Court Opinion

ID: 9552752
Source: CourtListenerOpinion
Date Created: 2023-08-07 19:16:01.036991+00
Date Added: 2024-06-11T15:28:50.079219
License: Public Domain

Wedell, J.
(concurring in part and dissenting in part): I concur in all parts of the opinion except the portion thereof which pertains to the statute of limitations.
The question is whether the petition alleged sufficient facts to relieve plaintiff from the operation of the two year statute of limitations pertaining to discovery of the fraud. The action was not instituted until June 10, 1948. It is alleged the fraudulent purpose of defendants to acquire stock existed as early as 1942 and culminated with the purchase thereof in May, 1944; that plaintiff was ignorant of the fraud until June 12, 13 or 14, 1946, when he heard evidence in the trial of the case of Dinsmoor v. Hill, No. 18141 in the district court of Douglas county (the latter case was filed in that *397court July 12, 1945, and decided in this court December 6, 1947. Dinsmoor v. Hill, 164 Kan. 12, 18, 187 P. 2d 338).
The instant petition was filed a few days before the two year period expired after the alleged discovery of the fraud and about four years after the alleged perpetration of the fraud. The pertinent part of G. S. 1935, 60-306, Third, reads:
“Within two years ... an action for relief on the ground of fraud — the cause of action in such case shall not be deemed to have accrued until the discovery of the fraud.”
What do the words in the statute “discovery of fraud” mean? That question has long been laid at rest. In City of Coffeyville v. Metcalf, 134 Kan. 361, 5 P. 2d 807, an opinion written by the late Justice Rousseau A. Burch, those words were defined as follows:
“In the subdivision of the statute of limitation relating to actions for relief on the ground of fraud and providing that a cause of action shall not be deemed to have accrued until discovery of the fraud (R. S. 60-306, third), discovery of the fraud means discovery of such facts as would, on reasonably diligent investigation, lead to knowledge of the fraud.’’ (Syl. If 2.) (Emphasis supplied.)
It is thus clear mere ignorance of fraud does not toll the statute. That, of course, is a rule of necessity. Otherwise the statute could easily be completely nullified by a plaintiff’s simple allegation and testimony he had been ignorant of the fraud, until a designated date, notwithstanding a multitude of facts and circumstances would have apprised him of the fraud had he pursued them with ordinary diligence. The rule has been applied to notice imparted by the recording statutes and in numerous other cases as will presently appear. In fact, it is the uniform rule. In Bluff City v. Western Light & Power Corp., 137 Kan. 169, 19 P. 2d 478, it was held:
“On an objection to the introduction of evidence because the action for relief, on the ground of fraud, is barred by the two-year statute of limitations (R. S. 60-306, subdiv. 3), the allegation of recent discovery of the fraud, which occurred more than two years earlier is subject to the effect of constructive notice and to the application of the .uniform rule that if by the exercise of reasonable diligence the fraud could have been discovered earlier, the failure to discover it will not toll the running of the statute.” (Syl. IT 3.) (Italics supplied.)
The rule that fraud is deemed to have been discovered whenever in the exercise of reasonable diligence it might have been discovered has been the settled law of this state as announced in a continuous succession of cases. A few of them are: Donaldson v. Jacobitz, 67 Kan. 244, 72 Pac. 846; Dusenbery v. Bidwell, 86 Kan. 666, 676-677, *398121 Pac. 1098; Rogers v. Lindsay, 89 Kan. 180, 181-182, 131 Pac. 611; Foy v. Greenwade, 111 Kan. 111, 117-118, 206 Pac. 332; City of Coffeyville v. Metcalf, supra; Bluff City v. Western Light & Power Corp., supra; Malone v. Young, 148 Kan. 250, 263-264, 81 P. 2d 23; Herthel v. Barth, 148 Kan. 308, 81 P. 2d 19, 119 A. L. R. 326; Manka v. Martin Metal Mfg. Co., 153 Kan. 811, 817, 113 P. 2d 1041; Preston v. Shields, 159 Kan. 575, 581, 156 P. 2d 543; Schulte v. Westborough, Inc., 163 Kan. 111, 114-116, 180 P. 2d 278, 172 A. L. R. 259, 265.
In the Herthel case, supra, we said:
“That the statutes of limitation, in such cases as this, apply where relief is sought on the theory of constructive trusts growing out of fraud, cannot be doubted. (Main v. Payne, supra; Kennedy v. Kennedy, 25 Kan. 151; City of Clay Center v. Myers, 52 Kan. 363, 35 Pac. 25; Kahm v. Klaus, supra; Bell v. Bank of Whitewater, supra; 37 C. J., Limitations of Actions, Implied or Constructive Trusts, § 270; Restatement, Restitution, §§148 (2) and 179.) G. S. 1935, 60-313, provides:
“ ‘When a right of action is barred by the provisions of any statute, it shall be unavailable either as a cause of action or ground of defense.’
“It has been expressly held that statute is broad enough to include all actions, whether legal or equitable. (Hogaboom v. Flower, 67 Kan. 41, 43, 72 Pac. 547.) Furthermore, our statute of limitations with respect to actions for relief on the ground of fraud makes no exception relative to constructive trusts resulting from fraud. We are not permitted to ingraft new exceptions onto the statute. (Regier v. Amerada Petroleum Corp., 139 Kan. 177, 183, 30 P. 2d 136.)” (p. 312-313.) (Emphasis supplied.)
To the same effect is the Malone case, supra, see p. 264. In the Malone case we also said:
"While the statute of limitations does not begin to run until the discovery of the fraud, plaintiff, under the general rule heretofore stated and under the repeated decisions of this court, is not relieved from such discovery by simply alleging ignorance of the fraud, but is required to plead facts which disclose inability to discover the fraud by the exercise of ordinary diligence.” (p. 264.)
The same rule applies to the equitable doctrine of laches. In the Malone case we quoted with approval from Bogert, in his work on Trusts and Trustees, as follows:
“ ‘But mere proof of ignorance is not enough to excuse delay. The ignorance must have been reasonable — must have existed despite the exercise of due care to learn the facts and to protect the cestui’s rights. A cestui que trust cannot sit idly by and close his eyes to what is going on around him. “One who would repel the imputation of laches on the score of ignorance of his rights must be without fault in remaining so long in ignorance of those rights. Indolent ignorance and indifference will no more avail than will vol*399untary ignorance of one’s rights.” As a Pennsylvania court has said: “Laches is not excused by simply saying: ‘I did not know.’ If by diligence a fact can be ascertained, the want of knowledge so caused is no excuse for a stale claim. The test is not what the plaintiff knows, ‘but what he might have known, by the use of the means of information within his reach, with the vigilance the law requires of him.”” (Vol. 4, p. 2747.)” (p. 263.) (Emphasis supplied.)
In the Preston case, supra, we held:
“ 'One may not sit idly by for any considerable time, without asserting claim to property of highly speculative nature, to await outcome of others’ efforts to develop and improve such property, and, when such efforts are successful, come in and claim fruits thereof.’ (Preston v. Kaw Pipe Line Co., 113 F. 2d 311.)” (Syl. ¶ 8.)
In the opinion we stated:
“Ignorance of fraud at the time of its alleged commission is not charged. Moreover a mere allegation of ignorance at the time of its commission, or later, would not suffice. A party is required to plead facts which disclose inability to discover the fraud by the exercise of reasonable diligence. (Malone v. Young, 148 Kan. 250, 81 P. 2d 23.) The instant petition does not meet those requirements.” (p. 581.)
Likewise in the recent Schulte case, supra, we held:
“In order to state a cause of action pn the ground of fraud which will toll the running of the two-year statute of limitations it is necessary that the petition clearly disclose the fraud was not, and in the exercise of reasonable diligence could not have been, discovered earlier than within the two-year period preceding the commencement of the action.”
Although a few early cases may contain language not entirely consistent with this view they have not been followed and are not in harmony with the great weight of authority generally. The rule of pleading stated in this opinion has not been applied in a single isolated case but in various kinds of cases, including trust cases, where this court has been required to rule on the sufficiency of allegations in a petition to toll the statute of limitations. Some of them are Bluff City v. Western Light & Power Corp., Malone v. Young, Herthel v. Barth, Preston v. Shields, omnia supra; Schulte v. Westborough, Inc., supra, 172 A. L. R. 259, 265, 266.
This rule of pleading is in harmony with the rule adopted in most jurisdictions. See anno, to Schulte case, supra, 172 A. L. R. 259, 265, 266.
Assuming, of course, for the purpose of the demurrer defendants knew the value of the stock to plaintiff exceeded $107.50 per share, *400there is not the semblance of an allegation plaintiff could not in the exercise of ordinary care have discovered that fact long before the two-year statute expired. The opinion in three consolidated cases, this day decided, related to the instant case, and referred to in the instant majority opinion (Dalton v. The Lawrence National Bank, No. 37,894, 169 Kan. 401, 219 P. 2d 719; Murphy v. The Lawrence National Bank, No. 37,895, 169 Kan. 401, 219 P. 2d 719; Hurst v. The Lawrence National Bank, No. 37,896, 169 Kan. 401, 219 P. 2d 719) is in nowise controlling here. Those cases involve trust duties. Moreover, in each of them it is at least, in substance, alleged the respective plaintiffs did not discover the fraudulent acts and in the exercise of ordinary diligence were unable to discover the fraud earlier than the date alleged in the petition; that the facts constituting the fraud were peculiarly within the knowledge of the defendants and were concealed by them from the plaintiffs. The fact the petitions in those cases contained such allegations is clearly set forth and properly emphasized in that opinion.
True defendants had duties commensurate with their position. Defendants’ duties, however, did not relieve the plaintiff of exercising ordinary diligence in the premises in order to discover the alleged fraud. Plaintiff cannot escape the plain interpretation this court has placed on the fraud statute.
Another allegation in the instant petition might well be treated but other duties preclude my doing so.