Roberts v. Wachter

• Decision Date: 17 May 1951
• Citation: 231 P.2d 540,104 Cal.App.2d 281
• Court: California Court of Appeals Court of Appeals
• Parties: ROBERTS v. WACHTER et al. Civ. 17876.

Page 540

231 P.2d 540

104 Cal.App.2d 281

ROBERTS v. WACHTER et al.

Civ. 17876.

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

May 17, 1951.

Elmer Patrick Friel, for appellant.

Marcus L. Roberts, Los Angeles, in pro. per.

Earl D. Killion, North Hollywood, for respondents.

DRAPEAU, Justice.

By the instant action, plaintiff seeks a declaration of the rights of the parties, and recovery of damages (1) against defendant Drudis for breach of trust; and (2) against defendants Wachter and Douglass for having induced such breach.

It is a so-called companion case to Roberts v. Wachter, Cal.App.2d 231 P.2d 534. Both actions are based upon the same agreements. The first is to recover money due thereunder for the year 1945, while the instant action covers a period subsequent to January 1, 1946.

Demurrers were sustained to plaintiff's amended complaints first to fifth, inclusive, with leave to amend. Thereafter plaintiff filed his sixth amended complaint to which general and special demurrers were sustained without leave to amend. The latter ruling was set aside on motion, and upon reconsideration, the demurrers were again sustained without leave to amend. From the ensuing judgment, plaintiff appeals.

It is here urged that the court erred in sustaining the demurrers and abused its discretion in denying appellant the right to amend his complaint.

The first and second causes of action of the sixth amended complaint are directed against respondent Drudis. The first alleges that appellant is an active member of the State Bar of California; that he and said Drudis made an oral agreement in January, 1942, to acquire an interest in a wholesale produce commission business; respondent to finance the same but to take no active part; appellant 'to represent said interest, help in the formation of said business and thereafter manage and devote such time and attention to said business as conditions warranted aside from actually conducting said business himself'; that appellant should have no quantum meruit claim against Drudis for his services 'but would be entitled to 50% of net profits from said business interest, after first deducting and allowing Drudis an amount equal to 5% per annum on his invested capital therein.'

Accordingly, the business was acquired and operated, appellant devoting thereto 8 to 10 hours of his time daily until June 22, 1942, when Drudis interfered with his management and requested him to leave. Appellant rescinded the agreement and left, but received no compensation for his time or efforts therefore expended.

Shortly thereafter, when the business showed a deficit of $16,130.47, appellant and Drudis renewed their association, Drudis promising not to interfere with appellant's management, and because of prior business dealings, it was understood that appellant should receive 50% of the net profits from Mr. Drudis' interest after allowing the latter 5% on his investment. At this time, appellant induced the financial advisors of Mrs. Drudis to approve an advance of $20,000 to refinance the business.

Appellant proceeded to organize the partnership of Drudis, Means and Wachter for a period of five years ending July 31, 1947, in which respondent Drudis was to take no active part. At this time, in order to help Mr. Drudis recoup the loss he had previously sustained in the business, appellant voluntarily agreed to reduce his percentage of the profits from 50% to a straight 1/6th during the term of the partnership or 'any partnership thereafter to be created for carrying on such business in which Drudis held an interest.'

In order to acquaint the partners 'with the terms of the fiduciary relationship then existing between appellant and Drudis and to authorize the payment of plaintiff's share of the profits direct to him', respondent Drudis signed a written memorandum of said agreement on October 9, 1942, to wit:

'For and in consideration of legal services heretofore rendered and hereafter to be rendered by Marcus L. Roberts for and in behalf of Jose Drudis in connection with his farming and/or produce house undertakings, the said Jose Drudis has agreed, and by these presents does agree, to pay to the said Marcus L. Roberts, one-sixth (1/6th) of whatever he receives or is entitled to receive, including drawing account paid to him out of and from any produce or farming partnership business of which he is a member. Said compensation and services to continue during the life of the present partnership of Drudis, Means and Wachter, and during any other partnership hereafter created as a result of death or change of membership therein.

'And the said Jose Drudis hereby authorizes the partnership of Drudis, Means and Wachter to pay the compensation of Marcus L. Roberts direct to him.

'Dated October 6, 1942.

(Signed) Jose Drudis.'

Appellant constantly kept himself informed on the operation of the business under conditions which required less of his time than under the original agreement; was at all times ready and willing to give more time if necessary, and did render all the services required 'under the terms of the agreement evidenced by said memorandum dated October 9, 1942, until on or about September 20, 1946, when Drudis again and without cause, breached and repudiated his agreement with plaintiff, and made further performance thereunder impossible.'

It is then alleged on information and belief 'that owing to plaintiff's nonrepresentation of the interest financed by Drudis, said interest has not received nor been credited with the share of the net profits due it.'

That when the said partnership was terminated on July 31, 1947, the business was perpetual and since that date has been carried on under a new partnership, i. e., Drudis, Wachter and Douglass, which was formed for another five-year period. It is alleged that Drudis entered into the new partnership without the help, advice or experience of appellant, thereby causing the interest held in Drudis' name to become greatly depreciated in value. Its percentage of profits was reduced from 44.77% to 33.33%, to the detriment of appellant. That appellant demanded his share of the profits accruing since January 1, 1946, but respondent Drudis has refused to comply therewith or to make any accounting to appellant.

Appellant then alleges a relationship of trust and confidence between him and Drudis; alleges that all of his agreements and dealings were fair and equitable and free from undue influence in their making, but that Drudis, contrary to his obligation of utmost good faith toward appellant, 'seeks unjustly to enrich himself by retaining for himself all the profits which have accrued and will accrue to said business interest since January 1, 1946.

'That by reason of the premises, Drudis has become and now is a trustee for plaintiff of said interest and of the profits derived and to be derived therefrom since January 1, 1946, which trust is subject to the terms of their said agreement.

'That Drudis, by his aforesaid acts and breach of said agreement, has caused plaintiff the loss of the moneys which would have come to him from a division of the profits made from the interest financed by Drudis and those that could have been made under plaintiff's supervision thereof subsequent to January 1, 1946, as well as the loss of all future moneys from said source, all of which has caused plaintiff damages in the sum of $68,000.00, no part of which has been paid.'

The second cause of action incorporates by reference that portion of the first cause of action with respect to the terms of the oral agreement of January, 1942. It is then alleged that neither Wachter nor Means contributed to the captial of the partnership and waived all their rights to any assets at its termination on July 31, 1947. After reciting the amounts received in 1942, 1943, and 1944 by respondent Drudis, after payment of one-sixth of his share to appellant and recoupment by Drudis of his loss sustained in 1942, appellant alleged an oral agreement between him and Drudis restoring the 'original basis for the division of profits between them commencing January 1, 1945, namely 50% * * * over and above Drudis' 5% invested capital'; that in consideration therefor appellant agreed to devote more time to the business than was then required, and it was mutually agreed that appellant should try to continue the existing partnership for another five years or form a like partnership; and if Drudis was dissatisfied that he should drop out and permit appellant to take over 'exclusively for himself' upon payment to Drudis of whatever amount he then had invested in said business. Accordingly, appellant gave a great deal more of his time to the business and performed services not required of him by the agreement evidenced by the memorandum of October 6, 1942, until September 20, 1946 when further performance was made impossible by Drudis, who refused to recognize any obligation to appellant under said agreement because it was not in writing.

It is further alleged that...