Opinion
Hearing Granted by Supreme Court June 14, 1928.
Appeal from Superior Court, San Bernardino County; Jesse Olney, Judge.
Action by Robert Walter Henderson and another against N. Miglietta to set aside sale of real property under a deed of trust and for reconveyance. Judgment for plaintiffs, and defendant appeals. Modified and affirmed.
COUNSEL
Walter E. Byrne and Emery B. Tyler, both of San Bernardino, for appellant.
Isaac Jones, of Ontario, and Albert Sidney Brown, of Los Angeles, for respondents.
OPINION
HOUSER, J.
This is an appeal by defendant from a decree in which it was ordered that a sale of real property made under the provisions of a deed of trust be set aside; a trust declared; and a reconveyance made to plaintiffs of the real property described in the deed of trust.
From the findings of fact made by the trial court, in part it appears that on April 25, 1921, plaintiffs were the owners of the property in question, of the stipulated value of $10,000, which property was held by them subject to a bank mortgage of $2,400, due one year thereafter, and bearing interest at the rate of 8 per cent. per annum; that defendant represented to plaintiffs that he had considerable money to lend, and that, if plaintiffs would borrow money from him and pay off the bank mortgage, he would take a lower rate of interest on the new mortgage, and make the terms of repayment much easier than those provided in the bank mortgage, and that all defendant wished was that his money bring him a fair rate of interest; that no mention was made at such time regarding the form of security to be given by plaintiffs for such loan, but, after consultation with an officer of a bank, defendant directed that the bank procure for him a trust deed from plaintiffs; that thereafter, without time afforded plaintiffs within which to read the instrument, and believing it to be a mortgage, plaintiffs executed a promissory note for the sum of $2,700 bearing interest at 7 per cent. per annum, payable semiannually, together with a trust deed in favor of defendant covering the property in question; that at the time the note and trust deed were executed, by reason of certain arrangements made by defendant in connection therewith, plaintiffs were intentionally and designedly prevented from reading said trust deed; that, when the semiannual interest on said loan became due, defendant requested that plaintiffs pay the same; that at said time the plaintiffs informed defendant they did not have the money with which to pay such interest, but that, if defendant insisted, plaintiffs would obtain such money for defendant; that at said time, in payment of said interest, plaintiffs also offered to sell or assign to defendant a crop of grapes on the property in question; that, although defendant was a dealer in grapes, he refused to accept said crop or to buy it at any price, notwithstanding said crop of grapes was worth more than the amount of the interest then due; that at the same time plaintiffs asked defendant "if it would be all right with him if they let the matter of paying the interest then due to go over until the time for the payment of the second interest installment, and they would arrange to pay both installments of interest at the time when the second installment of interest was due; that at said time, and after said request had been made by the plaintiffs, the defendant told them that that arrangement would be all right with him, and that they would not need pay said first installment of interest until the second installment was due, and they could pay both installments at the same time; *** that, the plaintiffs relying upon the arrangement to pay the first and second installments of interest at the time the second would become due, and as was represented to them by the defendant as being all right and satisfactory with him, the plaintiffs made no then further effort to obtain the money to pay the first installment of interest, depending and intending to pay both said installments when the second became due; *** that, had the defendant not stated that it would be all right and satisfactory to him for them to pay the first installment of interest at the time the second installment became due, they (plaintiffs) could have, and would have, obtained the money to have paid, and would have paid, the first installment of interest at or about the time when it became due, but that they relied upon the statement of the defendant and his waiver to his right of immediate payment of the first installment of interest when it became due; *** that the defendant lulled the plaintiffs into the belief that it was all right and satisfactory with him that they could wait until the second installment of interest was due to pay the first installment of interest, and that he knowingly knew that he had so lulled them into said belief, thereafter and almost immediately started the necessary proceedings to sell their (plaintiffs’) property under said trust deed, without in any wise notifying the plaintiffs of any such intention or of any such proceedings, until after said property had been sold"; that thereafter, and in pursuance of the proceedings instituted by defendant, the property of plaintiffs covered by said trust deed was sold-defendant becoming the purchaser at such sale; that the plaintiffs met the defendant and talked with him on several occasions during the time he was proceeding to have said real property sold under said trust deed, and that said defendant on none of said occasions made mention of or discussed with the plaintiffs the matter of the payment of the interest on said trust deed; and on none of said occasions, or at any time, informed or notified the plaintiffs that he had taken steps or proceedings to sell said real property under said trust deed; that prior to and at the time of the sale of said property under said trust deed "the defendant fraudulently and for the purpose of deceiving intending or possible purchasers of said property at said sale, represented to them that the property referred to had little value, and that he would lose money on the property if he himself bid it in, as he knew that no one would pay him the amount which he had loaned thereon for the property; that the property was in a windswept belt, and with no improvements thereon; that the defendant designedly and fraudulently made said statements and representations for the purpose of causing other persons not to make any bid upon said property in order that he might secure same upon his own bid and at the lowest sum possible, and at the time he made said statements and representations he knew that said property was worth more than three times the amount he had loaned thereon, and in excess of the sum of $10,000, and also knew that said property was improved with buildings and for the greater portion thereof with a well-matured vineyard, and that at said time that there was soon to be matured on said vineyard a crop of grapes, which said crop would be reasonably worth the sum of $1,050." Furthermore, that immediately upon receiving notice that said property had been sold under said trust deed plaintiffs offered to defendant the entire sum lent to them by defendant, to wit, the sum of $2,700, and all interest due or unpaid thereon, and all costs incurred by defendant in the sale of said property under said trust deed, and such additional amount as to recompense defendant in full for whatever moneys he had expended in the sale of said property under said trust deed, and in addition thereto the sum of $500, if defendant would release said property from any claim he might have against the same because of said trust deed, and transfer said land to the plaintiffs; but that the defendant then and there refused to release said property or to accept the amounts of money offered to him by the plaintiffs. The trial court also found "that the defendant conceived a fraudulent design in his purpose toward the plaintiffs for the ultimate purpose and object of acquiring said real property of the plaintiffs at a nominal sum."
Appellant contends that certain of the findings by the trial court are not supported by the evidence. In substance, they are as follows: (1) That the plaintiffs, relying upon the statements and representations of said defendant, formally signed and executed said note and deed of trust; (2) that the defendant at said time knew and intended it so to be that the plaintiffs were executing a deed of trust, and not a mortgage, upon said property; (3) that plaintiffs believed, without reading the deed of trust, that they were signing a mortgage.
But it is clear that, even if it could be conclusively shown that before the execution of the note and deed of trust the plaintiffs did not rely upon any representations made to them by defendant, it was defendant’s intention that plaintiffs should execute a deed of trust and not a mortgage, and that neither of plaintiffs had any belief as to whether either of them was signing a mortgage or a deed of trust-neither any one of such facts nor all of them together would authorize this court to order a reversal of the judgment. None of those facts, nor all of them combined, constitute the gist of the fraud of defendant which was alleged in the amended complaint of the plaintiffs and which the trial court found to be true. The gravamen of the charge against defendant was that he fraudulently lulled the plaintiffs into a sense of security with reference to the necessity of their payment of the interest due on their promissory note to defendant, and thereafter, while plaintiffs were so deceived, defendant took an unfair and unconscionable advantage of the fact that plaintiffs relied upon his representations of the situation and exercised his assumed right to "foreclose" on the deed of trust. It therefore results that, even though appellant’s point in that regard be admitted in its entirety, the judgment of the court cannot be affected thereby.
Appellant has cited many authorities to the effect that the terms of a written contract may not be varied by an unexecuted oral agreement of the parties to the contract made without consideration, from which it is argued that defendant’s oral statement to the plaintiffs that it was "all right" for them to defer the payment of the interest until the second installment of interest became due could not avail plaintiffs as against their written agreement to pay on a prior date. Ordinarily speaking, such may be the law; but such a legal principle cannot prevail in the face of positive fraud such as is hereinbefore outlined, practiced by one of the parties to the contract as against the other. Equitable principles cannot be thus subverted. The governing rule is enunciated by the Supreme Court of the United States in the case of Schroeder v. Young, 161 U.S. 342, 16 S.Ct. 516, 40 L.Ed. 721, where it was held that the expiration of the statutory period for redemption from a sale of land under execution did not bar a suit in equity to annul the sale and a deed made thereon, where it appeared that the debtor was lulled into a false security by assurances of permission to redeem irrespective of the statute, although such assurances were not in writing and were made without consideration. In connection with such ruling, the court said in part:
"Defendant relies mainly upon the fact that the statutory period of redemption was allowed to expire before this bill was filed, but the court below found in this connection that before the time had expired to redeem the property, the plaintiff was told by the defendant Stephens that he would not be pushed, that the statutory time to redeem would not be insisted upon, and that the plaintiff believed and relied upon such assurance. Under such circumstances the courts have held with great unanimity that the purchaser is estopped to insist upon the statutory period, notwithstanding the assurances were not in writing and were made without consideration, upon the ground that the debtor was lulled into a false security. [Citing cases.] In Southard v. Pope’s Ex’rs, 9 B. Mon. [Ky.] 261, 264, it is said that ‘a refusal by the purchaser to accept the money and permit the redemption to be made within the time agreed would be a fraud upon the defendant in execution, and authorize an application by him to a court of equity for relief."’
Bristol v. Hershey, 7 Cal.App. 738, 743, 95 P. 1040, 1041, involved a principle similar to that here under consideration, and the court declared that:
"*** The oral contract to extend the time for redemption was valid, needed no consideration in its support, if the debtor was lulled into a false security and thereby permitted the time for redemption to expire. ***"
Perhaps the leading case on the subject is that of McCue v. Bradbury, 149 Cal. 108, 84 P. 993, where the facts resemble those in the instant case. Therein a trust deed with its accompanying promissory note was involved. The obligation was due on October 22, 1904. Prior to that time, the promisor stated to the promisee that at a designated place he would be willing and able to pay the note on said 22d day of October, to which the promisee made no objection; his language being, "All right, but it is not due until the 23d." At the time and place specified the promisor went with the money with which to discharge his obligation, but the promisee failed to appear. The next day was Sunday. On the day following, that is, two days after the promissory note fell due, the promisor in good faith tendered to the promisee the full amount with all charges due on the promissory note, which the promisee refused to accept, but immediately instituted proceedings to sell the property under the provisions of the trust deed. Whereupon the promisor began a suit against the promisee to enjoin such sale, and a permanent injunction was granted. On appeal, it was held in substance that equity would refuse to enforce a forfeiture at the instance of one who had obtained the strictly legal right to it by fraud, deceit, or any other form of oppressive practice; on the other hand, equity would relieve the innocent, where such a forfeiture so secured was sought to be enforced. The following language appears in the opinion of the court:
"Appellants’ principal contention upon appeal is that the acts of the McCues looking to the payment of the obligation to Bradbury were entirely insufficient as a legal tender of payment, and that this being so, and plaintiffs being in default under the terms of the trust, Bradbury’s trustees were justified in proceeding with the sale of the property to extinguish the McCues’ obligation. But in this appellants mistake the gist of the action. The action is not based upon the assumption that the tender actually made was a full and complete legal tender, but upon the contention that the acts of the defendant William B. Bradbury, in assenting to the proposed mode of payment, in failing to make objection in any form to the tender as made, and in doing all this in bad faith, to lull the plaintiffs into a fancied security, with the end in view of declaring a forfeiture and forcing a sale of their property-that these acts and this conduct are sufficient to induce a court of equity to relieve against the forfeiture, and to compel defendant Bradbury to accept, in full satisfaction of his demand, the amount due and payable upon the twenty-fourth day of October, which amount the plaintiffs then and ever since have stood ready, willing, and able to pay. It is based upon the equitable principle, often invoked and as often upheld, that equity will refuse to enforce a forfeiture at the instance of one who has obtained the strictly legal right to it by fraud, deceit, or any other form of oppressive practice; and, upon the other hand, will relieve the innocent when such a forfeiture so secured is sought to be enforced."-Citing cases.
See, also, Webb v. Vercoe (Cal. Sup.) 258 P. 1099.
Appellant urges the point that, by reason of a former judgment in an action between the same parties, plaintiffs were estopped, and the instant action was barred. The record herein discloses the fact that shortly after the instant action had been commenced defendant filed an action against plaintiffs. It is conceded by the parties hereto that the allegations contained in the complaint therein were appropriate to either an action for unlawful detainer or in ejectment, or possibly suitable to a suit to quiet title. But, whatever may be the correct classification or name by which the action should be designated, without meaning to imply that in the circumstances an action in unlawful detainer was appropriate, from the fact that by the prayer in the action plaintiffs therein sought the possession only of the property described in the complaint, together with the further fact that, in all the proceedings from the service of notice to terminate tenancy to the judgment therein, the various and sundry summary steps peculiar to actions in unlawful detainer only were utilized by the plaintiffs, it is apparent that, so far at least as the plaintiff therein was concerned, the action was one in unlawful detainer. The authorities are numerous to the effect that, in an action of unlawful detainer, as a general rule, the question of title cannot be determined; the issue being one of possession only. 15 Cal.Jur. p. 855. A judgment in such an action cannot be successfully pleaded in bar in a subsequent action between the same parties to determine the title to the real property involved in the former action. Bekins v. Trull, 69 Cal.App. 40, 230 P. 24, and cases there cited. It is also well settled that neither a counterclaim nor a cross-complaint of any kind is permissible in an action in unlawful detainer. 15 Cal.Jur. p. 865; Arnold v. Krigbaum, 169 Cal. 143, 145, 146 P. 423, Ann. Cas. 1916D, 370; Knight v. Black, 19 Cal.App. 518, 527, 126 P. 512. Assuming that the plaintiff in the former action was bound by the procedure adopted by him, as well as by the allegations of his complaint by which the possession of the property was put in issue and was demanded in the prayer of his complaint, it is at least questionable whether the issue of title to the property could have been litigated or determined in that action, notwithstanding the fact that the issue of title was submitted by defendant and accepted by the plaintiff. If, relative to the title to the property, the trial court would have been powerless to grant affirmative relief to the defendant on the allegations contained in his answer to the complaint, it would seem but reasonable that the same relative situation should prevail with reference to similar relief to the plaintiff, taking into consideration the summary procedure adopted by him under the statutory provisions relating solely to actions in unlawful detainer. In the case of Phillips v. Hagart, 113 Cal. 552, 554, 45 P. 843, 54 Am. St. Rep. 369, it is held (citing authorities) that an allegation of title in himself by defendant in an action in ejectment is but a general denial in an argumentative form. But, if it be admitted that the accepted issues between the parties as finally presented to the court embraced the question of title, and that the action was tried on the theory that the title to the property was necessarily involved, and as a consequence the trial court had jurisdiction to determine such issue, nevertheless it is clear that the nature of that action differs materially from that of the instant action. In the former action, at most, the legal ownership of the property only could have been determined; while the relief sought in the instant action is purely equitable in character, and the judgment establishes the equitable rights of the parties to the controversy.
The case of South San Bernardino L. & I. Co. v. San Bernardino National Bank, 127 Cal. 245, 59 P. 699, like the instant action, was brought for the purpose of enforcing a trust and to compel a conveyance. Defendant pleaded in bar a judgment in a suit to quiet title between the same parties. The court said:
"In an action to quiet title the relief sought in the case at bar could not be obtained. This action, being to enforce a trust and compel a conveyance, proceeds on the theory that the legal title is in the defendant, whereas a suit to quiet title ordinarily proceeds upon a contrary theory, and cannot be maintained against the holder of the legal title. The former judgment is conclusive between the parties only ‘when the same thing under the same title’ is litigated. Code Civ. Proc. § 1908. We think, therefore, that the findings of the court and conclusions of law should have been for plaintiff on the plea in bar. Plaintiff should not be estopped from maintaining an action for relief that he is entitled to on the facts as they exist because he previously mistook his remedy and tried to maintain an action that he never was entitled to. The foregoing views find support in the following cases: Von Drachenfels v. Doolittle, 77 Cal. 295 [19 P. 518]; O’Connor v. Irvine, 74 Cal. 435 [16 P. 236]; Harrigan v. Mowry, 84 Cal. 457 [22 P. 658, 24 P. 48]; Shanahan v. Crampton, 92 Cal. 9 [28 P. 50]."
An action to quiet title is concededly of equitable origin, which is more than may be said of either unlawful detainer or ejectment. If a decree in a suit to quiet title may not be pleaded in bar of a suit to declare a trust, how much less available to a defendant in such action would be a judgment in another action for unlawful detainer, or ejectment! In opposition to such suggestion, however, see the dissenting opinion in Oakland v. Oakland W. F. Co., 118 Cal. 160, 220, 50 P. 277. See, also, Shively v. Eureka T. G. M. Co., 5 Cal.App. 236, 242, 89 P. 1073, and cases there cited.
In the case of O’Connor v. Irvine, 74 Cal. 435, 16 P. 236, the rule is announced that a judgment in an action in ejectment is not a bar to a subsequent action to establish a trust. In the course of the opinion the following language occurs:
"*** An action of ejectment and an action to declare a trust are essentially different. To prevail in the former, the plaintiff must, as against the defendant, be the holder of the legal title, whether such legal title be evidenced by a deraignment from the paramount source of title, or simply by prior possession; but in the latter the whole case depends upon the theory that the legal title is in the defendant. The rule as expressed in the Code (Code Civ. Proc., sec. 1908, subd. 2) is to the effect that a judgment is conclusive between the parties in respect to the matter directly adjudged; and section 1911 provides that ‘that only is deemed to have been adjudged in a former judgment which appears upon its face to have been so adjudged, or which was actually and necessarily included therein, or necessary thereto.’ Equitable rights are not necessarily included in an action of ejectment, and their determination, when not pleaded, is not necessary to a determination of the issues in such action."
A part of the syllabus in Hills v. Sherwood, 48 Cal. 386, is:
"A judgment at law against the defendant in ejectment is not a bar to a bill in equity addressed by the defendants in the ejectment to the equity side of the court, if the relief sought is purely of equitable cognizance."
That fraud was practiced by defendant on plaintiffs, if not conceded, is not seriously questioned. Justice demands that so far as possible the wrong should be righted. While many general authorities may be found in support of a doctrine at variance with the principle announced in the cases to which reference has been had, it is thought that, inasmuch as the latter authorities bear directly on the point at issue, they should control; from which conclusion it follows that the judgment in the former action between the parties was no bar to the instant action.
Appellant complains that the trial court refused to allow the defendant interest on the $2,700 borrowed by plaintiffs from defendant. The promissory note evidencing such indebtedness provided for interest at the rate of 7 per cent. per annum, and this court can perceive no reason why interest on the loan at the agreed rate should not be awarded to defendant from the date of the loan, to wit, April 21, 1921, to the date of the tender of the amount due, to wit, May 6, 1923, which amounts to the sum of $196.88.
Attention is also directed to inaccuracies with reference to the accounting by defendant for certain crops of grapes harvested by him on the property in question. It is undisputed that, according to the evidence, defendant should have received, but was not given, credit for picking 75 tons of grapes at $3 per ton, making a total of $225. Other claims for errors in computation on the part of appellant are offset by errors in his favor. As it appears that the judgment should be modified, it is ordered that all that part thereof beginning with the words "Now, therefore," and ending with the words "transferring the legal title to said real property to the plaintiffs" be, and the same is, stricken out; and in the place and stead thereof the following be inserted as a part of said judgment, to wit:
"Now, therefore, by virtue of the premises, it is ordered, adjudged, and decreed that the defendant, N. Miglietta, holds the legal title to the west one-half of the northwest quarter (N.W.¼ ) of the northwest quarter (N.W.¼ ) of section 12, township 2 south, range 7 west, San Bernardino base and meridian, in the county of San Bernardino, state of California, according to government survey, as a trustee only, for the use and benefit of the plaintiffs, Robert Walter Henderson and Ama Blanche Henderson; that the defendant be, and he is hereby, required to account to the plaintiffs for the value of the grape crops on said land for the years 1922, 1923, and 1924, in the sum of $2,300, and for the value of the grape crop hereafter upon said land so long as the defendant detains the possession of said land from the plaintiffs; that the plaintiffs are required to pay to the defendant the sum of $2,700, the amount of the money loaned by the defendant to the plaintiffs, with interest thereon, amounting to the sum of $196.88, together with the sum of $575 expended by the defendant in the production of the grape crops for the years 1922, 1923, and 1924, or a total sum of $3,471.88, less the item of $2,300 required to be accounted for by the defendant to them, being the sum of $1,171.88. It is further ordered, adjudged, and decreed that the defendant be, and he is hereby, required, directed, and ordered to convey to said plaintiffs the legal title to the west one-half of the northwest quarter (N.W.¼ ) of the northwest quarter (N.W.¼ ) of section 12, township 2 south, range 7 west, San Bernardino base and meridian, in the county of San Bernardino, state of California, according to government survey, upon payment to the defendant of the sum of $1,171.88, and, upon failure of the defendant to make such conveyance upon said payment being made, or tendered, by the plaintiffs to him, the clerk of this court is hereby authorized and directed to act as a commissioner, to execute a conveyance transferring the legal title of said real property to the plaintiffs herein, and the plaintiffs are authorized to pay said sum of $1,171.88 to the clerk of this court, in such event, for the use and benefit of the defendant, and the clerk of this court, in his capacity as such commissioner, is then authorized and directed to execute said conveyance transferring the legal title of said real property to the plaintiffs."
As so modified, it is ordered that the judgment be, and it is, affirmed; each party to bear his own costs of the appeal.
We concur: CONREY, P. J.; YORK, J.