Court Opinion

ID: 5448162
Source: CourtListenerOpinion
Date Created: 2022-01-08 18:14:36.759409+00
Date Added: 2024-06-11T08:32:16.611335
License: Public Domain

McFarland, J., dissenting.
I dissent, and adhere to the opinion delivered in Department. (Blood v. La Serena Land etc. Co., infra.) Section 2310 of the Civil *231Code must be construed, and has always been construed* by this court, in connection with the principle declared in section * 1589, that “a voluntary acceptance of the benefit of a transaction is equivalent to a consent to all the obligations arising from it, so far as the facts are known, or ought to be known, to the person accepting”; and in section 2311, that “ ratification of part of an indivisible transaction is a ratification of the whole.” Of course, there is a certain distinction between ratification and estoppel in pais; that is, the word “ estoppel ” applies to certain acts and conditions to which the word “ ratification ” could not be appropriately applied, and vice versa. Strictly speaking, estoppel is where a man is bound by his own act, and ratification where he is bound by his acceptance of the act of another. The common example of estoppel, where the owner of property stands by and sees it sold without disclosing his title, could not well be designated as ratification; and so when a man consents to, and indorses, the unauthorized contract of his agent by accepting the benefits of the contract, and acting upon it as if it had been authorized, the proper designation of such conduct is ratification and not estoppel, although the latter term is sometimes applied to it. But, whether it be called estoppel or ratification, it binds the person thus indorsing the agent, whether such person be a natural one or a corporation. This is the well established doctrine. (See Gribble v. Columbus Brewing Co., 100 Cal. 67, and cases there cited.) That the evidence in the case at bar showed such consenting and indorsing conduct on the part of the appellant is beyond question; and, in my opinion, the, judge of the court below properly found it to be “ ratification.” If he had called it by the less appropriate name of “estoppel” it would have meant, under the circumstances of this case, exactly the same thing. And if, under the construction given to section 2310, there can be no valid ratification by conduct or acts in pais of a contract which should have been originally in writing, then, *232surely, such attempted ratification cannot be made good by calling it estoppel.
In my opinion the judgment should be affirmed.
The following is the opinion of Department One, rendered on the 27th of September, 1895, and adhered to in the dissenting opinion of Mr. Justice McFarland.
Britt, C.
Foreclosure of mortgage. Defendant is a corporation. The complaint, filed May 24,1892, was in the usual form, alleging with other matters that defendant made its promissory note to plaintiff on August 30, 1887, for the sum of fifty-two thousand five hundred dollars, besides interest, due one year from date, and, at the same time, to secure payment of the note, executed to plaintiff a mortgage of certain lands in Santa Barbara county. The note and mortgage were subscribed with the name of the defendant by its president and secretary, and both bore the impress of a seal purporting to be that of the corporation. The only defense made by the answer was that the defendant never authorized the execution of the note and mortgage. De-fendant filed a cross-complaint stating, among other things, that about September 1,1887, plaintiff conveyed to defendant by deed the premises described in the mortgage, and that, as part of the consideration therefor, said note and mortgage were delivered to plaintiff without the authority or consent of defendant, and that it was not privy to the purchase of the land; that defendant never appropriated to itself the use of the land or the profits thereof; that defendant’s board of directors, at a meeting held May 26, 1892, passed a resolution reciting that the purchase of said land—called the “Blood ranch”—and the execution of said note and mortgage were never authorized by the defendant, and directing the president of the company to make in its name and tender to plaintiff a reconveyance of the land, excepting a small parcel previously conveyed by defendant, in conjunction with plaintiff, to one Thompson; that such a deed was so made and tendered to plain*233tiff on May 31, 1892, and by him. rejected; upon this cross-complaint defendant prayed that the note and mortgage be declared void. The court sustained a demurrer to the cross-complaint, and the correctness of its action in that regard is not impugned; we state the matters there alleged merely to illustrate the subsequent history of the case.
It is disclosed by the record that the plaintiff was the owner of the land—about three hundred and fifty acres —in the year 1887, and authorized his nephew, also named James A. Blood, a real estate broker, to make sale of the same at the price of one hundred and five thousand dollars, agreeing to pay him a commission of five thousand dollars, contingent upon his effecting a sale. The broker associated several other persons with himself, and they formed, in August, 1887, the defendant corporation for the purpose of buying plaintiff’s land; said broker conducted the negotiation with plaintiff on behalf of the promoters of the corporation, and the terms of the purchase were substantially settled before August 29, 1887, at which time officers of the corporation were elected, said broker becoming its secretary and a member of its board of directors. Plaintiff executed a deed of the land to defendant, and, at the same time, received (but from whose hands does not clearly appear) the said note and mortgage as security for the deferred or second payment of one-half the agreed purchase price, the first payment being made partly in cash—about thirty-seven thousand five hundred dollars —paid by the subscribers to defendant’s stock, and partly in such stock itself. There was no resolution of defendant’s board of directors authorizing the purchase of the land, or the issuance of the note and mortgage, nor was the seal affixed thereto ever adopted as the corporate seal by any direct action of the board for that purpose. Plaintiff’s deed to defendant bore the same date as the mortgage—August 30, 1887, but they were not, in fact, exchanged until about September 15th, following.
*234Shortly afterward the defendant took possession of the land, and its board of directors by resolution authorized the survey and subdivision of the same into lots, blocks, and streets, and fixed prices at which subdivisions might be sold; the board also ordered the letting of parcels of the land for temporary purposes, and in September, 1888, passed a resolution directing the execution of a deed to plaintiff of eight and one-fourth acres thereof at the price of three thousand seven hundred and fifty dollars, and in February, 1890, in the same manner, authorized the conveyance of a parcel—apparently about fifteen acres—to one Thompson; deeds were executed pursuant to such resolutions; in the conveyance to Thompson plaintiff joined; the defendant caused portions of the land to be cultivated and took the proceeds of the crops grown thereon in the year 1888; it also caused to be cut some trees growing on the land, and through its board of directors and officers exercised many other acts of ownership not necessary to be detailed. All the proceeds of said sales of land, as well as the net receipts from sales of crop, were paid over by defendant to plaintiff on the note in suit. In April, 1889, the board of directors passed a resolution reciting that “owing to the great depression in real estate it is impossible to sell our La Serena property [covered by the mortgage], either in whole or part,” and requesting plaintiff to accept the proceeds of the ranch in lieu of interest on the company’s indebtedness to him., and to assume the management of the ranch; such proposal was acceded to by plaintiff, and was carried into effect.
The trial was had in November, 1892, the evidence closing on the twenty-third day of that month; said real estate broker was a witness, and, incidentally to the main purposes of his examination, gave testimony of his agency to sell the land, and of his interest in effecting the sale. On May 12, 1893, the court announced orally its decision in favor of plaintiff, and on May 25tli following, before the findings were signed, defendant applied for leave to amend its answer by adding a de*235fense thereto based on the circumstances of the dual agency of the broker and his interest in making the sale, which matters, it was alleged, were unknown to the subscribers for the company’s stock. It was stated in an affidavit accompanying the motion for leave to amend that knowledge of the facts averred in the proposed amendment was first obtained by defendant from said testimony of the broker at the trial. Such amendment contained no allegations looking to a rescission of the contract, nor any reference to the offer to reconvey the land to plaintiff, as in the cross-complaint to which a demurrer had been sustained. The court refused leave to amend, and judgment passed for plaintiff, with provision for execution generally in case of deficiency after sale of the premises.
1. For the purposes of the decision it may bé assumed, in accordance witli the contention of appellant, that the corporation was not originally privy to the purchase of the land from plaintiff, and that the instruments in suit purporting to be its obligations were originally executed without its authority. But it is manifest—leaving out of view for the moment the effect of the broker’s double agency—that the corporation adopted as its own the whole transaction with plaintiff, of which the execution of the note and mortgage was an inseparable part. Defendant, acting through its board of directors and officers, and they having full knowledge of the terms of the mortgage, took possession of the land, surveyed and platted it, cultivated it, took its rents and profits, sold and conveyed some of it, and offered to sell the remainder; and, in all respects, conducted itself as the absolute owner thereof, subject only to the encumbrance of the mortgage. The facts that the proceeds of sale of portions of the land, and of produce grown thereon, were all paid over to plaintiff for application on the indebtedness in question, and that after April 23, 1889, the1 entire profits of the land were delivered to him in lieu of interest, cut no figure in the case, so far as we see,' except to show defendant’s knowledge of the debt and *236recognition of its liability thereon. With the assent of defendant, signified in the manner we have stated, the title to plaintiff’s land passed to defendant, and the contract of sale thus became fully executed; obviously defendant could not take the land in virtue of the contract made in its name and repudiate the obligation to pay therefor imposed by the same contract. (Civ. Code, secs. 1589, 2311.) The principle declared in section 2310 of the same code, illustrated by Salfield v. Sutter County etc. Co., 94 Cal. 546, and invoked by appellant, has no application to this case. (Borel v. Rollins, 30 Cal. 419; Rogers v. New York etc. Co., 134 N. Y. 211; Gribble v. Columbus Brewing Co., 100 Cal. 72, and cases cited; Fraser v. Bridge Co., 103 Cal. 79; 1 Morawetz on Corporations, secs. 548, 549.) Appellant argues that the ratification or adoption of the contract by defendant cannot be considered because not alleged in the complaint; but we understand the rule to be that it is sufficient in such cases to aver that the contract was made by defendant without describing the processes by which it was made. (Goetz v. Goldbaum (Cal.), 37 Pac. Rep. 646.)
2. That a broker cannot represent both parties to a contract of sale in which discretion, judgment, and skill are to be exercised by him, unless they have knowledge of his double capacity and consent to be so represented, and that a party led unwittingly into a contract by means of such double agency may avoid the contract by methods suitable to the circumstances of the case, are propositions not to be denied. (Empire State Ins. Co. v. American Cent. Ins. Co., 138 N. Y. 446, and cases cited; Cassard v. Hinman, 6 Bosw. 8; Hunsaker v. Sturgis, 29 Cal. 142; Davis v. Rock Creek Co., 55 Cal. 359.) In this case the real estate broker, as a promoter of the corporation, occupied a relation of trust to the subscribers for the stock, and to the corporation itself. (Burbank v. Dennis, 101 Cal. 100.) If he failed to disclose to his associates his agency for the plaintiff, and his interest in effecting the sale, and if he was charged with any duty in their behalf beyond merely communicating to *237plaintiff their determination in the matter reached independently of his suggestion or influence, then his conduct in negotiating the purchase as their agent also was a fraud upon them. (Civ. Code, secs. 2230-34.) But fraud as a defense to an action on contract is “ new matter,” which must be pleaded, and cannot be given in evidence under a mere denial of the execution of the contract. (Boone on Code Pleading, secs. 66, 67, 148; Gushee v. Leavitt, 5 Cal. 160; Capuro v. Builders’ Ins. Co., 39 Cal. 123; Wetherly v. Straus, 93 Cal. 283.) In the present instance, defendant made no attempt at defense on the ground that fraud had infected the transaction with plaintiff until more than six months after the trial, where the facts constituting the alleged fraud were divulged, and after the court had ordered judgment for plaintiff. We are therefore of opinion that, even if defendant had once the right to assail the contract because of the agency of said broker to sell as well as to purchase the land, the right was waived by failure to assert it; and that, under the circumstances appearing, the court did not abuse its discretion in refusing to allow an amendment to the answer setting up the alleged fraud.
3. But it is said that the fact that the broker represented both parties to the transaction for the sale of the land was a matter unknown to defendant at the time of its proceedings evincive of adoption and ratification of the contract with plaintiff, and hence the effect of those proceedings as confirmatory of the contract is nullified. (Civ. Code, sec. 2314.) That section provides that “ a ratification may be rescinded when made without such consent as is required in a contract, or with an imperfect knowledge of the material facts of the transaction ratified, but not otherwise.” Now, if it were conceded, as we do not concede, that defendant could obtain a rescission without some appropriate pleading showing the ground therefor, and that it had taken the steps necessary to give it the right to rescind, yet we think the evidence before us does not bring defendant’s case *238within the scope of said section 2314; it does not show but that all the promoters of the corporation, and the corporation itself, after it was organized, had full knowledge of the broker’s relation to the plaintiff and interest in bringing about a sale; or that the price and terms of sale were not fixed by those connected with him in the purchase without his intervention, so that he had no discretion to exercise for their benefit, and was a mere mouthpiece to communicate to plaintiff the result of their deliberations. (See Empire etc, Co. v. American etc. Co., 138 N. Y. 449.) Since defendant seeks to avoid the effect of an active affirmance of the contract with plaintiff during a period of several years, we think it had the burden of proof to show at least ignorance or imperfect knowledge of matters which might have influenced its conduct, and we also think that it failed to sustain such burden; this aside from the question of the necessity to plead the alleged defense. We find no substantial error in the record.
The judgment and order should be affirmed.