Court Opinion

ID: 9794543
Source: CourtListenerOpinion
Date Created: 2023-08-31 03:07:47.7121+00
Date Added: 2024-06-11T08:17:48.649317
License: Public Domain

BIRD, C. J.,
Concurring and Dissenting.—I respectfully dissent. I cannot agree with the majority that plaintiff’s claims for fraud and misrepresentation, and for rescission of the marital settlement agreement on the basis of mistake, are barred by the statute of limitations.
*877All the parties agree that only one year prior to the filing of her complaint, plaintiff actually discovered that the true value of her ex-husband’s stock may have greatly exceeded the value represented to her when she signed the marital settlement agreement. Despite this fact, the majority hold that these claims are barred by the statute of limitations because her attorneys purportedly developed “suspicions” about defendants’ representations some five to six years before her complaint was filed. In reaching this conclusion, the majority must ignore several important facts and rules: (1) the obligation imposed by the fiduciary relationship of the parties; (2) the rule that a cause of action for fraud accrues upon the discovery by the aggrieved party of the facts constituting fraud; and (3) the “well-established rules relating to the consideration of motions for summary judgment. ”
Code of Civil Procedure sections 337, subdivision 3 and 338, subdivision 4 both provide that the statute of limitations for fraud or mistake does not begin to run until the facts constituting the fraud or mistake are discovered by the aggrieved party.1 A plaintiff need not establish that she exercised due diligence to discover the facts within the limitations period unless she “is [under] a duty to inquire and the circumstances are such that the plaintiff is negligent in failing to inquire.” (2 Witkin, Cal. Procedure (2d ed. 1970) Actions, § 340, p. 1182; accord Hobart v. Hobart Estate Co. (1945) 26 Cal.2d 412, 437-438 [159 P.2d 958].) Where the plaintiff is under no such duty to inquire, the limitations period does not begin to run until the aggrieved party has actually discovered the facts constituting the fraud or mistake, even though the means for obtaining the information are available. (Ibid.)
Here, plaintiff had no duty to inquire about the accuracy of her ex-husband’s representations concerning the value of the stock because a fiduciary relationship existed between them.
In Vai v. Bank of America (1961) 56 Cal.2d 329 [15 Cal.Rptr. 71, 364 P.2d 247], this court held that a fiduciary relationship between spouses is established when one spouse controls the community property. Here, defendant Miller controlled the Bechtel stock. “ ‘As the manager of the community property the husband occupies a position of trust [citations], which is not terminated as to assets remaining in his hands when the spouses separate. It is part of his fiduciary duties to account to the wife for the community property when the spouses are negotiating a property settlement agreement. ’ ” (Vai, supra, 56 *878Cal.2d at p. 337, quoting Jorgensen v. Jorgensen (1948) 32 Cal.2d 13, 21 [193 P.2d 728].)2
This fiduciary duty places upon the spouse who controls the property the obligation to disclose not only the existence of community assets, but also any “material facts affecting their value." (Boeseke v. Boeseke (1974) 10 Cal.3d 844, 849 [112 Cal.Rptr. 401, 519 P.2d 161], italics added; accord Vai, supra, 56 Cal.2d at p. 342.) The husband’s fiduciary duties continue as long as his control of the community property continues “notwithstanding the complete absence of confidence and trust, and the consequent termination of the confidential relationship.” (Vai, supra, 56 Cal.2d at p. 338.)
In Vai, the wife sought rescission of a marital settlement agreement on the ground that her husband had concealed information material to the valuation of a parcel of vineyard property included in the settlement. Specifically, plaintiff’s counsel was shown a financial statement showing the book value of the land to be $200 per acre. He was not told, however, that vineyard land immediately to the north of the property was sold by defendant only nine months previously for over $500 per acre. Nor did defendant reveal that prior to the execution of the property settlement agreement, he had arranged to sell the property for over $800 per acre. (Vai, supra, 56 Cal.2d at p. 340.) These facts were “material facts relating to the value of community assets.” (Id., at p. 342.) That the wife knew the vineyard property existed was irrelevant. The husband breached his fiduciary duty by failing to disclose material facts relevant to the property’s valuation. (Ibid.)
The present case is strikingly similar to Vai. Here, plaintiff charges that her husband failed to reveal facts within his knowledge which were material to the valuation of the Bechtel stock. Plaintiff’s counsel was told that the price was set by a shareholders’ agreement. However, defendant Miller did not tell plaintiff or her attorney that the price contained in the agreement bore absolutely no *879relationship to the value of the corporation. Surely such information is “materially] . . . relat[ed] to the value of [the] community asset[ ].” (Ibid.)3
Under Vai, then, defendant Miller owed a fiduciary duty to plaintiff to disclose fully and fairly material facts relating to the value of the community property over which he had control—i.e., the Bechtel stock. Under such circumstances, plaintiff had no duty to investigate the manner in which the stock’s value was determined. Rather, she was entitled to rely on her husband’s representations.4
Nevertheless the majority conclude that plaintiff had a duty to investigate because she was “aware of facts which would make a reasonably prudent person suspicious” of fraud. (Maj. opn., at p. 875, citing Bedolla v. Logan & Frazer (1975) 52 Cal.App.3d 118, 131 [125 Cal.Rptr. 59].) That conclusion is based on their finding that plaintiff’s attorneys had “suspicions” about the valuation of the stock some five to six years before plaintiff actually discovered its true value. (Maj. opn., at p. 875.) However, the evidence equally supports the inference that plaintiff’s attorneys were not at all “suspicious.” After executing the marital settlement agreement, plaintiff consulted with several attorneys. One attorney wrote to Miller’s counsel and requested a copy of the shareholders’ agreement approximately one year after the negotiation of the property settlement agreement. A second attorney reiterated the request some four months later. Neither attorney ever received any of the requested information. These attorneys had only recently begun to serve as plaintiff’s counsel. Their inquiries do not necessarily reveal “suspicions” of any kind. They merely reflect a degree of professional thoroughness expected of members of the legal profession who have been consulted for advice. Thus, it is clear that an entirely “innocent” inference may be drawn from the facts referred to by the majority.
Moreover, even if plaintiff’s attorneys had the suspicions ascribed to them by the majority, such suspicions, by themselves, are insufficient to give rise to a *880duty to investigate. “The statute [of limitations] commences to run only after one has knowledge of facts sufficient to make a reasonably prudent person suspicious of fraud, thus putting him on inquiry.” (Hobart v. Hobart Estate Co. (1945) 26 Cal.2d 412, 437 [159 P.2d 958], italics added; accord Bedolla v. Logan & Frazer (1975) 52 Cal.App.3d 118, 130 [125 Cal.Rptr. 59].) The relevant consideration is not whether plaintiff had mere “suspicions,” but whether plaintiff had knowledge of facts sufficient to make a reasonable person suspect fraud.
That the evidence may suggest that plaintiff’s attorneys had doubts about the true value of the stock does not establish that their suspicions were based on an awareness of the requisite “facts.” Indeed, the inquiries which plaintiff’s attorneys did make were unavailing. No information was ever supplied by defendants. “A defrauded person ... is not barred from maintaining an action merely because he commenced an investigation if it was incomplete or abandoned before discovery of the falsity, particularly if the defendant has a superior knowledge of the facts, or if it is difficult for the plaintiff to ascertain all the facts. ...” (Hobart, supra, 26 Cal.2d at p. 435.)
A spouse should not be penalized for his or her attorneys’ unavailing curiosity. Such a rule would tend to deter attorneys from engaging in the laudable practice of thoroughly investigating the history of a new client’s pending legal affairs. And, it has the potential to render completely meaningless the well-established rule that a cause of action for fraud accrues upon the discovery by the aggrieved party of facts constituting fraud.
No doubt many divorcing couples are skeptical, to say the least, about whether their partners are being entirely straightforward and honest in the negotiation of a property settlement. However, that is not sufficient to create a duty of inquiry. Here, plaintiff should not be charged with constructive knowledge of facts which may have been revealed by an investigation merely because her attorneys had “suspicions”—unsupported by any facts—about representations which had earlier been made by defendants.
In addition, the knowledge that the price of the Bechtel shares was set by a shareholders’ agreement was not sufficient to make a reasonably prudent person suspect that fraud had been committed. Defendants argue that a reasonable person would necessarily infer from this fact that the price of the stock was not based on the assets or earnings of the corporation. But, a contrary inference could even more readily be drawn. Most shareholder agreements set stock prices by reference to some form of objective criteria such as book value, market price, capitalizing earnings or independent appraisal. (See 2 O’Neal, Close Corporations (2d ed. 1971) §§ 7.24-7.24g, pp. 83-100.) As O’Neal notes, “the parties to a restrictive [shareholders’ agreement] ordinarily prefer a *881pricing method which results in a transfer price that approximates the value of the shares at the time of transfer.” (Id., at p. 90, fn. omitted.) Therefore, the fact that the price was set by the shareholders would more likely than not lead a reasonable person to believe that the price bore some relationship to the value of the corporate assets.
The majority appear to forget that the grant of a motion for summary judgment is being reviewed. The role of the trial court on a motion for summary judgment is simply to determine whether there are any triable issues of fact presented. (Stationers Corp. v. Dun & Bradstreet, Inc. (1965) 62 Cal.2d 412, 417 [42 Cal.Rptr. 449, 398 P.2d 785].) Affidavits in support of the motion are strictly construed. Affidavits in opposition are liberally construed. And, “doubts as to the propriety of granting the motion should be resolved in favor of the party opposing the motion.” (Ibid.)
Summary judgment may not be granted where contradictory inferences may be drawn from the supporting declarations or affidavits. (Code Civ. Proc., § 437c, subd. (c); 4 Witkin, Cal. Procedure (2d ed. 1981 supp.) Proceedings Without Trial, § 196A, p. 63; Brown v. City of Fremont (1977) 75 Cal.App.3d 141, 145 [142 Cal.Rptr. 46].) Defendants’ contention that plaintiff was aware of facts sufficient to put her on inquiry must be examined in light of this standard. “[W]hen the facts are susceptible of opposing inferences, whether ‘a party has notice of “circumstances sufficient to put a prudent man upon inquiry as to a particular fact,” [is itself a] question[ ] of fact to be determined by the jury or the trial court. ’ ” (Hobart, supra, 26 Cal.2d at p. 440, quoting Northwestern P. C. Co. v. Atlantic P. C. Co. (1917) 174 Cal. 308, 312 [163 P. 47].)
In light of the unequivocal language of this court in Northwestern P. C. Co. and Hobart, it is difficult to understand how the majority can conclude that there are no triable issues in this case. The declarations establish that a triable issue exists as to whether plaintiff’s attorneys suspected that fraud had occurred. In addition, even if such suspicions arose, it cannot be concluded as a matter of law that those doubts constituted facts sufficient to put a reasonable person on inquiry of fraud.
Finally, even if plaintiff had a duty to investigate further, I cannot agree with the majority that she breached that duty. An aggrieved party is required to exercise “reasonable diligence” to discover the facts. (Bedolla v. Logan & Frazer, supra, 52 Cal.App.3d at p. 131, italics omitted, citing Moonie v. Lynch (1967) 256 Cal.App.2d 361, 365-366 [64 Cal.Rptr. 55],)5
*882Here, the declarations indicate that Bechtel’s method for determining the value of its stock was confidential information.6 In addition, when plaintiff’s attorney threatened to subpoena the information, he was advised that such a procedure might result in the termination of Mr. Miller’s employment with Bechtel. Plaintiff was no doubt aware that it would not be in her best interests for her husband to lose his job since he would then be unable to provide spousal and child support. In light of this risk, it cannot be said that plaintiff’s counsel was unreasonable in not pursuing his effort to subpoena, or otherwise obtain, Bechtel’s records. On the contrary, plaintiff has at least raised a triable issue of fact concerning whether she could have discovered her husband’s fraud through the exercise of reasonable diligence. Summary judgment was, therefore, improper.
The foregoing discussion applies to plaintiff’s first and ninth causes of action. The majority hold these claims were barred by the statute of limitations on the theory that plaintiff failed to exercise reasonable diligence to discover the facts upon which those causes of action are based. In my view, plaintiff was under no duty of inquiry—either in the abstract or because she was aware of facts which would make a reasonable person suspicious.
The majority also conclude that plaintiff’s second, third and seventh causes of action, alleging misrepresentation and concealment, are barred by the statute of limitations. Again, the majority uphold the grant of summary judgment on the ground that plaintiff “makes no claim . . . that she could not, with reasonable diligence, have discovered the facts upon which these causes of action are based prior to the expiration of the limitation period.” (Maj. opn., at p. 876.) This reasoning fails for the same reasons set forth with respect to the first and ninth causes of action. Since plaintiff was under no duty of inquiry, her failure to allege that an inquiry would have been futile does not bar her claims.
I also find, contrary to the majority, that the fifth cause of action, in which plaintiff seeks to set aside the marital settlement agreement on the ground that she was mistaken as to the law and facts at the time the agreement was executed, is not barred by the statute of limitations. As previously noted, plaintiff’s allegation that she was unaware of the true value of the stock until it was sold by her former husband in 1977, and the fact that she had no independent duty of inquiry, are sufficient to toll the statute of limitations.
*883I agree with the majority that the fourth and sixth causes of action, asserted only against defendant Miller, are barred by the statute of limitations. Those causes of action are based on allegations of intimidation and incapacity at the time plaintiff entered into the marital settlement agreement. As the majority note, plaintiff does not allege that either the effect of the alleged intimidation or the emotional strain which allegedly resulted in her incapacity extended beyond the time she signed the agreement in September 1971.
Thus, I would hold that plaintiff’s first, second, third, fifth, seventh and ninth causes of action are not barred by the statute of limitations.
The majority improperly deny plaintiff her day in court on the slender reed of the purported “suspicions” of her attorneys. In so doing, they distort the well-established rules relating to the consideration of motions for summary judgment and ignore the fiduciary relationship of the parties.
Accordingly, I respectfully dissent.
Kaus, J., concurred.
Appellant’s petition for a rehearing was denied June 23, 1983. Bird, C. J., and Kaus, J., were of the opinion that the petition should be granted.

 Code of Civil Procedure section 337, subdivision 3 provides a four-year period of limitation for actions for rescission of written contracts.
Section 338, subdivision 4 provides a three-year limitations period for tort actions based on fraud or mistake.

 Here, the property settlement agreement was executed in 1971. On January 1, 1975, Civil Code sections 5125 and 5127 became effective, permitting either spouse to manage and control community property. (Stats. 1974, ch. 1206, § 7, p. 2610.) Those sections do not apply retroactively to this case. (In re Marriage of Coffin (1976) 63 Cal.App.3d 139, 154 [133 Cal.Rptr. 583].) However, even if they were to apply, it does not appear that they would affect the fiduciary duty of the husband in this case. The pre-1975 cases placed the duty of full disclosure upon whichever spouse—husband or wife—had control over the community assets. When the wife was entrusted with control of the community property, “she likewise occupiefd] a position of trust. ” (Jorgensen v. Jorgensen, supra, 32 Cal.2d 13, 21; accord Orlando v. Orlando (1966) 243 Cal.App.2d 248, 253, fn. 7 [52 Cal.Rptr. 142].) Thus, the husband’s fiduciary obligation was based not on his exclusive right to manage and control the community property, but on his actual control over it.

 This is not a case in which the defendant simply misrepresented the value of a community property asset. Rather, the defendant concealed information which was essential for plaintiff’s own determination of the stock’s true value.

 Further support for finding the existence of a fiduciary relationship between the parties at the time of the property settlement agreement may be found in Civil Code section 5103. That section establishes that a husband and wife stand in a fiduciary relationship with regard to contracts with one another. All contracts between spouses are subject “to the general rules which control the actions of persons occupying confidential relations with each other, as defined by Title 8 (commencing with Section 2215) of Part 4 of Division 3.” Among the provisions of title 8 is the requirement that each person in whom confidence is reposed “is bound to act in the highest good faith toward his beneficiary, and may not obtain any advantage therein over the latter by the slightest misrepresentation, concealment, threat, or adverse pressure of any kind.” (Civ. Code, § 2228.)

 Plaintiff asserted that she did not learn that $294,000 was not the actual value of her husband’s stock until 1977. “This is the first time that there had been any indication to me that the $294,000 recited in the marital settlement agreement was not accurate. . . . [f] Because the Bechtel corporations are closed corporations and jealously guard their financial records, I had *882no way of ascertaining the true value of the stock which defendant Miller and I owned in these corporations, until defendant Miller redeemed the stock in 1977.”

 Paragraph 11 of the declaration of Miller’s counsel in support of a motion for a protective order reads as follows: “11. It is a well-established policy and practice of Bechtel that details of its business affairs and of its relationship with its shareholders and of the business affairs of those parties for whom Bechtel performs work are not publicized or publicly discussed but are maintained as confidential information. The officers and managers of Bechtel insist upon adherence to this policy of confidentiality.”