to sell the premises. In the words of plaintiffs' complaint, '. . . (Gibraltar's agent) informed the plaintiff JOHN W. RAEDEKE that he would grant an additional continuance of the Trustee Sale if said plaintiff had a responsible prospective purchaser for the said property; that . . . (Gibraltar's agent) stated on that occasion and on numerous other occasions to plaintiff . . . 'all we want out of this property is our money and we will cooperate with you in any manner that we can."

Notwithstanding Gibraltar's alleged oral agreement, and in spite of the fact that plaintiffs allegedly procured a willing buyer and so advised Gibraltar, Gibraltar refused to continue the trustee's sale, which took place as scheduled on April 13, 1966. Gibraltar was the sole bidder on the property, and acquired it for an amount equal to the unpaid balance on plaintiffs' loan, plus interest and costs. Thereafter, Gibraltar allegedly converted various items of personal property on the premises belonging to plaintiffs.

The alleged conversion formed the basis for plaintiffs' second cause of action. The alleged refusal to continue the trustees' sale constituted the basis for plaintiffs' first, third and fourth causes of action. As the allegations of these latter three causes of action are relevant to our determination regarding plaintiffs' right to a jury trial in this case, we review those allegations in greater detail.

As noted above, plaintiffs' first cause of action sought to set aside the trustee's sale. Plaintiffs alleged that Gibraltar promised to postpone the sale, that plaintiffs reasonably relied on that promise and, based on that reliance, took no steps to refinance the property, borrow money to cure their default or otherwise act to preserve their equity; that Gibraltar reasonably expected or should have expected plaintiffs to rely on the promise; and that Gibraltar's conduct was unreasonable, oppressive and unfair. Plaintiffs sought to set aside the sale, but did not pray for damages.

In their third cause of action, for fraud, plaintiffs reincorporated most of the preceding allocations and further alleged that Gibraltar's promise was known to be false when made. Plaintiffs sought compensatory and punitive damages for Gibraltar's alleged fraud.

In their fourth cause of action, for breach of contract, plaintiffs again incorporated many of the allegations made in the first cause of action, including allegations that Gibraltar's promise to postpone the sale led plaintiffs to rely thereon to their detriment. Plaintiffs sought compensatory damages for Gibraltar's alleged breach of contract.

Gibraltar's answer denied, among other allegations, that a promise had been made, that plaintiffs had relied on it to their detriment, or that plaintiffs had procured a responsible prospective purchaser.

2. Proceedings at Trial

As discussed in greater detail below, to insure themselves of a trial by jury, plaintiffs voluntarily abandoned their claim in equity, under the first cause of action, to set aside the trustee's sale. Plaintiffs further dismissed their third and fourth causes of action, and chose to rely solely upon the allegations in the first cause of action to support a claim for damages for breach of Gibraltar's oral promise to continue the sale. A jury was impaneled and the trial proceeded, although the trial court indicated that, as to the 'equitable issues' remaining in the case, the jury's verdict would be advisory only.

The jury returned a verdict in plaintiffs' favor in the amount of $475,000. The jury also made special findings to the effect that (1) Girbraltar did promise to postpone the sale, if plaintiffs had a responsible, prospective purchaser for the property, (2) plaintiffs did procure such a purchaser prior to the sale, (3) plaintiffs relied to their detriment on Gibraltar's promise, (4) Gibraltar should have reasonably expected plaintiffs to be misled or lulled by the promise, and (5) plaintiffs were Not misled or lulled by the promise into not taking any steps to borrow money to cure the default or sell or refinance the property. The jury also found that Gibraltar had converted plaintiffs' personal property in the reasonable value of $14.000.

The trial judge treated the jury's verdict as advisory only, and made its own findings regarding plaintiffs' first cause of action, namely, that (1) Gibraltar did not make a promise to postpone the sale if plaintiffs had a responsible prospective purchaser, and (2) plaintiffs were not misled or lulled into not taking any steps to borrow money, sell or refinance the subject property. The court adopted the jury's findings on the conversion cause of action and awarded damages to plaintiffs in the amount of $14,000.

Plaintiffs unsuccessfully moved for a new trial and to set aside the judgment, and then filed the instant appeal. Gibraltar filed a cross-appeal to challenge the $14,000 judgment.

3. Plaintiffs' Right to Jury Trial

If there were 'equitable' issues in this case which were properly triable by the court, and if the resolution of those issues left nothing remaining to be tried by the jury with respect to plaintiffs' first cause of action, then the court had the authority to treat the jury's verdict and findings as advisory only. (See Stearns v. Los Angeles City School Dist., 244 Cal.App.2d 696, 725--726, 53 Cal.Rptr. 482, and cases cited at p. 9, Infra.)

From the foregoing analysis of the allegations of plaintiffs' complaint, it seems evident that plaintiffs originally sought both equitable and legal relief based upon Gibraltar's alleged conduct. An action to set aside a trust deed foreclosure is an equitable action and one in which the plaintiff ordinarily would have no right to jury trial. (Rablin v. Greiner, 4 Cal.2d 255, 257, 48 P.2d 696; Estudillo v. Security Loan etc. Co., 158 Cal. 66, 71, 109 P. 884; see Py v. Pleitner, 70 Cal.App.2d 576, 579, 161 P.2d 393.) On the other hand, a suit to recover damages for fraud or breach of contract is an action at law in which a right to jury trial ordinarily exists. (Hutchason v. Marks, 54 Cal.App.2d 113, 128 P.2d 573 (fraud); Philpott v. Superior Court, 1 Cal.2d 521, 517, 36 P.2d 635 (fraud); Abbott v. City of Los Angeles, 50 Cal.2d 438, 461--462, 326 P.2d 484 (breach of contract); see Code Civ.Proc. § 592 (breach of contract).)

At trial, however, plaintiffs made an election of remedies in order to secure a trial by jury. In response to the trial court's statement of intention to 'proceed with the equitable issues,' plaintiffs' counsel voluntarily waived any right to set aside the foreclosure sale, stating that plaintiffs were going to proceed 'on purely a question of law having to do with damages' under the various causes of action in their complaint. Clearly, plaintiffs' counsel appreciated the substantial risk that if the court tried the 'equitable' issues first, plaintiffs might forfeit their right to a jury trial altogether. It is well established that, in a case involving both legal and equitable issues, the trial court may proceed to try the equitable issues first, without a jury (or, as here, with an advisory jury), and that if the court's determination of those issues is also dispositive of the legal issues, nothing further remains to be tried by a jury. (Connell v. Bowes, 19 Cal.2d 870, 872, 123 P.2d 456; Jaffe v. Albertson Co., 243 Cal.App.2d 592, 609, 53 Cal.Rptr. 25; Richard v. Degan & Brody, Inc., 181 Cal.App.2d 289, 295, 5 Cal.Rptr. 263.)

Thus, plaintiffs' tactic in seeking damages only was aimed at removing the equitable issues from the case. Plaintiffs did not, however, simply dismiss their first cause of action. Instead, under the assumption that the factual allegations...