Court Opinion

ID: 9795019
Source: CourtListenerOpinion
Date Created: 2023-08-31 03:16:14.634697+00
Date Added: 2024-06-11T08:22:52.250386
License: Public Domain

*469EDMONDS, J.
I concur in the conclusion that, for the reasons stated by Mrs. Justice Shenk, the demurrer to the second cause of action in the' complaint of Neet and his associates was properly sustained. However, in my opinion, upon the facts pleaded by the appellants, the statute of limitations has barred any recovery by them, and the decision should also be placed upon that ground. More than three years before the suit was filed, according to the allegations of the complaint, the appellants knew that at least some of the representations assertedly made by Fitzgerrell on behalf of himself, Holmes and Nicholson were false. Under well settled principles the statute commenced to run at that time and it effectively bars the fifth cause of action as well as that stated in the second count of the complaint.
The pleading upon which judgment was rendered is the fourth one filed in this suit and the facts stated in each of them may be considered in determining whether the bar of the statute extends to either the second or the fifth cause of action. (Wennerholm v. Stanford Univ. Sch, of Med., 20 Cal.2d 713, 716 [128 P.2d 522, 141 A.L.R. 1358]; Williamson v. Joyce, 137 Cal. 151, 153 [69 P. 980].) According to these complaints during Fitzgerrell’s visit to Kentucky in 1935, and in correspondence of about the same time, he represented that the mining claims in which Neet, Schenck and Glenn together owned a 55 per cent interest were of no particular value but mere desert waste claims and a gamble in which no operators were interested. But for the purpose of facilitating possible future action, said Fitzgerrell, title to the claims should be transferred to a corporation in exchange for shares of capital stock to be issued in proportion to the respective interests of all concerned.
Less than a month later, Rayfitz Company was organized, and at the first meeting of stockholders, Neet became one of the directors. Soon after, upon the representations of Fitzgerrell that Holmes and Nicholson desired to lease the claims for a period of five years upon terms which were fair in every respect, Neet and his associates expressly authorized the corporation to execute the proposed agreement.
At the time of his visit to Kentucky, Fitzgerrell represented that he would cause to be located, for the benefit of all of the owners of the property in which Neet and his associates, were interested, claims upon adjoining land. But immediately *470after the execution of the lease, Pitzgerrell informed Neet by letter that this would be' impossible. The complaint does not state the reason, if any, given by Pitzgerrell for his conclusion or that Neet made any inquiry as to the basis for it'.
About two years later, Pitzgerrell again visited Kentucky. The second trip was made for the purpose of obtaining Neet’s consent to the execution of a lease of the mining claims by the corporation to Holmes and Nicholson for a term of 20 years. In his discussions with Neet, Pitzgerrell told him that locations on land surrounding the mining claims transferred to the corporation could not be made because the property had been taken up by unknown persons.
' Neet refused to consent to another lease. Pitzgerrell then went to Massachusetts, where he saw the appellant Sehenek, and obtained his written consent to the execution of the 20 year agreement. Schenck’s approval was secured upon the representation that Neet would also consent to the new contract. Pitzgerrell then returned to Kentucky and showed Schenck’s consent to Neet, renewing his request that Neet join in approving the proposed transaction. When Neet again refused, Pitzgerrell informed him that his consent was unnecessary and the lease would be executed because, with Schenck’s consent, he controlled a majority interest in the corporation. Pitzgerrell then left for California. Neet communicated with Sehenek, stating that he had refused to consent to the execution of the proposed lease and Sehenek, by telegram dated August 7, 1937, addressed to Pitzgerrell, withdrew his approval of the transaction. Three days later, Pitzgerrell asked Sehenek to state his reasons for withdrawing his consent and told him that all negotiations concerning a new lease had been terminated. Apparently Sehenek did not reply to this request.
To summarize the allegations made by the appellants, in 1935 Pitzgerrell falsely represented to Neet that the mining claims in which they were jointly interested were of little value. Two years later, and after, the appellants had" transferred their interests to Rayfitz Company and approved a lease of the properties to Holmes and Nicholson," Pitzgerrell endeavored to obtain the appellants’ consent to another lease to the same persons for 20 years and as long thereafter as mining operations were profitably carried on. During those negotiations, Pitzgerrell made representations "to' Sehenek which were untrue. On or before August 7, 1937., Sehenek *471learned that Fitzgerrell had deceived him and he withdrew the authorization which Fitzgerrell had obtained from him. Unquestionably Schenck gave Neet full information concerning the reasons for his telegram to Fitzgerrell. In any event, from an investigation made in January and February, 1938, the appellants found that all of the representations made* by Fitzgerrell were false. As a result of these disclosures Fitzgerrell was ousted from control of the corporation.
A complaint upon which relief is sought because of asserted fraudulent representations made more than three years before suit was commenced must affirmatively show that the falsity of the defendant’s statements was not discovered during that time. The cause of action “is not to be deemed to have accrued until the discovery, by the aggrieved party, of facts constituting the fraud or mistake’’ (Code Civ. Proc., §338 (4)), but the word discovery is not synonymous with knowledge, and it is the duty of the court to determine, as a matter of law, when, according to the allegations made by the plaintiff, there was a discovery within the legal sense of that term. It has therefore been held that it is not sufficient to plead a lack of knowledge within the statutory period limiting the action. The plaintiff must allege when and how the facts concerning the fraud became known to him and also that, prior to three years before the commencement of the action, he had no means of knowledge or notice which, followed by inquiry, would have disclosed the falsity of the defendant’s statements. (Jackson v. Master Holding Corp., 16 Cal.2d 824 [108 P.2d 673]; Bainbridge v. Stoner, 16 Cal.2d 423 [106 P.2d 423]; Kelly v. Longan, 5 Cal.2d 274 [53 P.2d 971]; Johnson v. Ehrgott, 1 Cal.2d 136 [34 P.2d 144]; Consolidated R. & P. Co. v. Scarborough, 216 Cal. 698 [16 P.2d 268]; Original Min. & Mill. Co. v. Casad, 210 Cal. 71 [290 P. 456]; Victor Oil Co. v. Drum, 184 Cal. 226 [193 P. 243] ; Nichols v. Moore, 181 Cal. 131 [183 P. 531]; Galusha v. Fraser, 178 Cal. 653 [174 P. 311]; Lady Washington C. Co. v. Wood, 113 Cal. 482 [45 P. 809]; Watson v. Santa Carmelita etc. Co., 58 Cal.App.2d 709 [137 P.2d 757]; Turner v. Liner, 31 Cal.App.2d 196 [87 P.2d 740] ; Nighbert v. First Nat. Bank 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].)
For the purpose of fixing the time from which the statute of limitations commenced to run against their causes of ac*472tion, the appellants have pleaded the latter part of 1938 as the time when they “first realized that a fraud had been practiced upon them.” Their conclusion in this regard is more fully explained by the allegation that because they “were widely separated and had to communicate with each other in writing and were compelled to consult lawyers, and the import and legal effect of the facts discovered on and subsequent to February, 1938, did not unfold itself to them until on or about November, 1938.” But the determinative time is not the date when the appellants obtained from the corporate and public records evidence that the representations made by Fitzgerrell were untrue, for one must commence an action upon the ground of fraud within three years from the time he has that knowledge which, followed by inquiry, would disclose the falsity of the representations made to him. At least by August 7, 1937, the appellants had information which placed upon them the duty to make diligent inquiry concerning their rights. For as this court said in Ruhl v. Mott, 120 Cal. 668 [53 P. 304], when a person “discovers that he has been put upon and defrauded as to one material matter, notice is at once brought home to him that the man who has been false in one thing may have been false to him in all, and it becomes incumbent upon him to make a full investigation.” (Carpenter v. Hamilton, 18 Cal.App.2d 69 [62 P.2d 1397]; Nicolaisen v. Toffelmier, 97 Cal.App. 342 [275 P. 823]; Gratz v. Schuler, 25 Cal.App. 117 [142 P. 899].)
Unquestionably, it was the information obtained in July, 1937, which prompted the investigation of the transactions entered into upon Fitzgerrell’s representations, and as a matter of law, the statute of limitations ran upon the appellants’ causes of action at that time. Suit was not commenced until August 28, 1940, although it affirmatively appears from the complaints that all of the details concerning the value of the • mining claims owned by the corporation and of Fitzgerrell’s deception in regard to the adjoining land were known before the end of 1938. Under these circumstances, in my opinion, the demurrer to each of the causes of action was properly sustained and the judgment should be affirmed.
Schauer, J., concurred.
Appellants’ petition for a rehearing was denied January 18, 1945.