Hill v. Citizens National Trust & Savings Bank of Los Angeles

EDMONDS, J. By this action against the respondent bank, the appellants seek to recover under a contract by which another corporation agreed to sell certain real estate upon the ground that the corporation was the agent of the bank. At the time the contract was made the bank held title to a large parcel of property of which the land described in the contract was a part. The whole parcel was subject to a deed of trust which was later foreclosed. Thereafter the appellants gave notice to the bank that they had rescinded the agreement and this action followed.

In 1928 Harold G. Ferguson corporation was the owner of property known as Palm Ranch, which was subject to a deed of trust to secure its note in the principal amount of $110,000. It conveyed this property, subject to the indebtedness, to the respondent bank which executed a declaration of trust reciting the terms and conditions upon which title to the property was accepted. The Ferguson corporation then undertook to subdivide and sell the land and organized a subsidiary corporation under the name of Quartz Hill Land [174]and Development Company. The only meetings which this corporation held were the organization meeting of the incorporators and the directors ’ meeting for the election of officers. Its officers were all officers or employees of the Ferguson corporation.

The contract sued upon was entered into by the appellants with the Quartz Hill corporation following negotiations with a salesman for the Ferguson corporation. According to the testimony of Mr. Hill he heard that the Palm Ranch property was being sold and went to the office of the Ferguson corporation to make inquiries concerning it. At this time apparently there was only a preliminary discussion. Later Mr. Hill talked with Mr. Estes, a salesman for the corporation. Mr. Estes told him the Quartz Hill corporation was a subsidiary of the Ferguson corporation, that the latter was the sales agent of the respondent bank, and that title to any land purchased would be given by the bank upon completion of payment therefor. Later the appellants decided to buy some of the land and entered into a contract with the Quartz Hill corporation as seller. They executed this contract in the office of the Ferguson corporation. The appellants paid $3,574 to the Ferguson corporation on the purchase price of the property and expended $2,178 in improvements. The judgment sought by them is for these amounts.

The appellants declare that they are entitled to recover from the bank because the Quartz Hill corporation was its agent and acting within the scope of its authority. They also assert that it was the bank’s ostensible agent. Another contention is that certain notice to the bank put it on inquiry and its quiescence amounted to a ratification of the acts of the corporation. In support of their right to recover on any one of these grounds the appellants maintain that although this action was not brought until thirteen months after they learned the property had been foreclosed, under the facts shown by them they are not guilty of laches.