*1 May F. No. In Bank. 17048. [S. 1945.] WALTER HOBART, S. Respondent, HOBART ESTATE (a
COMPANY Corporation) al., Appellants. et *7 Turner, Allan Dunne, Dunne, B. & Sloss & Arthur Dunne McCutchen, Matthew, Thomas. Lipman Robert and P. L. Matthew, Appellants. & Griffiths Greene for for Re-
Vincent W. Hallinan Martin Maclnnis and James spondent.
GIBSON, damages re- C. J. This isan for loss action for alleged through from sulting representations fraudulent plaintiff claims he of stock was induced to sell shares 833% Company A the Hobart Estate than its true value. less Ho- against verdict was rendered defendants Company together bart for damages, Estate actual with an of exemplary damages against award Defendants Greene. appealed judgments have from the entered on the verdict from denying notwithstanding judgment orders motions the verdict. Hobart, grandfather
Walter S. died plaintiff, leaving children, (plaintiff’s his estate to his Hobart Walter S. father), Virginia Alice Lester and The three chil- Baldwin. organized family dren Company, the Hobart Estate cor- poration, transferring substantially they thereto all the assets had obtained from the Prior to 1933 certain of the estate. original three stockholders some their surrendered stock company, leaving outstanding. to the 38.010 shares law firm McCutchen, Olney, Greene, Mannon pre- or its (hereinafter decessors firm), represented called the law have company since its inception. In 1907 Alice Lester incompetent was declared has she since McCutchen, been confined in an E. institution. J. firm, member appointed guardian law of her estate. Greene, partner firm, Defendant subsequently became coguardian, death of McCutchen continued as guardian. attorney sole law firm has acted as for the guardian. Since 1932 president Greene has been of the Ho- Company, bart Estate general has also been its mana- *8 ger and a director. He owned no stock other than one share qualify him as a director. plaintiff’s In 1933 father, owing $240,000 Lester, to Alice by settled the selling 6,000 debt per shares at $40 share guardianship estate, thereby obtained control of the to vote right had company. Greene guardian, As stock. 1933, a November, in plaintiff’s Upon death of father and 2,500 stock terminated trust of shares 833% namely, children, to each his three shares were distributed Neil Prince. Hannah Crocker, and Hobart plaintiff, Euth the shares by plaintiff then received shares in this principally action. involved 3,289 in consisting part left Plaintiff’s father an estate plain- will of Company. in the Hobart shares Estate by firm, practically disinherited father, tiff’s law drawn co- was named plaintiff, bequeathing only Greene $100. him by created trusts executor of the trustees under and was one order to finance the will. Plaintiff contested will litigation pledged with Charles shares stock his 833% Crocker. attorney engaged Balph
Plaintiff first Laehmund as Aureguy George em- Eugene later Harris. was substituted by contest, ployed plaintiff as will investigator. alleged result June, 1934, filed in it that the will was the legatees also the execu- influence exerted undue tors, 1935, Harris one of whom Greene. In the summer of M. Aureguy settlement of the contest with J. discussed a Subsequently Man- Mannon, Jr., a firm. partner the law non Greene. left on vacation and turned the matter over to
According to insisted a condition plaintiff, Greene settlement of the will contest that his stock and sell represented share, it more than per $25 was worth no reli- more, and that in truth was worth much whereas at plaintiff agreed price ance thereon sell his stock this t.o in $25,000 buyer accept then and to undisclosed Greene deny contest. Defendants settlement the will such made and assert under actual representation was per agreement plaintiff paid to be for $55 share the stock nothing settlement of will contest. sought permission the superior obtained proceedings buy on guardianship court stock guardianship per behalf of the estate share. It does however, appear, pur- knew the actual who completed, the transaction was chaser was when and the at that to the purchaser documents executed time referred pay- firm. Plaintiff received as the “nominee” the law *9 ment of $45,833.15, approximately equivalent a sum to $55 per share for the receipt shares. The of this sum 833% plaintiff’s also consistent paid with claim that he was per plus lump $25,000 share sum of for the settlement of contest. January The transaction completed was not until 16, 1936. Plaintiff remained three California about months. Europe, returning Thereafter he went to to New York in January, 1941, where, he he testified, received infor- mation from of person concerning an unidentified value the holdings or Hobart Estate three Company. Two months later he Aureguy came to Francisco, San consulted and Harris, and obtained was information which testified “excessively at variance” the statements made to him by relating Greene to the of the The present value stock. action in June, was filed 1941.
Upon appeals these (1) both defendants contend that the evidence fraud, is insufficient to establish a cause of action for (2) plaintiff by that as a matter of law is the statute barred limitations, (3) that prejudicial the trial committed court giving error in refusing (4) instructions, various against that pres- the verdict from coercive Greene resulted sure exerted upon jury. trial court Hobart Company contends, further, Estate that the evidence does not support implied that finding agent Greene acted as its alleged making representations. Sufficiency
I. Evidence Fraud. In general, or to establish cause of action for fraud plaintiff representation deceit prove must that material was false; made; that it was that defendants knew it to untrue knowledge did have sufficient to warrant a belief that true; plain it that it made with an intent to induce was thereon; plaintiff tiff reasonably to act in reliance be true; plaintiff; lieved it to be that was on it relied damage thereby. determining suffered requirements sufficiency of evidence to meet these we must, plaintiff’s all verdict, view resolve conflicts sup permissible necessary favor all and draw inferences port judgment. alleged representations were made a series during concerning
four conferences with Greene settlement will at present contest. Plaintiff was the fourth conference only, represented by Aureguy at others was and Har- ris, by Aureguy alone. of these discussions first that at Aureguy testified cor- out family wanted that the stated sell necessary poration and precedent as a condition Company Estate
stock in the Hobart meeting, The second contest. will to the settlement him- Greene, Harris and according Aureguy, was between representations were made with At conference no this self. no discussion respect to value of the stock there Aure- be made. a settlement could terms conference Greene stated guy the third testified *10 con- willing $25,000 settle the will pay to his clients to were at a selling $25 the stock upon plaintiff’s contingent test suggested a share Aureguy price $40 a share. said he $25,000, for that of the will contest but and the settlement at not be sold a $40 that the stock could Greene stated and $25 stock a share share, that the book value of the was Aureguy reply all it testified that that was was worth. by “book Greene inquiry to as to what was meant value” his corporation sold, “If the assets of the were said: all divided, expenses paid money why each share might $25 not net excess a share it of stock would ... that,” and Greene also said that realize less than that condition,” that company in a bad financial “we “was times,” corporation “The very trying and that owes called, holdings, if the were on various loans money its position. corporation very bad Whether would be I not, pay able them or don’t know.” we would Plaintiff, Harris, Aureguy, present and Greene were at conference. Plaintiff had never before met Greene. fourth respect Aureguy conference testi- to this With Aureguy in substance as follows: started the conversa- fied brought plaintiff tion, saying that he had to have Greene prior Aureguy he had said at the conference. confirm what if it essential that part asked Greene with his replied: in order to the will contest. stock settle Greene definitely.” “Tes, protested, saying Plaintiff most he had daughter. to establish a with the wanted trust stock however, insisted Greene, there could be no settlement with- Aureguy out the sale. summarized what had been said at the prior respect stock, conference with to the value of men- figure tioning given $25,000 Greene to settle willing buyer contest and the fact that Greene had a was who pay per share, more, $25 but no for the stock. Plaintiff thought he more $100 stated that had the stock worth only per $25 share. He asked it be worth when how could appraised in his year a or so before it had been at $40 replied appraisal estate. of $40 father’s that the price by plaintiff’s based father prior sale to the Lester; plaintiff’s paid estate of Alice father was more than worth; appraisal the stock was did and that not, therefore, represent said, the value stock. Greene “The stock is not a share.” $25 worth over Aureguy
Plaintiff and ex- further testified that Greene plained family that the Hobart Company Estate was a cor- value; poration company and its stock had no market that the in very bad financial condition and its had assets in value; been declining money great that it owed deal and if it became necessary liquidate property satisfy stock, loan or if there were a forced of all the sale might be worth share; even less than that “due to the assets approaching rapidly, and liabilities one another the stock inwas jeopardy just and it well to sell the stock.” It was also testified that Greene said there was nothing he did not know about the financial situation, net assets or the liabilities company, he knew more about the corporation anybody Aureguy than else, that if anywhere, sought ultimately information would he come it, only Greene for that Greene assured that he had toward him feelings kindliest wanted him *11 get all possibly he could of the stock but that he out could in suggest anyone not fairness that more pay than $25 share for it.
Harris, he by plaintiff, called as witness testified that employed by plaintiff been had in connection with the will contest, sell stock, but not to the the that total sum of $45,833.15 figure received involving “was over-all the aspects settlement of all phases: case . .. there were two aspect the stock and the . will contest . and the . contest relinquishment could be the [plain- settled without . . . right to the stock . transaction inte- tiff’s] . the stock was . grated with the regard will contest.” With to the fourth conference, plaintiff present, at was Harris testified conversation, not recall all that he could but said that declining values, depressed discuss condition Greene did painted depressing a rather things picture the affairs Harris no time. had recollection as to at that whether or gave any opinion not Greene of the value of the stock. to him wished if he that Harris asked Plaintiff testified further, and the matter investigate take Greene’s word Greene’s “I a man Mr. plaintiff replied: that am certain regard integrity anything never state position would so, to it that and I take his was not will word.” say, had Plaintiff testified that heard Crocker also he was transaction, stock pledge connection that with worth only per share; $24 that he was doubtful about “finally statement Greene said he then, but that from what and that believed that the stock worth only $25.00”; was he sold said it was it at “because at time Mr. Greene $25 worth that.” He also before his conversation testified that with Greene he had not sell the but stock wanted Greene convinced him he should.
Greene testified that at first conference transaction prior discussed on the talk Harris and basis of a Aureguy Mannon, Mannon, which, according with offered get per settle if could share for $40 he the stock, together something contest, for the will being total $48,333. about the sale Greene said that both by plaintiff’s father at appraisal $40 and the inheritance tax figure Aureguy discussed. He told testified he that the figure $40 had given by been firm the law inheritance appraiser tax only because the of a record sale of the stock was at He depression share. said the one of the topics main say- of the conversations admitted ing at the conferences that there was no the stock. market for He testified that such was the fact because order to have a market there must trading. be represented denied the stock be worth only $25 a saying part share denied must with his stock in order to settle the will contest but admitted he had considered a troublemaker and a storm center in the company that he believed it to be in best inter- ests of the shareholders and company plain- to eliminate tiff as a stockholder. represent Greene testified that he did not company was in financial bad He condition. denied that there agreement purchase the stock at $25 a share or to $25,000. settle the will contest for discussing sufficiency of
Before evidence to estab- fraud, action lish a cause of should noted *12 dispute falsity principal the actual of the defendants do alleged if made. in representations, petition his filed January, in that the guardianship proceedings in the per in he testified reasonably $55 share and stock was worth the time of the action that it worth present $55 worth that and that he believed it to be transaction then He said it not a fact the assets were amount. that closely were very ap- that and liabilities bad or assets each several wit- proaching testimony other. There was nesses to the actual of the and stock of the as value assets times, it that company at those and is not claimed the amount upon of damages jury (necessarily awarded based this testimony) was excessive. arguing
In that the evidence is to establish insufficient fraud, plaintiff upon that reasonably and could not have relied statements, Greene’s testimony defendants assert that plaintiff Aureguy inherently improbable and is so it cannot be believed; alleged that representations, qualified by as Greene, merely opinion; statements of that there was fiduciary no relationship between Greene and in the absence thereof rely was not entitled to upon the representations; independent that in- plaintiff made vestigation of the upon value stock and relied such investigation upon advisers rather than Greene’s representations; certain concededly information known to agents put inquiry. or his him on argument support testimony Aureguy is incredible and version plaintiff and their inherently improbable, transaction defendants cite a number plaintiff’s of instances which evidence incon assertedly is light sistent unreasonable. Unless of the circum testimony improbable is so inherently stances the and impos sible of effect to constitute all, belief evidence at no disregarded may determining sufficiency not be judgment. support the evidence to testimony Defendants insist the total sum paid $25,000 consisted of for the settlement of the will con- only per $25 test and share for the stock is inconsistent with prepared certain letters documents contemporaneously completion with the of the transaction therefore in- improbable. herently urge They papers be- these show yond question paid for the stock and nothing for the contest. The first the letters was dated November 29, 1935, and was sent by plaintiff’s attorney, Harris, to the attorney Crocker, pledgee Charles stock, to inform proposed Crocker plan to sell the stock and settle the *13 in agreed that read, part: in . . it was It “. contest. will pend- dismissing the prejudice with of consideration our client in release complete full ing tendering a and will and contest in and rights rights any claimed respect and with and/or nominee transferring to the in estate, to said and addition thirty and eight hundred representatives of the of the estate Hobart (833-%) three and one-third stock shares of Hobart, standing Company Estate in of Walter S. the name and Jr., pay representatives therefor the of the estate would eight in hun- consideration thereof the said $55.00 a share for short, thirty dred (833-%) and three shares. and one-third the will contemplated the dismissal of only settlement a right, complete relinquishment contest but also of all the a title to said and interest reference of our in and client with shares of stock.” including (1)
The firm prepared certain documents law (2) contest, a a stock trans- dismissal and retraxit of the will (3) fer executed power attorney, of and a release to be others, both These documents Crocker. including On the stock in escrow. certificates, were delivered 14, January firm read- 1936, Harris law wrote letter ing for understanding as follows: “In accordance with our purchase by your you, or nominee, of shares 833% capital agreed of stock Company, Estate at the Hobart complete share, together full with a price $55.00 of Hobart, Jr., of of Walter settlement all interest S. father, deposited in I Mr. of his late have with the estate President, First National Murphy, Daniel Vice Crocker J. you city, all have handed Bank, this of documents which me, properly executed, pursuant These your instructions. papers appropriate been deposited by have me under instruc- tions, thing done, the only and I trust be remaining to wit, payment $45,833.15 of made forthwith.” will deposited documents by Harris escrow included signed letter instructions, by plaintiff, Aureguy with Harris as witnesses, reading part: “The said certificate agreed I repre- shares have purchaser to sell ato 833% sented firm MeCutchen, Olney, law Mannon & Greene, for the of $45,833.15, total representing shares 833% per share.” contemporane-
We hold as a matter law cannot relating ous form of letters documents the transac- tion compel money plaintiff a conclusion received part of solely paid for the stock and that no it was letter Harris to
settlement of the will contest. The from attorney Crocker’s to receive $55 stated per dismissing share in the will contest as consideration from well as for transfer the stock. letter Harris to January law firm on the contest settle- recited as a part jury ment have in- the transaction. The could together ferred from papers, these the other evidence in the case, that at least some portion paid sum based and, event, they dismissal of contest, plaintiff’s reconcilable with version of the transaction. Although the containing letter re- escrow instructions *14 purchase ferred to a of stock alone mention of without of settlement the contest, undisputed it is one of the that placed documents in delivery proponents escrow for the of to and of will, the dismissal retraxit the contest that was was a required firm and prepared by plaintiff by the law of completion as condition to a essential of the transaction. Furthermore, is, the of transaction, form the its that repeated description a share, as sale of the at per $55 stock explained by plaintiff, Aureguy, and was as a Harris matter insisted Plaintiff Greene. testified that Greene stated during last the conference that: “In selling the stock and thing, you the course, whole of realize according that to the trust up your drew in absolutely that we father’s will it is impossible you to pay out of estate. What his we will isdo this: I my purchaser, will contact willing if pay and he is to share, a why, then, $25,000 $25.00 we will to add that as set- tlement of the contest, will and we wish to make init the form a stock transaction though which then will look as being paid a you nominal a were sum share for $55.00 According Aureguy, your during stock.” to Greene stated assuage one that “to feelings the conversations family, scheming upon so there be and will no the fact with allegations” respect to the in contest, the will it would be necessary pay money the a such manner “that it will appear stock for was sold . . . a $55 share.” When arrangements Harris asked if was remembered “the he under thing which whole appear though was as it made were stock,” for the $55 a share he best of testified “to the my recollection . . only . transaction could handled in be that fashion . . . there was I feeling, considerable as recall, between certain members family, warring of certain fac- Crockers, others, tions between Hobarts and recollection, could condition no under the record my is that connection directly in any payment should show show amount if asked When will ...” this contest. with being paid for added on to what contest was will ’’ ‘‘ add- other, integrated replied: One was stock, he in his letter shown thought clearly this ing that fact was jury, be- attorney. to Crocker’s 1935, of November have Aureguy, could plaintiff testimony of lieving the transaction, facilitate Greene, in order inferred that per at $55 a sale stock the form take that it insisted for the stock paid share was per $25 in fact although share, contest. of the will $25,000 for the settlement relating plaintiff’s evidence if assert that Defendants plaintiff believed, is to the transaction form of to the calculated scheme knowingly participated a someone, advantage to be taken improper to enable pari be in delicto with Greene would which event escaping consequences court aid and no would (Cf. wrongdoing. of his own American T. v.Co. California Co., 497], 15 Cal.2d court Ins. where this etc. agreement general principle that “an de stated to be also persons illegal void.”) third is Defendants fraud argue this reason testimony Aureguy unworthy Aureguy of belief. To show that point testimony aware of a scheme his such defendants opinion it was if the transaction made appear to be share, “indulging sale would be *15 in a little duplicity.” plaintiff’s Defendants refer to also testimony thought extraordinary it was rather purchasers arrange way, wanted it that but that it was their affair. Defendants urge that if this testimony was true on put of an notice intent to deceive some one complain he cannot now if he one who present was deceived. In case, however, there no contract to person defraud third within meaning American Company Trust case, and it is not established that Greene, plaintiff’s knowledge, contemplated defrauding purchaser of the stock.
We have portions considered other of the record which defendants assert show that the testimony of and Aureguy is incredible and unworthy of belief but we say cannot as a matter of law that testimony contains 430 in- abnormality to render it evidentiary weakness or
such improbable. herently representa all of the
Defendants next contend that fact, expressions opinion, rather than of tions were of however, said, therefore, are not actionable. This court has “bearing expression an if opinion, that an of in mind speaker made, expression an of what the believes honestly fact, by expression of apparent to be a it becomes it, deceit is opinion rely upon a dishonest to one entitled to practiced, an action lie.” injury may worked, and will 561, (Edward Co., 163 Barron Co. Cal. Estate v. Woodruff 573 42 351, 125]; see, also, P. 23 Am.Jur. L.R.A.N.S. [126 789-791, stating represents 37 view C.J.S. that this weight 484 authority.) Engler, of In 205 Cal. [271 Neff 744], Fremery, P. and MacDonald 168 Cal. v. de 73], P. applied the rule was of value of statements false corporate stock MacDonald and financial condition. In the 199): expression case the of (p. court said “But an an opinion, expression to avoid action must deceit, be the ’’ opinion of an honestly making person entertained it. Restatement, Torts, b, section Comment it is said: A. . representation “. of mind of the state maker or of person third misrepresentation ais if the state mind in question represented. is otherwise than as Thus, a statement particular that a person, whether the maker the statement or a third person, particular is of a opinion misrep ... is a resentation person if the in question opinion does not hold the . . . asserted.” principal false statement attributed to Greene was that the stock in the Company Hobart Estate was not worth more than $25 a making share. Greene denied any representation as to the value the stock but admitted that, although he did say so, he then believed it was worth $55 a share.
Defendants cite proposition authorities for the a statement of professedly value which is given and received only opinion support as an will not charge (See fraud. eases 726-729.) cited They Cal.Jur. urge the pres ent falls case within because, according this rule to the testi mony Aureguy, qualifications certain were placed his statements of value which made it clear that they expressions were mere opinion. qualifications
Most the asserted during made They second or conference. third as follows: Greene
431 able to furnish only figure he was the Aureguy that told ap- by piece piece a in the absence of value, the respect to by plain- sale company, of was praisal the assets of Greene share. per at $40 estate to the Lester father tiff’s sale was this which however, at price that explained, of what “represents figure vastly a in advance made of way de- he had no that is Greene also said stock worth.” unable he sales; that actual termining except by values figure only of stock because to determine the value had no he father; by plaintiff’s had the sale ever worth; the stock knowing it way definitely of what was “just what generally dealt worth and was get can Hobart Mr. person pay will for it . whatever . . aof at the value it”; can arrive only way we “the sell the assets corporation this character would be fourth money.” divide the At the commencement repeated the conference, Aureguy attended, Greene, prior stating substance of the conference with Greene had informed him to arrive at the value necessary sell all the assets. be stock would it appears read a whole When the record is as properly statements, have found that instead jury could these qualifications, by being made as were intended difficulty ascertaining value, thereby the true show inducing discouraging investigation by plaintiff further representations rely Moreover, him to value. testimony that, subsequent making there was qualifications, to the representations positive
Greene made that the no stock was worth more than a share and ex- pressed willingness a take as Greene’s word to its value. positive circumstances, least, representa a
Under some as an may existing treated assertion of an of value tion Municipal Co., In Willson Bond fact. Cal.2d 974], the court said that “when a statement as to positive fact, value is made as affirmation in and is party it, making tended such as such statement false is to be false person making is known it, and upon by person such statement relied to whom it is made, then such false statement is actionable. The cases indicate that also where there is a reasonable doubt to particular expression whether statement is an opinion fact, the affirmation of a the determination rests with the trier (See, also, facts.” Bedell Engineering Rouse, Co. v.
432 Cal.App.2d
57 336-340; 734 404]; P.2d 37 C.J.S. [135 cf. Lloyd, 6 Wells 517]; v. Cal.2d 87 P.2d v. Harris Mil- [56 196 ler, Cal. 13-14 981].) P. [235 determining in char- considered One of the be factors right rely thereon is acter of statements of value and the accompanied represen- not other false they whether or are 222, 224 (See Wilcox, v. 178 Cal. P. tations. Edmonds [172 1101]; Engler, 744].) 484 P. v. Cal. Here [271 of. Neff testimony there that Greene made with is false statements company and respect to the assets and liabilities of its financial condition. why entitled further reason is a
There concerning the of the statements value rely upon Greene’s a com Plaintiff was stockholder a stock. corporation’s general director, president a pany of which addition, guardian of Alice manager. of estate majority voting a and the Lester, he shares con held right stock, giving of the him the to select most if not trol right indirectly all of the directors to determine all company policy practice. He had been connected with company many years; knowledge for he had an intimate company’s affairs, assets, prospects, its its and all affecting Moreover, other factors the value its stock. of particular importance, company closely was a held family corporation, appear as will hereinafter, the books company, plaintiff’s knowledge, inac contained curate valuations company’s assets so it would impossible have been to have ascertained the true value of his stock from this source. The stock was not dealt in on the judgment market and the of its value had to not published made from stock transactions but from the information of one familiar facts, with the and in this con nection Aureguy him testified that Greene told if he sought any place, information ultimately would come to Greene for it as there was no other source from which it could be obtained. Plaintiff, on hand, the other testified that he was not familiar with the corporation affairs of the or with financial general. matters foregoing circumstances are bring sufficient to case this within the rule that where an officer aor director of a cor- poration knowledge has special affecting facts the value stock, of its he cannot deal with a stockholder length at arm’s duty is but under to disclose such facts making before explained doctrine is This sale of the stock. purchase or 42, 57 Co., 15 Cal.2d Ins. etc. American T. Co. California various conflicting 497], views where of a director duty jurisdictions fiduciary on the existence of a necessary It was fully forth. set stockholders toward but its soundness doctrine, rely upon this that case rule, contrary therein. evident from the discussion in the case fiduciary duty the existence of denies that enable special facts knowledge of having officer use of shareholder expense profit him at the not in accord capacity, is in his official information obtained rejected. justice must be accepted principles *18 corporate a officer “special doctrine Under the facts” share with a fiduciary duty owes a limited in transactions involving rela holder stock. The confidential the transfer of tionship special of possession arises as a of the officer’s result knowledge gained corporate fiduciary. in capacity as a his An in officer, buying shareholder, in must selling or to a form him relating corporate of those business matters to the shareholder knowledge has and which the which officer right about, may latter have the has to know so that the a judging information advantages benefit of such made, deal. such disclosure has fulfilled Once the officer his duty doctrine, resulting bargain under this is not subject ground to disaffirmance on unfairness to the fiduciary duty shareholder. But without such disclosure the discharged. officer such a situation is not illogical liability impose It would be to for silence representations, deliberate false excusing it follows while complete honesty any duty that the officer owes a dis regardless makes, closure which he of whether statements his as “facts” or “opinions.” Coming classed to case hand, Greene, at president duty the corporation, had a special to disclose to any facts, of which he had knowledge, affecting represent and, value the stock ing what the shares worth, were to honestly state what believed to be fact. If Greene deliberately gave plaintiff false information concerning the financial condition of the company or if he told him the stock was not more worth than $25 a share when he share, believed to its value be a then he violated the duty which plaintiff. he owed to though further,
On related, theory a the statements may attributed Greene actionable. This court has held opinion fraudulently may that a false statement of made form making possesses party the basis of an action where the knowledge regarding sub- information superior special (Union F. Market v. ject representation. South- matter of the 503]; see 671, 676 Market, F. 10 Cal.2d ern Cal. 336-340.) 37 C.J.S. undisputed certain because contend Defendants occupied fiduciary possibly could not have evidence, Greene respect plaintiff. superior position or confidential destroyed evidence the facts shown this They urge that also representations of right rely plaintiff’s possible First, him fraud. de- and, further, put on notice of pending, will contest point then wherein fendants including charged executors, Greene, legatees fiduciary posi- with fraud and undue influence. The superior knowledge tion existing prior of Greene filing ipso of the will contest were terminated be- facto plaintiff charged improper cause Greene with conduct toward person. knowledge, superior third Greene’s obviously re- duty unchanged, dealing fair plain- toward mained not cease when stockholder did he and tiff as a be- legal proceeding. in a Nor say can we as a came adversaries allegations by plaintiff that the made of law in the matter relationship will contest evidenced of hostility and a lack deprived plaintiff confidence right of trust and which representations rely upon made Greene in subsequent meeting negotiations. representations been made by claimed to have Greene occurred moré than a year after the contest was filed. Plaintiff testified he then *19 expressed his confidence honesty willing- Greene’s and his ness take to Greene’s word as to the condition company of the and the value of the right stock. The jury had a infer to that any plaintiff beliefs or doubts may have had when the will contest filed concerning integrity Greene’s had been changed entirely dispelled at the time the representations were made. Defendants next claim that the evidence shows
plaintiff, Lachmund, Aureguy investigations made Company’s value the Hobart Estate of assets and stock, they contend that one has who an independent conducted in vestigation must be deemed have relied _ thereon rather representations upon any than made (Cf. to him. Carpenter Hamilton, Cal.App.2d v. 18 69 P.2d 1397]; [62 Blumenthal
435 82 Stanford, ; v. Colton 384 P. Greenberg, 130 Cal. 599] [62 v. per- A 137].) defrauded Am.St.Rep. 16, 16 351 P. Cal. [23 merely maintaining action an from however, is not barred son, incomplete investigation if an he commenced because if particularly falsity, discovery of the or abandoned before facts, or if knowledge of the superior a has the defendant or he facts all the ascertain plaintiff to for difficult it is expert assistance. judge facts without competent is not 702, 704 695, 21 Cal.2d Cooper, v. example, Shearer (See, for 587-588 579, 191 Cal. Freeman, ; v. French P.2d 764] [134 600-601 597, Cal.App. Clow, Payne v. 515]; P. [217 144, Co., 7 Municipal Bond Cal.2d ; v. Willson P. 138] [300 286-288.) Expert wit- 974];.37 C.J.S. P.2d 151-152 [59 the- the value of determine in order to testified nesses complete examination necessary to make stock it would be con- company, which all the appraisal assets land, mining property, timber city buildings, sisted several holdings. evi- utility public and numerous other plant, clearly the infor- dence shows that it difficult to secure value, estimate necessary mation form accurate knowledge concerning facts, superior had these competent assis- plaintiff expert and that was not without tance to evidence determine what stock was worth. Aureguy does not Lachmund, establish that Harris give qualified attempted they such assistance or that plaintiff advise respect Moreover, thereto. there was evidence that complete investigation did not make because his upon reliance representations. (See Greene’s Cooper, supra, 704; Shearer v. Cal.2d Divani Dono- van, 214 447, 453 Cal. 247].) contend that certain facts Defendants known suspicions have,aroused his precluded should representations upon assertedly his reliance made proponents that the appears Greene. It contest will deposition Stevenson, secretary of Howard G. took the company, and that present attorney Lachmund was inquired concerning of Stevenson value company’s assets and copies examined "the balance years company 1932, 1933, sheets of the for the which listed all the assets and liabilities company. argue acquired having Defendants information this through attorney, plaintiff rely could not Greene’s representations According of value. deposi- to Stevenson’s *20 principal cor-
tion, many of the placed upon the valuations as porate unchanged carried on from assets were the books changes early as 1915 did reflect actual values or in the depression. value due to the He said that some of only properties value, the worth were worth book some were any- one-tenth the book value and some were not worth thing. He actual further stated the determination of reappraisal value would require There was properties. carry- testimony that Greene Aureguy they told were “that ing on their in properties vastly books certain were which excess of the during real properties,” value of the the pointed conferences Greene out that a result of vari- as ous factors such as depression, net less than worth was by shown company. financial Ac- statements of the cording sheets, book balance value the stock was approximately per share, $120 whereas Greene testified then believed the stock worth but share. Greene further testified substance that the less assets were worth than by figures shown on the balance sheets. It is obvious the balance sheets fairly represent did not the actual value corporate assets and that so' had been informed. It cannot therefore said, law, be as a matter of that plaintiff prevented accepting representa- from tions of Greene as true because of the difference the value of the stock as by shown represented books Greene. evidence, opinion our when considered as a whole favorably most plaintiff, construed is sufficient to requirements
establish all of the essential of a cause action damages representations. for fraudulent II. Statute Limitations. this action is barred section
Defendants contend
provides
Procedure
Civil
which
three-
338 of
Code
year
for commencement of: “An
period
limitations
action
ground of fraud or mistake.
The cause of
for relief on
case not to
deemed
to have
until
action
such
accrued
discovery, by
aggrieved party,
facts consti-
tuting
or mistake.” The
the fraud
conferences at to have
false representations
Greene is claimed
made
part
latter
held in the
the transaction based
completed
January,
present
thereon
1936.
action,
than,
until
however,
June,
was not
commenced
more
alleged fraud took place.
five years-
the.
after
*21
discov
provision tolling operation
The
of the statute until
and,
long
exception
ery of the fraud has
been treated as an
brought
accordingly,
is
this court has held that
if an action
years
fraud, plain
more than
after
three
commission
tiff
proving
has the burden of
that he did not
pleading
discovery
prior
make the
to the
years
until
three
within
filing
complaint.
(See
(1858),
of his
9
Tinney
Cal.
Sublette v.
423;
Washington
Lady
Wood,
The court said: “Where duty no person make inquiry, the circumstances where under mere inquiry, put man’ not be prudent ‘a would he open plaintiff, knowledge to a means of fact that him from debar does not them, availed himself of has not discovery. make relief when thereafter shall actual duty, inquiry becomes a circumstances must be such that (Italics omission.” negligent to make the failure (See added.) Many adopted other have this view. decisions Mary Bros., Inc., 12 511 Bayly v. Cal.2d Co. Pickford 102]; Casad, 210 Cal. Original [86 Min. & Mill. Co. v. 71, 76 456]; Sunnymead Co., P. 189 Prewitt Orchard v. [290 Cal. 730 995]; Drum, 184 P. Victor Oil Cal. Co. [209 v. 226, 241 Washington Wood, 113 243]; P. Lady [193 C. Co. Co., Power 809]; P. West v. Western Cal. Great *22 406, seq. 1014]; P.2d Cal.App.2d 403, et Denson v. Pres [97 sey, Cal.App 522]; 13 .2d 137 472 P.2d Edwards v. Sergi, [57 Cal.App. Martin, 369 P.2d 541]; Smith v. 135 Cal. [30 cf. 247, 254-255 779].) P. many it been cases has [67 said knowledge equivalent knowledge. that means of are (See Shain Sresovich, People v. 104 402, 51]; 405 P. Cal. [38 v. Joaquin 740]; San Assn., 797, etc. 151 807 P. Cal. [91 698, 701, Consolidated R. & 216 et Scarborough, P. Co. v. Cal. seq. P.2d 268]; Knapp 237, 242 Knapp, 15 v. Cal.2d [16 [100 759]; P.2d Bainbridge 423, 16 430 Stoner, Cal.2d P. v. [106 ; 2d Mills, Angeles Inc., Merrill Los 120 Cotton Cal. 423] v. Beach) 329]; App. 149, Daily Long 158 P.2d v. Co. Tel. [7 140, Co., Cal.App. 833]; 133 143-147 Press P.2d Pub. [23 Nolan, 401, ; 3 403 Cal.App.2d Wheaton P.2d v. [39 457] Co., 420, Haley Imp. 415, Santa Fe 5 Cal.App.2d v. Land 1078]; 423 P.2d Vertex Schwabacher, Inv. 57 Cal. Co. v. [42 App.2d 406, 415-418 891]; Bryan P.2d Nicolas, v. 67 [134 Cal.App.2d 898 P.2d 835], Onderdonk, Truett v. [155 cf. 581, ; Phelps 120 589 Grady, P. 73, Cal. v. 168 [53 Cal. 26] 926]; 79-80 Clise, P. Malone 18 Cal.App.2d v. 154, 157 [141 321].) true, is P.2d however, only This [63 there is a where duty inquire, as where is aware of facts which make a reasonably prudent would person suspicious. In the Lady Washington case, the (113 487) court said at p. Cal. “as of knowledge means equivalent to knowl edge, appears that the plaintiff had notice or if information circumstances which would put him on an inquiry which, if followed, would lead 'to knowledge, or that the facts were
439 knowledge, he deemed he within his will presumptively added.) (Italics facts.” knowledge of have had actual these in Victor Oil Co. v. is well stated for rule reason not p. 241) : “The courts will at (184 Cal. supra Drum, deny relief circumstance upon some small lightly seize against actually defrauded been have plainly a party shown to he did forsooth, that ground, on the him those who defrauded he cheated as soon had been the fact that he discover should might only party is defrauded done. It where have inex except for his own plainly have discovered fraud discovery charged he will with cusable inattention that follows knowledge part.” on his It actual advance of discovery not barred because means has were available at an earlier date shown provided he put known to inquiry by any was not on circumstances agents him his commencement prior time three-year June, period ending 1941. complete most in this case contains a record might have all relevant circumstances that presentation of comple question up including bearing upon this to and 1936. fac January, tion transaction in Most of these tors been discussed heretofore in connection have sufficiency of the evidence to establish cause of action considered, did not problems however, fraud. The there negligence by concern this directly ordinary plaintiff, since would not be a defense to an action based intentional (See misrepresentation. Seeger Odell, 18 Cal.2d 1291].) Accordingly, must A.L.R. we now determine brought whether has himself within exception to the statute of limitations. Plaintiff’s *23 evidence, believed, may if disclosed certain factors that have discourage indepen tended making to of an exhaustive dent investigation, hold, law, of and we as matter cannot a that any plaintiff should have circumstances known to put a reasonably prudent inquiry. jury man could The have found representations a Greene’s were of such nature as to plaintiff security lull of a state into sense inaction,—an important factor to be considered in determin in negligent ing plaintiff to failing whether was vestigate. (See, example, Pressey, Cal.App for Benson v. 13 472, 522]; Sergi, .2d 476 P.2d Cal.App. v. 137 Edwards [57 541].) 369 P.2d [30 fiduciary a rela- pertinent factor is that there was
Another 440 tionship between the parties at time of the fraudulent
representations. general relating Although the rules pleading to proof excusing discovery facts late fraud recognized remain applicable, it is involv cases ing such a relationship facts re ordinarily which would quire investigation may suspicion, not excite degree same diligence required. is not v. Rutherford Rideout Bank, 11 479, Cal.2d 486 978, 117 A.L.R. P.2d [80 383], it was said that because plaintiff of such relationship could not be charged diligence with lack though even inquiry would have disclosed the true value of property involved. (See, also, Bainbridge Stoner, 423, v. 16 Cal.2d 423]; Knapp 430 Knapp, 15 P.2d 242 237, v. Cal.2d [106 759]; Orena, Lataillade v. 924, P.2d 91 565 [100 Cal. P. [27 Am.St.Rep. 25 Verne, 219]; Laraway First Nat. Bk. La v. 39 Cal.App.2d 95]; 799; 718 (1942) 12 [104 Cal.Jur. 30 591; Cal.L.Rev. Simpson, Marston 189; 54 v. Cal. of. Edward Barron Co., Estate Co. 163 Cal. v. Woodruff 575-577 351, 42 125].) P. argue [126 L.R.A.N.S. Defendants the fiduciary relationship terminated when the sale completed longer no entitled the benefit of the nevertheless, rule. relationship, fraud, the time of did exist at the asserted duty complete under make a search re-examination no merely immediately after it place of the entire transaction took fiduciary relationship parties was because the between the circumstances, for thereby. terminated Under these it was jury negligence plaintiff, to determine whether it was completion transaction, rely upon after to continue to representations a stock that were made while he was holder. contend, however, that certain facts
Defendants him on put sufficient indisputably known light must be examined inquiry. These contentions in Northwestern C. Atlantic P. C. Co. v. the rule announced P. Co., P. 308, 312 174 court there said Cal. 47]. opposing inferences, whether susceptible the facts when are put pru of ‘circumstances sufficient to party “a has notice fact,’ to a whether upon inquiry particular dent man prosecuting inquiry, might learned such ‘by such have (Civ. questions Code, §19), fact’ themselves of fact jury (See, also, be determined or the trial court.” Co., West Great Western Power Cal.App.2d 403,
441 mentioned 240.) The facts 20; Cal.Jur. P.2d 1014] [97 analyzed heretofore discussed have been defendants insufficient is evidence that the the contention connection with plaintiff’s or misrepresentation either actionable to establish them repeat shall thereon, reliance and we reasonable concluded have Although properly jury could here. urged defendants knowledge of these facts and others satisfied inquiry, man on we put prudent should have to up admittedly to that none known matters transaction com- including completion of the the time of pelled of law. such conclusion a matter support clearly
The evidence is
sufficient
nothing
implied
finding
learned
jury
comple
suspicions
arouse his
during
period between
tion of
fraud
alleged discovery
the transaction and
Europe
1941.
The record
went
shows
1941,
time
January
some
in 1936
until
and remained there
when he
prior
returned to New
He testified that
York.
time he
anything
had
come to
information,
no
nor had
his attention,
suspéct
that would
he had been
make him
“overreached”
transaction,
had not received the
full value of
stock,
Although
had
been defrauded.
absence from the locality
of limi
would not toll the statute
tations if it
already
had
(for example, if
to run
commenced
plaintiff had
him
put
been
on inquiry by
prior
facts known to
trip
to his
to Europe),
it
awas
relevant
factor to be con
sidered by the jury in explanation
delay
discovery.
(See Seeger
Odell,
v.
18
409,
977,
418
Cal.2d
P.2d
[115
Defendants dis relating to actual the claimed established sufficient.facts negativing In addition to notice in 1941. covery of the fraud excusing sooner, plain it failure discover of the fraud and showing and sur allege prove facts the time tiff must discovery and discov circumstances what the rounding (See ery Co., 675, 8 681 was. Davis Rite-Lite Sales Cal.2d v. 5 276-277 1039]; Kelly Longan, 274, Cal.2d P.2d v. [53 [67 Scarborough, 216 Cal. 971]; P.2d & v. Consolidated R. Co. P. ; Casad, 698, Original 703 Min. & Mill. v.Co. [16 268] 210 184 Cal. 456]; Drum, Cal. 75 P. Victor Co. Oil [290 243].) P. recognize important the dis rule this applying *25 to duty a is plaintiff tinetion. cases where the under between obliged any make inquire he is not to and those which hap knowledge investigation of the has notice or until he to pening fact or facts sufficient incident or of some some suspicions person. arouse the "Where of a reasonable charged may duty investigate, plaintiff there is a to the knowledge disclosed of the facts would have been by no investigation; where, here, prior an there is but as duty not run until he has investigate, the statute to does knowledge put notice a reasonable of facts sufficient to on inquiry. plaintiff man must The rule the show that may what he the information has so that court obtained, leading discovery determine whether or not the facts to the of the fraud years prior existed for more than three commencement of suit and could have been discovered ordinary applicable diligence, only exercise is where plaintiff diligent duty under a inquiry to make and he seeks to excuse his failure to discover the fraud showing true that were not then available facts or that though the inquiry diligent, he did make was unsuccessful. (See R. & Scarborough, 698, Consolidated P. 216 Co. v. Cal. 703-704 268]; Phelps Grady, 73, v. 168 [16 Cal. cf. 926]; 77-78 135, P. 101 140 Carpenter, [141 Wood v. U.S. L.Ed. in duty [25 In the absence of a to make 807]. quiry, pointed out above, merely the statute does not run because the of discovery means available, plaintiff were is compelled disprove that existed. need such means He only establish facts sufficient show that he made an actual discovery of hitherto unknown years information three within before filing Scarborough case, action. In the merely that, plaintiff lapse showed after supra, the of more period, investigation an statutory than the was made which fraud, discovery showing led but there was no investigation. prompted the the reasons which As the court (216 p. for all pointed 704), there Cal. at appeared out that knowledge have had plaintiff may prior suspicious facts, showing no why and there was earlier investigation requirement plaintiff not made. The in show what suspicious formation he received what facts came his imposed notice order may the court determine whether the discovery or not made within time plaintiff alleged, is, actually whether something learned Washington he did (Lady not know before. Wood, C. Co. v.
443 Drum, 184 Oil v. 809]; Victor Co. 482, 487 P. Cal. [45 653, Cal. Fraser, 178 243]; 226, 241 P. Galusha Cal. [193 Washington case, page Lady 311].) P. times said that must “show 487, the court constituting the the facts under which circumstances may court brought knowledge, so that the fraud discovery these was within determine whether facts (Italics alleged.” added.) time pleading on The amended point this is sufficient. complaint knowledge alleges prior had no perpetrated; February, fraud had been had him a conversation with man in York informed New who Europe that after had Charles left Crocker stated that in contest had the settlement of the will *26 lawyer gotten together Greene and Crocker’s and had had given plaintiff of trimming,” that, part “fearful as a the contest, plaintiff settlement of the to had sold his stock them for a share $120 when its actual value was at least a share; that about San two months thereafter he came to Aureguy, present Francisco and consulted his with Harris and in counseland that the his early part May, 1941, of counsel “informed him procured that he had that the information Company apparently Hobart Estate had been for years several in financial and owned excellent condition properties numerous valuable were unencumbered.” which Although supporting detailed the evidence is less allegations, bring plaintiff is sufficient to within than the testified, in that substance, the above stated. He rule January, York in his return New received “some suggestion” per from an information ... unidentified holdings concerning Company son Hobart Estate representations; prior variance Greene’s that was at information, anything no nor time he had had come suspicious him had attention, his that would make that he defrauded; been as soon as he was able he came to San Aureguy, present Francisco and consulted Harris and his that he then received information as to the nature counsel; holdings, company’s of en and value of the status excessively cumbrances, that was at variance with the state him by Plaintiff made to Greene. offered no further ments allegation regarding support the conver evidence sation in York, New that his and it obvious from the record counsel did ask him to of the information state details received, fearing might a recital what learned be inadmissible hearsay.* knowledge
Plaintiff has thus that he had no notice shown prior January, suspicious circumstances facts or possible put time he on notice of that at that was first fraud, an in- within months he made and that six thereafter vestigation, fraud, commenced action. discovered the follows, brought It has therefore, that he himself within exception of Civil to subdivision of section 338 the Code of limi- by Procedure that he is not barred statute tations.
III. Instructions. prejudicial Defendants assert errors were committed resulting justice. miscarriage jury instructions to rep jury that, The court instructed the “Where a resentation may is made of which facts are or be assumed knowledge making knowledge be it, within the party receiving party concerning shall facts, the real prevent relying being by it, clearly on and misled must and conclusively The court established the evidence.” specifically applied then facts the announced rule to the ‘‘ present case, stating: you from the Therefore, if believe repre evidence that defendant Greene did fact make sentations calculated him to deceive the and to induce part value, with his stock than for less its then he cannot showing excuse oppor the deceit had *27 tunity to examine or of information which have sources would disclosed falsity the true representations, facts and nor can by saying he excuse himself had facts; constructive notice of the true order excuse but to so himself it necessary clearly would have been evidence conclusively establish that had Hobart knowledge actual facts, of prevent the real which would admissible, purpose *Such evidence would not for have been showing made, establish fact truth statements but Whittier, (Smith 279, information v. 95 293-294 was received. Cal. Shamoon, Dunn 529]; see, Cal.App.2d 486, 491 P. v. 37 P.2d [30 [99 Wilson, Head Wig 6 1113]; Cal.App.2d 244, 509]; 36 251 P.2d v. [97 (3d Evidence, 1940) 1789, 235-236.) on pp. ed. more §
445 being any representations relying by on and misled defendant Greene.” defendants placed upon in effect These instructions evidence, by
obligation establishing conclusive facts certain greater required than that proof thereby imposing burden 1837, Code defined section evidence is by law. Conclusive permit not the law does “that which Procedure, as of Civil Code of (See, 1978 of the also, section be contradicted.” made byis law provides: “No evidence Procedure which Civil code.”) by declared this unanswerable, unless so conclusive or “Forming an end or termi- “conclusive” Webster defines involving a Putting question; debate or an end to nation. evidence; decisive; final; as, decision; conclusive conclusion or Wallace, v. As stated Watkins presumption.” a conclusive only on jury . instructed to act con- 76: . 57, 19 Mich. “. hardly suppose fail it must disre- evidence could clusive require absolutely gard balancing evidence, and case all any doubt.” from free requires which California statute decision
We find no knowledge prevent of facts that would reliance must be evidence, conclusive unanswerable established necessary evidence that such is were erroneous. instructions language apparently instructions used these taken 895, Pomeroy, Equity Jurisprudence 1941), (5th 3 ed. from § Teague Hall, 668, in the quoted cases 171 Cal. and it was v. 851]; Freeman, 579, P. French v. 191 586- 670-671 Cal. [154 Grimes, 526, 536-537 587 206 Cal. 515]; P. McMahon v. [217 Co., Cal.App 36 P. Power 440]; Great Western [275 West v. 403, Garvey, 1014]; .2d 413-414 Hill 56 v. Cal. P.2d [97 App, decisions, 98, however, 105-106 These P. 61]. [205 by Pomeroy, forth principles concerned law set with other “conclusively” and the use of word was not issue authority therefore, not cases, not discussed. question here it was not considered involved, since (Maguire Soc., L. & Cal.2d therein. Hibernia S. 1062].) 151 A.L.R. Plaintiff hold that certain cites numerous cases convincing” facts or “sat- must be established “clear and isfactory” however, phrases, evidence. The use of these equivalent requirement unanswerable evidence. to a
446
This court has
upon
said
two
deed
occasions that where a
purports to convey
absolutely,
testimony
land
oral
that it was
intended to
something
be
mortgage
entirely different,
as a
such
trust,
“clear, convincing,
(Shee
must be
conclusive.”
189,
han
Sullivan,
543];
126 Cal.
193
P.
v.
v.
[58
Goodfellow
see, also,
554
Goodfellow,
548,
898];
219 Cal.
P.2d
Miller
[27
Cal.App.2d 199,
438];
55
Miller,
v.
205
P.2d
Stevens v.
[130
102];
Fetterman,
Cal.App. 741,
76
v.
753
P.
Smith
[246
Plaintiff the error cured certain instruc- given request tions of defendants which contained general relating plaintiff’s statements burden of proof in an action for fraud. The erroneous statements using “conclusively,” however, the word specifically were di- important case, rected issue of narrow by general cannot said that error was overcome instruc- relating proof. tions burden jury
The court also instructed the that: “If false representations made to the the defendant Greene, representations and those were of a nature calculated to induce to sell his for the per stock sum sum, presumption share, other arises that the false he relied so, do and that induced him to representations *29 The “or words making the of the stock.” them in sale may they confusing in that are instruction other sum” in this to entitled recover plaintiff was jury to have the believe led by claimed as although $25 at the contract was not to sell defendants, plaintiff per share, as asserted $55 but at may reliance figure. although inference of Also, an some other to nature representations of a calculated drawn from false be arises there- “presumption” sale, true induce a it is not that from. “The plaintiff further that: jury
The was instructed right rely upon expressed had an the statements absolute to existing Greene, the truth of fact the defendant under he was him, to and unknown to and was known Greene the verify obligation investigate statements, no and knowledge the with full means of truth of which defendant The as deliberately pledged his faith.” instruction had “an abso given plaintiff in did not have was erroneous that must Reliance right rely” upon statements. lute Greene’s “conduct of justifiable, jury believed that the be and if the intelligence and informa light the in the of his own manifestly unreasonable” he should be denied tion was (See Odell, recovery. 409, 414-415 Seeger v. 18 Cal.2d 1291].) 136 A.L.R. require a re opinion We of the errors are these sufficiency judgment. passing upon versal of the the support be re the evidence to the verdict all conflicts must findings implied jury, solved in since is favor of the the judge credibility the sole of the witnesses and weight determining judg evidence; in but whether instructions, ment must reversed in we because of errors including required to examine entire cause the evidence opinion errors have resulted decide whether our (Cal. 4%.) miscarriage justice. Const., VI, in a art. § but perplexing often task This is a most difficult and case record is such present the condition of the prejudicial apparent. effect of the errors is testimony, plaintiff and his witnesses as essential disputed by is relevant matters defendants and the evidence subject conflicting ease is inferences. Plaintiff’s whole upon agreed rests assertion eon- to settle will $25,000 test for and sell his per $25 stock for share he was induced to enter upon into the transaction reliance representation Greene’s more the stock was not worth agreed than the price of is $25 a The evidence conflict- share. ing both as to agreement terms to whether representation actually asserted It made. is Greene’s against word Aureguy. the word of significant is It that Harris, plaintiff’s then attor- who was ney and present who agreed upon when the terms were representation and the failed to corrob- assertedly made, orate Aureguy important vitally these two particulars. testimony entirely of Harris silent with respect plaintiff’s story made that the transaction was payment basis of $25,000 for settlement of the will contest per merely share for the stock. He testified integrated will settlement contest was *30 sale of by the stock and that this was shown his letter attorney shortly Crocker’s written after the last conference with Greene. agreed In this Harris letter stated it was in consideration of the and the dismissal of the will contest plaintiff’s transfer of stock, representatives of the the estate pay would $55 a share for shares. The the written 833% agreement carrying instruments used in parties out the were to the general pointed same Although, effect. as we have out heretofore, writings necessarily these were not inconsistent plaintiff’s with testimony transaction, version the oral of required explain the apparent discrepancy between the contemporaneous plaintiff claims written instruments and what agreement. testimony constituted the of and Aureguy that of specified paid sum for settlement the purchase the will contest and fixed for the a further amount of the stock supported by Nor did Harris was not Harris. Aureguy testimony corroborate the and of Greene represented than the not more stock to worth a share. representation very plaintiff’s This heart of is the case, although con- the extended discussion with Greene cerning it, Aureguy, assertedly as by plaintiff related had presence Harris, occurred in the latter testified he the no gave any opinion recollection as to the value that Greene plaintiff’s the stock. dis- transaction, the Thus version puted by the con- Greene, supported by, either fully not attorney. testimony writings of his temporaneous or the to have record, jury appears the the Moreover, shown At against Greene. return reluctant been verdict deliberate, the had p. after retired m., 10:20 some hours it corporation against defendant brought the jury in a verdict for or damages $32,175 but no verdict for actual could jury the against informed Greene. court verdict principal against without not return a verdict the deliberating against agent directed it to continue the agent principal the against return a verdict the three hours agent principal. the About in favor the same brought back the morning, jury in later, at 1:35 against Greene against corporation verdict with a verdict damages only in exemplary damages for no actual but accept the ver- $10,000. again sum refused to The court against prin- explaining dict, be found that no verdict could amount. against agent in same cipal without a verdict instructions, response clarifying request to a for additional stated; is, explaining “I there find that the more court give more is. I am inclined to much confusion there fully I in- they way more of instruction. think they along. formed but They and have been all are confused ” ¡022 approxi- completely m., have been instructed. At a. retired, mately jury it returned fifteen minutes after the had present against defendants for actual with the verdict both damages against Greene for ex- $32,175, sum of damages $10,000. emplary sum jury case in It is that the confused in a close obvious conflicting. The sharply evidence was errors *31 and, when related to vital defendants instructions matters regarded together, prejudicial. must be as considered given request appears It instructions at the of that some there issues of the case that outside the judgments in be were certain the must errors others. Since of unlikely complained it is that errors reversed, as the unnecessary repeated upon will be the is case, a retrial of discuss them here. Liability Company as
IY. Hobart Estate Principal Creene. theory Plaintiff corporation to hold defendant on the seeks 450
that agent. Greene was its There is no claim that there was any express authority from corporation make the al- leged misrepresentations, and there no evidence Greene that purported .corporation to act for the in the transaction or acting. believed contends, that he was so Plaintiff however, corporation is nevertheless liable under the circumstances of this case. urged gave
First, Greene it is false information appraiser an inheritance tax a false appraise led to ment in the estate of plaintiff’s $40 stock father at per share; corporation required by that the to fur law information; agent nish the that Greene acted as in its so doing; misrepresentations by such corporation com injured public; any mitted a fraud on the and that member thereby against corporation. had a cause action Plain testimony, tiff’s however, own he shows that did not act or rely on appraisal. testified that him that He Greene told appraiser high, the value fixed was too and that he fixing telling believed $25. Greene was the truth the value at he did rely If on valuation, not act he was not injured by given appraiser. misinformation to the general
Plaintiff man next contends that as ager charged with the conduct business of the cor poration, get desired to rid of as a stock troublemaker, holder that, accordingly, because he was a by facilitating transaction, he acted in the interests of corporation scope agency. and hence within the authority may implied Actual express well as as and the implied powers general agent manager very broad, of a embracing authority customarily all do acts connected with (See engaged. Angeles the business in which he is Los L. Co. Los 533]; 716; 161 P. 1 Angeles, Cal. Cal.Jur. 70-73; (1934) 392, 394; Am.Jur. 22 Cal.L.Rev. Civ. cf. Code, appear, however, It 2319.) does not § acting scope general Greene was within the of his duties manager negotiating company purchase plaintiff. stock from indi The transaction between two shareholders, namely, plaintiff principal, vidual and Greene’s corporation Alice Ordinarily, Lester. is not interested and, sale of stock one to another the ab shareholder special sence of transactions within circumstances, such are not
451 v. (See Bisbee manager. general authority a implied the Rattray v. 27; 24, 19 F.2d Co., Linseed Products Midland cf. 253, 256-257 Cal.App. [171 36 Implement Co., Wichersheim corporation advantage the Any 964].) possible P. but as stockholder elimination of a from derived shareholders individual incidental the between the two sale cannot It liable. corporation render the and does not any, benefit, if involuntary acceptance of be said that corporation on justified on the imposition liability ratification, from the sale theory benefit since rejected it. not have corporation could such nature that a merely because company liable was not Agency, (See Rest., manager. president general was its said; not con “Statements 258, b, is Comment where it § nected, position agent’s employment. where the Except with fraud, a a agent him to occupied by perpetrate an enables agent only subject an principal liability is for the deceit of Misrepresenta him. connection with matters entrusted to range beyond the of what concerning which are tions matters agent employed no effective create to handle are more against agent’s promises liability principal than are the to them.”) as finally, corporation is contends,
Plaintiff Greene, placed liable position because in which it had knowledge apparently person who only who had information on as to the of the stock and factors value depended. which the is based value This contention on authority, doctrine of defined such au ostensible which is ordinary thority intentionally byor principal, want “as a care, agent person causes allows a third to believe the (Civ. possess” Code, 2317). prin this doctrine Under § cipal agent, merely under a is “bound acts of ostensible authority, persons only good faith, to those who have liability without ordinary care, parted want incurred value, upon (Civ. 2334). Code, the faith thereof” § cases that, California hold under 2317 and sections authority cannot on recover the basis of ostensible showing estoppel. without a of facts sufficient to raise (Hansen 212 Burford, 908]; v. 100 P. Ernst v. Cal. [297 Searle, 218 Green, 233 Van 120 715]; Cal. Buren P.2d [22 Cal.App. 461 also, 392, 395, 22 1079]; see, Cal.L.Rev.
396.) supra, As Searle, Cal., page said in Ernst v. “its representation by principal, essential elements are justifiable change of party, reliance thereon the third *33 position also, injury resulting (See, or from such reliance.” Rest., Agency, 265.) § finding permit not that these evidence does any are present
elements
here. The
is
show
record
devoid
ing
thought
that
at the time of the transaction
acting
believed that
corporation,
Greene was
for the
or that
relied on
such
attorney,- Harris,
His
wrote to
belief.
attorney
plaintiff’s
Crocker’s
stock was
be transferred
representatives
to the
nominee
of the estate and that
they
payment
would make
therefor.
it can be
Unless
said
acting
purporting
that Greene was
act
the cor
for
liability
poration,
predicated solely
should not be
on the fact
only person
knowledge
he was
possessed
who
Although
value of the
special
stock.
that Greene
the fact
had
knowledge
corporation
of the affairs of the
entitled
rely
concerning
representations
facts,
on Greene’s
those
justify plaintiff
acting
would
believing
in
that Greene was
on behalf
corporation
purport
when Greene did not
to act in
capacity
understood that he was
acting
representative
purchaser
and for the
estate
of the stock.
The case of
Bank,
v. Rideout
there guilty rep the bank who was of the fraudulent purported resentations acting bank, plaintiff be be lieved acting so, he was so to do and, and was authorized manager addition, customary it was for the to make statements upon rep to customers matters such as those embraced resentations. judgments are reversed.
Shenk, J., Carter, Traynor, Schauer, J., J., J. and concurred. SPENCE, judgments J. I concur the reversal of the grounds upon the stated but cannot subscribe to all is majority opinion. my opinion, said in the judgments grounds: (1) should reversed the further law, evidence, as matter of was insufficient to establish ac- action, alleged cause (2) plaintiff’s tionable fraud limitations. by the statute law, matter of was barred as a relating to these and the law facts view that I am the correctly exhaustively and grounds further for reversal Justice by Mr. dissenting opinion written discussed Court District pending Knight cause was the time this hereby dissenting opinion reference Appeal, to which 148 P.2d Co., (Cal.App.) Estate (Hobart Hobart made. 41, 59.) J.,
Edmonds, concurred. May 31, Bank. F. 16970. In 1945.] No.
[S. HARRY B. MADISON, Deceased. Estate FRANK D. *34 MAR- etc., Appellant, Controller, as RILEY, State Respon- al., Executor, etc., et MADISON, SHALL P. dents.