Opinion
Rehearing Denied Dec. 4, 1962.
Orr, Heuring & Wendel and Victor D. Rosen, Oakland, for plaintiff and appellant Herbert E. Ellis, Jr.
Alfred Nelson, Oakland, and Jerome R. Waldie, Antioch, for defendants and appellants Pericles Mihelis and Elias Mihelis.
Cardozo, Trimbur & Nickerson and R. L. Nickerson, Modesto, for plaintiff and respondent George Moreno.
STONE, Justice.
There are two appeals before us by reason of consolidation of two cases for trial in the court below. One case, Ellis v. Mihelis, is an action for specific performance; the other, Moreno v. Mihelis, is an action for a real estate commission. Although the cases were, for the sake of convenience, consolidated for trial, the questions presented on appeal differ so greatly that each action will be considered separately in this opinion.
Ellis v. Mihelis
This appeal is from a judgment decreeing specific performance of a contract for the sale of real property and for damages resulting from seller's failure to perform the contract.
The real property consists of 160 acres of improved farming land in Stanislaus County owned by defendants Pericles Mihelis and Elias Mihelis as joint tenants. The two brothers owned another ranch in Santa Cruz County as joint tenants. The court found that although Elias farmed the Santa Cruz ranch and Pericles the one in Stanislaus County, the brothers farmed the two ranches under a partnership arrangement. The brothers orally agreed with one another to sell the Stanislaus County ranch. Pursuant to the parol agreement, Elias listed the property with several real estate brokers in the Santa Cruz area, which listings were signed only by him; Pericles listed the property with real estate brokers in the Stanislaus County area, and he alone signed these listings.
Plaintiff Ellis operates a construction business in Alameda County. He wished to buy a parcel of real property in that County owned by the Ratto family. The Rattos did not want to sell for cash because of the capital gains tax, but they were willing to exchange their Alameda County property for farm land in the Stanislaus County area. Plaintiff Ellis suggested that the Rattos find a suitable ranch which he, plaintiff, would buy and then exchange for their Alameda property, thus avoiding capital gains tax. Plaintiff orally authorized Antone L. Ratto, Jr., to act as his agent in locating and arranging for the purchase of such a ranch. Ratto learned of the Mihelis property through Farmer George Moreno, one of the brokers with whom Pericles Mihelis had listed it. Ratto liked the property, and after some preliminary negotiations, Moreno, as seller's broker, prepared an Agent's Deposit Receipt.
Antone L. Ratto, Jr., approved and signed the agreement as agent for Plaintiff Ellis, the buyer. Pericles Mihelis approved and signed the agreement as seller. Pericles did not disclose that Elias was a co-owner of the real property at the time he listed it with his broker, Moreno, nor during any of the negotiations; nor did he make such disclosure at the time he alone signed the agreement as seller. The court found that Pericles Mihelis advised his broker, Moreno, that he, Pericles, was the sole owner of the property; that Moreno, relying upon said representation, in turn represented to Antone Ratto, Jr., the plaintiff's agent, that Pericles was the sole owner of the property. The court also found that plaintiff buyer had no knowledge that Elias was, or claimed to be, an owner of the property until Pericles made an attempt, on May 2, 1958, to rescind the agreement dated April 17, 1958.
The Deposit Receipt agreement provided for a $5,000 deposit in escrow on the part of the buyer. This sum was to be applied on the purchase price if the buyer completed the sale within 30 days, otherwise it was to be forfeited to the seller at his option. From Plaintiff Ellis, Ratto secured a check for $5,000 to cover the deposit. He On May 2, prior to the expiration of the 30-day period allowed buyer to perform, Pericles Mihelis gave notice of rescission, contending that his brother, Elias, was co-owner of the land and that he had not consented to the terms of the sale. Pericles stated that Elias demanded $100,000 as a down payment, rather than $35,000 as provided in the agreement. Pericles also notified Ratto, the buyer's agent, that since his brother Elias had not signed the agreement, they were not going to sell the property. The court found, however, that the Mihelis brothers elected not to perform the agreement because just prior to their notice of rescission a severe frost that heavily damaged some vineyards in the area, left the Mihelis grapes untouched. There was testimony that Pericles said that his grape crop had become too valuable as a result of the frost for him to sell the ranch at that time.
Plaintiff-buyer refused to accept the Mihelis brothers' attempted rescission of the agreement and, prior to the expiration of the 30-day period provided for buyer's performance, paid the additional $30,000 into escrow and executed a note for deferred payments and interest, together with a first deed of trust and crop mortgage. The Mihelis brothers, upon demand by plaintiff, still refused to perform the agreement, so plaintiff-buyer filed this action for specific performance and for damages.
A judgment decreeing specific performance of the agreement was entered in favor of plaintiff-buyer and against defendants-sellers, together with damages consisting of profits for the period May 15, 1958, to December 31, 1958, and for the crop year January 1, 1959, to December 31, 1959. Profits were computed on the basis of gross sales of crops less production costs. The court allowed as an item of production cost the sum of $500 per month for the personal services of Pericles Mihelis, who farmed the property during the period in question. Defendants were also allowed an offset for interest equal to that which would have accrued to them under the terms of the note and deed of trust had the contract been performed. Defendants were changed with rent at the rate of $75 per month for the dwelling on the premises occupied by Pericles.
Preliminarily, we should like to dispose of defendants' argument that the contract is not within the scope of equity because the arrangement between Ellis and the Rattos to trade property was a scheme to avoid taxes. In the first place, the tax arrangement between Plaintiff Ellis and the Rattos in no way affected the relationship between plaintiff and defendants, a prerequisite to invoking the doctrine of 'unclean hands.' (Bradley Co. v. Bradley, 165 Cal. 237, 242, 131 P. 750; Jordan v. Warnke, 205 A.C.A. 688, 698, 23 Cal.Rptr. 300.) Secondly, it has not been shown that the scheme or plan was tainted by illegality in any respect. At most it was a business device to avoid taxes. That no moral stigma attaches in such a circumstance was made clear by Mr. Justice Learned Hand in Helvering, Commissioner of Internal Revenue v. Gregory, 2 Cir., 69 F.2d 809, wherein he said, at page 810:
'We agree with the Board and the taxpayer that a transaction, otherwise within an exception of the tax law, does not lose its immunity, because it is actuated by a desire to avoid, or, if one choose, to evade, taxation. Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes. U.S. v. Isham, 17 Wall. 496, 506, 21 L.Ed. 728; Bullen v. Wisconsin, 240 U.S. 625, 630, 36 S.Ct 473, 60 L.Ed. 830. Therefore, if what was done here, was what was intended by section 112(i)(1)(B), it is of no consequence In support of their major contention that the agreement is not specifically enforceable, defendants present two principal arguments, each comprised of three subdivisions. They are: (1) The real property was held in joint tenancy by Elias and Pericles Mihelis, while (a) Pericles and only Pericles signed the agreement, (b) Pericles had no written authority to act as agent of Elias, as required by the statute of frauds, (c) the agreement was signed by Pericles subject to owner's approval and Elias as an owner did not approve in writing; (2) The agreement lacked mutuality of remedy because (a) Ellis, the buyer, did not sign the agreement, (b) Ratto, agent for Ellis, had no written authority to sign the agreement, as required by the statute of frauds, (c) Ellis performed the agreement after Pericles gave notice of rescission, so that performance by Ellis came too late to lend mutuality of remedy.
We shall take up, first, the various questions which arise from the fact that Pericles Mihelis alone signed the agreement, whereas the property stood in the names of Pericles and Elias as joint tenants. The court found that at all times pertinent to this action Pericles and Elias were conducting a partnership farming business. Further, it found that Elias, acting as a partner, authorized Pericles to sell the Stanislaus County ranch. Whether a partnership relationship existed between the brothers, and whether the ranch was an asset of the partnership used as an integral part of the business, were primarily questions of fact for the trial court to determine from the evidence and from inferences to be drawn therefrom. (Spier v. Lang, 4 Cal.2d 711, 716, 53 P.2d 138; En Taik Ha v. Kang, 187 Cal.App.2d 84, 90, 9 Cal.Rptr. 425; Farmers & Merchants Bank v. Kirk, 165 Cal.App.2d 470, 473, 332 P.2d 130.) The court had before it evidence that the Mihelis brothers operated a joint farming business at two locations, the Stanislaus County ranch and a Santa Cruz ranch; that Pericles managed the Stanislaus farm and Elias the one at Santa Cruz; that all income and expenses of the two operations were lumped together for accounting and tax purposes; that annual partnership income tax returns were filed; that the income derived from the two operations was divided equally in the partnership returns and also in the personal income tax returns of the two brothers; that the two real properties were integral parts of the joint farming business; that the income derived from the crops grown on both ranches was considered to be from one operation; that hay from the Stanislaus County ranch was used to feed cattle on the Santa Cruz County ranch; that the Stanislaus County ranch was improved with plantings and pipeline facilities which were depreciated in the partnership return as assets of the business, to the equal benefit of each brother.
Once the court found that defendants were conducting a partnership farming business utilizing the two ranches as assets of the business, it became immaterial that the title to the real property stood in the names of the brothers as joint tenants, and not in the name of the partnership. (People v. Greening, 102 Cal. 384, 36 P. 665; Perlli-Minetti v. Lawson, 205 Cal. 642, 647, 272 P. 573; 37 Cal.Jur.2d Partnership, § 39, p. 597; Corp.Code § 15010.)
The court also found that each partner authorized the other to sell the Stanislaus County property. Elias Mihelis listed the property with real estate brokers in the Santa Cruz area, while Pericles Mihelis listed the property with brokers in the Stanislaus County area. Prior to the frost, which enhanced the value of the crop, Pericles never disclosed that Elias was a partner nor a joint-tenant owner; nor did he, prior to the frost, make mention of the fact that Elias had conditioned his authority upon a $100,000 down payment. Failure to mention to his own real estate broker, Moreno, or to Ratto, the buyer's agent, that Elias was an owner or that his authority was conditional, and the signing of the Deposit Defendants cite evidence tending to support inferences contrary to the findings, particularly that Elias conditioned his authority for Pericles to sell upon a down payment of $100,000. In reviewing the record, we are mindful of the admonition of the Supreme Court that an Appellate Court (1) will view the evidence in the light most favorable to the respondent; (2) will not weigh the evidence; (3) will indulge all intendments and reasonable inferences which favor sustaining the finding of the trier of fact; and (4) will not disturb the finding of the trier of fact if there is substantial evidence in the record in support thereof. (Berniker v. Berniker, 30 Cal.2d 439, 444, 182 P.2d 557.) The evidence, when viewed in the light of the principles laid down in Berniker, is amply sufficient to sustain the findings of partnership and of authorization to sell by Elias.
The question is thus narrowed to whether the authority of the partner, Elias, was unenforceable under the statute of frauds since it was not in writing. (Civ.Code § 1091; Code Civ.Proc. § 1973(4).) The Uniform Partnership Act, as adopted by California, has been incorporated in Corporations Code. Section 15009 thereof, in the part here pertinent, provides that:
'(1) Every partner is an agent of the partnership for the purpose of its business, and the act of every partners, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority.
'(2) An act of a partner which is not apparently for carrying on of the business of the partnership in the usual way does not bind the partnership unless authorized by the other partners.
'(3) Unless authorized by the other partners or unless they have abandoned the business, one or more but less than all the partners have no authority to: * * * (c) Do any other act which would make it impossible to carry on the ordinary business of a partnership.'
It is to be noted that the word 'authority' appears in the statute several times, yet nowhere is it modified or limited by the word 'written.' Nor is there any intimation in the Uniform Partnership Act that authority as mentioned throughout section 15009, must be in writing. The decisions construing the meaning of the word 'authority' in the Uniform Partnership Act have been made as isolated cases without regard to, first, a consistent construction of the same language throughout the Uniform Partnership Act, and, second, recognition of the Uniform Partnership Act as the statutory adoption of a uniform law. The fundamental question is whether the Uniform Partnership Act controls over the statute of frauds in areas of conflict between the two rules of law. It appears that no California Court has faced the issue squarely, and that there is no determinative decision on the question.
In the absence of a direct conflict, the statute of frauds is clearly applicable, since Corporations Code § 15005 provides that: 'In any case not provided for in this act two rules of law and equity, including the law merchant, shall govern.' But since the section here in question, Corporations Code section 15009, specifically delineates the conditions of partnership agency, section 15005 is not applicable. Defendants cite Petrikis v. Hanges, 111 Cal.App.2d 734, 245 P.2d 39, for the proposition that the word 'authority' as used in section 15009, subdivision (1), must be interpreted to mean oral authority, while the same word used in subdivisions (2) and (3) of section 15009 means written authority. In the Petrikis case the plaintiffs, as partners, owned a bar and cocktail lounge which they decided to sell. All of the partners signed an instrument which was described as an 'intention to sell the business.' Subsequently one of the partners, purporting to act as agent for the partnership, found a buyer and signed an escrow memorandum. Later an 'Agreement to Sell' was drawn up and signed by all of the partners except one. The Appellate Court found that the trial court erred in finding the written document to be an agreement to sell or an authorization to sell. The Court characterized the document as 'merely a statement that the partners will sell their business' and stated: 'It provides no price, and, more important, does not authorize any partner to make the sale, bind his partners, or enter into any agreement of sale on behalf of his partners.' (Emphasis added.) Thus the basis for its determination was that the partners did not authorize each other to sell the property. The court discussed the effect of a parol authorization to sell, but there is nothing in the opinion to indicate that parol authorization was proved. Nevertheless the court said, at pages 738-739, 245 P.2d at page 41:
'But, argue plaintiffs, even without this writing, one partner may bind another partner in the partnership business. While that is true with reference to the transaction of the business it does not apply to a sale of the assets of the partnership. Corporations Code, section 15009 (formerly Civ.Code, § 2403) provides: '(3) Unless authorized by the other partners or unless they have abandoned the business, one or more but less than all the partners have no authority to: * * * (b) Dispose of the good will of the business. (c) Do any other act which would make it impossible to carry on the ordinary business of a partnership.' See Cowan v. Tremble, 111 Cal.App. 458, 296 P. 91; Moropoulos v. C. H. & O. B. Fuller Co., 186 Cal. 679, 200 P. 601. Therefore, neither the signing by Petrikis of the memorandum of January 5 nor by all the other partners of the agreement to purchase could, or did, bind Ellis.' (Emphasis added.)
The foregoing statement must be considered dictum not only because there is nothing in the opinion to indicate that evidence was introduced to prove parol authority, but also because the last sentence quoted above refers solely to written documents. These documents the court specifically found to be incomplete, uncertain, and lacking in the necessary elements of a contract of sale.
It appears to us that if the dicta in Petrikis were to control it would lead to an incongrous result--incongruous in that 'authority' is held to mean one thing in paragraph (1) of 15009 (parol authority), and something different in subdivision (3) (written authority). Yet there is no distinction in phraseology in any of the paragraphs of section 15009 by which the decision in Petrikis can be rationalized. Furthermore, we believe the court's interpretation of 'authorize' as used in section 15009, is contrary to the interpretation derived by inference from Corporations Code section 15010. Section 15010 pertains to the conveyance of partnership real property. Paragraph (3) thereof relates to a situation similar to the one presented here in that it refers to real property standing in the name of one or more of the partners. Paragraph (3) of section 15010 reads as follows:
'Where title to real property is in the name of one or more of the partners, whether or not the record discloses the right of the partnership, the partners in whose name the title stands may convey title to such property, but the partnership may recover such property Although paragraph (3) is not applicable to the facts before us, nevertheless section 15010 must be considered significant in determining whether the word 'authorization' as used in section 15009 means written authorization. The important fact is that paragraph (3) of 15010 acknowledges that one partner can authorize another partner to convey partnership real property if the authority is conferred pursuant to paragraph (1) of section 15009. The Petrikis case, and all other authority which has been cited to us, establish that the authority referred to in section 15009, paragraph (1) is parol authority. Since a partner can give parol authorization to convey real property under paragraph (1) of section 15009 notwithstanding the statute of frauds, the same language in paragraphs (2) and (3) cannot be construed to require written authority if the courts are to be consistent.
The Petrikis opinion cites two cases as authority for the conclusion that the word 'authority' as used in paragraph (1) of Corporations Code section 15009 means parol authority, while the same word in paragraph (3) means written authority. They are Cowan v. Tremble, supra, 111 Cal.App. 458, 296 P. 91, and Moropoulos v. C. H. & O. B. Fuller Co., supra, 186 Cal. 679, 200 P. 601. The Moropoulos case was decided before California adopted the Uniform Partnership Act. Even more basic is the fact that in Moropoulos one partner divested the partnership of an interest in real property without any authority from the other partner. Obviously a case predicated upon complete lack of authority cannot be used as the basis for interpreting the meaning of the word 'authority' as used in the Uniform Partnership Act. The Cowan case was decided after the Uniform Partnership Act and adopted, but it is not pertinent when the facts are examined closely. There the court held that one partner not only exceeded the scope of his authority in transferring a partnership asset, but more significantly, that the other party to the transaction knew of the limitations or restrictions upon the acting partner's authority. Also, the complaining partner accepted the benefits of the transaction, which the court held to be an act of acquiescence sufficient to bind the partnership. It is particularly pertinent that in neither case cited in Petrikis is any mention made of written consent or written authority, or the need for written authority.
We have found no Supreme Court decision adopting the dicta of Petrikis concerning interpretation of section 15009. Defendants, however, profess to find approval of Petrikis in the Supreme Court case of Bumb v. Bennett, 51 Cal.2d 294, 333 P.2d 23. The court said, at page 301, 333 P.2d at page 27:
'As partnership property used as the firm's place of business and held in the names of the individual partners as tenants in common, it could not be conveyed by one partner without the express authorization of his co-partner. (Corp.Code, §§ 15009, 15010; Petrikis v. Hanges, 111 Cal.App.2d 734, 738-739, 245 P.2d 39.)'
We point out that the foregoing quotation refers to 'express' authorization, not 'written' authorization. In the Bumb case the Supreme Court also held, at page 301, 333 P.2d at page 27, that:
'* * * absent evidence that the co-partner had abandoned the business, it could not be assigned for the benefit of creditors by one partner without the authorization of the other. (Corp.Code, § 15009; see also Richlin v. Union Bank & Trust Co., 197 Cal. 296, 304, 240 P. 782.)'
Again the reference to authorization is not qualified by the word 'written.' In fact,
'As a matter of agency or partnership law, there is no requirement that the assent be reduced to writing. (Hooper v. Baillie, 118 N.Y. 413, 23 N.E. 569; Crane, Partnership (2d ed. 1952), p. 267.'
The only comfort defendants can derive from the Bumb case, upon which they rely, is the following statement appearing at page 302, 333 P.2d at page 28:
'But defendants maintain that the assignment operated as a conveyance of the property in dispute and therefore was required to be 'subscribed by the party * * * assigning * * * the same, or by his lawful agent thereunto authorized by writing.' (Code Civ.Proc., § 1971; see also Civ.Code, §§ 1091, 1624, 2309; Code Civ.Proc., § 1973.) While the assignment might be voidable by the non-signing partner, he has never objected and defendants, as judgment creditors, cannot invoke the statute of frauds to avoid the assignment. Wood Estate Co. v. Chanslor, 209 Cal. 241, 250-251, 286 P. 1001; Mitchell v. Locurto, 79 Cal.App.2d 507, 512-513, 179 P.2d 848; 6 C.J.S. Assignments for Benefit of Creditors, § 374, p. 1419.' (Emphasis added.)
The foregoing quotation does not decide the issue before us; rather, it avoids it. The holding in the Bumb opinion is simply that a judgment creditor cannot invoke the statute of frauds to avoid a parol assignment for the benefit of creditors. The question of whether the authority of the partner executing the conveyance must be in writing or whether parol authority will suffice is left undecided by the inconclusive dictum that the conveyance 'might be voidable by the non-signing partner.'
We conclude that the Uniform Partnership Act prevails over a conflicting provision of the statute of frauds. We see no legal impediment to holding the Uniform Partnership Act paramount since the statute of frauds is not substantive law but is remedial in nature. Witkin, in his work, Summary of California Law, Volume 1, Contracts, section 88, page 95, in discussing the enforceability of contracts had this to say about the statute of frauds:
'The general rule, however, settled in California by a number of decisions, is that the statute relates to the remedy only and not to the substantial validity of the contract. The contract is not void, but merely unenforceable. It is effective for all purposes until, in an attempt to enforce it by action, its invalidity is urged as a defense. (Offeman v. Robertson-Cole Studios (1926) 80 C.A. 1, 251 P. 830; Warder v. Hutchison (1924) 69 C.A. 291, 231 P. 563; Durbin v. Hillman (1920) 50 C.A. 377, 195 P. 274; O'Brien v. O'Brien (1925) 197 C. 577, 241 P. 861; Romano v. Wilbur Ellis & Co. (1947) 82 C.A.2d 670, 674, 186 P.2d 1012 [pointing out that the party to be charged may waive the defense or may be estopped to use it]; Rest. Contracts § 178; see C.C. 1724 [modern view stated in Sales Act]; 1949 A.S. 522.)'
Logic as well as law impels us to the conclusion that the Uniform Partnership Act must be construed consistently, section by section, so that the single word 'authority' does not mean parol authority in one paragraph and written authority in another. There is precedent for this principle of statutory construction in the decisions of our courts. (Coleman v. City of Oakland, 110 Cal.App. 715, 719, 295 P. 59; Shorb v. Barkley, 108 Cal.App.2d 873, 877, 240 P.2d 337; 45 Cal.Jur.2d, Statutes, § 143, p. 650.)
Furthermore, to hold that Corporations Code section 15009, paragraph (3), refers to written authority although the word 'written' does not appear therein, would be to ignore section 1858 of the Code of Civil Procedure, which provides:
'In the construction of a statute or instrument, the office of the Judge is simply to ascertain and declare what is in terms or in substance contained not to insert what has been (See also Richardson v. City of San Diego, 193 Cal.App.2d 648, 650, 14 Cal.Rptr. 494.)
The Supreme Court recently commented upon the judicial prerogative in statutory construction, and made this definitive statement in Vallerga v. Department of Alcoholic Beverage Control, 53 Cal.2d 313, at page 318, 1 Cal.Rptr. 494, at page 496, 347 P.2d 909, at page 911:
"* * * a court is not authorized to insert qualifying provisions not included and may not rewrite the statute to conform to an assumed intention which does not appear from its language. The court is limited to the intention expressed. (Citations.)"
The Uniform Partnership Act provides certain rules of construction which are incorporated in the California Corporations Code. Section 15004, subdivision (1) admonishes that: 'The rule that statutes in derogation of the common law are to be strictly construed shall have no application to this act.' Subdivision (4) of the same section provides: 'This act shall be so interpreted and construed as to effect its general purpose to make uniform the law of those states which enact it.'
The only case in another State we have located which could be considered as a guide in resolving a conflict between the Uniform Partnership Act and a State enactment embodying the statute of frauds, is Lawer v. Kline, 39 Wyo. 285, 270 P. 1077. In that case one partner executed a lease for a term exceeding one year without the written authority of his partners. The court noted that each State, including Wyoming, has its own statute of frauds, and then went on to say, at page 1080 of 270 P.:
'* * * but whatever the rule might be under it [the Wyoming statute of frauds] in other cases, we must, in construing it in this case, take into consideration section 4180 [in California, Corporations Code § 15009] part of the uniform partnership law, which authorizes a partner to sign any instrument, if executed in connection with the usual course of business of the partnership. The framers of that provision knew, of course, the existence of the statute of frauds in every state in the Union, and they knew, further, that innumerable leases are constantly made for terms lasting longer than one year, and it would be strange indeed, that, while making such sweeping provision as above mentioned, they should not have intended to include lease of the character in question here. * * *'
The foregoing except from the Wyoming opinion, taken out of context, is hardly authority 'on all fours' for the disposition of this case. It does, however, express reasoning which supports our contention that the express provisions of the Uniform Partnership Act prevail when in conflict with the statute of frauds.
In construing the Uniform Negotiable Instruments Law, the Supreme Court observed that: 'It is useless to enact legislation having for its object the unification of our laws if the courts of the several states are to place different and opposite constructions as to the meaning of the laws thus enacted.' (People's Finance & Thrift Co. v. Shaw-Leahy Co., 214 Cal. 108, 109, 3 P.2d 1012.)
Thus we conclude that those provisions of the Uniform Partnership Act which use the word 'authority' without qualification or limitation must be interpreted to mean any authority, either parol or written. Further, we conclude that the unqualified word 'authority' as used in the Uniform Partnership Act is not limited by reference to the statute of frauds in those areas where the statutes are in conflict.
Defendants next contend that the finding that Elias authorized Pericles to sell the ranch is refuted by the Deposit Receipt agreement itself. Defendants suggest that the writing warned the buyer that the sale was made subject to the approval of Elias since it contained the following language: 'Said property is sold subject to approval 'I (or we) agree to sell and convey the above described property on the terms and conditions herein stated, and agree to pay the above signed agent as commission five (5) per cent of above purchase price, or one-half the deposit if it is forfeited by buyer, provided same shall not exceed the full amount of the commission.'
As noted hereinbefore, the trial court found that Pericles and Elias were partners, that Pericles had authority from Elias to sell the property, and that the authority was not conditional of limited. Therefore when Pericles signed the agreement to convey the property as seller, he effectively approved the agreement on behalf of his brother, Elias, as well as himself.
Defendants make the additional argument that the language, 'said property is sold subject to approval of owner' required the buyer to determine who was the true owner of the property. They contend that the records in the office of the County Recorder of Stanislaus County reflect that Elias was an owner of the property in joint tenancy with Pericles, and this was constructive notice that Pericles was not the sole owner. Under the facts of this case, the doctrine of constructive notice cannot be invoked by defendants. The court found, and there is evidence to support the finding, that Pericles represented to Moreno, his real estate broker, and to Ratto, the agent of the buyer, that he, Pericles, was the owner of the property. The buyer, as well as the seller's agent, had a right to rely on this representation. The law applicable to the facts before us is summarized in 23 Cal.Jur.2d, Fraud and Deceit, section 35, pages 85-86, as follows:
'Where one is justified in relying and in fact does rely on false representations, his right of action is not destroyed because means of knowledge were open to him. In such a case, no duty rests on him to employ such means of knowledge, even though by reason thereof, in the absence of any representation at all, a constructive notice would be inferred. The doctrine of constructive notice does not apply where there has been such a representation of fact. If the representation is of a character to induce action and does induce it, that is enough. It matters not that a person misled may be, in some loose sense negligent, for it is said not to be just that a man who deceives another should be permitted to say to him, 'You ought not to believe or trust me,' or, 'You are yourself guilty of negligence.''
(See also Teague v. Hall, 171 Cal. 668, 154 P. 851; French v. Freeman, 191 Cal. 579, 217 P. 746; Seeger v. Odell, 18 Cal.2d 409, 115 P.2d 977, 136 A.L.R. 1291; Grange Co. v. Simmons, 203 A.C.A. 639, 648, 21 Cal.Rptr. 757; Seeger v. Odell, 18 Cal.2d 409, 115 P.2d 977, 136 A.L.R. 1291.)
Turning now to defendant's second principal ground for contending that the agreement is not subject to specific performance, we find that plaintiff-buyer did not sign the agreement either. It was signed for him by Ratto, as agent. Defendants assert that the contract was not specifically enforceable because the authority of Ratto was not in writing and therefore failed to comply with Civil Code section 1091, which provides:
'An estate in real property, other than an estate at will or for a term not exceeding one year, can be transferred only by operation of law, or by an instrument in writing, subscribed by the party disposing of the same, or by his agent thereunto authorized by writing.'
(See also Code Civ.Proc. § 1973, subd. (4).)
Upon these statutes defendants predicate their argument that they as sellers would have been unable to specifically enforce the 'Neither party to an obligation can be compelled specifically to perform it, unless the other party thereto has performed, or is compellable specifically to perform, everything to which the former is entitled under the same obligation, either completely or nearly so, together with full compensation for any want of entire performance.'
Although a contract may lack mutuality at the time of execution, circumstances may develop during the time for performance which remove the bar of mutuality of remedy. One is estoppel predicated upon a change of position by one party in reliance upon the contract, which change of position causes a detriment which would make it inequitable to strictly enforce the rule of mutuality of remedy. This exception apparently was in the mind of the court when it found that substantial and detrimental changes of position occurred on the part of Antone L. Ratto, Jr. and members of his family.
There is evidence to support the finding, but the finding does not support the conclusion of law that defendants are estopped to assert the law of mutuality of remedy by reason of the detriment found to have been incurred. This is so because the Rattos, who suffered the detriment, are not parties to this action, nor were they parties to the contract. Furthermore, there is no evidence that plaintiff agreed to reimburse the Rattos or that plaintiff suffered any detriment by reason of the Rattos' change of position.
Plaintiff cites numerous cases holding that mutuality of remedy is supplied if the nonsigning party to a contract has performed or substantially performed, or has offered to perform the contract, or has brought an action to compel performance. However, to provide mutuality of remedy and satisfy Civil Code section 3388 in such cases, performance, part performance, or the bringing of an action to compel performance, must occur before the party signing the contract has withdrawn. In other words, if the party signing the contract has withdrawn or has rescinded the contract before tender of performance or commencement of suit by the party who did not sign, there is no mutuality of remedy, and Civil Code section 3388 is applicable. (San Francisco Hotel Co. v. Baior, 189 Cal.App.2d 206, 211, 11 Cal.Rptr. 32.)
Relying upon the rule laid down in the San Francisco Hotel case, defendants assert that they rescinded the agreement on May 2, which was prior to plaintiff's completed performance on May 12.
Defendant's argument is based upon a misconception of the nature of the Deposit Receipt agreement which was executed by Pericles. It is quite apparent that defendants interpret the agreement as a simple bilateral contract. We construe the deposit of $5,000 by the buyer to guarantee his performance, upon penalty of forfeiture, to be consideration for the seller's promise to allow him 30 days within which to perform. To express the thought in another way, the forfeiture payment of $5,000 made the offer irrevocable for 30 days. (Copple v. Aigeltinger, 167 Cal. 706, 709, 140 P. 1073; Jonas v. Leland, 77 Cal.App.2d 770, 777, 176 P.2d 764; Chrisman v. Southern Cal. Edison Co., 83 Cal.App. 249, 254, 256 P. 618.)
Our conclusion that the Agent's Deposit Receipt constitutes an irrevocable 30-day offer is supported by the form of the seller's ratification of the agreement. Pericles Mihelis agreed, in writing, to pay his agent a commission of 5% of the purchase price 'or one-half the deposit if it is forfeited by buyer.'
A unilateral agreement or option based upon valid consideration accepted by 'Although an option is a unilateral agreement, by which the promisor promises to sell land on certain conditions without any obligation to buy on the part of the person to whom it is given and such a promise is illusory and such a contract lacks mutuality, whether or not it is based on a consideration, it is an exception to the general rule that contracts must be mutual and it is an enforceable contract. Although not mutual in its inception, an option becomes so in the event of proper and timely acceptance, * * *.'
We find no merit in defendants' contention that the Deposit Receipt agreement is incomplete or indefinite, and therefore unenforceable. The agreement contains a description of the property, the sale price, the manner of payment, provision for security for the unpaid balance by a first deed of trust on the premises and a crop mortgage, and the proration of taxes and insurance. 'The material factors to be ascertained from the written contract are the seller, the buyer, the price to be paid, the time and manner of payment, and the property to be transferred, describing it so it may be identified (citations).' (King v. Stanley, 32 Cal.2d 584, 589, 197 P.2d 321, 324.)
In this connection, defendants also contend that the agreement is incomplete since no name was inserted in the blank space after the words, 'Make deed to--' However, immediately below the line 'Make deed to--' appears the name 'Herbert E. Ellis, Jr.', buyer. There can be no question as to the buyer's identity or to whom the deed is to be made. That specific performance cannot be defeated by quibbling is clear from the following language used by the Supreme Court in California Lettuce Growers v. Union Sugar Co., 45 Cal.2d 474, at page 481, 289 P.2d 785, at page 790, 49 A.L.R.2d 496:
'* * * 'The law does not favor but leans against, the destruction of contracts because of uncertainty; and it will, if feasible, so construe agreements as to carry into effect the reasonable intentions of the parties if that can be ascertained.' McIllmoil v. Frawley Motor Co., 190 Cal. 546, 549, 213 P. 971, 972; see Roy v. Salisbury, 21 Cal.2d 176, 130 P.2d 706; Long Beach Drug Co. v. United Drug Co., 13 Cal.2d 158, 88 P.2d 698, 89 P.2d 386; Sutliff v. Seidenberg, Stiefel & Co., supra, 132 Cal. 63, 64 P. 131, 469.'
Damages
In addition to decreeing specific performance of the contract, the trial court allowed plaintiff damages incurred by reason of defendants' failure to perform. It is well settled that damages may be awarded as a concomitant to specific performance of a contract for the sale of real property. (See Heinlen v. Martin, 53 Cal. 321; Greenstone v. Claretian Theo. Seminary, 173 Cal.App.2d 21, 343 P.2d 161.) The rule is stated thus in 45 Cal.Jur.2d, Specific Performance, section 83, page 374:
'Where the plaintiff is entitled to a decree of specific performance of a contract for the purchase or exchange of land the plaintiff is ordinarily entitled to a judgment for the rents and profits from the time he was entitled to a conveyance, provided the property has a rental value, though it may not have been rented or may have been occupied by the defendant himself. But, since the vendor is not in default until demand is made for conveyance, unless the demand is made rents and profits are computed only from commencement of the action. The amount can be ascertained either by charging the defendant with the rental value of the land or by taking an account, debiting the defendant with all sums realized or realizable with reasonable diligence The principal award was for loss of profits derived from operation of the farming land. Civil Code section 3334 fixes damages for wrongful occupation of real property 'at the value of the use of the property for the time of such occupation.' This language, argue defendants, confines damages for loss of use to rental value. We do not find that the courts have so limited the application of Civil Code section 3334. We are persuaded from an examination of the cases awarding damages for loss of use of real property, that whether rental value or profits derived from the land is used as the measure of damages in a given case, is determined by the nature of the real property involved in the particular action. That is to say, the value of the use of property depends upon the use to which it is put, or may be put.
Defendants cite many cases that speak of value of the use of property in terms of both rental value and profits, but they point out that in each case cited the court actually adopted rental value as the measure in assessing damages. It is also true, however, that the property involved in each case cited by defendants has been rental property. In 7 A.L.R.2d, under the title, 'Specific performance: compensation or damages awarded purchaser for delay in conveyance of land' the commentator has this to say, at page 1206:
'The compensation awarded as incident to a decree for specific performance is not for breach of contract and is therefore not legal damages. The complainant affirms the contract as being still in force and asks that it be performed. He cannot have it both ways, performed and broken. The situation is simply that, if the court orders it to be performed, the decree must as nearly as possible order it to be performed according to its terms, and one of those terms is the date fixed by it for its completion. This date having passed, the court, in order to relate the performance back to it, equalizes any losses occasioned by the delay by offsetting them with money payments. Often the result is more like an accounting between the parties than like an assessment of damages.'
We are satisfied that Civil Code section 3344 does not limit damages for loss of use of real property to the rental value thereof. Nor do we believe the trial court erred by using loss of profits as a measure of damages in this case.
Defendants contend that the court should not have charged them with rent for the use of a house on the premises as well as profits from the farm. We find no error here, since the house could have been rented separate and apart from the farm land, and Pericles Mihelis did occupy the dwelling. There is no evidence indicating that $75 per month is not a reasonable rental for the house.
Plaintiff, in his cross-appeal on the issue of damages, concedes that net profit derived from the crops harvested is the proper measure of damages for wrongful occupation of the farming property. His complaint is that the court, in arriving at a net profit of approximately $35,000, should not have credited defendants with $500 per month for the personal services of Pericles Mihelis. This credit was in the nature of salary for supervising and managing the ranch, a task to which Pericles devoted his full time. The value of the services is not in dispute, as the parties stipulated that $500 per month was reasonable; rather it is plaintiff's contention that the value of defendant Pericles' personal services may not be considered in determining net profit. It would appear that the question is undecided in California. Plaintiff cites a Minnesota case, Abrahamson v. Lamberson, 79 Minn. 135, 81 N.W. 768, 769, which, under comparable circumstances, held that a defendant should not be credited with anything for his personal services because In addition to attacking the method of computing value of the use of the land and of computing net profits, hereinbefore discussed, both sides attack interest charges and credits specified in the judgment. These criticisms again stem from a misconception of the nature of damages in specific performance cases. Such damages derive from the terms of the agreement which is the subject of the action. When viewed in the light of placing the parties in the respective positions they would have occupied had the contract been performed, which requires computing damages according to the terms of the agreement, the objections to the interest provisions of the judgment are groundless.
The judgment is affirmed.
Moreno v. Mihelis
Farmer George Moreno, the real estate broker who acted as agent for sellers-defendants, recovered a judgment against defendants for a real estate commission. The record in the case of Moreno v. Mihelis reflects that the judgment for real estate commission against defendants was entered on December 13, 1960. Plaintiff served notice of entry of judgment December 15, 1960, and defendants' counsel served a written notice of motion for new trial December 20, 1960. The motion for new trial was denied by written order filed February 14, 1961. Defendants then engaged different counsel who, on February 27, 1961, filed a second notice of motion for new trial. Plaintiff moved to quash the second notice of motion for new trial and motion for new trial. The motions to quash were granted, and properly so.
Code of Civil Procedure section 660 provides, in pertinent part, as follows:
'* * * the power of the court to pass on motion for a new trial shall expire sixty (60) days from and after service on the moving party of written notice of the entry of the judgment, or if such notice has not theretofore been served, then sixty (60) days after filing of the notice of intention to move for a new trial.'
The record reflects that the second motion for new trial was filed more than sixty days after both the service of notice of entry of judgment and the notice of filing the first motion for a new trial. Therefore the court lost jurisdiction to grant a new trial before the second motion was filed. (Jordan v. Warnke, 205 A.C.A. 688, 699, 23 Cal.Rptr. 300; Hinrichs v. Maloney, 169 Cal.App.2d 544, 546, 337 P.2d 471; Muller v. Municipal Court, 176 Cal.App.2d 156, 161, 1 Cal.Rptr. 207.)
This appeal was not taken from the judgment, but from the order quashing the second notice of motion for new trial and the second motion for new trial. Present counsel for defendants were substituted into the The order quashing notice of motion for new trial and the order quashing motion for new trial are affirmed.
CONLEY, P.J., and BROWN, J., concur.