Stockton v. Ortiz

• Decision Date: 14 April 1975
• Citation: 120 Cal.Rptr. 456,47 Cal.App.3d 183
• Parties: Richard M. STOCKTON, Plaintiff and Appellant, v. Pablo ORTIZ et al., Defendants and Respondents. Civ. 39662.
• Court: California Court of Appeals Court of Appeals

Page 456

120 Cal.Rptr. 456

47 Cal.App.3d 183

Richard M. STOCKTON, Plaintiff and Appellant, v. Pablo ORTIZ et al., Defendants and Respondents.

Civ. 39662.

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

April 14, 1975.

Hearing Denied July 3, 1975.

Hanson & Milman and Roger S. Hanson, Beverly Hills, for plaintiff and appellant.

Edward D. Nino and William G. Filice, San Jose, for defendants and respondents.

HANSON, Associate Justice.

Following rendition of opinion by this court, the Supreme Court granted a hearing and thereafter transferred the cause to us for reconsideration in the light of Hurtado v. Superior Court, 11 Cal.3d 574, 114 Cal.Rptr. 106, 522 P.2d 666. Our opinion on reconsideration follows:

PLEADINGS

Appellant/plaintiff Richard M. Stockton's (hereinafter Stockton) original complaint was filed on March 21, 1966. The fourth amended complaint, upon which the action proceeded to trial, was filed July 11, 1967. It named as individual defendants Pablo Ortiz (hereinafter P. Ortiz), Louis Federico (hereinafter Federico), John Bonfante (hereinafter Bonfante), Joaquin Rodriquez (hereinafter Rodriquez), Don Johnson (hereinafter Johnson) and Juventino Ortiz (hereinafter J. Ortiz). It also named three Mexican corporations: Loma Linda, S.A., Inversiones Mulege, S.A. de C.V. (hereinafter Inversiones, S.A.) and Club Aereo Mulego, S.A. (hereinafter Club Aereo, S.A.). The theories of the nine causes of action contained therein The trial by court, nonjury, commenced on December 23, 1970. Some of Stockton's causes of action were dismissed early in the proceedings. On December 30, 1970 the trial court denied plaintiff's motion to amend to conform to proof and add a tenth cause of action. On December 31, 1970, at the close of plaintiff's case, defendants moved for a judgment in favor of defendants pursuant to Code of Civil Procedure section 631.8 as to the remaining causes of action. The motion was granted and subsequently judgment entered for defendants.

were not set forth in its caption. Respondents/defendants P. Ortiz, J. Ortiz and Bonfante each filed an answer and counterclaim. The other named defendants were not served and did not appear. The plaintiff seeks to recover.$390,000 lost in a business venture in the Republic of Mexico and $400,000 exemplary damages.

Appellant appeals from the judgment.

CONTENTIONS

The fifteen contentions, with subsections, listed in appellant's opening brief merge into two basic issues which warrant consideration by this court; namely, (1) whether or not the trial court erred in denying plaintiff's motion to amend to conform to proof; and (2) whether or not the trial court erred in granting defendants' motion for judgment pursuant to Code of Civil Procedure section 631.8.

FACTS

In 1959, P. Ortiz, a Mexican national living in the United States, went down to Baja California with his friend, Bonfante, an American citizen, for a vacation. The two men saw a piece of real property that appeared desirable for developing. In May of 1959 they bought the property from one Zuniga Meya for $5,000. The property deed was put in P. Ortiz's name because Bonfante as a non-Mexican national could not be listed as the owner of the land since it was situated on the seashore. ¹

To obtain additional capital to build a seaside motel on the property P. Ortiz acquired additional partners, namely, J. Ortiz, Johnson, Rodriquez and Federico. In 1959, P. Ortiz and the other individual defendants began to form Loma Linda, S.A., a Mexican corporation. The intended function of Loma Linda, S.A. was to operate in Mexico with American investors and to operate the motel in Mulege (an area of Baja California). In January of 1960, they began building a seaside motel. The formation of Loma Linda, S.A. was never completed; stock was never issued; and there were never any board of director meetings.

In January or February of 1961, P. Ortiz first met plaintiff Stockton at the completed motel while Stockton was a guest of the motel. Stockton became interested in the property as a business venture. At this time Loma Linda, S.A. owned the personal property of the motel and operated same, while P. Ortiz had title to the real property. Negotiations commenced between Stockton and the individual defendants regarding the business venture. Stockton and the individual defendants consulted their respective California attorneys. Stockton's California attorney suggested that Stockton hire a Mexican attorney. Jose Schnaider (hereinafter Schnaider), an attorney of the Mexican bar, was retained by Stockton to represent him in Mexico. Stockton testified that Schnaider told him that it was impossible for an American to take any title, either directly or indirectly, in the property. Stockton, under advice by Schnaider, organized two corporations in Mexico, Inversiones, S.A. and Club Aereo, S.A., to take title to the real and personal property. The purchase price of the realty was to be $150,000 with an additional Thereafter on September 4, 1961, a ten-page written agreement, of the type to be executed between Mexican corporations, was entered into between the named individual defendants and Loma Linda, S.A., as sellers, with Inversiones, S.A. and Club Aereo, S.A., as buyers. Bonfante testified that at the time of the negotiations Stockton and Stockton's American and Mexican attorneys all knew that incorporation of Loma Linda, S.A. was not completed and that Stockton's attorneys drew up the agreement. Plaintiff's Exhibit 1 shows as signators of the agreement, as sellers, the following: P. Ortiz (Stockholder), Federico (Stockholder), Bonfante (Stockholder), Johnson (Stockholder), J. Ortiz (Stockholder), and P. Ortiz for Loma Linda, S.A.; Schnaider (Stockton's Mexican attorney) signed the agreement for Inversiones, S.A. and Club Aereo, S.A., as buyers.

$25,000 for the personal property. Inversiones, S.A. was the Mexican corporation designated by Stockton to take title to the real property, and Club Aereo, S.A. was the Mexican corporation designated by Stockton to take title to the personal property.

The agreement does not mention Stockton's name and was allegedly signed in South Gate, California.

The agreement states that the Mexican corporations are de facto corporations To be formed under the laws of Mexico and that the defendant listed individuals are stockholders of Loma Linda, S.A., a Mexican corporation. The agreement also acknowledges that the land is situated within the boundaries of an 'Ejido.' ²

The agreement, in brief, involves the following recitations: That P. Ortiz developed the land by erecting a hotel, pool, etc.; that Loma Linda, S.A. owns all the movable property; that Inversiones, S.A. wants to buy the P. Ortiz rights in the real property, and Club Aereo, S.A. wants to buy the movable and personal property; that the parties agree to buy and sell to each other; that Inversiones, S.A. and Club Aereo, S.A. are de facto corporations and when they become final they will execute the agreement; that Inversiones, S.A. agrees to pay P. Ortiz $150,000 for the real property rights, and Club Aereo, S.A. agrees to pay Loma Linda, S.A. $25,000 for the personal property; that $50,000 is to be put in escrow with the attorneys of both sides to act as trustees, with the money to be in a California bank; that if the funds are not used within 24 months from the signing of the agreement, then Stockton's attorney is to be the sole trustee; that the buyer will pay $2,500 a month toward the remaining $125,000 and if they (Inversiones, S.A. and Club Aereo, S.A.) fail to do so, sellers have the right to retake the property; that upon the execution of the agreement, P. Ortiz is to deliver possession of the land to Inversiones, S.A., and Loma Linda, S.A. its interests to Club Aereo, S.A.; that if buyers need to pay taxes, liens or claims imposed on the properties, sellers will repay buyers; that certain monthly payments will be made until full control is taken by the corporations; that when the sellers perfect title and convey same to buyers, the promissory notes are to become due; that in the interim P. Ortiz and Loma Linda, S.A. will be paid rent until title is perfected; that buyers may take possession and operate and maintain the business and retain profits earned during the title clearing period.

It was further agreed that P. Ortiz would try to get rid of the 'ejido' and clear the title; that if buyers were deprived of possession, they would be given back their notes, not have to pay the Inversiones, S.A. and Club Aereo, S.A. took possession of the property and paid the rent pursuant to the contractual agreement. For two years thereafter these two corporations operated the business and paid the rent, while Stockton's Mexican lawyer attempted to clear the title to the land. From 1961 to 1963 the rent of $1,500 per month was paid, and in 1963 the buyers, Inversiones, S.A. and Club Aereo, S.A., instructed their American attorney to release the $50,000 in escrow to the defendants. Even though the $50,000 was paid, it appears from the record that clear title had not passed. Apparently, the parties felt that the 'ejido' problem would be cleared, that Inversiones, S.A. and Club Aereo, S.A. would make payments of $2,500 a month for the next 12 months, and that during this period the property would be cleared according to Mexican law. The $2,500 payments were to be applied against the purchase price. All payments were made through the corporations, and although the checks may have had Stockton's name on them, they were made in behalf of Inversiones, S.A. and Club Aereo, S.A. The last check representing payments was dated in January 1965.

monthly rent, and would be able to re-obtain their $50,000. There were also provisions that the parties could extend the agreement by mutual consent; that if in one year from the signing of the agreement the property was placed in a condition to be transferred, then sellers would obtain...