Opinion
Hearing Granted Dec. 16, 1940.
Appeal from Superior Court, Los Angeles County; Charles S. Burnell, Judge.
Three consolidated actions by John T. Watson against Alvin H. Poore and Beulah Poore, husband and wife, and another, to establish a resulting trust, by S.P. Leffler and Nellie E. Leffler, husband and wife, against Jack Watson and Inez Watson, husband and wife, Alvin H. Poore and Beulah Poore, sued as Jane Doe One, and others, to recover for an alleged conspiracy to deprive plaintiffs of land, wherein named defendants filed cross-complaints, and by Alvin H. Poore and Beulah Poore, husband and wife, against Prow & Leffler, a copartnership, and others to eject S.P. Leffler and Nellie E. Leffler from a tract of land, wherein Cornelius Kallmeyer intervened, making Alvin H. Poore, Beulah Poore, and others defendants in intervention. From judgments adverse to Alvin H. Poore and Beulah Poore in each of the three actions, they appeal.
Affirmed. COUNSEL
Hector P. Baida, of Santa Monica (Tanner, Odell & Taft, of Santa Monica, of counsel), for appellants.
B.W. Burkhead, of Los Angeles, for respondent John T. Watson.
Claude A. Shutt, of Los Angeles, for respondents Prow & Leffler, S.P. Leffler and Nellie E. Leffler.
Arthur E. Briggs, of Los Angeles, for petitioner in intervention Cornelius Kallmeyer and respondent Inez Watson.
OPINION
McCOMB, Justice.
The above-entitled cases were consolidated for trial and for the purpose of this appeal.
(1) In action No. 12656 respondent Watson sought to establish against appellants Alvin H. and Beulah Poore a resulting trust as to 10 acres of land.
(2) In action No. 12657 appellants Poore sought to eject respondents S.P. and Nellie E. Leffler from the 10 acres of land which was the subject matter of action No. 12656.
(3) In action 12658 respondents Leffler sought to establish that respondent Watson and appellants Poore conspired to deprive them of a portion of the land described in actions Nos. 12656 and 12657.
The cases were tried before the court without a jury and the trial court gave judgment in favor of respondents, finding that appellants held the property, which is the subject of the suits, as trustees for Mr. Watson. The evidence is the same in all three cases, and, viewing it most favorably to respondents, the essential facts are:
Cornelius Kallmeyer owned ten acres of land subject to a trust deed which secured Mr. Kallmeyer’s note in the sum of $5,000, payable April 1, 1931, to Mr. Hunt. In June, 1927, Mr. Kallmeyer agreed to sell 5 acres of this land to Mr. Watson for $10,000, said respondent to pay $5,000 in cash and assume and agree to pay the note which Mr. Kallmeyer owed Mr. Hunt. In February, 1928, respondent Watson contracted to sell two acres of the land to the respondents Leffler. They went into possession, paid $1,500 in cash, and agreed to pay $5,000 on or before February 3, 1931. In February, 1931, respondents Leffler were ready to pay to respondent Watson the $5,000 which they owed him, but, since he was unable to pay the $5,000 note due Mr. Hunt which had been transferred to the Betsy Warren Estate, he was not in a position to give them a clear title to the property which they had agreed to purchase from him, and the Lefflers refused to pay the balance of the purchase price. Thereafter the Betsy Warren Estate recorded the customary notice of default and election to sell.
Subsequently Mr. Kallmeyer and respondent Watson, in consideration of certain agreements, were given a contract by the Betsy Warren Estate to repurchase the 10 acres for the balance due on the original Kallmeyer note. In July of 1933, appellant Alvin H. Poore promised to loan respondent Watson $1,200 so that he could repurchase the 10 acres. Appellant Poore took the note of Mr. Watson and his wife and mortgages on certain property of theirs as security for the loan. In August, 1933, respondent Watson drew on Alvin H. Poore’s account for $1,200 and from that date until November 13, 1933, Messrs. Watson and Kallmeyer tried to complete their purchase of the 10 acres. This they were unable to do because of a disagreement between themselves.
On the last-named date Mr. Kallmeyer sued Mr. Watson for breach of contract. When served with the complaint respondent Watson went to Mr. Poore for advice, explaining to him that he was being pressed by his creditors. Mr. Poore then advised Mr. Watson to let him buy the land for said respondent and that he would convey the two acres to respondents Leffler for $3,000, subject to the trust, and hold the balance of the eight acres pending settlement between Messrs. Kallmeyer and Watson. He also suggested to Mr. Watson that the mortgages previously given to him were not sufficient and that Mr. Watson and his wife should deed property which they owned in El Monte to him in order that he might collect the rents. This was done. Also the $1,200 loaned by Mr. Poore to Mr. Watson was returned to Mr. Poore for the purpose of applying it on the purchase price of the 10 acres.
In January of 1934, Mr. Poore purchased the 10 acres at a probate sale for $6,500. He paid $1,000 down with Mr. Watson’s money and the balance was evidenced by a note of Mr. Poore and his wife secured by a trust deed upon the property. The payments on the note were $100 per month and the income from the 10-acre tract was approximately $150 per month.
In August, 1935, Mrs. Watson sued Mr. Watson for divorce and joined Mr. Poore as a party defendant, claiming title to all of the El Monte city property which she had conveyed to Mr. Poore, and seeking to establish a resulting trust in her favor as to the 10-acre tract. Mr. Poore advised Mr. Watson to leave the state until the divorce action was over and that he would be able to save the property for him. This case was tried, resulting in a judgment in favor of Mrs. Watson for divorce, the award to her of all of the property which she had conveyed to Mr. Poore located in the city of El Monte, and a money judgment against Mr. Poore and his wife for $2,553.97 on account of rents collected from the property located in the city of El Monte. It was further decreed that Mrs. Watson had no interest in the 10-acre tract and title was quieted in the Poores as against Mrs. Watson.
After the divorce action Mr. Watson returned to El Monte and Mr. Poore told him that he, Watson, had lost everything and induced him to sign a quitclaim deed to the 10-acre tract and certain other property, and at the same time to sign a general release of all claims which Mr. Watson might have against Mr. Poore, representing to him that it was necessary for him to do this in order to bring to a culmination the divorce suit filed by Mrs. Watson. After obtaining the quitclaim deed and release from Mr. Watson, Mr. Poore settled the money judgment with Mrs. Watson for $2,000 and received a satisfaction of judgment from her.
Appellants rely for reversal of the judgment against them on these propositions:
First: Respondent Watson was not entitled to recover as against the appellants, because he had conveyed his property to appellant Alvin H. Poore for the purpose of defeating and defrauding his creditors.
Second: In any event respondent Watson’s interest in the 10-acre tract extended to five acres thereof only, because only five acres were involved in the original agreement between respondent Watson and Mr. Kallmeyer.
Third: There was no privity of contract between appellants Poore and respondents Leffler, whatever rights the Lefflers had, having been eliminated at the trustee’s sale by the Warren Estate, since their contract was subsequent to the trust deed.
Fourth: The release executed by respondent Watson to respondent Poore could not be set aside (a) without respondent Watson’s paying to appellant Alvin H. Poore $2,000, nor (b) on the ground that it was obtained by fraud and misrepresentation, since the settlement was fully discussed in the presence of respondent Watson’s attorney.
Fifth: Even though respondent Watson be entitled to relief, the trial court erred in not ordering an accounting to be taken between the appellants Poore and respondent Watson.
Appellants’ first proposition is untenable. The general rule is established in California that if a contract has been entered into to accomplish a fraudulent purpose, a court of equity will not at the suit of one of the parties to the fraud while the agreement is still executory, compel its execution or decree its cancellation nor after it has been executed set it aside and restore to the complainant property or other interests which he has transferred for a fraudulent purpose. Allstead v. Laumeister, 16 Cal.App. 59, 65, 116 P. 296. There is an exception to this rule, which is that if a contract or deed is made for a fraudulent purpose through the undue influence of the contractee or grantee in violation of a fiduciary relationship, abuse of confidence, oppression or fraud, a court of equity will grant relief to a party least in fault who has been led into his act by a violation of confidence, since in such case the parties are not equally in the wrong. Birney v. Birney, 217 Cal. 353, 359, 18 P.2d 672. In the case just cited our Supreme Court says at page 359 of 217 Cal., at page 674 of 18 P.2d: "As was said in Chamberlain v. Chamberlain, 7 Cal.App. 634, 95 P. 659, one cannot lay a trap for another, secure his confidence, induce him to make a conveyance of his property in expectation that it will be returned, and thereafter retain the fruits of his perfidy on the ground that the donor too readily yielded to temptation to save himself at the possible expense of his creditors."
The facts of the present cases bring them within the exception to the general rule above stated. Mr. Watson reposed confidence in Mr. Alvin H. Poore, sought his advice, relied upon it, and yielded to the temptations and inducements extended by Mr. Poore to save himself from his creditors. Mr. Poore having thus entrapped Mr. Watson by violating the confidence reposed in him is more at fault than Mr. Watson and may not, therefore, in order to retain the fruits of his own wrong, rely upon the general rule heretofore mentioned.
Appellants’ second proposition is likewise without merit. The trial court found upon conflicting evidence that Mr. Poore made the initial payment for the property in question with money belonging to Mr. Watson. The transaction between Messrs. Poore and Watson was entirely independent of any agreement between Messrs. Watson and Kallmeyer, their agreement having been terminated when Mr. Watson was unable to perform the same and the Betsy Warren Estate exercised their rights under the trust deed they held upon the property, which is the subject of this suit. Hence, it is immaterial so far as Mr. Poore is concerned as to the terms of the agreement between Messrs. Watson and Kallmeyer.
Appellants’ third proposition is without merit. The Lefflers were within their rights in refusing to make their final payment to Mr. Watson for the land they were purchasing from him, in the absence of his ability to tender to them a good and sufficient deed in accordance with the terms of their contract. Boone v. Templeman, 158 Cal. 290, 297, 110 P. 947, 139 Am.St.Rep. 126; Kerr v. Reed, 187 Cal. 409, 411, 202 P. 142. Therefore, since Mr. Watson was the real owner of the property and the Lefflers were entitled to receive two acres from him upon the payment of the purchase price, the lower court sitting as a court of equity properly refused to eject them from the land and gave judgment in their favor.
Appellants’ fourth proposition likewise is without merit.
(a) The trial court found in the action instituted by Mrs. Watson against her husband and Mr. Poore that Mr. Poore had received income from the El Monte property which she had conveyed to him amounting to $3,632 and in that action gave judgment against him in the sum of $2,500. When Mr. Poore paid $2,000 to obtain a release from Mrs. Watson, it was predicated upon an obligation arising from money which he had received that in fact belonged to Mrs. Watson. Mr. Watson did not receive any money from Mr. Poore in return for Mr. Watson’s executing the release the trial court set aside. Hence it was not necessary for Mr. Watson to return to Mr. Poore as a prerequisite to the repudiation of the release any money, since he had received nothing from him.
(b) The trial court found upon conflicting evidence that Mr. Watson did not read the release before he signed it, and that he was induced to sign it by fraudulent statements and representations of Mr. Poore. It is immaterial that a contrary finding would have been supported by the evidence, had the trial court believed Mr. Poore’s testimony to the effect that Mr. Watson read the release and discussed it with his attorney before signing it.
Appellants’ final proposition is devoid of merit. Appellants did not seek by their pleadings or otherwise in the trial court for an accounting, but relied on the theory that they did not owe respondent Watson any sum of money or hold title to any property in trust for him. They may not for the first time on appeal present a different theory of their case and claim that it was error for the trial court not to order an accounting between the parties.
For the foregoing reasons the judgments appealed from are and each is affirmed.
We concur: MOORE, P.J.; WOOD, J.