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chat her late husband was a large owner of tility is no hostility; and outwardly the postock in the corporation, inquired at the sition of the corporation towards the adminotlice if any dividends accruing upon this istratrix bore every semblance of the greatstock prior to his death had not been drawn; est honesty, kindest intentions, and the and she was then informed that all such friendliest feelings. This being the position dividends had been paid to one Anderson, of the corporation towards Mrs. Reagan, the agent of her husband, and that the cor- there was no hostility of interest between poration had no dividends in its possession them, and the statute of limitations did not belonging to the estate. To resolve the in- begin to run from the date of these conquiry of the administratrix and the reply of versations. If Mrs. Reagan had treated these the corporation to that inquiry into a de- conversations as constituting a demand and mand and refusal would require a technical, refusal, and brought an action for the diviclose, and even strained construction of the dends against the corporation, relying upon language; and such a construction is not such demand and refusal, the corporation's favored in law, in order that fraud and decep- conduct would have been such that very tion may not thrive. The complaint alleges probably, upon a plea by it of no demand that these statements of the corporation were and refusal, the court would have held false, and were made knowingly and inten- against it. But the converse of the propositionally for the express purpose of defraud- tion, as presented in this case, by no means ing the administratrix out of this proper- follows, for the corporation, by its conduet, ty by concealing from her her cause of ac- was tarnished with deceit and dishonesty, tion until it was barred by the statute of lim- and no such taint was upon her. itations. It will not be allowed to do these It is further contended in the concurring iniquitous things, and then plead them in opinion of the chief justice that the debar of plaintiff's cause of action, if any rea- mand made in January, 1885, came too late; sonable construction can be given the lan- that, when a demand is necessary to set the guage and the acts of these parties when statute of limitations in motion, it must be they met, which will defeat it. Misrepre- made within a reasonable time after the sentation and falsehood, practiced for the right to make it accrues; that this reasonavery purpose of securing the unjust results ble time must not exceed the period prewhich follow the decision of the trial court, scribed by statute for the limitation of the if upheld and practiced for the very purpose action, if no demand were necessary; and of securing those results in the identical way that if such demand is not made the acthey are proposed to be secured, do not com- tion is barred, either because of the failure mend themselves as matters for favorable to make it, or that, owing to the lapse of consideration. It would be a gross wrong to time, it is presumed to have been made. The deny plaintiff's right of action by construing general principle here declared is somewhat this language into a demand and refusal, elementary, and an abundance of authority when by the language the administratrix in- is presented by counsel to support it. But, tended to make no demand, and at the same like other principles of law, there are exceptime did not understand the language of the tions to it; and, while broad in its terms, corporation to amount to a refusal. I find it is not broad enough to cover all cases, and no case in the law books holding that sim- this case comes within the exception. This ilar acts and facts constitute demand and re- exception is based upon the principle that the fusal. Conceding that no formal demand is conduct of the defendant may be such as to necessary, still its equivalent in acts or la: excuse a plaintiff from sooner making a deguage must be present. If a stockholder had mand, and the soundness of this exception, called at the office of the corporation, and as a legal principle, is as fully recognized by inquired if a dividend had been declared, the courts as is the general rule itself. In and the corporation had falsely replied in the Codman v. Rogers, 10 Pick. 112 (a leading negative, a parallel case to the one at bar case relied upon by respondents), the court would be presented; and, according to the said: “The question is whether a dorinant corporation's contention, the statute would claim may be revived by a demand after begin to run from such demand and refusal.
seventeen years, during the whole or nearly This cannot be the law. While the corpora- the whole of which time a demand might tion, by its answer to the administratrix's have been made, but was not, and no reason inquiries, may have secretly placed itself in is assigned for the omission.” And again: a position of hostility to her interests, yet "What is to be considered a reasonable time that is not the character of hostility contem- for this purpose does not appear to be setplated by the statute of limitations. The cor- tled by any precise rule. It must depend poration's secret hostility to her interests upon circumstances. If no cause for delay amounts to nothing. It was full of that same can be shown, it would seem reasonable to secret hostility before she ever came to it require the demand to be made within the for information. It follows that, if this hos- time limited by the statute for bringing the tility caused the statute to run, then the action." In Wright v. Paine, 02 Ala. 310, statute was already in motion prior to the another case relied upon by respondents, the time she made the inquiries. As far as the court said: “If there be any facts or circumstatute of limitations is concerned, secret hos- stances which can excuse the long delay of the appellant in commencing suit and in a cause of action; but, strange as it may making demand for the money, the record seem, the diligence that she used is so efdoes not disclose them; . and it would fectively arrayed against her as to cause her be violative of the policy of the statute of own downfall. Anderson was in no sense limitations, and defeat the purposes it was her trustee. He was the trustee and agent intended to accomplish, if, without an ex- of her husband, and a payment to bim was planation of the long delay in making de- a payment to her husband, and she had a mand, and the unwarrantable delay in bring. | right to so consider it; for there is nothing ing suit after the fruitless demand, until whatever in the case to indicate but that Winston was dead, the statute was held she was perfectly justified in assuming that, not a bar.” It is thus apparent from the if the money in fact had been paid to Anderforegoing cases that a plaintiff may be ex- son, it had been disbursed in proper and cused from not making an earlier demand, legitimate channels. If Reagan bad not been and, if excuses are ever to be accepted by | insane, and Anderson had been a myth, and courts, then this plaintiff is excused. No case the corporation had stated to her at the time has been cited holding an action barred upon of her inquiries that these moneys had been a state of facts in any way analogous to that paid to her husband prior to his death, as here disclosed. All the cases assume that the an ordinary, unsuspicious, trustful woman plaiutiff was aware that he had a claim she would have believed the statement, and which would ripen into a cause of action upon relied upon it; and she would have had a making a demand, and charge him with lach- right to believe it and rely upon it. The fact es in not making the demand within a rea- that she was told the money was paid to sonable tiine. But here plaintiff could not be Anderson, bis trustee, does not alter the case. 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
(4 Cal. Uprep. 940) was falsely and mercenarily informed by de
BURLING et al. v. NEWLANDS et al. (No. fendant that she had no claim against it,
14,592.) 1 and for this reason alone she was lulled into a quiescent state of ignorance which pre
(Supreme Court of California. Jan. 5, 1895.)
CHARGING Trust Estate -LIMITATIONS — Laches. vented a discovery. Whatever diligence she
1. For the convenience of certain lenders may have been required by the law to exercise
and borrowers of money, who did their busiin the discovery of a cause of action, as ness through a bank, a firm of stockbrokerg against third parties, it does not become the were in the habit of giving their promissory defendant, who by its fraud and misrepre
notes, and securing themselves by bank stock
and other collaterals delivered to them by the sentation caused the delay in making the president of the bank. Subsequently the bank demand, to now rely upon its bad conduct failed, and the president conveyed all his propfor the purpose of defeating rights based erty to a trustee, to be applied by him to "such
purposes and uses as he may deem best for our upon such demand. Much that we have
joint and several interests." By fraudulent said upon these lines in a previous portion representations that the stock and collateral of this opinion bears directly upon the ques- held by the stockbrokers were worthless, the tion here presented. The fact that the pres
trustee induced them to pay to him $200,000,
in consideration of his promise to pay all their ent action is not one for relief founded upon
outstanding notes, which promise he performed. the fraud of the corporation is not material Held, that the fraudulent representations by to the case. Neither is it necessary to hold
the trustee gave the stockbrokers only a perthat fraud practiced by a debtor upon his
sonal right of action against him, and that they
could not charge the trust estate in his hands creditor, whereby the creditor fails to bring
for such sum, since they were not creditors of bis action within the time allowed, is suf- the bank president, who created the trust. ficient to defeat a plea of the statute of
2. A cause of action for fraud is not taken
out of the operation of the statute of limitalimitations made by the debtor. The ques
tions by Code Civ. Prıc. 8 338, subd. 4, which tion here is not one of laches in discovering provides that the statute does not begin to run the existence of an indebtedness, but of lach- until discovery of the fraud, where it appears es in making a demand for the payment of
that the slightest examination of the public rec
ords would have put plaintiffs in possession of such indebtedness. Every authority cited
the facts, and that they acquired their inforby respondents' counsel concedes full knowl- mation on which the action was based by inedge upon the part of the creditor of his
quiry of their friends and acquaintances.-a
course open to them before the statute bad run. rigbts during the entire period covered by the
3. Equity will not entertain a cause of acdelay in making the demand, but this case pre- tion seeking relief from an alleged fraud, where sents no such state of facts. The concurring complainants could have informed themselves opinion goes against the appellant upon the
of the facts by the exercise of reasonable dili
gence, but delayed bringing suit for over 10 ground that Mrs. Reagan was negligent in dis- years, and until after the death of all the parcovering her cause of action, but I think that ticipants in the transactions. question is foreign to the case, and involves an
In bank. Appeal from superior court, city entirely different principle. Again, if Mrs.
and county of San Francisco; Walter H. Reagan had made no inquiries whatever of
Levy, Judge. the corporation as to dividends, but had as
Action by Leonide H. Burling and others sumed them to have been paid to Reagan
against Frank G. Newlands and Frederick or bis agent, it appears she would now have v.39P.no.1-4
1 Rehearing granted.
W. Sharon to compel defendants to account and uses as the said William Sharon may, in as successors of William Sharon, trustee of his judgment, deem best for our joint and the property of William C. Ralston, deceased. several interests." On December 24, 1875, From a judgment sustaining a demurrer to William Burling and Burling & Bro. made a the complaint, plaintiffs appeal. Affirmed. contract with said William Sharon, under
which they paid to Sharon $200,000, and asJoseph M. Nougues, for appellants. Wm.
signed to him all claims against the estate of F. Herrin, J. M. Allen, and H. L. Gear, for
said Ralston upon said outstanding notes; respondents.
and said Sharon, by said contract, undertook
to assume all indebtedness upon said notes, McFARLAND,J. This action was brought and relieve said Burling and Burling & Bro. to obtain an accounting of the alleged trust from all liability arising upon the same, estate and property of William C. Ralston, which said undertaking by said Sharon he deceased, which is averred to have been con- fully performed. The said Burlings and the veyed by him in his lifetime to William said Sharon had been negotiating about said Sharon, also now deceased, and by said contract nearly four months before its conSharon to the defendants herein, and for a summation. It is a verred that the Burlings decree that there be paid to plaintiffs, out of were induced to pay said $200,000 to said said property, the sum of $200,000 and inter- William Sharon by representations of the lat. est.
The plaintiffs are the executrix and ex- ter to them that the shares of bank stock ecutor of William Burling, deceased, and the held by them as security for their said notes assignee in insolvency of James W. Burling, were illegally overissued stock, and worthan insolvent; and the defendants are Frank | less; that the other collaterals held by them G. Newlands and Frederick W. Sharon, to were owned by strangers to these transacwhom the said William Sharon during his life- tions, and had been surreptitiously taken time conveyed all his property in trust. De- | from the bank; that Ralston's estate was infendants demurred to the complaint on gen- solvent; that they (the Burlings) would be eral and on several special grounds. Their holden for the whole amount of said outstanddemurrer was sustained by the court below, ing notes without recourse to any security; and judgment was rendered for defendants; that D. O. Mills and all the other officers and and plaintiffs appeal from the judgment. employés of said bank confirmed the truth
The amended complaint occupies 426 pages of said representations; and that they, hav. of the printed transcript; and we will not | ing no sufficient information on the subject, undertake to give here even a synopsis of relied on said representations of Sharon, and such a lengthy document. We will state only were thus led to enter into said contract and such facts as will present a distinct view of pay said $200,000. And it is further averred the main epochs in the long historical narra- that all these representations were false, and tive. William C. Ralston was cashier of the were by said Sharon "willfully, designedly, Bank of California from 1868 to 1873, and its and fraudulently made for the purpose of president from 1873 to the time of his death, cheating and defrauding them, said Burlings, which occurred August 27, 1875. From 1869 as aforesaid, out of said sum of $200,000.” to 1872 he employed William Burling, a stock- A certain proportionate part of the $200,000 broker, to negotiate loans; Burling giving his was paid by said William Burling, and the individual notes for the loans, and Ralston balance by the said Burling & Bro. William furnishing shares of the stock of the bank, | Burling died on July 15, 1877; and the partand other collaterals, as securities for the nership was wound up and settled in Janmoney borrowed.
In 1872, William Burling uary, 1879. In August, 1877, the plaintiffs formed a partnership with James W. Burling herein, Leonide H. Burling and Benjamin under the firm name of Burling & Bro.; and Burling, were appointed administratrix and thereafter, until Ralston's death, loans were administrator of said William Burling, denegotiated in like manner through the agency ceased; and they pray that there be paid to of said firin. On August 26, 1875, the said them the proportionate part of said $200,000 bank failed; and on the next day Ralston and interest, which they allege to be due to died by drowning. At that time there were his estate. In June, 1882, the said James W. outstanding notes of said William Burling for Burling, formerly the other member of the loans negotiated as aforesaid in the amount of said firm of Burling & Bro., became an inabout $155,000; and there were notes of Bur- solvent debtor; and in June, 1886, the plainling & Bro. given for loans so negotiated in tiff Benjamin Burling was appointed his asthe amount of about $1,613,000. Before his signee in insolvency; and he prays that there death, and on the day of his death, Ralston be paid to him, as such assignee, the proporexecuted a conveyance of all his property to tionate part of said $200,000 and interest said William Sharon, "in trust to collect and which he avers to be due the estate of said receive the rents, issues, incomes, and profits insolvent. The said William Sharon, on Nothereof, and every part thereof, and to sell vember 4, 1885, by deed of trust, conveyed in and dispose of the same on such terms and fee all his property, of every kind, to the deprices as he deems best, and to apply the fendants Newlands and Frederick W. Sharon; same and the proceeds thereof, and of all the and on November 15, 1887, the said William property hereby conveyed, to such purposes Sharon died. The purpose of this action is
to compel the defendants, as trustees under California, and who were frequently unknown said deed to them from said William Sharon, to the Burlings, they (the Burlings) were in to account for all real and personal property, the habit of giving their promissory notes, the title to which "the said Sharon received and securing themselves by taking bank stock under and by virtue of said deed of trust and other collaterals. Why the Burlings did made on the 27th day of August, A. D. 1875, this, or what, if any, advantage accrued to by said W. C. Ralston to him, said William them therefrom, does not appear. During the Sharon," and to have said property, "of the period of these transactions Ralston estate of said W. C. Ralston," applied to the either the cashier or president of the bank, payment of said $200,000 and interest. The and appears to have been its principal busiaction was commenced on the 25th day of ness manager. Whether or not his request October, 1886, which was about 11 months to the Burlings to make these notes upon the after the death of said William Sharon, and securities furnished them was made in his 11 years after the transaction upon which the individual capacity, or as an officer of the suit is founded.
bank, does not clearly appear. It certainly Respondents present various reasons why does not appear from the facts stated that he the judgment of the court below should be entered into any personal obligation to the sustained, and appellants attack it from vari- Burlings on account of said notes, or made ous standpoints; but, under the views which any individual promise with respect to them. we take of the case, it is not necessary to dis- It is expressly alleged in the complaint that cuss all the propositions argued by the re- at the times of these transactions "said Wm. spective counsel. In our opinion, if, upon the C. Ralston did not give * to the said facts alleged, the Burlings had any cause of Wm. Burling, or to the said firm of Burling & action at all, their remedy was a personal Brother, any evidence of indebtedness from action against William Sharon to recover him, said W. C. Ralston." Facts are not damages for deceit in procuring their pay- averred showing that the Burlings were surement to him of the $200,000 in the manner as ties for Ralston; neither is it averred that the alleged, or upon an assumpsit to refund the said collateral securities were not sufficient to money, implied from a rescission of the con- protect said Burlings. No charge of miscontract under which it was paid, for fraud by duct is made against Ralston; but, on the Sharon in obtaining it. But this is not such contrary, it is a verred that all statements of an action. The nature of the action is stated William Sharon about the unlawful acts of in the first sentence of the brief of appellants, Ralston, his insolvency, and the worthlessas follows: "This action is brought to ob- ness of said securities, were false. Moreover, tain an accounting of the trust estate and the Burlings assigned to William Sharon all property of the late William C. Ralston, claims arising upon said notes against the eswhich was conveyed to the late William tate of Ralston. Therefore, whatever conSharon in trust, and if, upon such account- struction may be given to the said deed from ing, it be ascertained that the estate of said Ralston to William Sharon, the appellants in Ralston was solvent, that there be repaid to this action have no present claim as benethe plaintiffs the sum of two hundred thou- ficiaries thereunder. And it is very clear that sand ($200,000) dollars and interest thereon, they are not such beneficiaries with respect to being moneys paid on account of liabilities the very thing sued for in this action, viz. the incurred for said William C. Ralston.” No $200,000, which it is a verred William Sharon claim is made against the personal representa-fraudulently induced the Burlings to pay him tives of William Sharon, deceased, or against four months after the death of Ralston and his estate.
the execution of said deed. It is a verred that The theory of the complaint is that the con- Sharon used the said $200,000 in paying off veyance from Ralston to William Sharon was certain debts of Ralston, but we do not see a deed of trust for the benefit of Ralston's that any importance attaches to that avercreditors; that the Burlings were benefi- ment. It could make no difference whet her ciaries under such deed of trust; and that, as he so used that particular money, or any other such beneficiaries, they can charge the pres- money which he may have had. From every ent respondents F. W. Sharon and Newlands point of view the case presents the same asfor the repayment of said $200,000 and inter- pect; namely, that if any wrong was done the est, to the extent of the value of any prop- Burlings, under the facts alleged, it was a erty which they may have belonging to said wrong done by William Sharon personally, alleged Ralston trust estate. Now, in the and that the only remedy was a personal acfirst place, it is doubtful if said conveyance tion against the said Sharon. created a trust estate of which Ralston's cred- Moreover, we think that the action is barred itors were the beneficiaries. It is not so ex- by the statute of limitations, and is stale from pressed on the face of the instrument. But, laches. Of course, the statutory period has assuming that there was such a trust estate, run two or three times unless the case is it does not appear that at the time of its crea- saved by the clause (subdivision 4) of section tion the Burlings were creditors of Ralston. 338, Code Civ. Proc., which provides that in It appears that for the convenience of certain an action based upon alleged fraud the statlenders and borrowers of money who did ute does not commence to run until the distheir business mainly through the Bank of covery of the facts constituting the fraud. This action is founded upon the contract be- on which this action rests until 10 years after tween the Burlings and William Sharon, the date of the contract, and until after the made on December 24, 1875, which was an deatb of said William Sharon. And it is executed contract; and the statute com- averred that then “the means by which they menced to run on that day, except so far as obtained any information was by inquiring its running was delayed by a want of knowl- among their friends and acquaintances whethedge of the fraud by which said contract is er they (said persons) had any information realleged to have been procured. But “thelating to the dealings of said Sharon with said means of knowledge are the same thing, in trust estate, and whether they had any inforeffect, as knowledge itself” (Wood v. Car- mation regarding the property which was penter, 101 U. S. 143); and one who makes a conveyed by said Ralston to said Sharon in charge of fraud for the first time, many years trust, as aforesaid.” But such means were alafter its alleged perpetration, must show that ways within the power of appellants and the within a reasonable time he has used due dili- Burlings; and there are no sufficient facts algence to discover it, has followed up circum- leged to show that the delay is “consistent stances which would have put a prudent man with the required diligence." See Ang. Lim. upon inquiry, and has not slept upon his 88 187, 190; Hecht v. Slaney, 72 Cal. 363, 14 rights until the lapse of time and the death Pac. 88; Moore v. Boyd, 74 Cal. 167, 15 Pac. of parties charged with the fraud have de- 670. stroyed the means of a full, fair, and satis- Moreover, apart from the question of strict factory investigation in a court of justice. statutory limitation, the claim of appellants Moreover, in such a case the complaint must is too stale to be enforced in a court of equity. state facts from which it will appear to the "No rule of law is better settled than that a court that ordinary prudence could not have court of equity will not aid a party whose apdiscovered the fraud within the statutory pe- plication is destitute of conscience, good faith, riod. "The circumstances of the discovery and reasonable diligence, but will discourage must be fully stated and proved, and the de- stale demands, for the peace of society, by lay which has occurred must be shown to be refusing to interfere when there has been consistent with the requisite diligence.” gross laches in prosecuting rights, or where Wood v. Carpenter, supra. Statutes of limi- long acquiescence in the assertion of adverse tation are in great part founded upon the rights has accrued. The rule is peculiarly approbability that during the course of many plicable where the difficulty of doing entire years witnesses will die, and recollections of justice arises through the death of the prinevents long past will become indistinct in the cipal participants in the transactions complainmemories of the living. In the case at bared of, or of the witness or witnesses, or by sufficient facts are not stated to show that the reason of the original transaction having bealleged fraud could not, with requisite dili- come so obscured by time as to render the gence, have been sooner discovered. There ascertainment of the exact facts impossible." was great opportunity for discovering the Hammond v. Hopkins, 143 U. S. 230, 12 Sup. fraud, if any such existed, before the contract Ct. 418. In speaking of this rule, this court, between the Burlings and William Sharon in Bell v. Hudson, 73 Cal. 288, 14 Pac. 791, was made. That contract was not made in said: “It is a material circumstance that the a hurry. Sharon's representations, alleged claim was not made until after the death of now to have been false, were not immediately those who could have explained the transacaccepted as true and promptly acted upon. tion." In the case at bar, William Burling Negotiations were continued for four months. and William Sharon, “the principal particiRalston, as appears from the complaint, was pants in the transactions complained of," widely known in business circles, and had were both dead before the commencement of been accredited with great wealth. It is the action. It is quite apparent that no court averred in the complaint that he was perfect- could do "entire justice” in the premises withly solvent, and that he had real and personal out the testimony of William Sharon. Of property, which passed to Sharon under the course, if the suit had been commenced withdeed, of the aggregate value of $9,000,000. It in a reasonable time, and William Sharon had is averred, also, that he had real property of died before his testimony could have been the value of $6,000,000. If that was the fact, taken, the want of his testimony would simand the Burlings really had a legal claim ply bave been one of those natural misforagainst Ralston, it is almost beyond compre- tunes which sometimes come to litigants. hension why they did not discover it, if not But William Sharon lived for 10 years after before the $200,000 contract, at least before the transaction complained of. William Burthe death of William Burling, or before the ling died two years after the transaction, fully lapse of the statutory period of limitation. satisfied, as is a verred, that it was a fair one. The slightest examination of public records James W. Burling did business for several would have put them on the trail of the fact. years afterwards, and, until he became an It does not appear that they demanded an ex- insolvent, was also satisfied with the fairness amination of the books, papers, etc., of Ral- of the transaction. There was perfect acston. But no discovery was made, and it does quiescence by all parties for 10 years, and not appear that any reasonable efforts were while Sharon lived. It was not until he died, made for a discovery, of the alleged facts up- and his testimony was forever beyond human