Babcock v. Berkson

SHINN, P. J.

Plaintiff brought this action for rescission of an exchange of real properties, for cancellation of deeds, a bill of sale and a promissory note, and for damages for alleged fraud. Defendant Harry Berkson filed a cross-complaint seeking damages for the alleged fraud of plaintiff in the exchange. In a trial to the court the action was dismissed as to all defendants except Harry Berkson, and findings were in his favor on the complaint and against him on his cross-complaint. Plaintiff appeals.

[712]

The complaint alleged that in January, 1950, plaintiff owned real and personal property of the value of $55,000, located in the mountainous region of San Bernardino County, with improvements thereon consisting of the equipment of an apple orchard and also a hotel of 13 furnished rooms, together with other structures. Defendant Berkson was the owner of a hotel property located at 1120 South Grand Avenue in Los Angeles. The property was encumbered by a trust deed with an unpaid balance of $58,791.97, payable at the rate of $600 per month including interest, and another trust deed in the sum of $15,678.59, payable $200 per month, including interest. Defendants Ed Chapin and W. F. Bonner were real estate brokers in the employ of Berkson. Pauline Hastings was an employee of defendant Thomas, a real estate broker. All the defendants were charged with fraud in bringing about an exchange of plaintiff’s property for that of Berkson. The exchange was consummated on or about February 8, 1950. There was an exchange of possession and on March 23, 1950, plaintiff gave notice of rescission. Before the time of trial plaintiff defaulted in payments on the encumbrances and lost the hotel property through foreclosure.

The complaint alleged that defendants Berkson and Chapin made the following representations, all of which were alleged to have been false and made, with intent to deceive plaintiff: (1) That the income from Berkson’s hotel for January, 1950, was $2,750, when it was no more than $2,140; (2) that for several years prior to January 1,1950, the hotel actually averaged income of $93 per day; (3) that the rents received in 1948 amounted to $30,000 gross; (4) that there had been a net profit of $650 a month for the past two years and that such condition would continue in the future; (5) that the hotel was in excellent and first class condition, but that there were large areas of dry rot covered up beyond recognition on cursory examination; (6) that there was plenty of linen and a sufficient number of usable blankets and sheets, whereas, most of the blankets were old, burned and torn, and the sheets, which were in insufficient number, were in almost unusable condition; (7) that the hotel would make plaintiff a net profit of over $7,000 per year; (8) that the lot on which the hotel stood had recently been appraised at $80,000; (9) that Berkson represented there were no vacancies in the hotel, whereas there were many vacancies; and (10) that all the rooms and apartments were in excellent condition and were in the same condition as one or two rooms that were shown