Marks v. Evans

California Supreme Court Aug 2, 1900 No. S. F. No. 2173Published

Before: Gray

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Holding. The court held that the plaintiff's claims were barred by the statute of limitations and the doctrine of laches because the plaintiff had sufficient knowledge of the alleged fraud more than three years prior to filing the action.

Issues

Whether the complaint states facts sufficient to constitute a cause of action.
Whether the plaintiff's claim is barred by the statute of limitations for fraud.
Whether the plaintiff's claim is barred by laches.

Disposition. affirmed

Quotations verified verbatim against the opinion

“We think all three of the grounds of demurrer above stated are well taken, and that the demurrer was therefore properly sustained.”

“In such a case as this, where he has once discovered enough to put him upon his guard, plaintiff is deemed to have had notice of everything that he might have discovered by the use of reasonable diligence.”

“Equity abhors a stale claim, and it was incumbent upon plaintiff to show facts excusing his long delay in asserting the fraud.”

Synopsis

Limitation of Actions—Fraud—Corporate Transactions.—Code of Civil Procedure, section. 338, provides that actions for relief on the ground of fraud must he commenced within three years after discovery thereof. A complaint in a suit commenced in 1898 alleged that a corporation’s directors conspired to defraud plaintiff, and accordingly sold him considerable capital stock; that in 1888 they levied an assessment on the stock without necessity, and sold his stock in payment thereof; that in 1889 plaintiff commenced an action to set aside the assessment and sale thereunder, which suit was afterward compromised. Held, that the action was barred, since eight years had expired since the fraud was discovered.

Limitation of Actions—Fraud—Corporate Transactions.—The Fact That a Complainant in a suit against a corporation’s directors for fraudulently selling capital stock alleged that the directors afterward appropriated the corporation’s property did not prevent the statute of limitations from running from the time that the sale was discovered, since the sale was the gravamen of the action.

Limitation of Actions—Fraud—Corporate Transactions.—Where Plaintiff Knew that a corporation’s directors had fraudulently assessed his stock, and sold the same under the assessment, his failure to discover other frauds perpetrated by them, without seeking to inspect the corporation’s books, did not delay the running of limitations, since he would be presumed to know all that reasonable diligence would have disclosed to Mm.1

GRAY, C. In this case the court below sustained a demurrer to the complaint, without leave to amend, and dismissed the case. Plaintiff appealed from the judgment of dismissal.

The complaint alleges, in substance, that in or about the month of January, 1883, the plaintiff was, and ever since has been, uneducated, and of a credulous, confiding disposition; that one John Dunn and the defendants Evans and Rodda were acute business men, friends among themselves, and the intimate friends of the plaintiff; that in or about said month last aforesaid the defendants last named and said John Dunn entered into a conspiracy among themselves to cheat and defraud plaintiff, and that in pursuance of said conspiracy they induced him by false and fraudulent representations to subscribe for stock, and put between four and five thousand dollars into a corporation named the San Francisco Fuse Manufacturing Company, which they had formed for the express purpose of receiving the plaintiff’s said money, and-with the view of subsequently cheating him out of it and acquiring it to their own use; that in 1884, in pursuance of their said conspiracy, the said John Dunn and said defendants Evans and Rodda, being in control of the said corporation, the San Francisco Fuse Manufacturing Company, fraudulently conferred upon themselves salaries ranging from fifty to a hundred dollars per month, and the following year increased the same to from one hundred to one hundred and fifty dollars per month; that the said corporation prospered to such an extent that on the fifth day of September, 1888, it had on hand and under the control of the said John Dunn and said defendants not less than nine or ten thousand dollars in gold coin, together with other property of the value of ten thousand dollars, and was out of debt, except a few hundred dollars; that on the last-mentioned date, in furtherance of the said aforesaid conspiracy, and that they might fraudulently acquire the shares of stock owned by plaintiff in said corporation, the said [507]defendants Evans and Eodda and said John Dunn, acting as directors of said corporation, without any necessity therefor, in form levied an assessment upon the capital stock of said corporation, and when the said assessment had become delinquent in form, in the manner then prescribed by law, they undertook to, and in form did, sell defendants’ said stock, and at said sale said defendants were themselves the purchasers of said stock at a nominal price; that on the tenth day of December, 1888, said defendants, as such directors, undertook to convey, and did in form convey, in the name of said corporation, all the real estate and improvements belonging tp said corporation to the defendant Thomas E. Evans, but in truth and fact in a secret trust for the benefit of said defendants Evans and Eodda and said John Dunn; that thereafter in the same month the said parties last named filed a petition for the disineorporation of said corporation; “that on or about the date last aforesaid, knowing as he did of the sale of his stock as hereinabove alleged, and of the conveyance to the defendant Thomas E. Evans, and of the filing of the petition for disineorporation aforesaid, the plaintiff realized and believed that he had not been treated fairly or justly by the said John Dunn and by the defendants Thomas B. Evans and John Eodda, but had a very imperfect and insufficient knowledge of the facts then existing and hereinabove alleged, and which have induced him to commence this suit.” The complaint then alleges that in 1889 the plaintiff and one Burnham, another stockholder in said corporation, as plaintiffs, commenced a suit against said corporation, said Eodda, Dunn and Evans, and John Bryant, George Comstock and David F. Maey, as defendants therein. Said suit was commenced for the benefit of said corporation by said named plaintiffs, as stockholders therein, and the object thereof was to set aside the fraudulent assessment aforesaid, and all sales thereunder, and to recover from the defendants therein $3,450, claimed to be the aggregate of the salaries which the defendants had fraudulently conferred upon themselves and appropriated as hereinabove set forth, and to set aside the conveyance to the defendant Evans as above mentioned. The complaint then alleges that said suit was mainly conducted and managed through the coplaintiff therein, said Burnham, and individually the plaintiff herein had scarcely any knowledge thereof, beyond the fact that he was a plaintiff therein,

Marks v. Evans

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