Mahon v. Berg

DRAPER, P. J.

The trial court found that defendants fraudulently induced plaintiffs to enter into an agreement for exchange of real property by gross overstatement of the income of the motel offered by defendants and by concealment of the existence of a deed of trust upon that property. This deed of trust, executed in favor of defendant husband’s brother 10 weeks before signature of the exchange agreement, was not recorded until close of escrow, at a time carefully contrived to precede recordation of defendants’ deed to plaintiffs. Judgment directed rescission of the exchange agreement, cancellation of plaintiffs’ note to defendants, and reconveyance to plaintiffs of the land originally owned by them. It also

[589]

awarded compensatory damages of $3,100 and exemplary damages of $3,500. Defendants appeal, attacking only the award of punitive damages.

Exemplary damages may be awarded only in an action “not arising from contract” (Civ. Code, §3294). They are not allowable in an action for breach of contract, even though the breach be “wilful”

(Chelini

v.

Nieri

(1948) 32 Cal.2d 480, 487 [196 P.2d 915]). An action on the common counts for money had and received has been held to be “based on a breach of contract,” thus barring exemplary damages

(Crogan

v.

Metz

(1956) 47 Cal.2d 398, 404-405 [303 P.2d 1029]). Appellants contend that the effect of

Grogan

is to bar exemplary damages in any action in 1 ‘ quasi-contract. ’ ’

A later case

(Ward

v.

Taggart

(1959) 51 Cal.2d 736, 742-743 [336 P.2d 534]) demonstrates that this conclusion is overly broad. There a real estate broker fraudulently purported to act for a named seller, but in fact used buyer’s funds to purchase for himself and resell to the buyer at a higher price. The buyer was allowed recovery on the basis that the broker was an involuntary trustee of the amount of his secret profit. This remedy was expressly termed quasi-eontraetual, but award of exemplary damages was sustained.