Trafton v. Youngblood

• Decision Date: 11 July 1968
• Citation: 69 Cal.2d 17,69 Cal.Rptr. 568,442 P.2d 648
• Court: California Supreme Court
• Parties: , 442 P.2d 648 George E. TRAFTON, Plaintiff and Respondent, v. N. E. YOUNGBLOOD, Defendant and Appellant. L.A. 29552.

Page 568

69 Cal.Rptr. 568

69 Cal.2d 17, 442 P.2d 648

George E. TRAFTON, Plaintiff and Respondent, v. N. E. YOUNGBLOOD, Defendant and Appellant.

L.A. 29552.

Supreme Court of California,

In Bank.

July 11, 1968.

Rehearing Denied Aug. 8, 1968.

Ball, Hunt & Hart, Joseph A. Ball, Joseph D. Mullender, Jr., and Anthony Murray, Long Beach, for defendant and appellant.

Marvin Gross, Los Angeles, for plaintiff and respondent.

SULLIVAN, Justice.

Plaintiff George E. Trafton retained defendant N. E. Youngblood, an attorney at law, to represent him in settling some disputes arising out of the payment of a fire loss to a building. The insurance company had settled the loss but had made its check therefor payable jointly to Trafton, a Miss Gerry, beneficiary of a first deed of trust on the property, and the contractor hired by Trafton to repair the building. Miss Gerry refused to endorse the check and, although the contractor was paid by Trafton with other funds, the subcontractors who had worked on the building remained unpaid. These subcontractors had filed mechanics' liens against the property and had commenced foreclosure actions.

Youngblood, acting on behalf of Trafton, commenced an action against Miss Gerry, the insurance carrier and others to compel Miss Gerry's endorsement of the check. The controversy was eventually settled by an agreement whereby the insurance proceeds were placed in escrow. Miss Gerry endorsed the check and deposited it in the escrow subject to instructions to deliver it to Trafton when the property was free and clear of all mechanics' liens. Trafton and the contractor in turn authorized disbursement of the escrowed funds by Youngblood who was to secure the necessary dismissals of foreclosure actions and releases of liens.

Trafton withdrew from the escrow an amount sufficient to reimburse himself for his payment to the contractor. Youngblood then withdrew the balance of the funds in escrow, which, after payment of taxes and escrow fees, amounted to $11,886.34. Of this amount he paid a total of $4,672.21 in settlement of the various lien claims. On August 9, 1961, Youngblood sent Trafton an itemized statement of his services rendered for Trafton and of costs advanced in connection with a number of legal actions including those arising out of the fire loss disputes. A recapitulation at the end of the statement showed funds in the total sum of $11,886.34 received and to be received by Youngblood, $12,495.50 disbursed by him and a balance due from Trafton in the sum of $609.16. The statement thus disclosed that, of the amount received, Youngblood had paid to himself the sum of $6,800 for services rendered in the several actions.

Trafton received the statement in Canada where he was then employed. On August 22, 1961, he replied by letter to Youngblood, stating in part: 'I have tried to answer your last letter, referring to all the legal transactions you mentioned in your letter, but I have to beg off answering your letter until I return to the States, and check my files as to the authenticity of your claims. I will be back in Los Angeles no later than December 15, 1961, if God is willing.' He returned to Los Angeles about December 15, 1961, but did not contact Youngblood. The latter sent several statements for a balance due of $609.16, which Trafton ignored. Eventually Youngblood abandoned the claim. ¹ On August 7, 1963, Trafton commenced the instant action.

Trafton's complaint sets forth two causes of action. The first is a common count for money had and received in the sum of $7,400. The second cause of action alleges in substance that defendant received $11,886 from the escrow; that he was authorized 'to act as escrow' and pay certain 'claims and assessments' against plaintiff; that he satisfied certain claims amounting to $4,422; that he furnished plaintiff a statement setting forth that he had satisfied claims amounting to $4,422 and 'that the balance of approximately $7,464.00 was being diverted to certain claims the said defendant had against the plaintiff,' and, 'That defendant had no instruction or authority to pay over said sums to himself, and thereby violated the original escrow agreement between the parties.'

In his answer Youngblood denied the material allegations of the first cause of action and set forth two affirmative defenses of (a) laches and (b) what was in effect an account stated. ² Answering the second cause of action, Youngblood denied certain material allegations but admitted receipt of the $11,886.34, alleging in substance that he had received, disbursed and retained the funds as set forth in the accounting given plaintiff and accepted by the latter on August 9, 1961. He then set forth two affirmative defense identical with those he alleged in answering Trafton's first cause of action (see fn. 2, ante). Youngblood also filed a cross-complaint against Trafton stating a cause of action on an account stated for a balance due in the sum of $609.16. Trafton answered the cross-complaint, denying its allegations.

The case was tried to the court sitting without a jury, Youngblood appearing in propria persona. Plaintiff's case consisted of the testimony of Youngblood, called under former Code of Civil Procedure section 2055 (see Evid.Code, § 776) and the testimony of plaintiff himself. Generally speaking, this evidence pertained to the opening of the escrow and the withdrawal of the funds. ³ However, during the cross-examination of plaintiff, a colloquy occurred concerning Youngblood's affirmative defense of account stated. As indicated in the footnote, ⁴ the court then made it clear, and both counsel agreed, that the issue before the court was not the value of Youngblood's services but the existence of an account stated. The balance of the cross-examination of plaintiff dealt only with this latter subject.

In defense, Youngblood, on direct examination testified briefly and without interruption in a single narrative covering only 22 lines in the transcript. The gist of this testimony is that Trafton authorized Youngblood to use the escrowed funds to settle the various claims and lawsuits; that 'after this was over I would bill him for the amount that we paid out to these various people and for fees and costs'; that he accounted to Trafton, and that except for one reply (see ante) he never received any communication from the latter or any objection to the fees. ⁵

Following the trial a memorandum decision was written wherein the court rejected Youngblood's defenses of laches and account stated and continued: 'Defendant, having chosen not to interpose an offset and counterclaim based on reasonable value of services rendered and costs incurred (see Code Civ.Proc. § 438 et seq.), judgment must be for the plaintiff and against the defendant Youngblood in the sum of $7,574.00, * * *.' Thereafter, during oral argument on his objections to the proposed findings of fact, Youngblood contended that by his general denial of Trafton's first cause of action the issue of offsetting the reasonable value of his services properly had been raised. Youngblood also orally moved to reopen the case in order to be permitted to file an amended answer specifically alleging a counterclaim for the reasonable value of his services in the event the court did not accept his prior contention. Although neither a written motion nor amended answer was offered by Youngblood, both parties submitted the matter for determination and filed memoranda of points and authorities.

The court denied the foregoing motion at the same time as it filed the findings of fact and conclusions of law and the judgment. ⁶

The trial court found, so far as is here material, that defendant received the funds from the title company in trust for plaintiff; that defendant wrongfully applied the balance of the funds to his claim for monies due him for legal services and costs advanced for both related and unrelated matters; that he had no lien on the funds; that there was no agreement fixing defendant's fees in any amount and that he had no authority to make deductions from the trust funds; and that there was no account stated between the parties. ⁷ Accordingly, judgment was entered against Youngblood and in favor of Trafton in the sum of $7,386.34, together with interest and costs.

Youngblood filed a notice of motion for a new trial, based on all applicable statutory grounds except that of newly discovered evidence (Code Civ.Proc. § 657, subd. 4), and, in the alternative, for 'an order reopening the case for further proceedings and for the introduction of additional evidence on the question of the reasonable value of defendant's services as authorized by the Code of Civil Procedure, Section 662.' These motions were denied and this appeal followed.

Youngblood contends: (1) That Trafton's failure for two years to object to Youngblood's account created an account stated as a matter of law; (2) that the general denial of the common count for money had and received raised the issue of offsetting any sums due from Trafton to Youngblood; and (3) that even if the general denial did not raise the issue of offset, leave should have been granted to amend the answer in order to permit Youngblood to specifically plead the defense of an offset.

An account stated is an agreement, based on prior transactions between the parties, that all items of the account are true and that the balance struck is due and owing from one party to the other. (Jones v. Wilton (1938) 10 Cal.2d 493, 498, 75 P.2d 593; Wenban Estate, Inc. v. Hewlett (1924) 193 Cal. 675, 701--702, 703--704, 227 P. 723; Parsons v. Segno (1921) 187 Cal. 260, 263--265, 201 P. 580; Bennett v. Potter (1919) 180 Cal. 736, 743, 744--746, 183 P. 156; Gardner v. Watson (1915) 170 Cal. 570, 574--575, 150 P. 994; Coffee v. Williams (1894) 103 Cal. 550, 556, 37 P. 504; Baird v. Crank (1893) 98 Cal. 293, 298, 33 P. 63; Auzerais v. Naglee (1887) 74 Cal. 60, 64--65, 15 P. 371; see...