Kelly v. Longan

5 Cal.2d 274 (1936) JAMES KELLY, Appellant,

v.

PATRICK M. LONGAN et al., Respondents.

S. F. No. 15363. Supreme Court of California. In Bank.

January 30, 1936. John J. McMahon and Patrick J. Murphy for Appellant.

Arthur R. Smiley, Bertram L. Linz and Luther Elkins, in pro. per., for Respondents.

WASTE, C.J.

This action is one to recover from respondents actual and exemplary damages for fraud, and for other [275] relief. Demurrers to the amended complaint were sustained, the order not granting leave to amend. Motion to be permitted to file a second amended complaint was denied on the ground, as recited by the court in the judgment, that the proposed amended pleading contained no material allegations not contained in plaintiff's first amended complaint. The court also found in its judgment that it appeared in both the first and second amended complaints that plaintiff had actual and full notice and knowledge, more than three years before he filed the complaint in the action, of the alleged fraud and the alleged fraudulent representations and promises of the defendants, and that from affidavits filed in the action it appeared impossible for plaintiff to amend the first amended complaint so as to toll the statute of limitations pleaded by the defendants in their demurrers. The court therefore refused permission to file the second amended complaint, and entered judgment that plaintiff take nothing and the defendants have their costs. Plaintiff appeals.

The respondents are alleged to have fraudulently obtained from appellant sums aggregating $55,936.21, either advanced or guaranteed to the Western Export Corporation (a Nevada corporation), which respondents controlled and to which they were heavily indebted, the corporation being insolvent. Appellant was a subordinate employee, having implicit trust and confidence in his employer, the respondent Patrick M. Longan. Between them there was a confidential relationship. It is alleged that appellant was promised a "bonus" of 16,666 shares of the corporation, contrary to the Corporate Securities Act, and it was agreed that he would be indemnified and held harmless from any liability as a stockholder; that respondents made him believe that as a stockholder he was not only liable for existing debts of the corporation, but was personally liable as a stockholder to the respondents in a sum in excess of what they had procured from him. Respondents thereby secured releases and discharges of their own liability from appellant. None of the representations nor promises was made good. Appellant first discovered the truth of the situation in 1928, and commenced action in 1932, pleading the reason for not sooner discovering the fraud practiced upon him.