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terpreted the original contract as requiring possession of the defendant, and imply that that obligation was a continuing

one.

[5] It is contended on behalf of the defendant that the last arrangement was a novation, meaning by that that it was in complete substitution for the previous contract and arrangement between the parties. But there is not a word in the new arrangement to that effect, and it refers to the original contract and then goes on to provide merely for the matter of payments in view of the continued failure of the defendant to give possession. It does not purport to do anything more than to change the agreement of the parties as to when the purchase price should be paid. It was clearly intended simply to change the old contract in that particular and nothing more. Considering together the original contract and the two modifications made of it, the understanding between the parties was very evidently that the vendor should put the vendee in possession and that if he did not do so there was an essential failure to perform upon his part.

The conclusion just stated is practically decisive of the case, but there are a number of points made on behalf of the defendant which should perhaps be noticed. It is claimed that the complaint fails to state a cause of action for the reason that while it sets forth in full the three writings between the parties, it fails to allege that by these writings the defendant was bound to deliver possession to the vendee. [6] But such an allegation would be nothing more than pleading the legal effect of the writings, and the rule is familiar that where a writing is set forth in a pleading it is not necesary to plead its legal effect in addition.

[7] It is contended that no tender of the balance of the purchase price was alleged or shown. But such tender was not necessary, since it would have been wholly futile. The plaintiff had the right to insist as a condition of the tender that it receive possession, and this admittedly the defendant could not give.

[8] It is urged that the deed called for by the contract was a quitclaim deed only, and that the rule is that an agreement to convey by quitclaim does not require the vendor to convey a good title. This may or may not be the rule in this state, where, unlike many states, warranty deeds are not

usual, and the form of deed usually employed, a grant deed, does not, any more than a quitclaim deed, imply a warranty of good title. (Civ. Code, sec. 1113.) Furthermore, we are not concerned in this case with the question as to whether the vendor had to give a good title, but with that as to his being required to give peaceable possession. But however all this may be, the conclusive consideration is that the rule stated by counsel is at most a rule as to the construction and meaning to be given a contract. It can have no application to a case where from other considerations it is plain that, although only a quitclaim deed was called for, the contract was conditional upon the vendee being let into actual possession. Of this sort is the present case.

[9] It is next objected that a party desiring to rescind must not subsequently affirm the contract, and must rescind promptly on the occurrence of the cause for rescission, and that in this case the vendee waived the right to rescind upon the failure of the defendant to deliver possession immediately, both by making the two arrangements which in effect affirmed the contract and by failing to rescind promptly at that time. The answer to this is that while the vendee for both these reasons undoubtedly waived or lost the right to rescind for the vendor's failure to give possession immediately upon the execution of the contract, that is not the ground upon which rescission is now claimed. By the arrangements between the parties, the vendor's original obligation to give immediate possession was transformed into one to give possession within a reasonable time after the making of the last arrangement, that of May 27, 1910. It is for the failure to perform this obligation that the plaintiff finally sought to rescind, and there was no waiver of this failure in any manner.

[10] The point is also made that the plaintiff failed to demand possession of the defendant in advance of endeavoring to rescind, and that without such demand the defendant could not be put in the wrong. Such a demand would have been necessary if the defendant had been in a position where he could have complied with it. But he was not, and the demand would have been wholly futile. At the time the plaintiff demanded back the payments on the purchase price, it was definitely understood on both sides that the defendant could not give possession, and the plaintiff's demand for the

CLXXXIV Cal.-15

money was made upon that basis. There are no further points which require discussion.

Judgment affirmed.

Shaw, J., Wilbur, J., Lennon, J., Lawlor, J., and Angellotti, C. J., concurred.

Mr. Justice Sloane, deeming himself disqualified, did not participate.

Rehearing denied.

All the Justices concurred.

[L. A. No. 5155. In Bank.-October 23, 1920.]

VICTOR OIL COMPANY (a Corporation), Respondent, v. C. P. DRUM et al., Defendants; GEORGE HOLMAN COFFIN, Jr., et al., Appellants.

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[1] CORPORATIONS - PURCHASE OF PROPERTY FROM PROMOTERS — DISCLOSURES OF SECRET PROFITS-WHEN UNNECESSARY.-The owners of any kind of property may form a corporation with others and sell the property to the corporation at any price that may be agreed upon between them, regardless of the original cost, provided there is no fraudulent misrepresentation made by the vendors, and they are not bound to disclose the profit which they made by the transaction.

[2] ID.-SALE OF LANDS TO CORPORATION-LIABILITY OF PROMOTERS FOR SECRET PROFITS.-Where the holder of an option to purchase lands and his associates, through the medium of a corporation which they organized, induced a number of persons to associate with them for the purchase of the lands at a price greater than that called for by the option without disclosing to such persous that they were making a profit by the transaction, they were liable to the corporation for such profits.

[3] ID.-EXISTENCE OF FIDUCIARY RELATIONSHIP

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DISCLOSURE OF TRANSACTION-DUTY OF PROMOTER.-Where a promoter makes a sale of lands to a corporation and realizes a profit therefrom, he

2. Liability of promoter of corporation for secret profits, note, 18 L. B. A. (N. S.) 1110.

3.

Relation of promoter to corporation and stockholders, notes, 4 Ann. Cas. 669; 17 Ann. Cas. 269; Ann. Cas. 1915B, 176.

occupies a fiduciary relation toward the corporation and his associates in it, and the burden is upon him to show a full disclosure of the facts concerning the transaction.

[4] ID. RECOVERY OF SECRET PROFITS-NONCONCEALMENT OF TRANSACTION FROM DIRECTORS-INSUFFICIENT DEFENSE.-In an action by a corporation against its promoters to recover secret profits made by them on a sale of lands to the corporation, the fact that the nature of the transaction was not concealed from the board of directors was no defense, where the promoters directed and controlled the corporation.

[5] ID. PLEADING INDUCEMENT OF OTHERS TO BECOME SUBSCRIBERS -SUFFICIENCY OF COMPLAINT.-In an action by a corporation against its promoters to recover secret profits realized by them on a sale of lands to the corporation, the failure of the complaint to allege directly that others were induced to become subscribers to the stock of the plaintiff is not a sufficient ground for reversal of the judgment, where the fact is alleged indirectly, is not in dispute, and affirmatively appears from the answers of the defendants themselves.

[6] ID.-VALUE OF PROPERTY IMMATERIAL.-In an action for the recovery of secret profits made by promoters on a sale of property to the corporation, it is wholly immaterial whether the property was or was not worth what the plaintiff paid for it, since the wrong lies in the profit that was wrongfully made, and the relief in the return of the profit to the corporation.

[7] ID.-JOINT AND SEVERAL JUDGMENT AGAINST PROMOTERS—EVIDENCE. In an action by a corporation against the holder of an option to purchase lands and his associates to recover secret profits made by them on a sale of the lands to the corporation without disclosing their personal interest in the transaction, a joint and several judgment against all of the defendants for the full amount of the profits was proper where it appeared from the evidence that all defendants were participants in the fraud.

[8] ID. PART PAYMENT IN STOCK-RECOVERY OF STOCK OR VALUE— RIGHT OF CORPORATION.-Where a part of the purchase price of lands sold to a corporation by its promoters at a secret profit was paid for in shares of stock, the corporation had the right to reclaim the shares or to recover their value as of the time of the wrong.

[9] ID.-JUDGMENT WHEN NOT ESTOPPEL.-In an action by a corporation to recover secret profits made by promoters on a sale of lands to the corporation, the defendants cannot set up by way of estoppel a judgment obtained against the plaintiff and one of the defendants in an action against them by a third party, since under section 1910 of the Code of Civil Procedure a judgment may operate as an estoppel between parties to it only when they are adverse parties.

[10] ID.-STATUTE OF LIMITATIONS-DIVISION OF SHARES AMONG PROMOTERS-INSUFFICIENT NOTICE OF FRAUD.-Knowledge by a corporation that certain of its shares given by it to a promoter on a sale of lands by him to the corporation wherein the promoter made a secret profit had been transferred to other promoters was not sufficient to put the corporation on inquiry as to whether there had been a division of the shares pursuant to a scheme to defraud so as to bar an action for the recovery of the profits commenced more than three years thereafter.

[11] FRAUD-DISCOVERY-RULE OF COURTS. The courts will not lightly seize upon some small circumstance to deny relief to a party plainly shown to have been actually defrauded against those who defraud him on the ground that he did not discover the fact that he had been cheated as soon as he might have done, and it is only where the party should have plainly discovered the fraud except for his own inexcusable inattention that he will be charged with a discovery in advance of actual knowledge on his part. [12] CORPORATIONS-RECOVERY OF SECRET PROFITS DISCOVERY OF FRAUD-PLEADING.-In an action by a corporation to recover secret profits realized by promoters on a sale of lands to the corporation, brought after the expiration of the statutory period of three years, where the complaint alleged the facts constituting the fraud showing it to be a concealed one and that defendants concealed the facts from the plaintiff, there was a sufficient allegation as to why there was no earlier discovery.

[13] ID.

CIRCUMSTANCES OF DISCOVERY.-In such an action, where the evidence makes it plain that the circumstances under which the fraud was discovered did not involve a knowledge of facts upon which the plaintiff could be charged with a discovery prior to the three-year statutory period, plaintiff's failure to plead the circumstances under which the fraud was discovered was nonprejudicial.

[14] ID.

DELAY IN COMMENCEMENT OF ACTION-LACK OF LACHES.— In such action, the plaintiff cannot be charged with laches in delaying the commencement of the action after the discovery of the fraud, where brought within the period of limitation and no prejudice was shown to have resulted from the delay.

[15] LACHES-PLEADING.-Laches is a defense and is not a condition of relief, and, if it does not appear on the face of the complaint, must be affirmatively pleaded and proven by the defendants.

APPEAL from a judgment of the Superior Court of Los Angeles County. Chas. Wellborn, Judge. Affirmed.

The facts are stated in the opinion of the court.

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