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that her late husband was a large owner of stock in the corporation, inquired at the office if any dividends accruing upon this stock prior to his death had not been drawn; and she was then informed that all such dividends had been paid to one Anderson, the agent of her husband, and that the corporation had no dividends in its possession belonging to the estate. To resolve the inquiry of the administratrix and the reply of the corporation to that inquiry into a demand and refusal would require a technical, close, and even strained construction of the language; and such a construction is not favored in law, in order that fraud and deception may not thrive. The complaint alleges that these statements of the corporation were false, and were made knowingly and intentionally for the express purpose of defrauding the administratrix out of this property by concealing from her her cause of action until it was barred by the statute of limitations. It will not be allowed to do these iniquitous things, and then plead them in bar of plaintiff's cause of action, if any reasonable construction can be given the language and the acts of these parties when they met, which will defeat it. Misrepresentation and falsehood, practiced for the very purpose of securing the unjust results which follow the decision of the trial court, if upheld and practiced for the very purpose of securing those results in the identical way they are proposed to be secured, do not commend themselves as matters for favorable consideration. It would be a gross wrong to deny plaintiff's right of action by construing this language into a demand and refusal, when by the language the administratrix intended to make no demand, and at the same time did not understand the language of the corporation to amount to a refusal. I find no case in the law books holding that similar acts and facts constitute demand and refusal. Conceding that no formal demand is necessary, still its equivalent in acts or language must be present. If a stockholder had called at the office of the corporation, and inquired if a dividend had been declared, and the corporation had falsely replied in the negative, a parallel case to the one at bar would be presented; and, according to the corporation's contention, the statute would begin to run from such demand and refusal. This cannot be the law. While the corporation, by its answer to the administratrix's inquiries, may have secretly placed itself in a position of hostility to her interests, yet that is not the character of hostility contemplated by the statute of limitations. The corporation's secret hostility to her interests amounts to nothing. It was full of that same secret hostility before she ever came to it for information. It follows that, if this hostility caused the statute to run, then the statute was already in motion prior to the time she made the inquiries. As far as the statute of limitations is concerned, secret hos

tility is no hostility; and outwardly the position of the corporation towards the administratrix bore every semblance of the greatest honesty, kindest intentions, and the friendliest feelings. This being the position of the corporation towards Mrs. Reagan, there was no hostility of interest between them, and the statute of limitations did not begin to run from the date of these conversations. If Mrs. Reagan had treated these conversations as constituting a demand and refusal, and brought an action for the dividends against the corporation, relying upon such demand and refusal, the corporation's conduct would have been such that very probably, upon a plea by it of no demand and refusal, the court would have held against it. But the converse of the proposition, as presented in this case, by no means follows, for the corporation, by its conduct, was tarnished with deceit and dishonesty, and no such taint was upon her.

It is further contended in the concurring opinion of the chief justice that the demand made in January, 1885, came too late; that, when a demand is necessary to set the statute of limitations in motion, it must be made within a reasonable time after the right to make it accrues; that this reasonable time must not exceed the period prescribed by statute for the limitation of the action, if no demand were necessary; and that if such demand is not made the action is barred, either because of the failure to make it, or that, owing to the lapse of time, it is presumed to have been made. The general principle here declared is somewhat elementary, and an abundance of authority is presented by counsel to support it. But, like other principles of law, there are exceptions to it; and, while broad in its terms, it is not broad enough to cover all cases, and this case comes within the exception. This exception is based upon the principle that the conduct of the defendant may be such as to excuse a plaintiff from sooner making a demand, and the soundness of this exception, as a legal principle, is as fully recognized by the courts as is the general rule itself. In Codman v. Rogers, 10 Pick. 112 (a leading case relied upon by respondents), the court said: "The question is whether a dormant claim may be revived by a demand after seventeen years, during the whole or nearly the whole of which time a demand might have been made, but was not, and no reason is assigned for the omission." And again: "What is to be considered a reasonable time for this purpose does not appear to be settled by any precise rule. It must depend upon circumstances. If no cause for delay can be shown, it would seem reasonable to require the demand to be made within the time limited by the statute for bringing the action." In Wright v. Paine, 62 Ala. 340, another case relied upon by respondents, the court said: "If there be any facts or circumstances which can excuse the long delay of

the appellant in commencing suit and in making demand for the money, the record does not disclose them; * * and it would be violative of the policy of the statute of limitations, and defeat the purposes it was intended to accomplish, if, without an explanation of the long delay in making demand, and the unwarrantable delay in bringing suit after the fruitless demand, until Winston was dead, the statute was held not a bar." It is thus apparent from the foregoing cases that a plaintiff may be excused from not making an earlier demand, and, if excuses are ever to be accepted by courts, then this plaintiff is excused. No case has been cited holding an action barred upon a state of facts in any way analogous to that here disclosed. All the cases assume that the plaintiff was aware that he had a claim which would ripen into a cause of action upon making a demand, and charge him with laches in not making the demand within a reasonable time. But here plaintiff could not be guilty of such laches, for she was not aware that she had any claim upon which to form a basis for a demand. More than that, she was falsely and mercenarily informed by defendant that she had no claim against it, and for this reason alone she was lulled into a quiescent state of ignorance which prevented a discovery. Whatever diligence she may have been required by the law to exercise In the discovery of a cause of action, as against third parties, it does not become the defendant, who by its fraud and misrepresentation caused the delay in making the demand, to now rely upon its bad conduct for the purpose of defeating rights based upon such demand. Much that we have said upon these lines in a previous portion of this opinion bears directly upon the question here presented. The fact that the present action is not one for relief founded upon the fraud of the corporation is not material to the case. Neither is it necessary to hold that fraud practiced by a debtor upon his creditor, whereby the creditor fails to bring his action within the time allowed, is sufficient to defeat a plea of the statute of limitations made by the debtor. The question here is not one of laches in discovering the existence of an indebtedness, but of laches in making a demand for the payment of such indebtedness. Every authority cited by respondents' counsel concedes full knowledge upon the part of the creditor of his rights during the entire period covered by the delay in making the demand, but this case presents no such state of facts. The concurring opinion goes against the appellant upon the ground that Mrs. Reagan was negligent in discovering her cause of action, but I think that question is foreign to the case, and involves an entirely different principle. Again, if Mrs. Reagan had made no inquiries whatever of the corporation as to dividends, but had assumed them to have been paid to Reagan or his agent, it appears she would now have v.39p.no.1-4

a cause of action; but, strange as it may seem, the diligence that she used is so effectively arrayed against her as to cause her own downfall. Anderson was in no sense her trustee. He was the trustee and agent of her husband, and a payment to him was a payment to her husband, and she had a right to so consider it; for there is nothing whatever in the case to indicate but that she was perfectly justified in assuming that, if the money in fact had been paid to Anderson, it had been disbursed in proper and legitimate channels. If Reagan had not been insane, and Anderson had been a myth, and the corporation had stated to her at the time of her inquiries that these moneys had been paid to her husband prior to his death, as an ordinary, unsuspicious, trustful woman she would have believed the statement, and relied upon it; and she would have had a right to believe it and rely upon it. The fact that she was told the money was paid to Anderson, his trustee, does not alter the case.

(4 Cal. Unrep. 940)

BURLING et al. v. NEWLANDS et al. (No. 14,592.) 1

(Supreme Court of California. Jan. 5, 1895.) CHARGING TRUST ESTATE-LIMITATIONS- - LACHES.

1. For the convenience of certain lenders and borrowers of money, who did their business through a bank, a firm of stockbrokers were in the habit of giving their promissory notes, and securing themselves by bank stock and other collaterals delivered to them by the president of the bank. Subsequently the bank failed, and the president conveyed all his property to a trustee, to be applied by him to "such purposes and uses as he may deem best for our joint and several interests." By fraudulent representations that the stock and collateral held by the stockbrokers were worthless, the trustee induced them to pay to him $200,000, in consideration of his promise to pay all their outstanding notes, which promise he performed. Held, that the fraudulent representations by the trustee gave the stockbrokers only a personal right of action against him, and that they could not charge the trust estate in his hands for such sum, since they were not creditors of the bank president, who created the trust.

2. A cause of action for fraud is not taken out of the operation of the statute of limitations by Code Civ. Proc. § 338, subd. 4, which provides that the statute does not begin to run until discovery of the fraud, where it appears that the slightest examination of the public records would have put plaintiffs in possession of the facts, and that they acquired their infor mation on which the action was based by inquiry of their friends and acquaintances.-a course open to them before the statute bad run.

3. Equity will not entertain a cause of action seeking relief from an alleged fraud, where complainants could have informed themselves of the facts by the exercise of reasonable diligence, but delayed bringing suit for over 10 years, and until after the death of all the participants in the transactions.

In bank. Appeal from superior court, city and county of San Francisco; Walter H. Levy, Judge.

Action by Leonide H. Burling and others against Frank G. Newlands and Frederick

1 Rehearing granted.

W. Sharon to compel defendants to account as successors of William Sharon, trustee of the property of William C. Ralston, deceased. From a judgment sustaining a demurrer to the complaint, plaintiffs appeal. Affirmed.

Joseph M. Nougues, for appellants. Wm. F. Herrin, J. M. Allen, and H. L. Gear, for respondents.

MCFARLAND, J. This action was brought to obtain an accounting of the alleged trust estate and property of William C. Ralston, deceased, which is averred to have been conveyed by him in his lifetime to William Sharon, also now deceased, and by said Sharon to the defendants herein, and for a decree that there be paid to plaintiffs, out of said property, the sum of $200,000 and interest. The plaintiffs are the executrix and executor of William Burling, deceased, and the assignee in insolvency of James W. Burling, an insolvent; and the defendants are Frank G. Newlands and Frederick W. Sharon, to whom the said William Sharon during his lifetime conveyed all his property in trust. Defendants demurred to the complaint on general and on several special grounds. Their demurrer was sustained by the court below, and judgment was rendered for defendants; and plaintiffs appeal from the judgment.

The amended complaint occupies 426 pages of the printed transcript; and we will not undertake to give here even a synopsis of such a lengthy document. We will state only such facts as will present a distinct view of the main epochs in the long historical narrative. William C. Ralston was cashier of the Bank of California from 1868 to 1873, and its president from 1873 to the time of his death, which occurred August 27, 1875. From 1869 to 1872 he employed William Burling, a stockbroker, to negotiate loans; Burling giving his individual notes for the loans, and Ralston furnishing shares of the stock of the bank, and other collaterals, as securities for the money borrowed. In 1872, William Burling formed a partnership with James W. Burling under the firm name of Burling & Bro.; and thereafter, until Ralston's death, loans were negotiated in like manner through the agency of said firm. On August 26, 1875, the said bank failed; and on the next day Ralston died by drowning. At that time there were outstanding notes of said William Burling for loans negotiated as aforesaid in the amount of about $155,000; and there were notes of Burling & Bro. given for loans so negotiated in the amount of about $1,613,000. Before his death, and on the day of his death, Ralston executed a conveyance of all his property to said William Sharon, "in trust to collect and receive the rents, issues, incomes, and profits thereof, and every part thereof, and to sell and dispose of the same on such terms and prices as he deems best, and to apply the same and the proceeds thereof, and of all the property hereby conveyed, to such purposes

and uses as the said William Sharon may, in his judgment, deem best for our joint and several interests." On December 24, 1875, William Burling and Burling & Bro. made a contract with said William Sharon, under which they paid to Sharon $200,000, and assigned to him all claims against the estate of said Ralston upon said outstanding notes; and said Sharon, by said contract, undertook to assume all indebtedness upon said notes, and relieve said Burling and Burling & Bro. from all liability arising upon the same, which said undertaking by said Sharon he fully performed. The said Burlings and the said Sharon had been negotiating about said contract nearly four months before its consummation. It is averred that the Burlings were induced to pay said $200,000 to said William Sharon by representations of the latter to them that the shares of bank stock held by them as security for their said notes were illegally overissued stock, and worthless; that the other collaterals held by them were owned by strangers to these transactions, and had been surreptitiously taken from the bank; that Ralston's estate was insolvent; that they (the Burlings) would be holden for the whole amount of said outstanding notes without recourse to any security; that D. O. Mills and all the other officers and employés of said bank confirmed the truth of said representations; and that they, having no sufficient information on the subject, relied on said representations of Sharon, and were thus led to enter into said contract and pay said $200,000. And it is further averred that all these representations were false, and were by said Sharon "willfully, designedly, and fraudulently made for the purpose of cheating and defrauding them, said Burlings, as aforesaid, out of said sum of $200,000.” A certain proportionate part of the $200,000 was paid by said William Burling, and the balance by the said Burling & Bro. William Burling died on July 15, 1877; and the partnership was wound up and settled in January, 1879. In August, 1877, the plaintiffs herein, Leonide H. Burling and Benjamin Burling, were appointed administratrix and administrator of said William Burling, deceased; and they pray that there be paid to them the proportionate part of said $200,000 and interest, which they allege to be due to his estate. In June, 1882, the said James W. Burling, formerly the other member of the said firm of Burling & Bro., became an insolvent debtor; and in June, 1886, the plaintiff Benjamin Burling was appointed his assignee in insolvency; and he prays that there be paid to him, as such assignee, the proportionate part of said $200,000 and interest which he avers to be due the estate of said insolvent. The said William Sharon, on November 4, 1885, by deed of trust, conveyed in fee all his property, of every kind, to the defendants Newlands and Frederick W. Sharon; and on November 15, 1885, the said William Sharon died. The purpose of this action is

to compel the defendants, as trustees under said deed to them from said William Sharon, to account for all real and personal property, the title to which "the said Sharon received under and by virtue of said deed of trust made on the 27th day of August, A. D. 1875, by said W. C. Ralston to him, said William Sharon," and to have said property, "of the estate of said W. C. Ralston," applied to the payment of said $200,000 and interest. The action was commenced on the 25th day of October, 1886, which was about 11 months after the death of said William Sharon, and 11 years after the transaction upon which the suit is founded.

Respondents present various reasons why the judgment of the court below should be sustained, and appellants attack it from vari- | ous standpoints; but, under the views which we take of the case, it is not necessary to discuss all the propositions argued by the respective counsel. In our opinion, if, upon the facts alleged, the Burlings had any cause of action at all, their remedy was a personal action against William Sharon to recover damages for deceit in procuring their payment to him of the $200,000 in the manner as alleged, or upon an assumpsit to refund the money, implied from a rescission of the contract under which it was paid, for fraud by Sharon in obtaining it. But this is not such an action. The nature of the action is stated in the first sentence of the brief of appellants, as follows: "This action is brought to obtain an accounting of the trust estate and property of the late William C. Ralston, which was conveyed to the late William Sharon in trust, and if, upon such accounting, it be ascertained that the estate of said Ralston was solvent, that there be repaid to the plaintiffs the sum of two hundred thousand ($200,000) dollars and interest thereon, being moneys paid on account of liabilities incurred for said William C. Ralston." No claim is made against the personal representatives of William Sharon, deceased, or against his estate.

The theory of the complaint is that the conveyance from Ralston to William Sharon was a deed of trust for the benefit of Ralston's creditors; that the Burlings were beneficiaries under such deed of trust;' and that, as such beneficiaries, they can charge the present respondents F. W. Sharon and Newlands for the repayment of said $200,000 and interest, to the extent of the value of any property which they may have belonging to said alleged Ralston trust estate. Now, in the first place, it is doubtful if said conveyance created a trust estate of which Ralston's creditors were the beneficiaries.. It is not so expressed on the face of the instrument. But, assuming that there was such a trust estate, it does not appear that at the time of its creation the Burlings were creditors of Ralston. It appears that for the convenience of certain lenders and borrowers of money who did their business mainly through the Bank of

California, and who were frequently unknown to the Burlings, they (the Burlings) were in the habit of giving their promissory notes, and securing themselves by taking bank stock and other collaterals. Why the Burlings did this, or what, if any, advantage accrued to them therefrom, does not appear. During the period of these transactions Ralston was either the cashier or president of the bank, and appears to have been its principal business manager. Whether or not his request to the Burlings to make these notes upon the securities furnished them was made in his individual capacity, or as an officer of the bank, does not clearly appear. It certainly does not appear from the facts stated that he entered into any personal obligation to the Burlings on account of said notes, or made any individual promise with respect to them. It is expressly alleged in the complaint that at the times of these transactions "said Wm. C. Ralston did not give * * to the said Wm. Burling, or to the said firm of Burling & Brother, any evidence of indebtedness from him, said W. C. Ralston." Facts are not averred showing that the Burlings were sureties for Ralston; neither is it averred that the said collateral securities were not sufficient to protect said Burlings. No charge of misconduct is made against Ralston; but, on the contrary, it is averred that all statements of William Sharon about the unlawful acts of Ralston, his insolvency, and the worthlessness of said securities, were false. Moreover, the Burlings assigned to William Sharon all claims arising upon said notes against the estate of Ralston. Therefore, whatever construction may be given to the said deed from Ralston to William Sharon, the appellants in this action. have no present claim as beneficiaries thereunder. And it is very clear that they are not such beneficiaries with respect to the very thing sued for in this action, viz. the $200,000, which it is averred William Sharon fraudulently induced the Burlings to pay him four months after the death of Ralston and the execution of said deed. It is averred that Sharon used the said $200,000 in paying off certain debts of Ralston, but we do not see that any importance attaches to that averment. It could make no difference whether he so used that particular money, or any other money which he may have had. From every point of view the case presents the same aspect; namely, that if any wrong was done the Burlings, under the facts alleged, it was a wrong done by William Sharon personally, and that the only remedy was a personal action against the said Sharon.

Moreover, we think that the action is barred by the statute of limitations, and is stale from laches. Of course, the statutory period has run two or three times unless the case is saved by the clause (subdivision 4) of section 338, Code Civ. Proc., which provides that in an action based upon alleged fraud the statute does not commence to run until the discovery of the facts constituting the fraud.

This action is founded upon the contract between the Burlings and William Sharon, made on December 24, 1875, which was an executed contract; and the statute commenced to run on that day, except so far as its running was delayed by a want of knowledge of the fraud by which said contract is alleged to have been procured. But "the means of knowledge are the same thing, in effect, as knowledge itself" (Wood v. Carpenter, 101 U. S. 143); and one who makes a charge of fraud for the first time, many years after its alleged perpetration, must show that within a reasonable time he has used due diligence to discover it, has followed up circumstances which would have put a prudent man upon inquiry, and has not slept upon his rights until the lapse of time and the death of parties charged with the fraud have destroyed the means of a full, fair, and satisfactory investigation in a court of justice. Moreover, in such a case the complaint must state facts from which it will appear to the court that ordinary prudence could not have discovered the fraud within the statutory period. "The circumstances of the discovery must be fully stated and proved, and the delay which has occurred must be shown to be consistent with the requisite diligence." Wood v. Carpenter, supra. Statutes of limitation are in great part founded upon the probability that during the course of many years witnesses will die, and recollections of events long past will become indistinct in the memories of the living. In the case at bar sufficient facts are not stated to show that the alleged fraud could not, with requisite diligence, have been sooner discovered. There was great opportunity for discovering the fraud, if any such existed, before the contract between the Burlings and William Sharon was made. That contract was not made in a hurry. Sharon's representations, alleged now to have been false, were not immediately accepted as true and promptly acted upon. Negotiations were continued for four months. Ralston, as appears from the complaint, was widely known in business circles, and had been accredited with great wealth. It is averred in the complaint that he was perfectly solvent, and that he had real and personal property, which passed to Sharon under the deed, of the aggregate value of $9,000,000. It is averred, also, that he had real property of the value of $6,000,000. If that was the fact, and the Burlings really had a legal claim against Ralston, it is almost beyond comprehension why they did not discover it, if not before the $200,000 contract, at least before the death of William Burling, or before the lapse of the statutory period of limitation. The slightest examination of public records would have put them on the trail of the fact. It does not appear that they demanded an examination of the books, papers, etc., of Ralston. But no discovery was made, and it does not appear that any reasonable efforts were made for a discovery, of the alleged facts up

on which this action rests until 10 years after the date of the contract, and until after the death of said William Sharon. And it is averred that then "the means by which they obtained any information was by inquiring among their friends and acquaintances whether they (said persons) had any information relating to the dealings of said Sharon with said trust estate, and whether they had any information regarding the property which was conveyed by said Ralston to said Sharon in trust, as aforesaid." But such means were always within the power of appellants and the Burlings; and there are no sufficient facts alleged to show that the delay is "consistent with the required diligence." See Ang. Lim. §§ 187, 190; Hecht v. Slaney, 72 Cal. 363, 14 Pac. 8S; Moore v. Boyd, 74 Cal. 167, 15 Pac. 670.

Moreover, apart from the question of strict statutory limitation, the claim of appellants is too stale to be enforced in a court of equity. "No rule of law is better settled than that a court of equity will not aid a party whose application is destitute of conscience, good faith, and reasonable diligence, but will discourage stale demands, for the peace of society, by refusing to interfere when there has been gross laches in prosecuting rights, or where long acquiescence in the assertion of adverse rights has accrued. The rule is peculiarly applicable where the difficulty of doing entire justice arises through the death of the principal participants in the transactions complained of, or of the witness or witnesses, or by reason of the original transaction having become so obscured by time as to render the ascertainment of the exact facts impossible." Hammond v. Hopkins, 143 U. S. 250, 12 Sup. Ct. 418. In speaking of this rule, this court, in Bell v. Hudson, 73 Cal. 288, 14 Pac. 791, said: "It is a material circumstance that the claim was not made until after the death of those who could have explained the transaction." In the case at bar, William Burling and William Sharon, "the principal participants in the transactions complained of," were both dead before the commencement of the action. It is quite apparent that no court could do "entire justice" in the premises without the testimony of William Sharon. Of course, if the suit had been commenced within a reasonable time, and William Sharon had died before his testimony could have been taken, the want of his testimony would simply have been one of those natural misfortunes which sometimes come to litigants. But William Sharon lived for 10 years after the transaction complained of. William Burling died two years after the transaction, fully satisfied, as is averred, that it was a fair one. James W. Burling did business for several years afterwards, and, until he became an insolvent, was also satisfied with the fairness of the transaction. There was perfect acquiescence by all parties for 10 years, and while Sharon lived. It was not until he died, and his testimony was forever beyond human

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