Hjorth v. Bernstein

CONWAY, J.,

pro tem.

Plaintiffs commenced an action against defendants for rescission of a contract for the purchase of an oil royalty upon the ground of fraud, and in a second count of the complaint alleged a cause of action upon the common count of money had and received. No demurrers were filed and after issue was joined the case proceeded to trial. The court, sitting without a jury, rendered judgment in favor of all of the defendants upon the cause of action based upon the theory of rescission of the contract, and gave plaintiffs judgment for $1553.71 against the defendant Sam Bernstein under the second count of the complaint for money had and received.

The material facts are as follows: Robert Lison and Helen Allen Lison are husband and wife, and she was the owner of a 1 per cent royalty interest in the production of four oil wells in Los Angeles County. Appellant Bernstein, who it was admitted was not the agent of either of the Lisons, in order to induce plaintiffs to purchase said royalty, fraudulently represented to them that said interest had theretofore produced an income of not less than $134 per month and that the month immediately preceding the making of the contract the 1 per cent royalty had produced a sum in excess of $134 and which, under the contract, plaintiffs were entitled to receive as a part of the deal. Plaintiffs made no independent investigation and purchased the royalty solely upon said false representations. Neither of the Lisons made any false repre

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sentations of any character and were entirely innocent of the fraud perpetrated by Bernstein. Plaintiffs paid the sum of $3,000 for the royalty interest and their first check representing the said royalty interest from the sales amounted only to $47.22, and thereafter they received no checks which were in excess of $42.50 per month.

Upon discovery of the fraud perpetrated by Bernstein plaintiffs tendered the royalty interest which they had received, and demanded a return of the purchase price in order to place the parties

in status quo.

Upon refusal to return the purchase price a trial followed, and the court decided it would be inequitable to declare a rescission of the contract as against the Lisons, who were in no way tainted by or responsible for Bernstein’s fraudulent representations. A rescission would have been equally ineffective against Bernstein who was not and never had been the owner of the royalty. Therefore, the court gave judgment for damages sustained by the plaintiffs and found that the reasonable value of the interest sold was not in excess of $1300. Prom the difference of $1700, the purchase price being $3,000, the court set off the royalties received by plaintiffs and gave judgment for the balance. Inasmuch as the court denied rescission but gave judgment for damages upon the contract, the miscalculation as to the amount injured plaintiffs only, as it seems clear that plaintiffs were entitled to retain all of the royalties under the contract. Obviously, the error was in favor of the appellant and he is in no position to complain because the damages were not larger.