National City Finance Co. v. Lewis, Civ. 6702 (1931)

* Rehearing denied 4 P.2d 163. Three barriers have been erected between plaintiffs and the judgment for $87,550 and interest which they desire. The first barrier is the conclusion that the plaintiffs have no legal capacity to sue, because they have failed to file and publish a certificate of doing business under a fictitious name. Secondly, it is found that fraud guided the defendant's hand as he signed the twelve notes upon which recovery is sought. Lastly, it appears that plaintiffs failed to demand payment when the notes matured and neglected to tender the stock which had been pledged as security for the notes. We are of the opinion that the first of these barriers is without substance, that the second is without a sound foundation in the evidence thus far produced, and that only a new trial can determine how real an obstacle the facts, out of which the third barrier is built, may prove to be.

The notes sued upon were made payable to the National City Finance Company. This payee, the trial court found, is a common-law trust, with E. L. Junod, John L. Junod, and Myron J. Sophy, as trustees, doing business in their collective capacity under a fictitious name. None of these trustees, the finding further recites, has either filed or published a certificate of doing business under a fictitious name. As its conclusion of law, based on these facts, the trial court held that plaintiffs had no legal capacity to sue, having failed to comply with the provisions of sections 2466 and 2468, Civil Code. It is unnecessary to quote in full the provisions of these familiar sections. In brief, they declare that a suit may not be maintained by a person or partnership transacting business under a fictitious name until a certificate giving the names and addresses of those making use of the name has been filed and published. In view of the interpretation now placed upon these provisions, that the sections are complied with if, at any time before proof must be made of the fact, the filing and publication of the certificate take place (Rudneck v. Southern Calif. M. R. Co. [1920] 184 Cal. 274, 193 P. 775; Isom v. Shields [1924]69 Cal.App. 515, 231 P. 587), we see no reason why the provisions of these sections should be stretched to cover a business not plainly within their purview.

Common-law (or Massachusetts') trusts may or may not be partnerships, depending upon the degree of control that the beneficiaries have over the activities of the trustees. Where, as in the case under review, that control approximates absolute zero, they are held true trusts and not partnerships. See the extensive note in 7 A. L. R. 621. Plaintiffs, then, were not required to file a certificate as partners, for they were not. Nor do we believe that the reference of the sections to "a person transacting business under a fictitious name" applies to trustees of a common-law trust. We are not unmindful of the explanation of section14 of the Civil Code, speaking of the use of words, that "the singular number includes the plural." As first enacted in 1872, section 2466 began: "No partnership or person may transact business by a fictitions name." The Code amendments of 1873-74 deleted the word "person" from the section; then in 1911 it was reinserted (St. 1911, p. 440), the refereace to a partnership being left as it had been since 1804. It might well be argued that, had it been the legislative intent, either originally or as re-expressed in 1911, to have the section applicable to the various legal relationships under which two or more persons may transact business, it would have contented itself with the use of the word "person" and not specified both "person" and one form only of joint enterprise, that is "partnership." Section 14, Civil Code, also declares: "The word person includes a corporation as well as a natural person," and we know that a corporation is a method whereby "persons" transact business. Who has the temerity to hold that a corporation, both a person and a combination of persons, may not maintain an action without complying with the sections? Moreover, we see the trustees transacting business, not as natural persons, but solely in their representative capacity. The trust in this instance, furthermore, continues undisturbed by any change in the personnel of its trustees, and hence has at least one characteristic of a legal entity distinguishable from the persons who may for the moment have charge of its affairs and from those for whose benefit its affairs are conducted. We are persuaded that the judgment may not be upheld because of the absence of a certificate of the National City Finance Company from among those filed by persons and partnerships transacting business under fictitious names.