Greenberg v. Du Bain Realty Corp.
42 P.2d 628
Cal.
1935
Check Treatment
WASTE, C. J.

Plаintiff bought two lots from defendant corporation Du Bain Realty Corp., through Stoll and Boyd, salesmen for the realty corporation, agent for Ambassador Park Syndicate, in 1923. According to his complaint, he did and performed everything of him rеquired to be done under and in pursuance of the terms of the agreement and contract for the purchase of the lots, and was not in default. *629 He gave notice of rescission in February, 1932, and brought this action upon refusal of the defendants to restore his money. The trial court sustained a demurrer to the third amended complaint, and the District Court of Appeal affirmed the ‍‌​​‌​​​​‌​‌‌‌‌‌​​​​​​​‌​‌​​​​‌‌​‌‌‌​‌​‌‌‌‌‌​​‌​‌‍judgment enterеd thereon for defendants. It held that plaintiff’s claim of fraudulent representations of the agent is not tenable in view of a stipulation in the contract еntered into limiting the agent’s authority, under the doctrine of Gridley v. Tilson, 202 Cal. 748 [262 Pac. 322] ; and also that plaintiff’s right tо rescind was barred by laches and by the statute of limitations.

The case was tаken over by this court in order ‍‌​​‌​​​​‌​‌‌‌‌‌​​​​​​​‌​‌​​​​‌‌​‌‌‌​‌​‌‌‌‌‌​​‌​‌‍to eliminate the language dealing with the Gridley v. Tilson rule, which is nоw limited, in view of the decisions of this court in Speck v. Wylie, 1 Cal. (2d) 625 [36 Pac. (2d) 618, 95 A. L. R. 760], and Lozier v. Janss Investment Co., 1 Cal. (2d) 666 [36 Pac. (2d) 620], which were handed down after the oрinion in this case was filed by the District Court of Appeal. In these later cases the rule is now firmly-established that a rescission of contract may be had against even an innocent principal because of unauthorized misrepresentations by his agent, even though ‍‌​​‌​​​​‌​‌‌‌‌‌​​​​​​​‌​‌​​​​‌‌​‌‌‌​‌​‌‌‌‌‌​​‌​‌‍the rescinding party had notice of the agent’s lack of authority. In those decisions, we endeavored to, and believe we did, make it clear that the basis for our conclusion is the equitable rule against unjust enrichment. As stated by the author of the concurring opinion in the Wylie case: ‘ ‘ The rule proceeds upon the theory that an innocent princiрal so contracting may not be permitted to enrich himself by reason of his agent’s fraud, and that any property received by such principal is held by him as а constructive trustee for the person defrauded.” We are therefore of the view that the claim of plaintiff may be maintained.

Plaintiff bought the lots in 1923, while in' California. He paid something down on the purchase price, and began making periodical payments on the balance. Between October 8, 1923, and October 7, 1931, he paid in all the amount of $3,372.56. Plaintiff lived in New York, and during the period ‍‌​​‌​​​​‌​‌‌‌‌‌​​​​​​​‌​‌​​​​‌‌​‌‌‌​‌​‌‌‌‌‌​​‌​‌‍оf making his payments he wrote to defendants asking them to install the improvements rеpresented by them as part of the consideration for the purchase by him of the lots. The replies of the defendants led plaintiff to believe they wоuld do so, and he continued to make payments on *630 the purchase priсe of the lots. Shortly after making the agreement for the purchase of thе lots, plaintiff left California for his home in New York, and did not return to California until October, 1931. He thereupon inspected the property and found the promisеd improvements had not been made. After negotiations as to the cause of the failure to install the improvements set forth in the contracts and prоspectus of the tract, the plaintiff, on February 9, 1932, in writing, notified defendants of the rеscission by him of the contract of purchase, and tendered everything of vаlue he had received in the transaction, together with a quitclaim deed оf the property from himself to Ambassador Park Syndicate, owner of the traсt, and demanded from defendants the total amount, $3,372.56, paid by him. The defendants refused the tender, and declined to pay the money. This action was commenced on February 10th, the day follow-, ing the rescission.

In our estimation, the action wаs not barred either ‍‌​​‌​​​​‌​‌‌‌‌‌​​​​​​​‌​‌​​​​‌‌​‌‌‌​‌​‌‌‌‌‌​​‌​‌‍by laches or by the statute of limitations.

The judgment is therefore reversed. The cause is remanded to the trial court with directions to ovеrrule the demurrer, permit the defendants to answer, and proceed with the trial of the cause.

Preston, J., Curtis, J., Langdon, J., and Seawell, J., concurred.

Rehearing denied.