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McCarthy v. Tally

Court of Appeals of California
Nov 14, 1955
289 P.2d 589 (Cal. Ct. App. 1955)

Opinion

11-14-1955

Harold McCARTHY, Plaintiff, Appellant and Respondent, * v. Thomas Seymour TALLY, Defendant, Appellant and Respondent. Civ. 5041, 5042.

Combs & Hoose, Beverly Hills, for plaintiff and appellant. Wilson & Wilson, San Bernardino, for defendant and appellant.


Harold McCARTHY, Plaintiff, Appellant and Respondent, *
v.
Thomas Seymour TALLY, Defendant, Appellant and Respondent.

Nov. 14, 1955.
Rehearing Denied Dec. 14, 1955.
Hearing Granted Jan. 5, 1956.

Combs & Hoose, Beverly Hills, for plaintiff and appellant.

Wilson & Wilson, San Bernardino, for defendant and appellant.

MUSSELL, Justice.

On July 17, 1944, T. L. Tally and Thomas Seymour Tally, as lessors, and plaintiff Harold McCarthy and his wife, Barbara, as lessees, executed an agreement in writing by which the Tallys leased to the McCarthys certain real and personal property in the San Bernardino mountains, known as the 'Glenn Ranch'. The lease was for a term of ten years, at an annual rental of $10,000 and provided for the continuance of the operation of a hotel and recreation resort then being operated on the premises by the lessors.

The lessees entered into possession on August 1, 1944, and operated the business and paid the rent to October 31, 1950. On or about November 28, 1950, McCarthy was served by Tally with a notice to pay rent or vacate the premises and on or about December 1, 1950, McCarthy served Thomas Seymour Tally with a notice that he, McCarthy, had vacated and surrendered the property referred to in the notice of November 28th and that he was delivering possession to Tally. McCarthy moved most of his property from the premises and on January 4, 1951, a receiver was appointed to take charge of the business and the ranch.

On October 26, 1948, plaintiff McCarthy (who had acquired the interest of his co-lessee wife upon her death) instituted an action (our number 4th Civil 5041) against the defendant Thomas Seymour Tally (who had acquired the interest of his co-lessor father, T. L. Tally, upon the death of the latter) by which McCarthy sought (1) A declaratory judgment interpreting some of the provisions of the lease; and (2) A judgment for $100,000 as damages based upon the contention that certain false statements had been made by the lessor to induce the execution of the lease by the lessees.

On January 4, 1951, Tally commenced an action (our number 4th Civil 5042) against McCarthy seeking therein (1) A judgment terminating the lease and the right of McCarthy thereunder; (2) A judgment that he was entitled to possession of the premises and requiring McCarthy and his sublessees to vacate and deliver up possession; (3) The appointment of a receiver pendente lite; and (4) A judgment against McCarthy for damages on account of nonpayment of rent and taxes, liquidated damages in the sum of $10,000 and general damages. Both actions were consolidated for trial and separate findings and judgments were entered in each case.

In the first action (number 5041) the trial court rendered judgment that plaintiff have and recover nothing from the defendant except that plaintiff have and recover judgment against the defendant for the return of $10,000 deposited by plaintiff in the Citizens National Bank of Riverside (this sum was deposited by plaintiff under the liquidated damage provisions of the lease, paragraph 28). Plaintiff McCarthy appealed from the portion of the judgment that he recover nothing in his action for fraud and Tally appealed from that part of the judgment providing for the return of the said $10,000 deposit to plaintiff.

In the second action (number 5042) the trial court rendered judgment that the lease was terminated December 5, 1950; that McCarthy abandoned the property on December 5, 1950; that Tally has been entitled to the possession of the premises since that date; that McCarthy is entitled to remove certain personal property from the premises; that plaintiff Tally recover judgment against the defendant for $1,414.14 on account of unpaid rental and taxes and the further sum of $2,000 as attorney fees; that plaintiff is not entitled to recover any sum as liquidated damages; that the cross-complainant McCarthy is not entitled to recover judgment against plaintiff except the right to recover certain personal property; that plaintiff is entitled to recover costs and charges of the receiver; and that McCarthy is entitled to an offset in the amount of $821.32. McCarthy appealed from the whole of this judgment and Tally appealed from the part thereof which provides that he is not entitled to any sum as liquidated damages.

In his appeal in the first action McCarthy contends that Tally made material representations respecting the amount of income from the lease property and the 'good going condition of the premises'; that these representations were false, were acted upon by McCarthy and were knowingly made by Tally with the intent to induce McCarthy to enter into the lease involved.

There is a sharp conflict in the evidence respecting the statements made by Tally. McCarthy and witness C. C. Vogl testified that Tally told McCarthy prior to the execution of the lease that the ranch earned $27,000 net the previous year. In his complaint McCarthy alleged that Tally and his wife represented that in the preceding years the ranch had produced an average of $27,000 net income per year. This allegation and the asserted statements were denied and Tally testified that he made no such statements; that the only statement he made in this connection was 'The fact that the year in which they were taking it over, it would possibly do that much, as compared with the previous year, because as the season started it was showing such an increase over the previous year that we expected it to better $27,000'; that the maximum income he ever made on the ranch was about $22,000 the previous year.

In connection with the alleged representations regarding the condition of the leased premises, McCarthy testified that defendant Tally and his wife represented that 'the property was in excellent condition', 'the property was in good condition', 'everything was in such good condition', 'it is in good condition', and 'the property was in wonderful condition'. Defendant Tally testified that he informed the lessees that the ranch was 'in good operating condition' and there is substantial evidence that at the time of the negotiations which culminated in the signing of the lease the resort had enjoyed its most successful year, a condition which prevailed after the lessees took possession on August 1, 1944. On that date the ranch was in full operation, the place was full of guests and reservations had been made for August and September of that year. The ranch property had been operated for many years and several of the buildings were very old, as McCarthy well knew. The personal property had been used in the operation of the business. Under the circumstances shown by the record there is substantial evidence to support the trial court's finding was in 'good operating condition' and that was in 'good operaing condition' and that such statement was true.

Plaintiff's allegations that he relied upon the statements of defendant, believing them to be true, and acting upon them, accepted and undertook the lease and its terms and obligations, were denied and the court found them to be untrue. This finding is also supported by substantial evidence. The lease contains the following provision: 'That said lessees have inspected parcels 1, 2 and 3, and know and accept the same in their present condition.' While, as contended by plaintiff, evidence of fraud may be received and considered notwithstanding provisions in the contract where the material facts are accessible to the vendor only, Rothstein v. Janss Investment Corp., 45 Cal.App.2d 64, 113 P.2d 465, the statement in the lease is an admission that plaintiff inspected the property and the evidence shows that Tally refused to sign a lease containing a clause that McCarthy relied on his statements only and insisted that McCarthy visit and inspect the property.

McCarthy testified that he and his wife did inspect the property and were familiar with it; that he visited the ranch four or five times in 1943 and that his wife visited it at least once a week during that year; that he might have visited the ranch twice in 1944 and his wife might have been there quite often. There is evidence in the record that when the parties were having the lease drawn up in an attorney's office, McCarthy asked Tally if everything was in good condition and Tally replied that they were running the place as it had been run the previous year and that so far as he knew, it was in good condition; that the attorney then suggested to McCarthy that if there was any doubt in his mind about the condition of the premises being such as he desired the condition to be, that he should go and look the place over, if he had not already done so, and determine for himself whether he was willing to accept the premises as they were and this McCarthy said he would do. The record also shows that McCarthy took possession on August 1, 1944, and operated the business until October 26, 1948, before filing his action. Where, as here, the findings relative to the statements made by Tally are supported by substantial evidence, they are conclusive on appeal and it is not our province to analyze conflicts in the evidence. As is said in Berniker v. Berniker, 30 Cal.2d 439, 444, 182 P.2d 557, 561: 'As has so frequently been said, it is the general rule that on appeal 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.'

Appellant Tally contends that the provision in the lease for liquidated damages is valid as a matter of law and that the court erred in rendering judgment that McCarthy was entitled to the return of the sum of $10,000 deposited by him under paragraph 28 of the lease. That paragraph and the one following, are as follows: '(28) That it is and will be impracticable and extremely difficult to fix the actual damages to said Parcel Four in the event of termination of this lease by the lessors for cause, or by reason of abandonment of the demised property by the lessees, and that the sum of $10,000.00 shall be and said sum is hereby fixed as the amount of the liquidated damages in the event of such termination of such abandonment; that said lessees have this day executed to the lessors a demand note for $10,000.00 secured by a deed of trust upon real property in Riverside County, California, to evidence and secure the payment of such liquidated damages; that said lessees may at any time deposit with the lessors the sum of $10,000.00 in lieu of said note and deed of trust; 'That in the event said lessors successfully prosecute proceedings to terminate this lease for cause, the Court may, in addition to actual damages by reason of loss with respect of Parcels One, Two and Three, award to said lessors liquidated damages in the sum of $10,000.00 by reason of loss with respect of Parcel Four; 'That in the event said lessees abandon and give up possession of said demised property to the lessors, said lessees shall be liable to the lessors for actual damages by reason of loss with respect to Parcels One, Two and Three, plus liquidated damages in the sum of $10,000.00 by reason of loss with respect to Parcel Four; 'That in the event of such termination or such abandonment, the liquidated damages aforesaid shall be paid to the lessors from said deposit or from the proceeds derived from a sale under said Deed of Trust; that the payment of actual and liquidated damages, as aforesaid, shall fully satisfy all obligations of lessees under and by virtue of the provisions hereof.' '(29) That default shall not be deemed to have occurred with respect to any of the terms, covenants and conditions herein set forth, other than the payment of the aforesaid installments of rental, unless the lessees, within ten days after written notice of the nature of the asserted breach, shall have failed to cure such breach.'

It is evident from the reading of these provisions of the lease that the liquidated damage clause of the lease relates to parcel four, which is described in the instrument as follows: 'The said business and the goodwill thereof, and the right to the use of the trade name of Glenn Ranch.' In this connection the court found, in action number 5042, 'That there was no evidence establishing any damage to or loss of good will', and on the basis of this finding, it was adjudged that plaintiff Tally is not entitled to recover any sum as liquidated damages. The record shows there was no evidence establishing any damage to or loss of good will, and as is said in Kelly v. McDonald, 98 Cal.App. 121, 125, 276 P. 404, 406: 'While the term 'liquidated damages' does imply that the parties have ascertained and agreed upon a sum which they assume will adequately compensate for a breach of the contract, this does not necessarily mean that the amount specified must be paid whether damages result from the breach or not. The very term of 'damages' contemplates an injury sustained or detriment resulting from the breach of a contract or the nonperformance of a duty. As the court says in Starr v. Lee, supra: 'We find authorities holding that recovery cannot be had when the evidence shows that no damage at all resulted from the breach.' The exception to the general rule to the effect that the predetermined amount of damages for the breach of an obligation is void, as that exception is expressed in section 1671 of the Civil Code does not purport to declare that an amount of liquidated damages agreed upon shall be conclusively presumed to be the exact figure which will adequately compensate for the breach of contract. This section merely asserts that it is 'presumed to be the amount of damages sustained.' This presumption may be rebutted by proof that no detriment whatever resulted from the breach.'

The evidence shows that on or about November 29, 1950, Tally served a written notice and demand on McCarthy that he pay the rent on the premises or vacate, surrender up and deliver possession to Tally, and on December 1, 1950, McCarthy notified Tally in writing that he had vacated the premises in accordance with said notice of November 29, 1950. It appears from the notice served by Tally that he was terminating the lease solely for nonpayment of rent and not for other defaults in the performance of the lease agreement. In Rez v. Summers, 34 Cal.App. 527, 529, 168 P. 156, it is held that when a tenant fails to pay rent as provided in the lease, the amount of damage is not extremely difficult to fix, and it is not impracticable to fix the amount of such damage. In 15 Cal.Jur.2d, Damages, sec. 217, it is said that 'Since there is no presumption that the amount of damages which may result from a tenant's breach of a covenant to pay rent is impossible or extremely difficult to fix, a provision for payment of liquidated damages in the event of such a breach is void.' In Olson v. Biola Co-op. Raisin Growers Ass'n, 33 Cal.2d 664, 668, 204 P.2d 10, 12, 12 A.L.R.2d 112, the rule is stated that: '* * * a contract which undertakes to fix the amount of damages in anticipation of a breach of an obligation is void to that extent, Civil Code, sec. 1670, except 'when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage.' Civil Code, sec. 1671. Accordingly, it is held that a party relying on a liquidated damage clause in a contract must plead and prove the facts validating his right to recover such predetermined amount.'

In Rice v. Schmid, 18 Cal.2d 382, 385, 115 P.2d 498, 499, 138 A.L.R. 589, it is held that: 'It is a question of fact in each instance whether the nature of the case is such that it would be impracticable or extremely difficult to fix the actual damage.'

In the instant case the court found, in action number 5042, 'That by reason of the breaches by said defendant McCarthy of his covenants in said lease, other than payment of rental and taxes, as set forth in paragraphs IX and X of said first cause of action, the plaintiff was not damaged in any sum whatever. We cannot hold as a matter of law that this finding is unsupported by the record.'

Appellant McCarthy argues that there were numerous inconsistencies in the findings and that most of them are not supported by the evidence. However, where as here, the probative and ultimate facts found properly and completely dispose of the material issues and support the judgments, the failure to find on the other issues and immaterial inconsistencies in the findings do not constitute reversible error. Chester R. Ryle Co. v. Fossler, 200 Cal. 204, 209, 252 P. 599.

Appellant McCarthy argues that the receiver was wrongully appointed and that the trial court wrongfully determined costs and charges of said receiver in action number 5042. The record shows that the receiver was appointed January 4, 1951, and that no appeal was taken from the order of his appointment and it became final. Under the circumstances shown by the record the order appointing the receiver may not be reviewed on appeal from the judgment. Weygandt v. Larson, 130 Cal.App. 304, 310, 19 P.2d 852; 22 Cal.Jur. 476, Sec. 61.

In view of what we have here said it is unnecessary to pass upon other points raised in the appeals.

The judgments are affirmed. Each party to bear his own costs on appeal.

BARNARD, P. J., and GRIFFIN, J., concur. --------------- * Opinion vacated 297 P.2d 981.


Summaries of

McCarthy v. Tally

Court of Appeals of California
Nov 14, 1955
289 P.2d 589 (Cal. Ct. App. 1955)
Case details for

McCarthy v. Tally

Case Details

Full title:Harold McCARTHY, Plaintiff, Appellant and Respondent, * v. Thomas Seymour…

Court:Court of Appeals of California

Date published: Nov 14, 1955

Citations

289 P.2d 589 (Cal. Ct. App. 1955)