Court Opinion

ID: 9624299
Source: CourtListenerOpinion
Date Created: 2023-08-22 06:57:32.787313+00
Date Added: 2024-06-11T11:44:40.034011
License: Public Domain

MOSK, J.
I dissent.
This is not a suit upon a secured debt, but a suit to prevent security from being impaired. (Mills v. Brown (1928) 205 Cal. 38 [269 P. 636].) The deed of trust signed by the defendant provided he was “to protect the security.” Specifically he agreed “ (1) To keep said property in good condition and repair, ... to complete or restore promptly and in good and workmanlike manner any building which may be constructed, damaged or destroyed thereon. . . .” (Italics added.)
To permit the defendant to appropriate to his own use a cash fund a part or all of which he received because third parties “constructed, damaged or destroyed” the building which constituted the security does violence to the intent of the foregoing trust deed provision. The defendant had a clear duty to restore promptly the building to good condition. Since he received funds and has failed to use them for the agreed purpose, it is not inappropriate to impress the funds with a lien or trust (Civ. Code, § 2224).
It is true that we do not now know, nor does plaintiff, how much of the settlement between defendant and the Sheridans was attributable to damage to the security property and how much was for the Sheridans ’ tortious conduct in the nature of fraud and deceit. But it must be remembered that this ease was decided at the pleading stage. The plaintiff alleged that defendant sued the Sheridans for damage to the land and improvements and subsequently settled the claim; the demurrer admits the allegations. Despite this admission that defend*618ant received money for damage to the security, the plaintiff was not permitted to maintain his prima facie cause of action and then to ascertain, through defendant’s answer, discovery and ultimate trial, the precise nature of the settlement.
The court below apparently examined the complaint in the defendant’s suit against the Sheridans and concluded that it sounded exclusively in tort. However, the court failed to consider the pretrial contentions, in which defendant demanded of the Sheridans not merely the sums he had himself expended, but the full purchase price of $122,500, including the $85,000 borrowed from plaintiff company. As to the $85,000 or any part thereof ultimately recovered, it seems irrefutably clear that the defendant would necessarily be a constructive trustee for plaintiff. The Sheridans in their pretrial statement maintained that the $85,000 loan be excluded from the damage claim against them. In that manner the issues were joined and subsequently settled.
Nevertheless the defendant has insisted that his action against the Sheridans was merely for a personal tort and unrelated to property damage to the security. I find it of particular relevance that the defendant sought as damages in his prayer in that prior lawsuit the exact amount of the purchase price. It would be a remarkable coincidence if damage for fraud and deceit he purportedly suffered equalled to the penny the value of the security property. Thus even beyond the technical admission of facts alleged in the complaint which a demurrer is deemed to be, a conclusion is inescapable that some part of the defendant’s settlement with the Sheridans was attributable to damage to the security property. In that event, as stated in Los Angeles Trust & Sav. Bank v. Bortenstein (1920) 47 Cal.App. 421, 424 [190 P. 850], the money “takes the place of the reduced value of the land’’ and is subject to a constructive trust.
Although the majority hint some future action might lie, for the present they permit the defendant to effectively escape his responsibility to the plaintiff to keep the security intact, and they allow him to retain the entire fund received from the third parties some part of which was obtained because of damage to the security. This is unjust enrichment.
The complaint stated a cause of action. It was error to sustain the demurrer without leave to amend. I would reverse the judgment.
Appellant’s petition for a rehearing was denied June 26, 1968. Mosk, J., was of the opinion that the petition should be granted.