Court Opinion

ID: 5447467
Source: CourtListenerOpinion
Date Created: 2022-01-08 18:13:19.280452+00
Date Added: 2024-06-11T08:32:14.836514
License: Public Domain

Garoutte, J.
I dissent.
A demurrer was sustained to plaintiff’s complaint upon the ground that his cause of action was barred by the statute of limitations, and, upon refusal to amend, the action was dismissed; and thereupon this appeal was taken.
The complaint contains the following allegations:
“ Plaintiff further complaining avers and alleges upon information and belief that the said Silver King Mining Company, with the intent, object, purpose, and design to defraud the said Mary A. Reagan, the heirs of said Benjamin W. Reagan, said estate of said Benjamin W. Reagan, and said administratrix out of said dividend, and out of the moneys payable on account of said dividend, held by it in trust for said heirs and administratrix, and to deceive and impose upon said Mary A. Bills, as said administratrix and individually, and to-fraudulently conceal the fact that said dividend had not been paid, so as to prevent an action or suit being brought therefor by said administratrix, and to make said Mary B. Bills, as said administratrix and individually, believe that such dividend had been paid, did, on or about the tenth day of September, 1875, and there-. after, and at divers other times, at and in the said city and county of San Francisco, fraudulently state, declare, and represent to said Mary A. Bills and to said administratrix that said dividend on said forty-nine thousand nine hundred and eighty-five shares of stock had been paid to said John W. Anderson, and that all dividends due on said forty-nine thousand nine hundred and eighty-five shares of stock had been paid to said J. W. Anderson, and that no money was due or owing or unpaid on account of said dividend, or on account of or on any dividends that had been declared on said forty-nine thousand nine hundred and eighty-five shares of stock during the lifetime of said Benjamin A. Reagan; that said Mary A. Bills, as said administratrix, at and before the time when said statements, declarations, and *25representations were made to her, applied to the defendant corporation and its officers in the city and county of San Francisco for information as to said forty-nine thousand nine hundred and eighty-five shares of stock, and as to whether any dividend which had been declared thereon prior to the death of said Reagan, or any part of such dividend, was unpaid, and as to whether any money was due from said defendant corporation to said estate, or to her as such administratrix, for or on account of any dividend or dividends declared by said defendant corporation prior to the death of said Benjamin W. Reagan, and that such statements, declarations, and representations of the defendant corporation were made at the times of said inquiries, and when such information was being sought, and in reply to such inquiries by said administratrix, that said declarations, representations, and statements to said administratrix were made for and in behalf of said defendant corporation by certain of its officers and directors, namely.....That the said administratrix, and said Mary A. Bills, was at the times of the making of said false representations, statements, and declarations, as aforesaid, and was known to said corporation and said James M. Barney and B. A. Barney, to be, ignorant as to the fact whether said dividends had been paid or not, and that she believed said statements, representations, and declarations to be true, and relied upon the same as true, and had no suspicion that any of the same was or were untrue or false, and was imposed upon and deceived by said false and fraudulent statements, representations, and declarations, and was deceived and misled and defrauded thereby. That she, as such administratrix and individually, continued to believe and rely upon said statements, representations, and declarations as true, and to act upon the same as true, until the discovery of the fact, as hereinafter alleged.....That said false statements, representations, and declarations were made to said Mary A. Bills, as aforesaid, with the fraudulent intent, object, purpose, and design to *26conceal the existence of the cause of action against said defendant corporation for said dividends until a sufficient time should elapse and expire to enable the defendant corporation to interpose a plea of the statute of limitations as a bar to any action to recover said dividends.” The complaint further alleges that, upon the tenth day of January, 1885, plaintiff discovered the falsity of these statements, and thereupon and upon that day made a demand for a payment of the dividends.
The foregoing facts are sufficient for the purposes before us. They form an interesting recital; and if, under the circumstances here detailed, the appellant can be deprived of his money and the respondent be allowed to retain it as its own, there is something wrong in the law. It was held by the trial court that this action was barred by the statute of limitations, and this ruling is supported by counsel upon the grounds: 1. That no demand for declared dividends is necessary to set the statute of limitations in motion; and 2. That, if such demand is necessary, then the foregoing facts constitute a demand on the part of appellant for these dividends and a refusal upon the part of respondent to pay them; and by reason thereof the statute of limitations was set in motion and the action fully barred before the filing of the complaint herein.
I cannot assent to either of these propositions. It is a well-established principle of law that a demand for declared dividends is necessary by the owner of stock in a corporation before a right of action exists. It can hardly be claimed that there is any authority to the contrary. It was said in State v. Baltimore etc. R. R. Co., 6 Gill, 387: “We are clearly of opinion that such demand was necessary before a right of action would exist on the part of'the plaintiff to recover this dividend. The establishment of the principle, that suits could be instituted without demand for dividends declared by banking and other corporations, would greatly impair the value of stock held therein by rendering it necessary to employ agents to hunt up the stockholders in various parts of *27the state or the union in order to prevent a multiplicity of suits, or, on a failure to do this, suits, and, of consequence, costs, might be multiplied to an alarming extent. Such a doctrine has certainly never been supposed to exist. Dividends are paid when called for, and we apprehend that limitations would not run until demand was made.” (See, also, Jones v. Terre Haute etc. R. R. Co., 57 N. Y. 205; Philadelphia etc. R. R. Co. v. Corwell, 28 Pa. St. 329; 70 Am. Dec. 128; Scott v. Central etc. Co., 52 Barb. 69; Hagar v. Union Nat. Bank, 63 Me. 512.) Upon sound reason such should be the law. If it were otherwise, the corporation would be at the mercy of the stockholders; for, upon the declaration of a dividend, causes of action innumerable would be outstanding against the corporation. If the law were otherwise the stockholders would be largely at the mercy of the corporation, for dividends might be declared and the statute of limitations bar an action for a recovery before the stockholders were even aware that such dividends had been declared.
The foregoing facts do not in law amount to a demand and refusal to pay dividends. At the time or times there specified the administratrix, Mary A. Beagan, demanded nothing and the corporation refused nothing. The occurrence was simply this: The administratrix, knowing that her late husband was a large owner of stock in the corporation, inquired at the office if any dividends accruing upon this stock prior to his death had not been drawn, and she was then informed that all such dividends had been paid to one Anderson, the agent of her husband, and that the corporation had no dividends in its possession belonging to the estate. To resolve the inquiry of the administratrix, and the reply of the corporation to that inquiry, into a demand and refusal would require a technical, close, and even strained construction of the language, and such a construction is not favored in law in order that fraud and deception may thrive. The complaint alleges that these statements of the corporation were *28false, and were made knowingly and intentionally for the express purpose of defrauding the administratrix out of this property, by concealing from her her cause of action until it was barred by the statute of limitations-It will not be allowed to do these iniquitous things and then plead them in bar of plaintiff’s cause of action, if any reasonable construction can be given the language and the acts of these parties when they met, which will defeat it. Misrepresentation and falsehood, practiced for the very purpose of securing the unjust results which follow the decision of the trial court if upheld, and practiced for the very purpose of securing those results in the identical way they are proposed to be secured, do not commend themselves as matters for favorable consideration. It would be a gross wrong to deny plaintiff’s right of action by construing this language into a demand and refusal, when by the language the administratrix intended to make no demand, and at the same time did not understand the language of the corporation to amount to a refusal.
I find no case in the law-books holding that similar acts and facts constitute demand and refusal. Conceding that no formal demand is necessary, still its equivalent in acts or language must be present. If a stockholder had called at the office of the corporation and inquired if a dividend had been declared, and the corporation had falsely replied in the negative, a parallel case to the one at bar would be presented, and, according to the corporation’s contention, the statute would begin to run from such demand and refusal. This cannot be the law. While the corporation by its answer to the administratrix’s inquiries may have secretly placed itself in a position of hostility to her interests, yet that is not the character of hostility contemplated by the statute of limitations. The corporation’s secret hostility to her interests amounts to nothing. It was full of that same secret hostility before she ever came to it for information. It follows that if this hostility caused the statute to run, then the statute was already in motion *29prior to the time she made the inquiries. As far as the statute of limitations is concerned, secret hostility is no hostility, and outwardly the position of the corporation toward the administratrix bore every semblance of the greatest honesty, kindest intentions, and the friendliest feelings. This being the position of the corporation toward Mrs. Keagan, there was no hostility of interest between them, and the statute of limitations did not begin to run from the date of these conversations. If Mrs. Keagan had treated these conversations as constituting a demand and refusal, and had brought an action for the dividends against the corporation, relying upon such demand and refusal, the corporation's conduct would have been such, that very probably upon a plea by it of no demand and refusal,the court would have held against it. But the converse of the proposition, as presented in this case, by no means follows, for the corporation by its conduct was tarnished with deceit and dishonesty, and no such taint was upon her.
It is further contended in the concurring opinion of the chief justice that the demand made in January, 1885, came too late; that when a demand is necessary to set the statute of limitations in motion, it must be made within a reasonable time after the right to make it accrues; that this reasonable time must not exceed the period prescribed by statute for the limitation of the action, if no demand were necessary, and that, if such demand is not made, the action is barred, either because of the failure to make it, or that, owing to the lapse of time, it is presumed to have been made. The general principle here declared is somewhat elementary, and an abundance of authority is presented by counsel to support it. But, like other principles of law, there are exceptions to it, and, while broad in its terms, it is not broad enough to cover all cases; and this case comes within the exception. This exception is based upon the principle that the conduct of the defendant may be such as to excuse a plaintiff from sooner making a demand, and the soundness of this exception as a legal principle *30is as fully recognized by the courts as is the general rule itself. In Codman v. Rogers, 10 Pick. 111, a leading case relied upon by respondent, the court said: “ The question is, whether a dormant claim may be revived by a demand after seventeen years, during the whole or nearly the whole of which time a demand might have been made, but was not, and no reason is assigned for the omission”; and again: “What is to be considered a reasonable time for this purpose does not appear to be settled by any precise rule; it must depend upon circumstances. If no cause for delay can be shown it would seem reasonable to require the demand to be made within the time limited by the statute for bringing the action.” In Wright v. Paine, 62 Ala. 340, 34 Am. Rep. 24, another case relied upon by respondent, the court said: “ If there be any facts or circumstances which can excuse the long delay of the appellant in commencing suit and in making demand for the money, the record does not disclose them .... and it would be violative of the policy of the statute of limitations, and defeat the purposes it was intended to accomplish, if, without an explanation of the long delay in making demand, and the unwarrantable delay in bringing suit after the fruitless demand, until Winston was dead, the statute was held not a bar.” It is thus apparent from the foregoing cases that a plaintiff may be excused from not making an earlier demand; and, if excuses are ever to be accepted by courts, then this plaintiff is excused. No case has been cited holding an action barred upon a state of facts in any way analogous to that here disclosed. All the cases assume that the plaintiff was aware that he had a claim which would ripen into a cause of action upon making a demand, and charge him with laches in not making the demand within a reasonable time. But here plaintiff could not be 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 was falsely and mercenarily informed by defendant that she had no claim against it, and for this *31reason alone she was lulled into a quiescent state of ignorance which prevented a discovery. Whatever diligence she may have been required by the law to exercise in the discovery of a cause of action as against third parties, it does not become the defendant, who by its fraud and misrepresentation caused the delay in making the demand, to now rely upon its bad conduct for the purpose of defeating rights based upon such demand. Much that we have said upon these lines in a previous portion of this opinion bears directly upon the question here presented. The fact that the present action is not one for relief founded upon the fraud of the corporation is not material to the case; neither is it necessary to hold that fraud practiced by a debtor upon his creditor, whereby the creditor fails to bring his action within the time allowed, is sufficient to defeat a plea of the statute of limitations made by the debtor.
The question here is not one of laches in discovering the existence of an indebtedness, but of laches in making a demand for the payment of such indebtedness. Every authority cited by respondent’s counsel concedes full knowledge upon the part of the creditor of his rights during the entire period covered by the delay in making the demand, but this case presents no such sfate of facts. The concurring opinion goes against the appellant upon the ground, that Mrs. Reagan was negligent in discovering her cause of action, but I think that question is foreign to the case, and involves an entirely different principle. Again, if Mrs. Reagan had made no inquiries whatever of the corporation as to dividends, but had assumed them to have been paid to Reagan or his agent, it appears she would now have a cause of action; but, strange as it may seem, the diligence that she used is so effectively arrayed against her as to cause her own downfall. Anderson was in no sense her trustee; he was the trustee and agent of her husband, and a payment to him was a payment to her husband, and she had a right to so consider it; for there is nothing whatever in the case to indicate but that she was *32perfectly justified in assuming, that if the money in fact had been paid to Anderson, it had been disbursed in proper and legitimate channels. If Reagan had not been insane, and Anderson had been a myth, and the corporation had stated to her at the time of her inquiries that these moneys had been paid to her husband prior to his death, as an ordinary, unsuspicious, trustful woman she would have believed the statement, and relied upon it; and she would have had a right to believe it and rely upon it. The fact that she was told the money was paid to Anderson, his trustee, does not alter the case.