JOSEPH G. SCAFIDI et al., Appellants, v. WESTERN LOAN AND BUILDING COMPANY (a Corporation) et al., Respondents.
Civ. No. 12943
First Dist., Div. One.
Jan. 15, 1946.
72 Cal. App. 2d 550
Hardin, Rank, Meltzer & Fletcher, H. L. Mulliner and Donahue, Richards & Hamlin for Respondents.
ATTERIDGE, J. pro tem. ---Plaintiffs’ appeal is from a judgment on the pleadings entered by the trial court on motion of the defendants.
The basic cause of action which plaintiffs attempted to plead in their complaint appears to be that form of assumpsit denominated as “money had and received,” but both in the trial court and before this reviewing court they contend otherwise and take the position that theirs is in essence an action for fraud and deceit. If the action is of the first ascribed classification it must be held, as the trial court found, to have been barred by the statute of limitations (
In pleading a cause of action based upon fraud or in pleading fraud in avoidance of the bar of a statute of limitations, “It is essential that the facts and circumstances which constitute the fraud should be set out clearly, concisely, and with sufficient particularity to apprise the opposite party of what he is called on to answer, and to enable the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud.” (37 C.J.S., § 78, p. 371.) Plaintiffs’ complaint fails signally to comply with these requirements. A special demurrer designed to point out certain of its obvious deficiencies in these respects was interposed and erroneously overruled under extenuating circumstances by a judge other than the trial judge ultimately passing on the merits of the motion. The order overruling the demurrer recites: “No one appearing as counsel for either party, said demurrer is submitted without argument,“-a circumstance having some tendency toward causing the judge to believe that plaintiffs considered their complaint as sufficient, and that defendants did not regard their demurrer as meritorious, since neither felt sufficiently concerned to advise him of their views. Nevertheless, the deficiencies and uncertainties of the complaint are so great that in our analysis of the pleading which follows we take frequent occasion to parenthetically point out some of them, because they later enter into and become part of the reasons for some of the determinations made on this appeal. It will therefore be understood that all observations contained within brackets are our own and are no part of the allegations of the pleader.
Omitting all preliminary and various other allegations having no relevancy to the contentions under consideration, the amended complaint in substance sets forth the following:
(1) On June 7, 1928, plaintiffs were the owners of two corner lots in the Marina District of San Francisco. On said date plaintiffs conveyed [and inferentially sold] said lots to Louis A. Goldstein pursuant to an arrangement [a contract or agreement is not alleged], whereby Goldstein was to construct apartment house buildings on said lots, and the money
It further is alleged therein that Goldstein commenced the construction of the buildings according to plans and specifications on file with defendant Western Loan and Building Company [but the date of said commencement is nowhere alleged]; and that after receiving advances of moneys [the amounts of which are nowhere stated], secured by the above-referred-to mortgages, as the construction work progressed and prior to the completion of the buildings, Goldstein [then] abandoned the construction thereof and defaulted in the terms of the written instruments evidencing the loans and securing the same [nowhere, however, alleging the date of said abandonment or to what extent toward completion the work had then progressed].
It will be noted that up to this point in the complaint there is no allegation placing the plaintiffs in the slightest privity of contract with defendants, and that no obligation whatsoever on the part of defendants to plaintiffs has as yet been pleaded.
The next succeeding allegation, which is the only one in the entire complaint which has any tendency toward pleading the establishment of a contractual relationship between the parties, and upon which allegation alone any cause of action plaintiffs may ever be said to have possessed can be predicated, will be quoted verbatim:
(2) The complaint then proceeds to further allege that the real properties were sold under the deeds of trust in favor of plaintiffs, and plaintiffs thereupon became the owners thereof subject to the mortgages held by defendant Western Loan and Building Company.
The next succeeding are the only allegations bearing upon the question as to whether or not the same sufficiently plead the fraudulent concealment by defendants of the existence of plaintiffs’ primary cause of action for money had and received; and it should here be noted, as will later more definitely appear, that the pleading of the facts constituting a cause of action and which give to the same its own intrinsic character is an entirely distinct legal concept and undertaking from the pleading of sufficient facts as will prima facie show the successful fraudulent concealment by a defendant of the existence of the cause of action itself. The purpose of the former undertaking is to state facts sufficient to entitle a plaintiff to the particular relief he seeks; while the purpose of the latter undertaking is simply to relieve him from the bar of the statute of limitations or the statute of frauds. The allegation relating to concealment follows.
In section VII of the complaint plaintiffs allege:
“That from time to time plaintiffs demanded from defendants . . . accounting of all moneys expended by said defendants [nowhere, however, stating or even approximating any given date or year when they made such or any demand, and nowhere or at all alleging that they ever made any such demand at any date prior to the expiration of the period of
In section VIII of their complaint plaintiffs next allege:
“That said statements and accounts [to wit, that statement made and rendered on February 1, 1941, which was the only one ever rendered] were false and untrue, and were known by defendants to be false and untrue at the time they were furnished plaintiffs herein [to wit, February 1, 1941]; that said statements [of February 1, 1941] were furnished to plaintiffs with intent on the part of defendants to conceal from plaintiffs the fact that defendants had not expended a sum in excess of the amounts of the mortgages in favor of Western Loan and Building Company and thereby [by the false account of February 1, 1941] to conceal the fact from plaintiffs that no part of said sum of $12,000.00 advanced by plaintiffs on or about October 29, 1928, had been expended on the construction or completion of said buildings.” (Italics ours.)
In section IX, as amended, plaintiffs next allege:
“That prior to the rendition on or about February 1, 1941, of the statement of the account of the moneys alleged [on
It will be noted that this last-stated interval is an indefinite period which grants plaintiffs, who alone know the date of their alleged discovery of an alleged fraudulent concealment, a leeway of uncertainty of more than fifteen months as to when they made the discovery, without in any manner disclosing how they discovered it other than the bare foregoing assertions by way of recital to the effect that more than nine years after the statute of limitations had run against their original and only cause of action defendants then rendered them a false account, while at the same time wholly failing to plead, in the manner and to the extent invariably exacted in actions based upon fraud, that the original transaction was itself fraudulent.
It is self-evident that the foregoing allegations of the complaint are wholly insufficient to state a cause of action based upon fraud primarily because every one of the allegations relating to fraud is definitely limited by the pleader to the alleged concealment of the cause of action for money had and received, and is not directed at that cause of action itself.
It should first be observed with respect to the said cause of action that it is nowhere alleged that defendants ever made any false or fraudulent representations; on the contrary, it is alleged only that defendants made a mere “request” for money to be applied to a particular purpose and that plain-
The remaining question to be determined is whether or not the facts pleaded by plaintiffs are prima facie sufficient to show a fraudulent concealment by defendants of the existence
Before determining the applicability of the doctrine of fraudulent concealment to the facts of this case, as disclosed by plaintiffs’ complaint, it is advisable to again restate just what those facts are and to point out how extremely limited and meager they are. The facts, together with the inferences that seem to us to arise naturally and logically therefrom, may be stated as follows:
In June, 1928, when plaintiffs sold their property to Goldstein they owned two lots of such sufficient value, although the same is nowhere stated, as would warrant the erection thereon of two buildings costing $80,000. In October, 1928, on the bare request of defendants (nothing else being pleaded), plaintiffs advanced the additional sum of $12,000 for the further cost of constructing said buildings. So that in 1929, when plaintiffs acquired full ownership of the land and buildings, subject to the outstanding liens in favor of defendants but which plaintiffs subsequently fully satisfied, they had an investment in these properties, exclusive of the value of the lands, of over $92,000, or, more accurately stated, their investment coupled with their contractual liability exceeded the sum of $92,000. It is admitted that the buildings were completed in January, 1929; and from that date, at which time the statute of limitations began to run against their cause of action, plaintiffs did not, insofar as their complaint anywhere discloses, take one single step or make one single inquiry of anyone to ascertain either what had become
It will be noticed, however, that we have eliminated from our statement of the factual matters pleaded by plaintiff with respect to the alleged concealment of a cause of action the only allegation in plaintiffs’ entire complaint which has the slightest tendency toward charging defendants with the performance of any act calculated to have that effect, to wit, the allegations in section VII thereof, which read: “From time to time plaintiffs demanded from said defendants, and each of them, accounting of all moneys expended by said defendants . . . which said defendants had, from time to time, promised and agreed to render [and did not do].” We here point out that this elimination of said allegations is advisedly made and for the following reasons: this appeal is accompanied by a reporter‘s transcript which shows that the learned trial judge in passing upon the motion for judgment on the pleadings afforded counsel an ample opportunity to argue the sufficiency of his pleading and permitted its amendment after it had thus been challenged; and that during the discussion of these matters the court interrogated counsel for plaintiffs as follows: “THE COURT: What facts could you plead other than the facts used in this Complaint? MR. ARNOLD: Maybe they will be the same facts because I am of the opinion that the
Counsel, however, after having been afforded further opportunity, was unable then, and was similarly unable before this court, to suggest or state any fact or facts not already pleaded which would tend to excuse this long delay; and in the course of the foregoing presentation of the motion plaintiffs’ counsel then made the following definite admissions going directly to the truth of the above quoted allegations: “MR. ARNOLD: . . . I asked her [plaintiff Adelina Scafidi] whether or not she had ever demanded an accounting, and she said she had not. I asked her to authorize me to do so, which she did; my demand was refused; whereupon I promptly and immediately [to wit, June 17, 1940; see Complaint, section VII] commenced an action for those accounts and in due course an accounting was rendered to me. [It is to be noted that it is this account alone and not any other anterior act of concealment which plaintiffs claim was false and fraudulent.] . . . MR. ROWELL: Counsel said here there had been no demand of any kind until she [plaintiff Adelina Scafidi] came to him. MR. ARNOLD: That is correct.” (Italics ours.)
These admissions by plaintiffs’ counsel made directly to the trial court had the immediate effect of eliminating from plaintiffs’ complaint the allegations set forth in section VII thereof, to wit: “That from time to time plaintiffs demanded from said defendants . . . accounting of all moneys . . . which said defendants had, from time to time, promised and agreed to render,” because these admissions were and are an express concession that the said allegations were in fact untrue and could not be supported by proof.
These admissions further show: first, that no accounting was ever promised or agreed to, and that therefore plaintiffs were never lulled into a sense of security by any act whatsoever of defendants; and, secondly, that the first and only demand ever made on defendants to account was made in June, 1940, which was more than eight years after the statute of limitations had run.
The right of the trial court to act on these admissions in testing the sufficiency of plaintiffs’ complaint was full and
The Oscanyan v. Winchester R. Arms Co. decision is cited with the approval of the Supreme Court in Bias v. Reed, 169 Cal. 33, 37 [145 P. 516], where, on the principles that it enunciates, the court upheld the direction of a verdict upon an opening statement by counsel for plaintiff in said action. It should, of course, be understood that the rule just enunciated should not be given application with respect to admissions which are improvidently or unguardedly made, or which are in any degree ambiguous. The admissions hereinbefore referred to are not of that character; on the contrary, they are clear and explicit.
Where mere silence and inaction on the part of the alleged concealor are alone relied upon to establish the fraudulent concealment of the existence of a cause of action, it is almost universally held in all jurisdictions that in the absence of the existence of a confidential relationship between the parties, or unless some specially appearing circumstances are shown which of themselves equitably estop a person from relying on his silence or inaction, and which of themselves are sufficient to create on the part of the nonrevealor a positive duty to speak or act, mere silence or inaction, or both, are by themselves insufficient to establish such a concealment. A long line of California cases, some of which are presently adverted to, similarly so hold.
In support of the foregoing statement, it is pointed out that in Words and Phrases (vol. 17, pp. 607-609) there are to be found nineteen definitions, all relating to the “fraudulent concealment” of a cause of action where silence and inaction are the only elements relied upon. Of these, eight definitely
In Kimball v. Pacific Gas & Electric Co., supra, 220 Cal. at p. 217, the Supreme Court declares: “Mere silence [on the part of the defendants] . . . would not constitute, under well-settled principles, a fraudulent concealment“; and in Lencioni v. Fidelity Trust & Savings Bank, 95 Cal. App. 490, 498 [273 P. 103, 274 P. 75], this court said: “‘The concealment of facts by a party to a contract, which amounts to fraud, implies design or purpose, and mere silence is not of itself concealment’ [citing Barrett v. Lewiston, B. & B. St. R. Co., 110 Me. 24 (85 A. 306)]. ‘We do not generally speak of a person concealing a thing unless he is in some way called upon to produce it’ [citing Watertown Sav. Bank v. Mattoon, 78 Conn. 393 (62 A. 624)].” Likewise, in Fink v. Weisman, 129 Cal. App. 305, 318 [18 P.2d 961], the court states:
The clear import of the foregoing decisions to the effect that mere silence, or inaction, alone is not sufficient to establish a fraudulent concealment is in nowise changed or weakened by anything that is stated or held in the cases of Kimball v. Pacific Gas & Electric Co., supra, and Pashley v. Pacific Elec. Ry. Co., supra. These cases are readily distinguishable, by reason of their wholly different factual situations, from the instant case, which presents as its only element of concealment the mere silence of a party occupying no confidential relationship toward its adversary. In the Kimball case the plaintiff‘s employer, a corporation, advised him that it was responsible for his injuries. This definite representation was in fact false. Unknown to Kimball, he had in fact been injured through the negligence of an employee of another and distinct corporation against whom his cause of action existed. While Kimball was unable by reason of the extent and severity of his injuries to inform himself of the actual facts, and while his employer was continuing to represent to him that it was responsible for his injuries, it entered into an arrangement or compact with the actual tort feasor whereby it was agreed between them that the latter would assume one-half of the amount of money to be paid Kimball as and for a full settlement of his injuries under the provisions of the
In Pashley v. Pacific Elec. Ry. Co., supra, the second paragraph of the decision sets forth a whole series of false and fraudulent misrepresentations, all of which are properly and appropriately pleaded, extending and continuing to extend, in furtherance of their designed aims of concealment and deception, over a long period of years. It is not a case involving, as does the instant case, only mere silence; on the contrary, it is a case where the defendant‘s employees spoke early and often with the design and intent of deceiving and concealing from plaintiff the existence of his cause of action.
Having thus examined the facts pleaded by plaintiffs here in claimed support of an alleged fraudulent concealment of the existence of their cause of action for money had and received, and having also compared them with the established principles of law applicable thereto, we find them wholly insufficient to establish such a concealment, and we so hold.
It is also evident from the same facts that the said last-mentioned cause of action had been barred by the statute of limitations for more than eight years before plaintiffs ever took a single step toward making the discovery or asserting it, and that no statement, act or refusal by defendants during said period operated in any degree to prevent its discovery. Under
Our courts have repeatedly affirmed that mere ignorance, not induced by fraud, of the existence of the facts constituting a cause of action on the part of a plaintiff does not prevent the running of the statute of limitations. (Lightner Mining Co. v. Lane, 161 Cal. 689, 696 [120 P. 771, Ann.Cas. 1913C 1093]; Rose v. Dunk-Harbison Co., 7 Cal. App. 2d 502, 505 [46 P.2d 242]; Medley v. Hill, 104 Cal. App. 309, 311 [285 P. 891]; 37 C.J. § 350, p. 969); and that “mere ignorance of the facts, . . . without some valid excuse for ignorance, was of no consequence.” (Dennis v. Bint, 122 Cal. 39, 44 [54 P. 378, 68 Am.St.Rep. 17] [citing authority].) Such, only, is the position in which the plaintiffs’ complaint places them in this case. The last-cited cases are, in effect, a recognition of the prevailing rule that a failure to discover a cause of action does not, as in the case of its fraudulent concealment, suspend the running of the statute of limitations.
We have deferred to this more appropriate point a discussion of the possible effect on this appeal of the recent and important case of Hobart v. Hobart Estate Co., supra, mainly in order that it should first sufficiently appear that, irrespective of anything held or stated by the court in the Hobart decision, the present case is not affected by that decision for the reasons, first, that fraud has not been pleaded, and, secondly, that plaintiffs have not been able to successfully plead the fraudulent concealment of the existence of their cause of action. The Hobart case was one in which the plaintiff‘s cause of action was based exclusively upon fraudulent deceit. The Supreme Court was nowhere therein concerned with a claimed fraudulent concealment of the cause of action itself. With respect to the statute of limitations, the court considered its effect only insofar as it related to the discovery of the fraud itself, and it therefore had no occasion to discuss the alleged concealment of the existence of a cause of action. These, as has been previously
The Hobart decision does, however, present within its scope a restatement of certain well-established principles which defendants and respondents are entitled to and do urge on this appeal. These relate to the effect of the complete failure of the plaintiffs to have exercised any diligence whatsoever-or to have made any investigation or inquiry into matters which, if pursued, would have led them to the discovery of the existence of their cause of action, for a period of over nine years-upon their present attempt to litigate a stale and barred cause of action.
Bearing upon these established failures is the following statement of the court in the Hobart case (159 P.2d at p. 972): “. . . plaintiff must affirmatively excuse his failure to discover the fraud within three years after it took place, by establishing facts showing he was not negligent in failing to make the discovery sooner and that he had no actual or presumptive knowledge of facts sufficient to put him on inquiry. [Citing authorities].” (Italics ours.) It is to be noted that identically the same requirements are exacted of the pleader in alleging a discovery of fraudulent concealment as are required in pleading the discovery of fraud. (Kimball v. Pacific Gas & Electric Co., supra, 220 Cal. at p. 215.) The court then further states (159 P.2d at p. 972): “The statute commences to run only after one has knowledge of facts sufficient to make a reasonably prudent person suspicious of fraud, thus putting him on inquiry. Section 19 of the
The Supreme Court in that case, after next pointing out that many California cases had held that the “means of knowledge are equivalent to knowledge” (citing fifteen cases), added the following important qualification: “This is true, however, only where there is a duty to inquire, as where plaintiff is aware of facts which would make a reasonably prudent person suspicious.” (159 P.2d p. 973.)
This last-above-quoted qualification states a broader and more definite limitation (in favor of plaintiffs in the instant case) upon the earlier recognized obligation resting upon a latent discoverer of fraud-which previously required him to initially affirmatively show, in his effort to avoid the bar of a statute of limitations, that he had himself exercised such degree of diligence and had pursued such means of investigation and inquiry as a reasonably prudent person would have exercised or done under similar circumstances-than had ever been previously stated by the court in its many decisions upon the nature and extent of the duty resting upon a party to make diligent inquiry and investigation of the available means leading to the discovery of fraud. It will be further noted that this recent declaration of the law which now obtains in this respect has been made generally and without regard to or dependency upon any qualifying facts in the case.
The Hobart decision holds then that the rule is that a plaintiff is now required to make an inquiry or investigation only where he “is aware of facts which would make a reasonably prudent person suspicious” that he may have been defrauded. We are of the opinion, nevertheless, that the facts here pleaded by the present plaintiffs fall squarely within the above-stated category, and of themselves show that an active duty rested upon them to diligently inquire and investigate concerning the disposition of their money, and that they were negligent in failing to do so.
A “diligent inquiry” was early defined in this state as one involving the exercise of “ordinary or reasonable diligence [in making inquiry]-such as men of business usually exercise when their interest depends upon obtaining correct information.” (Garver v. Downie, 33 Cal. 176, 182.) This is in consonance with the classic and more extended definition of Judge Story which defines “ordinary diligence” as that “which
We now examine the facts and state the implications that flow therefrom which, to us, plainly show that a duty rested upon plaintiffs to investigate and make inquiry concerning the dispositions made by defendants of their $12,000, as follows:
Plaintiffs, upon a mere request, had advanced $12,000 for the further cost of construction of buildings which already had cost $80,000. In these buildings they presently had an investment of their own in the sum of $92,000. These buildings must have been erected before their very eyes, for they not only had previously owned the property but very shortly thereafter reacquired it. The buildings had been under course of construction since about June 7, 1928. It is reasonably certain that buildings of such considerable cost were erected under the supervision of an architect; and certainly there also must have been available to plaintiffs for inquiry some of the many artisans and materialmen who had been concerned with their construction. There was also available, as a primary and most logical source of inquiry, Louis A. Goldstein, the original owner and builder, who is nowhere charged by plaintiffs with participating in any fraud, concealment or collusion with the defendants. Goldstein, of course, knew how much money had been spent on the buildings, and also knew how much more would be reasonably required to complete them. Then also always available for inquiry were the defendants themselves. To no one of these various and presumptively available persons is it alleged that plaintiffs ever addressed a single inquiry or made a single demand until more than nine full years had elapsed; and, as has been shown, no act or statement of any person deterred or impeded them from so doing. Such neglect on their part, under the existing circumstances, amounts to nothing short of gross and inexcusable negligence-i.e., the neglect of an obvious duty which common prudence imposed upon them to discharge in their own self-interest. We believe these circumstances are on their face sufficient to satisfy the hereinbefore stated requirements of the Hobart case,-for negligence such as this is the antithesis of duty, and without a duty there can be no negligence.
In Simpson v. Dalziel, 135 Cal. 599 [67 P. 1080], the court
Likewise in Purdon v. Seligman, 78 Mich. 132 (43 N.W. 1045), a case cited with frequency with respect to the effect of this type of negligence, the court, in discussing a similar failure of a plaintiff to make any inquiry, said (p. 134): “He [plaintiff] entirely neglected to search where the only information was to be found, and defendant threw no obstacle in the way of his doing so. How this inaction could, under such circumstances, amount to a concealment of anything it is hard to see. Plaintiff did not, so far as appears, even complain to defendant, or ask information. Had he done so, and had defendant then tried to put him off his guard, the case might possibly have been different. But the statute was not meant to help parties who take no pains to see what is before their eyes.”
Also at all times available to plaintiffs were the very means by virtue of which they now claim that they ultimately discovered that defendants had misused their money, to wit, either by bringing an action, as they ultimately did, for an accounting, or one for money had and received. In either of said actions they would be entitled to avail themselves of their right to take depositions and to the issuance of a subpoena duces tecum-both of which are powerful weapons of discovery; and if concealed fraud was then thereby discovered plaintiffs would have the right to set it up by appropriately pleading the same by way of amendment. Indeed, we are wholly at a loss to understand why plaintiffs failed to pursue that course in that then pending action, which was then at issue, to which they specifically refer in section VII of their complaint. It plainly appears that the so-called fraud of which they now complain was intrinsic to and within the issues of that very action; and it was their duty as well as right to exhibit and expose it to the court in that action, and, if necessary, to therein request the leave of the court to amend
Under all the existing circumstances, there was no abuse of discretion by the trial court in granting defendants’ motion for judgment on the pleadings.
The Presiding Justice in his dissenting opinion stresses the very limited amount of time which was accorded plaintiffs’ counsel by the trial court in which to amend plaintiffs’ complaint. Mention is not made therein, however, of the fact that this limitation was imposed at a time when a jury, which had just been impaneled at plaintiffs’ request, was being held in attendance outside the courtroom awaiting the determination of defendants’ motion for judgment on the pleadings. There can be but little doubt that it was this circumstance, together with the fact that plaintiffs’ counsel, after being interrogated, had been unable to suggest or state orally any further fact which he desired to embody in his pleading, that caused the trial court to impose what concededly would otherwise have been an arbitrarily limited amount of time for the given purpose. In the absence of some representation to the contrary by plaintiffs’ counsel (and there was none), the trial court had the frequently judicially recognized right to presume that the pleader had stated his side of the controversy as strongly and as favorably as all the facts known to him would permit. (21 Cal. Jur., § 29, p. 51; Vilardo v. County of Sacramento, 54 Cal. App. 2d 413, 417 [129 P.2d 165].) After the long period afforded for reflection which ensued between the taking of the appeal and the oral argument thereof, counsel has still been unable to state in his briefs or at the hearing any additional fact or facts that he might have pleaded had the trial court afforded him further time. It is therefore very difficult to perceive just how an application of what the dissenting opinion terms the modern rules of pleading could have in any wise aided him in this respect.
The judgment is affirmed.
Ward, J., concurred.
PETERS, P. J.-I dissent.
The recent cases of Wennerholm v. Stanford Univ. Sch. of Med., 20 Cal. 2d 713 [128 P.2d 522, 141 A.L.R. 1358]; Kimball
Although the complaint is inartfully drawn, and is incomplete in some details, a cause of action has in fact been substantially disclosed. This was an original complaint. General and special demurrers were interposed by the defendants. These demurrers were overruled. The majority opinion now holds that the trial judge who overruled these demurrers committed error, even as to the overruling of the special demurrer, and this in a case where the defendants are not appeal-
After answers were filed and at the commencement of the trial the defendants moved for judgment on the pleadings. It must not be forgotten that up to this point plaintiffs’ counsel was entitled to believe that the complaint was sufficient. Over two years before the commencement of the trial another department of the same court had so ruled. (See comments in MacIsaac v. Pozzo, 26 Cal. 2d 809, at p. 815 [161 P.2d 449].) After defendants’ counsel had challenged the sufficiency of the complaint, and after the trial court had indicated that it thought the complaint insufficient, plaintiffs’ counsel asked leave to amend. He was somewhat vague as to what further facts could be alleged but it is quite obvious that many, if not all, of the deficiencies of the pleading that are pointed out at length in the majority opinion could have been remedied by amendment. The trial court suggested that the amendments be prepared during a ten-minute recess. Counsel requested further time, and suggested a week‘s continuance, and, when this was denied, asked for a two-day continuance. The court granted a fifteen-minute continuance, and several amendments were then drafted. It is quite clear that this time was totally inadequate to have permitted counsel to have considered sufficiently the many objections raised by defendants, and discussed at great length in the majority opinion. A mere reading of that opinion demonstrates how complex the problem is. While it is true that a jury had been then impanelled, there were no legal or practical reasons why the trial court could not have granted a reasonable continuance to plaintiffs to permit their counsel to maturely study the problems involved. This it did not do.
The majority opinion holds that no cause of action for fraud is pleaded. With this conclusion I disagree. The pleading is entitled: “Complaint for Damages for Fraud.” The complaint alleges that plaintiffs in 1928 conveyed certain parcels of real property owned by them to the Goldsteins pursuant to a plan whereby the Goldsteins were to erect certain apartments thereon, to be financed by loans from the defendant Western Loan and Building Company secured by first mortgages, and that plaintiffs were to have second mortgages. It is alleged that this plan was carried out, and that the Goldsteins executed and delivered to Western Loan and Building Company
At this point it should be noted that there is sufficiently pleaded a transaction whereby money was deposited with defendants at their request to be used for a specific purpose, and that they represented it would be used for that purpose. There can be no doubt but that when defendants received the $12,000 they were obligated to use the money for that purpose. There can be no doubt at all that the deposit was in the nature of a trust fund, and that a misuse of the fund constituted a breach of trust.
The complaint then alleges the foreclosure of plaintiffs’ liens and the acquisition of title by plaintiffs to the property subject to the defendants’ liens; that from time to time plaintiffs demanded an accounting from defendants and from time to time defendants promised to account but failed to do so; that in June, 1940, plaintiffs commenced an action for an accounting, and defendants on February 1, 1941, rendered an accounting purporting to show that the $12,000 had been properly expended; that these statements were false and untrue and known to the defendants to be so, and were furnished by defendants with intent to conceal the fact that the $12,000 had not been expended in the construction of the buildings; that the true fact is that defendants used the money to finance other buildings being constructed for the Goldsteins and charged such advances to plaintiffs’ buildings; that plaintiffs prior to February 1, 1941, believed the money had been used on plaintiffs’ buildings; that the true facts were discovered shortly prior to the filing of the action.
The test that must be applied in determining the sufficiency of this pleading has recently been stated as follows: “In considering whether the judgment on the pleadings was prop-
Tested by these standards, in my opinion the trial court committed error in granting the judgment on the pleadings without giving the plaintiff an adequate opportunity to amend. Under the rule of the above two cases all of the grounds of special demurrer discussed at such great length by the majority, must be eliminated from consideration. Moreover, even as to essential allegations it is not necessary that they appear clearly and without ambiguity. The true test, to use the words of the Chief Justice in the MacIsaac case, supra (p. 815), is to ascertain if “the facts stated indicate that the party probably has a good cause of action” even though it is pleaded “imperfectly or defectively.” Can there by any doubt but that this complaint indicates that plaintiff “probably has a good cause of action” for fraud? From the allegations of the complaint it can be ascertained that the $12,000 was originally secured as a result of an express representation that it was needed to finish construction of the buildings. Are the allegations susceptible of any other reasonable inter-
Had the action been brought within three years of the time the money was advanced there can be but little doubt that under the facts alleged, and those necessarily inferred, a cause of action for fraud would have been stated. A defendant that secures money on the express promise to use it for a specific purpose, and then uses it for other purposes, is guilty of a fraudulent breach of trust. Although silence is not ordinarily the equivalent of a representation, it may amount to a representation where there is a duty to speak. Here, under the facts pleaded, the defendants were under a duty to speak. They had secured the money upon their representation that the money was necessary to complete the buildings. They had charge of the trust fund. Their failure to speak under the circumstances amounted to a representation that the money had been properly expended. Certainly plaintiffs were not required at their peril to assume that they were dealing with rogues. They were entitled to believe that they were dealing with a reputable concern. Under the circumstances, to say the least, the allegations indicate that plaintiffs “probably” have a “good cause of action” for fraud against defendants. This is so even though the complaint fails to use the word “fraud” in its allegations. This failure is several times commented upon in the majority opinion, and apparently some weight given to it. It is too elementary to require citation of authority that the nature of the cause of action is determined by the facts pleaded, not by how they are characterized.
Plaintiffs did not discover the fraud until some twelve years after it was consummated. Have they alleged sufficient facts to excuse their failure to sooner discover the fraud?
This very problem has so recently received the attention of the Supreme Court in Hobart v. Hobart Estate Co., 26 Cal. 2d 412 [159 P.2d 958], that it would be needless repetition to do more than quote from that case. At page 437 the court stated:
“Defendants assert that in addition to these requirements plaintiff must show that he made a diligent inquiry to discover whether or not he had been defrauded, and they argue that plaintiff failed to prove that earlier inquiry would not
“The reason for the rule is well stated in Victor Oil Co. v. Drum, supra (184 Cal. at p. 241 [193 P. 243]): ‘The courts will not lightly seize upon some small circumstance to deny relief to a party plainly shown to have been actually defrauded against those who defrauded him on the ground, forsooth, that he did not discover the fact that he had been cheated as
Certainly plaintiffs have pleaded no facts to show that they were put on inquiry prior to 1941. The plaintiffs have alleged not only a failure on the part of defendants to speak when they were under a duty to speak, but have alleged a fraudulent concealment of the cause of action when they were compelled to speak by the filing of the accounting suit. They have properly pleaded such fraudulent concealment within the rules laid down in Kimball v. Pacific Gas & Electric Co., 220 Cal. 203 [30 P.2d 39], and Pashley v. Pacific Elec. Ry. Co., 25 Cal. 2d 226 [153 P.2d 325].
To further elaborate my views would unduly extend this dissent. It is sufficient to state that, tested by the standards laid down in the Wennerholm v. Stanford Univ. Sch. of Med., 20 Cal. 2d 713 case, the Kimball, Hobart and Pashley cases, supra, and the cases of Rannard v. Lockheed Aircraft Corp., 26 Cal. 2d 149 [157 P.2d 1] and MacIsaac v. Pozzo, 26 Cal. 2d 809 [161 P.2d 449], it was error of a most serious and prejudicial nature to have granted the motion for judgment on the pleadings without affording plaintiff a more adequate opportunity to amend. I believe the judgment should be reversed.
Appellants’ petition for a hearing by the Supreme Court was denied March 14, 1946. Gibson, C. J., Carter, J., and Traynor, J., voted for a hearing.