Case Name: VERTEX INVESTMENT COMPANY (a Corporation), Appellant, v. NORMA B. SCHWABACHER, Individually and as Executrix, etc., Respondent
Court: District Court of Appeal of the State of California
Jurisdiction: California
Decision Date: 1943-03-01
Citations: 57 Cal. App. 2d 406
Docket Number: Civ. No. 12159
Parties: VERTEX INVESTMENT COMPANY (a Corporation), Appellant, v. NORMA B. SCHWABACHER, Individually and as Executrix, etc., Respondent.
Judges: 
Reporter: California Appellate Reports, Second Series
Volume: 57
Pages: 406–443

Head Matter:
[Civ. No. 12159.
First Dist., Div. One.
Mar. 1, 1943.]
VERTEX INVESTMENT COMPANY (a Corporation), Appellant, v. NORMA B. SCHWABACHER, Individually and as Executrix, etc., Respondent.
Philip S. Ehrlich, Albert A. Axelrod and Julien R Bauer for Appellant.
Brobeck, Phleger & Harrison, Maurice E. Harrison and Moses Lasky for Respondent.

Opinion:
WARD, J.
Plaintiff appeals from a judgment entered after demurrer sustained to the amended complaint without leave to amend. The gravamen of the action is that Louis A. Schwabacher, while a director and officer of plaintiff, Vertex Investment Company, embezzled, misappropriated and converted cash and property of plaintiff to his own use. The defendant, Norma B. Schwabacher, was sued individually and as executrix of the last will of Louis A. Schwabacher. Norma Schwabacher is the widow of Louis Schwabacher and legatee and devisee of his entire estate except as to some small specific bequests. The decree of final distribution has been entered in the estate proceeding. Samuel Schwabacher, brother of Louis, was co-executor of his will, and in that capacity was named as a defendant. The disposition of the action as to him does not appear from the record herein. This appeal involves only the demurrer of Norma Schwabacher individually and as executrix of the will of Louis.
Plaintiff prays that an accounting of the alleged misappropriations be had, that it have judgment for the amount found due and that a trust in its favor be impressed on all moneys and properties received by Norma from the estate of Louis, and on the proceeds of policies of insurance on the life of Louis received by Norma Schwabacher.
The grounds of demurrer are that the complaint does not state a cause of action; that it is barred by the statute of limitations, subdivision 4 of sec. 338, Code of Civil Procedure, and see. 353, Code of Civil Procedure, and by laches; that plaintiff is estopped by the decree of distribution to maintain the action; that several causes of action have been united, but not separately stated, and-that several causes of action have been improperly united.
The demurrer to the amended complaint was first overruled on February 19, 1941, but on April 10, 1941, the order was vacated and the demurrer was sustained without leave to amend. Judgment was entered for defendant on the following day.
Plaintiff contends that even though the order sustaining the demurrer would have been proper had it been the original decision of the court, the judge was without jurisdiction in the circumstances here to change his first ruling. The order overruling the demurrer was made on February 19, 1941. On March 3, 1941, counsel for defendant wrote a letter to the judge making a "request that the previous order overruling our demurrer be vacated and the matter reopened for further co3isideration.'' The letter called the court's attention to a decision in another state, which had appeared in the reports after the argument and filing of briefs in this case. Counsel urged that this decision -was strong authority in defendant's favor. A copy of the letter was sent to plaintiff's counsel. On March 6, 1941, counsel for the plaintiff wrote a letter to the judge in answer to defendant's letter. Counsel for each side thereafter wrote two further letters to the judge, sending copies to opposing counsel. The last letter was written by plaintiff's counsel on March 14, 1941. On April 10, 1941, the judge made the order sustaining the demurrer without leave to amend and rendered judgment on the following day. No motion for recosisideration was made in open court and no fo3mial notice of motion given.
Plaintiff contends that the court was without jurisdiction to change its ruling except pursuant to a motion made in court, and that it was required that notice of motion be given or waived. Plaintiff further contends that after the order overruling the demurrer had been made by the judge of the law and motion department, the case automatically passed to the jurisdiction of the presiding judge by force of the court rules, and the order changing the ruling on demurrer was beyond the jurisdiction of the judge of the law and motion department unless reassigned by the presiding judge, which was not done here. It is further contended that since the judge who made the original ruling ceased to be the judge of the law and motion department on March 31, 1941, he was without right on April 10, 1941, to make the order sustaining the demurrer, such matters being within the sole jurisdiction of the" law and motion judge.
We are of the view that the judge who originally ruled upon the demurrer had jurisdiction to change his decision by reason of the fact that it was he who originally ruled on the demurrer, even though at the time of the changed ruling he was no longer judge of the law and motion department. A ruling on demurrer, unlike many" other types of judicial determinations, may be changed for no other reason than that the judge is of the view that his first ruling was erroneous. (De La Beckwith v. Superior Court, 146 Cal. 496 [80 P. 717]; Kelly v. Liddicoat, 35 Cal.App.2d 559 [96 P.2d 186]; Howe v. Board of Supervisors, 118 Cal.App. 306 [5 P.2d 28]; 21 Cal.Jur. 124.) Proceedings had in court, pursuant to notice given or waived, when the demurrer was first argued are the basis for the changed ruling as for the original decision, and an additional motion and notice are not required.
In the case herein the record does not show that the right of the judge who made the original ruling had ceased by reason of further proceedings had in the case before another judge of the court. The point raised by plaintiff is without merit.
In determining the applicability of the statute of limitations herein, two distinct periods may be considered; that, from the date of the organization of the corporation to the date of the death of Louis A. Schwabacher (about twenty-four years) ; and that from his death to the filing of the complaint (approximately five years). If the statute of limitations is applicable to either period, the demurrer to the amended complaint should be sustained. We will proceed to consider the demurrer as directed to the statute of limitations for the first, twenty-four year, period.
The complaint alleges that Louis A. Schwabacher died on or about the 1st day of August, 1935; that his wife Norma and Samuel Schwabacher, a brother, who were named in his will as such, qualified and were appointed as executors of his last will and testament; that Sarah Schwabacher, whose husband predeceased her, was the mother of Louis A., Samuel I. and Edgar B. Schwabacher, Mina A. Eckstein and Jennie S. Rosenbaum; that in the year 1911 plaintiff corporation was formed, the mother transferring to it certain stocks, , bonds and other securities, which at that time constituted its sole assets; that the corporation issued 5,000 shares of capital stock equally to her five children, from whom officers and directors were selected; that Louis, as president, treasurer and -general manager "exclusively controlled, dominated, directed and managed the properties, business and affairs of plaintiff, and at no time or at all consulted with or received any advice from the other directors, officers, or stockholders of said plaintiff, and in all respects said Louis A. Schwabacher managed and controlled said properties, business and affairs of plaintiff corporation as though the same were his individual properties, business and affairs"; that his brothers and sisters "looked upon said Louis A. Schwabacher as the head of their family; that said Sarah Schwabacher was 64 years of age in the year 1911; and had the greatest love and affection for said Louis A. Schwabacher and the greatest respect for the integrity, honesty, character and business ability of said Louis A. Schwabacher; that said Louis A. Schwabacher was very prominent in business affairs, being a director of several large corporations and being experienced in the management of corporate and business affairs; . . . that sometime after the organization of the plaintiff corporation said Samuel I. Schwabacher objected to the manner in which said Louis A. Schwabacher handled some routine matters for the plaintiff corporation; that said Sarah Schwabacher informed said Samuel I. Schwabacher that if he objected to the manner in which said Louis A. Schwabacher managed the business and affairs of the plaintiff corporation, or if said Samuel I. Schwabacher opposed said Louis A. Schwabacher in the management of the business and affairs of the plaintiff corporation she, said Sarah Schwabacher, would disinherit said Samuel I. Schwabacher; that said Samuel I. Schwabacher thereupon withdrew said objections and agreed to abide by the wishes of his mother. That . . . very close family ties and relations existed between said Louis A. Schwabacher and his brothers and sisters, the other stockholders and directors of the plaintiff corporation; that all of said stockholders and directors had full and complete confidence in the honesty, integrity and ability of Louis- A. Schwabacher and relied implicitly upon him in the management and direction of the. business and affairs of the plaintiff corporation. . . . That from time to time said Louis A. Schwabacher, without consulting the other directors or stockholders of plaintiff corpo ration, caused dividends to be paid to the stockholders of plaintiff corporation from the assets of plaintiff corporation; that from the date of the organization of the plaintiff corporation to the date of the death of said Louis A. Schwabacher the stockholders of the plaintiff corporation never held any meetings whatever; that though the minute book of plaintiff corporation records directors' meetings of the plaintiff corporation purportedly held from time to time up to the date of Louis A. Schwabacher's death, none of the other stockholders or directors of the plaintiff corporation had notice or knowledge thereof and never attended any such meetings; that said minutes were dictated or drafted by said Louis A. Schwabacher and none of said meetings were ever actually held. . . . That at no time during the period hereinabove mentioned did Louis A. Schwabacher establish or cause to be established on behalf of plaintiff corporation any bank account or depositary for its funds, and said plaintiff corporation at no time during the lifetime of said Louis A. Schwabacher had any bank account or depositary for its funds; that during all of said period of time said Louis A. Schwabacher either deposited said funds of plaintiff corporation in his personal bank account or otherwise commingled said funds of plaintiff corporation with his own personal funds; that during said period of time said Louis A. Schwabacher disbursed from said commingled funds such funds as he purportedly disbursed on behalf of plaintiff, and also such funds as he disbursed for his own use and benefit. . . That plaintiff is further informed and believes, and upon such information and belief alleges, that various purchases purportedly made by said Louis A. Schwabacher for and on behalf, of the plaintiff corporation resulted in the realization of profits therefrom; that such purchases purportedly made for and on behalf of the plaintiff which resulted in profits were transferred by the said Louis A. Schwabacher from the plaintiff corporation to said Louis A. Schwabacher at the actual cost thereof to plaintiff corporation, and the profits resulting therefrom were converted by said Louis A. Schwabacher to his own use and benefit. " It is also alleged upon information and belief that the purported purchases resulted in losses which were "transferred from the said Louis A. Schwabacher to the plaintiff at the actual cost thereof to the said Louis A. Schwabacher, and the losses resulting therefrom were charged by Louis A. Schwabaoher to plaintiff corporation."
Upon the foregoing allegations based upon information and belief it is alleged "that plaintiff is informed and believes, and based upon such information and belief alleges that said books of account did not contain true and correct entries of all the financial and business transactions between plaintiff corporation and said Louis A. Schwabaoher; that plaintiff is further informed and believes, and upon such information and belief alleges that said books of account merely contained a transcription of certain entries contained in the personal books of account of said Louis A. Schwabaoher, and marked therein 'Vertex Investment Company' . . . That during all of the times herein mentioned the said Louis A. Schwabaoher had misappropriated, embezzled and converted to his own use and benefit large sums of money and properties of great value belonging to the plaintiff corporation, the exact amount and character of which said money and properties are unknown to plaintiff at the present time. . . . That plaintiff is further informed and believes, and based upon such information and belief alleges that at the time of the death of Louis A. Schwabacher, there was included among the alleged assets of his estate, cash and properties, which cash and properties were actually the property of the plaintiff corporation, and which said cash resulted from the aforesaid misappropriation, embezzlement and conversion, and which properties had been purchased with the funds of the plaintiff corporation . . . That plaintiff is informed and believes, and based upon such information and belief alleges that said Louis A. Schwabaoher, during his lifetime, purchased various forms of policies of life insurance, and that the defendant, Norma B. Schwabaoher was named as sole beneficiary of all said policies of life insurance, other than those in which the estate of Louis A. Schwabaoher was named as beneficiary; that plaintiff is further informed and believes, and based upon such information and belief alleges that the premiums upon all of said policies of life insurance, so paid by Louis A. Schwabaoher or on his behalf, were paid for with the funds of plaintiff corporation, or with funds of plaintiff corporation which had been commingled with the personal funds of said Louis A. Schwabaoher, as hereinabove alleged . . . That said Louis A. Schwabacher at no time or at all advised any of the stockholders, directors or officers of plaintiff corporation of the matters and things hereinabove alleged; that at no time or at all did said Louis A. Schwabacher furnish a financial statement of the plaintiff corporation to the stockholders of said plaintiff, nor did he cause such' a financial statement to be prepared for submission to the stockholders or directors of said plaintiff, nor did the stockholders or directors of said plaintiff ever see a financial statement of said plaintiff, except as hereinafter alleged; that none of the stockholders or directors of said plaintiff, other than Louis A. Schwabacher, ever saw or were permitted by said Louis A. Schwabacher to see the purported books of account of said plaintiff, nor the personal books of account of said Louis A. Schwabacher; that none of the stockholders, directors or officers of said plaintiff had any knowledge of the financial and business transactions between said plaintiff and said Louis A. Schwabacher, as hereinabove set forth until subsequent to the death of said Louis A. Schwabacher, and then only under the circumstances hereinafter alleged; that none of the stockholders, directors or officers of said plaintiff ever consented to or approved of the financial and business transactions between said plaintiff and said Louis A. Schwabacher, nor consented to or approved of the manner in which said Louis A. Schwabacher directed and managed the business and affairs of said plaintiff, as hereinabove set forth; that by reason of the matters and things herein set forth and the confidential and family relations existing between said Louis A. Schwabacher and the other stockholders and directors of said plaintiff, and the trust and reliance placed by them in said Louis A. Schwabacher, as hereinabove alleged, the said stockholders and directors of said plaintiff at no time suspected or had any cause to suspect any of the matters or things herein alleged."
Under the terms of the will, except for certain specific bequests, the entire estate was devised to Norma B. Sehwabacher, the widow of Louis, and under a decree of distribution the estate was distributed to her. The complaint herein was filed in May 1940 subsequent to the final distribution in the estate of Louis. The date of the final discovery of the fraud is placed as of September 1937.
In addition to the allegations outlined or quoted herein, the complaint further alleges certain matters subsequent to the death of Louis.
When failure to discover fraud is due to lack of diligence, the statute of limitations commences to run from the time it should have been discovered.
A cause of action for fraud is "not to be deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud." (Sec. 338, subd. 4, Code Civ. Proc.) But it is not sufficient for the complaint merely to allege discovery within the three-year period for actions for relief on the ground of fraud. "Discovery," within the meaning of the section, is deemed to take place when the plaintiff in the exercise of due diligence should have learned the facts. Hence it must affirmatively appear that the failure to make discovery was not due to lack of diligence. The plaintiff should set forth the circumstances under which he learned the facts, and the reasons for failing to learn them sooner in order that the court may determine whether he has been negligent in not acquiring knowledge of them at an earlier date. (Consolidated R. & P. Co. v. Scarborough, 216 Cal. 698 [16 P.2d 268]; Victor Oil Co. v. Drum, 184 Cal. 226 [193 P. 243]; Lady Washington C. Co. v. Wood, 113 Cal. 482 [45 P. 809]; West v. Great Western Power Co., 36 Cal.App.2d 403 [97 P.2d 1014].) The rule is often expressed in the statement that where plaintiff knows facts which place him under a duty of inquiry, he is charged with knowledge of such facts as an investigation would have revealed. It has also been said that the means of knowledge are the equivalent of knowledge, but this is subject to the qualification that the position of plaintiff must be such that he is under a duty to make use of such means. (Prewitt v. Sunnymead Orchard Co., 189 Cal. 723 [209 P. 995].)
In considering the question whether there was a lack of diligence in failing to discover the facts before the death of Louis, we are of the view that upon the facts alleged it is immaterial whether all, or less than all, were originally elected directors. That is, it is not necessary here to determine whether, if the facts were such as to impose a duty of investigation on directors, but not on persons who were stockholders only, the constructive notice of the directors would be imputed to the corporation to bar an action by it for the benefit of all stockholders. (Curtis, Receiver, v. Connly, 257 U.S. 260 [42 S.Ct. 100, 66 L.Ed. 222]; Whitten v, Dabney, 171 Cal. 621 [154 P. 312].)
It is alleged that from time to time Louis caused dividends to be paid without consulting the other directors, and that plaintiff at no time had any bank account or depositary for its funds. It is further alleged that Louis either deposited funds of plaintiff in his personal bank account or otherwise commingled funds of plaintiff with funds of his own and those of his mother. The conclusion to be drawn from these allegations, in the analysis of defendant, is that the dividends were paid by personal check of Louis. We are of the view that this deduction is a proper one. To have paid dividends in currency would have been such a departure from common business practice that it will not be inferred that they were thus paid in the absence of an allegation to that effect. But it does not follow from the fact that corporate funds were deposited in a bank account in the name of Louis that he also deposited his personal funds in the same account.
To summarize the charge of lack of diligence on the part of the stockholders during the lifetime of Louis, it is that they permitted him to have exclusive management of the corporation without calling him to account for his management. During this period they received no financial statements and never saw the books of the corporation. It is not averred that they ever made any request for such statements, nor that they ever asked to see the corporate books or to have them audited. If they had requested a financial report, an honest statement by Louis should have revealed his indebtedness, if any, to the company. They may not have been in a position themselves to analyze the corporate books kept by Louis, but a professional audit if they had asked for one, would have revealed Louis' indebtedness to the company. If a request for a statement or audit had been made, a failure on the part of Louis to comply would arouse a strong suspicion of irregularity.
If Louis were alive he could not rely on the other directors having abrogated their functions in his favor to defeat liability, since it was with the consent of all. Their lack of diligence, if any, consists in their failing to call Louis to account for his exclusive management over a long period of years.
An inference may be drawn from the complaint that the action was not commenced earlier because of the reluctance of. the stockholders to distress their mother who was living during the greater period between the organization of the corporation and the filing of the complaint. It is sufficient to say that the complaint was filed prior to the death of the mother and approximately five years after the death of Louis. Primarily, the allegations of fraud are based upon the commingling of the funds of the corporation with the personal funds of Louis and those of his mother. It appears from the amended complaint that the lips of Louis and the lips of the mother have been sealed by death.
The charges of embezzlement, etc., are directed against a man long since dead. In the absence of specific factual allegations of fraud, the law should not indulge in presumptions in favor of the plaintiff corporation. The amended complaint does not allege any direct acts of concealment on the part of Louis or any misrepresentation or deceit by him. The closest approach is the allegation that the other directors and stockholders were not permitted to examine the books; it is not alleged that a request therefor was ever presented to Louis.
As stated before, all the allegations of fraud up to 1935, based upon information and belief or otherwise, rest upon the fact that there was a commingling of funds. The fact was not concealed. The corporation, its directors and stockholders knew of this apparent irregularity covering an approximate period of twenty-four years. According to the complaint, also, the stockholders and directors knew that no directors' meetings were held, nevertheless they continued to accept dividends paid by Louis' personal checks. These facts, standing alone, are sufficient to establish the stockholders were put on notice of an apparent irregularity. Respondent quotes from Vertex Investment Co. v. Commissioner of Internal Revenue, 47 U. S. Board of Tax Appeal Reports, which is not challenged by appellant, as follows: "The fact that he [Louis] kept the funds of petitioner [appellant] in his own account should have been known to the other stockholders, since they were paid dividends from time to time by checks drawn on his personal account."
The means of knowledge which was clearly available to plaintiff and the stockholders thereof is equivalent to knowledge. (Consolidated R. & P. Co. v. Scarborough, supra; Bainbridge v. Stoner, 16 Cal.2d 423 [106 P.2d 423]; Nighbert v. First Nat. Bk. of Bakersfield, 26 Cal.App.2d 624 [79 P.2d 1105]; Haley v. Santa Fe Land Imp. Co., 5 Cal. App.2d 415 [42 P.2d 1078]; Daily Tel. Co. v. Long Beach Press Pub. Co., 133 Cal.App. 140 [23 P.2d 833]; Turman v. Holmes, 29 Cal.App.2d 198 [84 P.2d 225]; Myers v. Metropolitan Tr. Co. of Cal., 22 Cal.App.2d 284 [70 P.2d 992].)
Delay in discovering a fraud is sometimes excusable in eases involving a confidential relationship. It should be noted that this is not an action by the individual stockholders or directors against Louis, as trustee, but by the corporation against the widow of Louis individually and as executrix of his estate. So far as Louis was concerned, in his capacity as president of the corporation he was the agent thereof. If, over a long period of time, he adopted the policy of placing the funds of the corporation in his personal account, and the corporation, through indolence and neglect, "or by want of ordinary care" on the part of its directors permitted such practice, the agent may assume that he has the authority and approval of the principals to so act. (Civ. Code, sec. 2316.)
It was the duty of the corporation to know its own books, and the stockholders had a right to inspect them. (Wood V. Carpenter, 101 U.S. 135 [25 L.Ed. 807]; Curtis, Receiver, v. Connly, supra.) In County etc. Bk. v. Coast D. & L. Co., 46 Cal.App.2d 355, 359 [115 P.2d 988], the following facts are shown: "It appears that all transactions by defendant company, including this, were handled in an altogether informal manner; that no directors' meetings were ever actually held, the resolutions and minutes being prepared by Poletti, and he and Morelli simply counting 'the other directors in.' Between 1921 and 1934 no directors' meetings were ever, in fact, held, although the record shows numerous 'resolutions' including the one above-mentioned, 'passed' by defendant company." The majority opinion (petition for hearing denied by the Supreme Court) further states (p. 367) : "As directors and officers of the company, it was their duty to know what was being done by Poletti and how he was performing his duties as general manager. They cannot be permitted to disregard their duties for thirteen or fourteen years, and then, after receiving the benefits of the transaction, and when the particular transaction does not turn out advantageously, as an afterthought, contend that their agent was unauthorized to perform the questioned act." The precise point in that case is not raised herein, but the statement on the duties of directors is illuminating.
Appellant corporation, according to the complaint, had actual knowledge of circumstances which should have prompted it to examine the books irrespective of any possible personal confidential relationship between the president thereof and the stockholders. In some instances affectionate brothers and sisters may hesitate to make a charge of fraud against one another, but if the delay is unduly prolonged the existence of the relationship should not prevent the statute of limitations from becoming effective (Mackall v. Casilear, 137 U.S. 556 [11 S.Ct. 178, 34 L.Ed. 776]; Bacon v. Soule, 19 Cal.App. 428 [126 P. 384]), particularly if the delay is twenty-four years and in the meantime the accused dies.
The answer to the question involved as regards the first twenty-four years of the existence of the corporation is well set out in Kenton v. Wood, 56 Ariz. 325 [107 P.2d 380, 383], where the court said: "This is an action by a minority stockholder and director to recover for the benefit of the corporation money which he alleges was misapplied by a co-director. While defendant was general manager of the corporation during the time in which it was contended there was a discrepancy in its accounts, plaintiff was also a member of its board of directors, and such board had both the ultimate authority and responsibility for the management of the corporation. It is true that directors are trustees for the benefit of the stockholders of a corporation, but there is no fiduciary relation between two directors as such, and since this was not an individual action between plaintiff and defendant to recover money which it was alleged that defendant, as trustee for the benefit of plaintiff, owed the latter, we think family relationship between them as individuals cannot create a fiduciary relation between them in the present case. . . . Plaintiff did not occupy the position of an ordinary stockholder, who can only have an inspection of the records of the corporation by a special effort and who is under no duty to inspect them. He was a director charged with the duty of guarding the interests of the corporation and, therefore, of examining all of the acts of its officers and its records. We think under these circumstances that a delay of approximately eight years by the plaintiff before he brought his action was laches, if, indeed, the statute of limitations had not actually run. (Guerin v, American S. & R. Co., 28 Ariz. 160, 236 P. 684; Pourroy v. Gardner, 122 Cal.App. 521, 10 P.2d 815.) " On the question involved on this appeal, namely, that the corporation had actual knowledge of its own affairs and of cirumstances that should have led to an investigation, see Consolidated R. & P. Co. v. Scarborough, supra; Underhill v. Santa Barbara etc. Co., 93 Cal. 300, 312 [28 P. 1049] ; Lady Washington C. Co. v. Wood, supra; Daily Telegraph Co. v. Long Beach Press Pub. Co., supra; Pourroy v. Gardner, supra.
The statute of limitations started to run long before the death of Louis. The allegations of subsequent occurrences are not relevant to the case. (Del Campo v. Camarillo, 154 Cal. 647 [98 P. 1049].) For that reason the further contentions of respondent—that appellant was chargeable with knowledge of the true facts upon the election of Samuel, brother of Louis, as president of the corporation following .the death of the latter in 1935; that there is no excuse for the delay after the alleged discovery of fraud in September 1937; that the action is barred by laches; that appellant is barred either by the doctrine of election of remedies or the doctrine of res judicata—need not be considered. The last point is based upon the fact that appellant in February 1936 elected to file a claim as a general creditor of Louis in the amount of $134,479.78, plus interest. In March of 1937 the corporation and each of its stockholders and directors accepted assets valued at $173,650 in settlement of all claims against the estate of Louis, and the "discovery" by Edgar B. Schwabacher in September of the alleged fraud was prior to a ratable and subsequently a final distribution of the remainder of the estate of Louis. The merits of these contentions by respondent, or the allegations of the complaint covering the period from 1935 to 1940 need not be considered in view of our conclusion that the statute of limitations started to run within the previous, twenty-four-year, period.
The cases cited by appellant, covering the twenty-four-year period, are not in point. They involved actions by stockholders, and not by the corporations, or were suits to reform conveyances, or it was determined that there were no circumstances to arouse suspicion, or that allegations of concealment appeared in the complaint, or they do not involve the statute of limitations.
When it is "clear" that a complaint may be amended to state a proper cause of action (Wennerholm v. Stanford Univ. Sch. of Med., 20 Cal.2d 713 [128 P.2d 522]), a reviewing court, though no request to amend is presented, may reverse the order sustaining the demurrer and direct an amendment. (Code Civ. Proc., sec. 472c.) The complaint alleges knowledge of the commingling of funds. It must be assumed that plaintiff stated its cause as favorably and completely as possible. No amendment would be available to deny knowledge that should have been possessed by appellant.
The judgment appealed from is affirmed.
Knight, J., concurred.