Stock v. Meek
Decision Date | 18 August 1950 |
Citation | 221 P.2d 15,35 Cal.2d 809 |
Court | California Supreme Court |
Parties | STOCK v. MEEK et ux. L. A. 20921. |
Desmond & Desmond and Walter Desmond, Jr., all of Long Beach, for appellant,
Newton M. Todd, Fred A. Watkins and James J. Baker, all of Long Beach, for respondents.
Plaintiff brought this action to rescind the purchase from defendants, husband and wife, of space in a cooperatively-owned apartment house and to recover the amount she had paid defendants therefor. Defendants counter-claimed for interest that they had paid plaintiff on a usurious loan.
Early in 1945 defendants purchased the Palace Apartment Hotel in Long Beach. They intended to sell the forty-six apartments to purchasers on an 'own-your-own' plan. An escrow and trust were set up to convey title to purchasers, to pay expenses, and to distribute any profits.
Defendants consulted counsel about obaining a permit from the Commissioner of Corporations to sell units to the public. Counsel advised that it was desirable to pay off a $20,000 second mortgage on the property before applying for the permit. Defendants raised $10,000 by selling 30% of the venture to friends. One of these investors suggested that plaintiff might furnish the remaining funds, and introduced defendant Glenn L. Meek to her. Defendant offered to give plaintiff a promissory note for $20,000, payable 365 days from date, in return for a loan of $10,000. Plaintiff wished to consult an attorney and accompanied defendant to his attorney. Plaintiff testified that she intended to buy an interest in the venture, not to lend money to defendant, and that the attorney had advised her that such a purchase would not be illegal but had disapproved of the investment as a gamble. Defendant and the intermediary who introduced the parties testified that the arrangement was always considered a loan and that the lawyer had specifically warned plaintiff that the transaction was therefore usurious. Plaintiff furnished the funds to defendants and was eventually paid $20,000 from the proceeds of the sales of apartments.
In a separate transaction, plaintiff purchases a non-residential part of the same apartment house, called 'Space 101' by the parties. She paid defendant Glenn L. Meek $9,000 for the 'exclusive and permanent right of occupancy,' as described in the Certificate of Beneficial Ownership issued by the trustee, Security-First National Bank of Los Angeles. The record does not disclose what use plaintiff intended to make of the space. Plaintiff alleged, however, that defendant had represented to her that the space could be 'used and owned exclusively' after the lobby of the building had been completed, and that she had purchased the space in reliance on the representation. Plaintiff alleged that when the work on the lobby was completed, she discovered that no one could obtain the exclusive and permanent occupancy of the space because of the building and fire regulations of the City of Long Beach. Plaintiff thereafter gave prompt notice of rescission; she seeks in this action to recover the $9,000 paid. Her complaint also included a common count for $9,000 had and received by defendants for her use and benefit.
Defendants denied the allegations of the complaint and counter-claimed for the interest or bonus paid on the note.
At the trial without a jury, the court excluded testimony by plaintiff concerning oral misrepresentations by defendant. Her counsel made the following offer of proof: * * *'
The trial court gave judgment for defendants in the rescission action on the basis of the evidence before it. The trial court also held that the earlier transaction between the parties was a usurious loan. Judgment for the bonus amount, $10,000, and interest was awarded defendants on their counterclaim. Plaintiff appealed from the judgment and from an order denying the motion for new trial. The latter order is not appealable and the appeal therefrom is dismissed. Gray v. Cotton, 174 Cal. 256, 162 P. 1019; Code Civ.Proc. § 963.
Defendants have moved to dismiss the appeal from the judgment in the light of the following events occurring after entry of judgment. Plaintiff gave notice of appeal on June 23, 1948. Plaintiff did not, however, file a bond for stay of execution. Defendants levied execution on property of plaintiff, including her interest in the Palace Apartment Hotel trust representing Space 101 and Apartment 702. Before entry of judgment, plaintiff had filed and recorded a declaration of homestead as a single person upon Apartment 702. On or about August 6, 1948, defendants applied to the superior court pursuant to Civil Code, section 1245 for the appointment of appraisers to appraise plaintiff's homestead and requested that the court order the sale of Apartment 702. On September 28, 1948, the superior court ordered the sale after due notice to the judgment debtor, hearing, and appraisal. On or about October 28, 1948, both Space 101 and Apartment 702 were sold by the sheriff at public auction to the highest bidders. Space 101 was purchased by defendant Glenn Meek for $3,000, credited as a partial satisfaction of the judgment. Apartment 702 was purchased by one Watkins for $4,000, of which the sheriff paid plaintiff $3,000, her homestead stead exemption. On or about April 21, 1949, plaintiff transferred her power of redemption and property in Apartment 702 to Abel L. McConnell and Ila M. McConnell. On April 22, 1949, the McConnells redeemed Apartment 702 from the execution purchaser.
After the sale of Space 101 to defendant Glenn Meek on execution, the maintenance charges required of plaintiff by the trust became delinquent. The trustee sold Space 101 at public auction on June 3, 1949, under a power of sale provided by the declaration of trust. Space 101 was again purchased by defendants, who paid a cash consideration not exceeding $1,000. On June 22, 1949, defendants made a bona fide sale of Space 101 for $4,050 to a third person or persons who are now the owners of the space.
Defendants move to dismiss the appeal on the ground that the questions involved have become moot. Their claim is not, however, that the outcome of the appeal is a matter of indifference to the parties or that consideration and disposition of the case on the merits cannot affect the substantial rights of the parties. They contend that plaintiff has destroyed her cause of action for rescission by her loss of Space 101, which she had offered to restore to defendants at the time she gave notice of rescission. The cases relied on by defendants, e. g., Lupton v. Domestic Utilities Mfg. Co., 173 Cal. 415, 160 P. 241; Taylor v. Hammel, 39 Cal.App. 205, 178 P. 547, are cases where plaintiff either made no offer to restore or else made the offer after an undue lapse of time from the notice of rescission, so that no cause of action for rescission ever arose.
Plaintiff complied with Civil Code, section 1961 by her offer of restoration, the bona fides of which is not questioned. Thereafter defendants twice acquired Space 101 at public sales, and finally disposed of it to a third party. In the light of these facts, the plaintiff's cause of action did not become 'moot' when defendants reacquired the property. Hillman v. Gordon, 126 Wash. 614, 219 P. 46, 51; Vodicka v. Sette, Mo.Sup., 223 S.W. 578.
Defendants' second ground for their motion to dismiss the appeal is based upon plaintiff's acceptance of her homestead exemption at the time Apartment 702 was sold upon execution. Defendants contend that plaintiff thus accepted benefits from the judgment. Defendants rely on Turner v. Markham, 152 Cal. 246, 92 P. 485, but the case does not support their position. In that case, the appeal was from the order subjecting the homestead to execution, and not from the judgment that was being enforced by execution. In fact, that judgment was appealed, the appeal was heard and the judgment reversed. 155 Cal. 562, 102 P. 272.
In order to benefit from the homestead, the proceeds of the sale under section 1245 of the Civil Code must be accepted by the judgment debtror within six months since they are protected from legal process for only that length of time. Civ.Code, § 1257. Thus, the exemption usually must be accepted before the appeal can be completed. It may be proper to hold, as did the Turner case, that a judgment debtor, by accepting his homestead exemption, loses the right to challenge the order subjecting the homestead to sale. It is quite another matter to deprive him of his appeal from the original judgment.
In the Turner case, the potential liability of the judgment creditor to the purchaser at the execution sale 1 after reversal of the judgment on...
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