author: THE COURT.

text:
    [L. A. No. 14519.
    In Bank.
    May 17, 1934.]
    AGNES SALOMON, Appellant, v. ALBERT F. MEYER, Respondent.

      Fred W. Morrison for Appellant.
    Paul Barksdale D’Orr and Thomas A. Reynolds for Respondent.
    Glensor, Clewe, Schofield & Van Dine, as Amici Curiae on Behalf of Respondent.
   THE COURT.

This appeal is prosecuted from a judgment rendered upon a verdict in favor of the defendant in an action for damages on account of injuries sustained in an automobile accident. The defendant pleaded contributory negligence on the part of the plaintiff and the only error specified is an instruction on that phase of the case. The accident occurred while plaintiff was crossing Jefferson Street at Gramercy Place, in the city of Los Angeles, between 5:30 and 6 o’clock on the evening of December 4, 1928. The plaintiff was crossing Jefferson Street from north to south, using the pedestrian lane, which was marked out with white lines. She was a woman of about seventy-two at the time of the accident. She testified that she was wearing her glasses and could see quite well, that she stood on the curb before attempting to cross and looked both east and west and saw a car in each direction but both were “far away” so that she thought she was safe and started across the street at a fast walk, looking straight ahead and walking on the white line, and had reached the car tracks (which one of the tracks she did not know) when a car struck her from behind. She did not see the car which hit her and does not know by what part of it she was struck. She admits that she did not look either up or down Jefferson Street after leaving the curb. As a result of the collision plaintiff was very badly hurt.

Defendant testified that he was driving west on Jefferson, the wheels of his ear straddling the north rail of the north car track, that he was traveling between twenty-two and twenty-five miles an hour, that he first saw the plaintiff when she was about six or eight feet away and about halfway between his car and the north curb of Jefferson Street and that he put on the brakes and swerved sharply to the left in an attempt to avoid her but that she kept on and walked into the right rear fender of his car. The testimony of defendant, and of bystanders as well, shows that Mrs. Salomon fell in the pedestrian zone, which would indicate that she did in fact walk into the car, although two witnesses said that she was struck by the right front fender.

It was stipulated that by a Los Angeles city ordinance it was “unlawful for the operator of any vehicle to drive into any cross walk outside of the central traffic district which is marked as provided . . . while there is in such cross walk upon the half of the roadway upon which such vehicle is traveling any pedestrian engaged in crossing the roadway, until such pedestrian shall have passed beyond the path of said vehicle”. This was not in the central traffic district. On the question of the plaintiff’s contributory negligence the following instruction was given and it constitutes the sole error complained of by the appellant: “I instruct you that it is a duty resting upon any person attempting to cross a street that is likely to be dangerous, before placing himself or herself in a position of danger, to look in the direction from which such danger is to be anticipated. This is a continuing duty, and is not met by looking once and then looking away. In the exercise of ordinary care it is the duty of the pedestrian to look to the right and to the left whenever he or she has voluntarily put himself or herself into a position which may be one of peril coming from either direction.

“If you believe from the evidence in this case that the plaintiff, in attempting to cross the street, did so without exercising that degree of care which would have been exercised by a person of ordinary prudence, under the instructions that I have just given you, and if you find that such failure upon her part proximately contributed to her injury, then the plaintiff cannot recover, and your verdict must be in favor of the defendant; and this is true even though you may believe that the driver of the automobile was also negligent.”

It is the appellant’s contention that the trial court invaded the province of the jury and committed prejudicial error by giving the charge that it was plaintiff’s duty to continue to look both ways after she had testified that she looked in both directions before she started to cross, saw two cars each at a distance, concluded it was safe to cross and so did not look again. This contention must be sustained. It is true, as pointed out in the opposing briefs, that similar instructions laying on the pedestrian the duty of looking in both directions before proceeding into a position of probable danger were given in the cases of Niosi v. Empire Steam Laundry, 117 Cal. 257 [49 Pac. 185], and Sheldon v. James, 175 Cal. 474 [166 Pac. 8, 2 A. L. R. 1493], and that the instruction complained of was probably modeled on language employed by this court in the case last cited and in Davis v. John Breuner Co., 167 Cal. 683 [140 Pac. 586]. These instructions, however, have been limited in their application to the particular facts involved in each case. (Burgesser v. Bullock’s, 190 Cal. 673, 676 [214 Pac. 649].) In the Niosi and Davis cases the plaintiff had failed to look in both directions before starting across a busy city thoroughfare. In Sheldon v. James, supra, the plaintiff was crossing the street in a long diagonal in the middle of the block and was struck by a car backing into a vacant parking space on the opposite side of the street when he had almost completed the crossing. The court there said, at page 479: “The observation of ordinary care by such a pedestrian is not fully performed by merely looking to the left or right as he steps upon the street. The observance of that care is imperative upon him during all of the time that he is crossing. (Scott v. San Bernardino Valley etc. Co,, 152 Cal. 604 [93 Pac. 677].) Here it is in evidence from plaintiff’s own witnesses that the automobile in backing up the grade made an extremely loud and raucous noise sufficient to attract the attention of people upon the opposite side of the street, and such as should have attracted the attention of the plaintiff before he put himself in a place of danger. If, then, under these circumstances he did not look, the jury was justified in concluding that he was negligent in not having looked. We do not construe the instruction given as meaning that it is the duty of a pedestrian to look backward, nor yet as an effort to standardize the law by declaring that a pedestrian must constantly and continuously be looking from right to left. We construe it to be no more than a declaration that in the exercise of ordinary care it is the duty of such a pedestrian to look to the right and to the left whenever he has voluntarily put himself in a position which may be one of peril coming from either direction, and in particular where he has received adequate warning of the likelihood of peril.” In Sheldon v. James, supra, the instruction was as follows: “Ordinary care, or its opposite, neglect, are not absolute terms, but they have reference to times, places and circumstances, and where a plaintiff is a foot passenger, crossing a street where vehicles are numerous, it is his duty to look both ways, ...” and substantially the same language was used in Niosi v. Empire Steam Laundry, supra. In neither was the duty described as “continuing”.

The vice of the instruction here complained of lies in the unqualified statement that “this is a continuing duty, and is not met by looking once and then looking away”. Whenever there is room for an honest difference of opinion between men of average intelligence the question of whether the plaintiff was negligent in failing to look again in the direction from which the defendant’s car was approaching is a question of fact for the jury and the finding of the triers of fact is conclusive. (McQuigg v. Childs, 213 Cal. 661 [3 Pac. (2d) 309].) Counsel for appellant have made calculations based upon the speed wdth which the plaintiff walked and the speed at which the defendant testified he was driving, the accuracy of which is not challenged by the respondent, and by which it is claimed to have been shown that the car was at least 132 feet away when the plaintiff saw it as she stood on the curb. Whether plaintiff’s conduct thereafter in proceeding across the street in the crosswalk without again observing the approach of the defendant was consistent with ordinary care is a question to be determined from a consideration of all the facts and circumstances of time, place and conditions of traffic. (McQuigg v. Childs, supra; Pinello v. Taylor, 128 Cal. App. 508 [17 Pac. (2d) 1039]; Long v. Barbieri, 120 Cal. App. 207 [7 Pac. (2d) 1082].) In the last two cited cases the plaintiff was not only using a clearly marked crosswalk but was crossing in accordance with the traffic signals. Respondent has attempted to make a distinction upon that basis. Such a distinction is unsound as the existence or nonexistence of traffic signals is only a further circumstance to be considered in determining the reasonableness of the plaintiff’s conduct. In view of the stipulated ordinance, the plaintiff, in the absence of any reasonable ground for thinking otherwise, had a right to assume that she would not, while walking in the pedestrian lane, be exposed to danger through a violation of the traffic laws. (McQuigg v. Childs and Pinello v. Taylor, both supra.) Whether she had reason to believe the defendant would not obey the law and stop is a question for the jury also.

It is argued that this instruction is not assailable on the ground that it took away from the jury the right to determine whether the plaintiff was contributorily negligent because it left to the jury the determination of the questions of whether she had voluntarily placed herself in a position of possible peril and whether she had attempted to cross the street without exercising the degree of care which would have been exercised by a person of ordinary prudence and that, under the instruction, the jury had first to find that she had knowingly placed herself in a place of probable peril. Respondent points to the second paragraph of the instruction in support of this contention. Although it was by this paragraph left to the jury to find whether plaintiff had attempted to cross the street without using the degree of care which would have been exercised by an ordinarily prudent person, they were told to do so “under the instructions I have just given you”, which set up continued observance as a definite and absolute standard of duty, upon the basis of an assumption that she had voluntarily placed herself in a position of probable danger, thus fixing for the jury a measure of ordinary care without requiring them to first find, as a condition of its application, that the plaintiff had exposed herself to a continuing danger. Under the holding of Long v. Barbieri, supra, this should have been made an express condition of a finding of contributory negligence under the instruction given.

Having determined that the trial court fell into error in giving this instruction, we cannot escape the conclusion that it was prejudicial. The negligence with which the plaintiff was charged began and ended with her failure to look for approaching ears after she had left the curb. She admitted she did not look thereafter. The jury was told that one attempting to cross a street likely to be dangerous must first look in the direction from which danger was to be anticipated, that it was a continuing duty and was not met by looking once and that, having put one’s self in a position which may be one of peril, there is a duty to look to the right and to the left. Applying this inflexible measure of ordinary care to the admitted facts, the jury could not have found otherwise than that the plaintiff had failed to exercise it.

Judgment reversed and case remanded.


source: Caselaw Access Project

author: PRESTON, J.

license: Public Domain

text:
    [L. A. No. 14385.
    In Bank.
    May 17, 1934.]
    HELEN T. VERDER, Respondent, v. AMERICAN LOAN SOCIETY (a Corporation) et al., Defendants; FRIEND W. RICHARDSON, as Building and Loan Commissioner, etc., Appellant.

      Roscoe C. Andrews, Roland Tognazzini and Jean Wunderlich for Appellant.
    MacDonald & Thompson and Kimball Fletcher for Respondent.
   PRESTON, J.

In this cause, tried upon an agreed statement of facts, Honorable Henry M. Willis, the learned trial judge, filed, as the basis for his judgment, a written opinion which exhaustively, and we think correctly, treats the material questions presented by the record. We hereby make it the basis of our order affirming the judgment.

"This is an action to annul a deed of reconveyance by the trustee in a trust deed, and to restore to their former force and effect a note and trust deed securing the same belonging to plaintiff. The facts are stipulated in writing by plaintiff and defendant Friend W. Richardson as Building and Loan Commissioner of the State of California, in charge and control of the assets and business of defendant American Loan Society, pursuant to the Statutes of California relating to Building and Loan Associations. None of the other defendants have appeared herein, but service of summons has been made on the Mortgage company’s receiver, the American Loan Society by its receiver, and the Title Guarantee and Trust Co.

“The essential facts for the purpose of decision herein are as follows: On March 12,1930, plaintiff was the owner of a note for $12,000.00, secured by mortgage on Lot 16, Block 1, Lafayette Square, in the city of Los Angeles, executed by one Harold L. Shaw to American Mortgage Co. on May 13, 1925, and which note and mortgage had been sold and assigned by American Mortgage Có. to plaintiff and her husband on May 15, 1925. On March 12, 1930, plaintiff released said mortgage, and surrendered said note to the Mortgage Co., and in exchange therefor on March 14, 1930, received from American Mortgage Co. a note for $10,000.00, secured by a trust deed of the same property, executed on March 13, 1930, by the then record owner, A. W. Kundert, in favor of the Mortgage Co., and by said Mortgage Co. assigned and delivered to plaintiff without recourse. The record owner, A. W. Kundert, was an employee of the Mortgage Co. and the property in question had' been deeded to him by the Mortgage Co. on March 13, 1930, to be held by him in trust for the Mortgage Co., title having been acquired by the Mortgage Co. previously by trustee’s deed upon a sale under a trust deed executed by the former owner, Shaw, but which was second and subordinate to the mortgage which had passed to the ownership of plaintiff.

“On January 9, 1931, Roy IT. Fish, as Secretary and Treasurer of the Mortgage Co., requested plaintiff in writing to bring to the office of the company the said $10,000.00 note and all papers connected with the Kundert loan for repayment, and in response to which plaintiff, on January 12, 1931, delivered to the Mortgage Co. the Kundert note and trust deed for collection, and received a written receipt of the Company, signed by Roy H. Fish as Secretary-Treasurer, acknowledging receipt thereof ‘for collection’.

“On January 15, 1931, the Mortgage Co. produced the note and the trust deed to the trustee named therein, viz., Title Guarantee and Trust Company, a defendant herein, and requested a reconveyance, and such trustee did, without plaintiff’s knowledge or consent, on January 16, 1931, execute and deliver a reconveyance which was thereafter recorded on January 19, 1931.

“In the meantime, and prior to December 15, 1930, the American Loan Society had paid over and delivered to the Mortgage Co. as and for the purchase of mortgages and deeds of trust, a sum of money in excess of $400,000.00, for which, on such date, no mortgages or deeds of trust had been delivered. On this date, Kundert, who, on March 13, 1930, had become record owner of the property in question by deed from the Mortgage Co., but who held title in trust for the Mortgage Co., made application to the Loan Society for a loan of $10,000.00 on this property, which application was approved, and on December 15, 1930, he made and delivered to the Loan Society, his note for $10,000.00 with his deed of trust on this property to secure the same, which deed was recorded on January 14, 1931, two days prior to the execution arid five days prior to the recordation of the reconveyance under the former deed of trust owned by plaintiff and recently delivered to the Mortgage Co. for collection. No part of the plaintiff’s note was paid by the maker, Kundert, nor by the Mortgage Co., but previously on October 30, 1930, the Mortgage Co. had placed on its books a purported credit in favor of plaintiff for the principal sum of her note and trust deed, without her knowledge or consent. Previously, on March 14, 1930, being the day following the date of conveyance of the title by the Mortgage Co. to him, Kundert made and delivered to the Mortgage Co. his deed conveying the title to said property, but which deed was not recorded, but held in the Mortgage Company’s files until discovered by the Receiver for that-Company, subsequently appointed on April 7, 1931, by the United States District Court.

“On October 2, 1931, the Loan Society filed its notice of default on the note and trust deed, last executed by Kundert in its favor on December 15, 1930, and thereafter a sale under such trust deed was had at which a deed was issued by the trustee to the Loan Society and recorded on February 8, 1932, in whom the record title still is vested, subject only to the official taking of all its assets and business by the Building and Loan Commissioner, defendant herein, on April 6, 1931, and who, without previous knowledge of any claim to the property by plaintiff has, since receiving such deed, expended in repairing, operating and protecting the property the sum of $1,830.55. It is further made to appear from the stipulation of facts that when plaintiff delivered her note and trust deed to the Mortgage Co., said Roy H. Fish informed her it would be some time before collection could be had, and that frequently thereafter she made inquiries of him concerning the collection, to which his reply was that the money had not been collected but was expected soon. That prior to the receivership proceedings of April, 1931, she reposed great faith and complete confidence in Roy H. Fish and in the Mortgage Co., and relied confidently on Fish’s representations, and that prior to August 20, 1932, she had neither knowledge nor notice that Kundert was not the bom fide owner of the property, nor that the Mortgage Co. held Kundert’s unrecorded deed of the property, nor that the Mortgage Co. had credited' her on its books with any amount on account of her delivery to it of her note and trust' deed, nor that Kundert had executed the note and trust deed to the Loan Society, nor that a reconveyance had been made by the trustee under her trust deed.

“It further appears that numerous investors had become owners of various forms of investments, credits or instruments, issued to them by the Loan Society, in good faith and in confidence in the integrity of the Loan Society, prior to the taking over by the Commissioner. And that exclusive of about $9,000.00 in investments held by directors of the Loan Society, all members are creditors of the Loan Society in good faith and in no way responsible for anything done •in the management or control of the Loan Society.

“It is further made to appear by the stipulation that at the time plaintiff delivered her note and trust deed to the Mortgage Co. for collection, and when the application by Kundert for the loan, and his deed to the Loan Society were made, and when the reconveyance under plaintiff’s trust deed was made and recorded, the Mortgage Co. and the Loan Society had four officers in common as to person, viz., Frank N. Fish, President of both; Boy II. Fish, Secretary and Treasurer of both; George X. Hickerson, First Vice President of both, and A. O. Kelliher, Second Vice President of both companies; and that the said Hickerson acted and signed as appraiser on Kundert’s application for said loan, and that George X. Hickerson, First Vice President of both companies, together with Frank N. Fish, President of both companies, A. O. Kelliher, Second Vice President of both companies, Boy H. Fish, Secretary-Treasurer of both companies, O. S. Holmes, Director of the Loan Society, Alexander Patterson and Chris Koch, Directors of both companies, all signed approval of said application.

“It is also made to appear that during all times here involved, the stock of the Loan Society comprised 1,000 shares, of which the Mortgage Co. owned 828 shares, the remaining 172 shares being held by the wife of George X. Hickerson, the Estate of Bobert J. Gardner, deceased, and O. S. Holmes; and that all the directors of the Loan Society were also directors of the Mortgage Co., except that after October 8, 1930, Frank N. Gregory was a director of the Mortgage Co. only, and O. S. Holmes of the Loan Society only.

“Bearing in mind that the Mortgage Co. was under obligation to supply the Loan Society with $400,000.00 worth of mortgages on trust deeds, and that on October 20, 1930, the Mortgage Co. had made a false credit entry of $10,000.00 on plaintiff’s account, it is significant that when these officers and directors, common to both companies, on December 15, 1930, approved Kundert’s application for a loan of $10,000.00 on this property, they also approved the following condition in such application, viz., ‘The money is to be paid out subject to the above conditions, as follows: The entire net proceeds of this loan to be used in repayment of present encumbrances now of record against the property herein described and held by the A. M. Co. of Calif.’

“On that date the trust deed of plaintiff was the encumbrance on record, and on that date Kundert made and delivered to the Loan Society his note for $10,000.00 secured by trust deed, pursuant to the approved loan" agreement. Following which, on January 9, 1931, the Mortgage • Co. called in plaintiff’s note and trust deed for payment and on January 12, 1931, received and receipted for the same for collection. On January 14, 1931, the new Kundert trust deed to the Loan Society was recorded and on January 9, 1931, the reconveyance under plaintiff’s trust deed was recorded. Plaintiff’s note, endorsed by her, together with her trust deed, was on January 15, 1931, delivered by the Mortgage Co. to the trustee, Title Guarantee and Trust Co., a defendant herein, when request for reconveyance was requested. This leads to the conclusion that the note of plaintiff is still in the possession of the Title Co. as trustee, and that it is not paid, and is a subsisting obligation of its maker, but with its original security, the trust deed, wiped out on the record by the reconveyance. Instead of plaintiff having record security for her Kundert note of $10,000.00, in the form of a trust deed on the lot in question, the Loan Society received a trust deed on such lot to secure its Kundert note of $10,000.00, which trust deed it has caused to be enforced for default, resulting in legal title to the lot becoming vested in the Loan. Society, free of any record encumbrance in favor of plaintiff.

“Another significant fact stipulated, and emphasized in argument by defendant, is that after the Federal Receiver was appointed for the Mortgage Co. in April, 1931, plaintiff, on November 18, 1931, filed a claim with said Receiver, as part of which she included this Kundert note and trust deed in an item reading: ‘Securities delivered for collection on which payment has not been made . . . $10,000.00,’ with a description thereof and a copy of the receipt therefor given her by the Mortgage Co.

“Finally it is stipulated that both the Mortgage Co. and the Loan Society are insolvent, and their assets, respectively, not sufficient to pay their debts, the Mortgage Company’s assets being in the hands of a Federal Receiver, and the Loan Society’s assets in the hands of the Building and Loan Commissioner, as a statutory receiver for liquidation under the state law.

“Upon this state of facts plaintiff claims that ‘basically plaintiff’s case rests upon the theory that the owner may always recover stolen property’. It is argued that the knowledge of the Mortgage Co. was knowledge of the Loan Society through the unity of the officials and directorate of the two companies; and that by the fraudulent acts of such common officers, plaintiff was deprived of her security, and the Loan Society enabled to acquire its substitute or successor security, which later was transformed into record title in fee by process of trustee’s sale.

“Defendant, the Building and Loan Commissioner, concedes the general rule that the owner may recover from innocent third parties property which has been transferred by an agent in violation of his duty to his principal, but claims an exception to the general rule in favor of the innocent third party in cases where the agent is invested with apparent authority to dispose of the property, and held out by the principal as possessing such authority, in which cases, upon wrongful transfer to an innocent party, redress will be denied the owner against such innocent party, notwithstanding the agent’s wrongful act, for the reason that ‘where one of two innocent persons must suffer by the act of a third, he, by whose negligence it happened', must be the sufferer’. (Civ. Code, sec. 3543.)

“That neither the rule stated by plaintiff nor its exception as stated by defendant are applicable in this case is manifest under the facts. Neither the note nor trust deed of plaintiff was transferred by the Mortgage Co. to another, nor has the Loan Society ever received the same. The Mortgage Co. wrongfully caused a reconveyance under the trust deed to be made and recorded, and delivered the note to the trustee with the trust deed, solely for the purpose of reconveyance, and such trustee, Title Guarantee and Trust Co., defendant herein, presumably still has possession of both. What the Loan Society received was another and different note and trust deed, the only thing in common to the two items of property being the real property described in each trust deed.

“Whatever of relief plaintiff may be entitled to under these facts, must be predicated on broader grounds of equity and upon the establishment of what may well be called a conspiracy to defraud her of her property, participated in by both the Mortgage Co. and the Loan Society as voluntary actors with knowledge of the wrongful purpose and joint participation in the acts committed to accomplish such purpose.

“That there was such a conspiracy chargeable against both companies, as legal entities, there can be no doubt after consideration of all the facts. The knowledge of its agents acquired while acting for and on behalf of the Mortgage Co. must be imputed to that company. Likewise the knowledge of its agents acquired while acting in its behalf, must be imputed to the Loan Society. The agents of each company being the same, acting at the same instant in dual capacities in the transaction of their principals’ business inter sese, were carriers of such knowledge to both principals synchronously, with the result that each company principal is charged with all the knowledge and acts of its agents, gained or performed in transacting the business of the respective companies. (McKenney v. Ellsworth, 165 Cal. 326 [132 Pac. 75]; Williams v. Hasshagen, 166 Cal. 386, 393 [137 Pac. 9] ; National Bank of San Mateo v. Whitney, 40 Cal. App. 276 [180 Pac. 895]; Live Oak Cemetery Assn. v. Adamson, 106 Cal. App. (Supp.) 783 [288 Pac. 29].)

“The state of facts does not present a case where an agent gains knowledge in the commission of acts in which he has an interest hostile and adverse to his principal, which furnishes basis for an exception to the general rule, announced in the above-cited cases, but clearly herein all the acts of the common agents of both companies were conceived, arranged and performed for the benefit of the respective companies—not for the agent himself—and each company-derived and retained the benefit of the acts in question. The Mortgage Co. received a credit of $10,000.00 on its $400,000.00 advance, and the Loan Society received a note for $10,000.00, secured by a trust deed on the property, of which plaintiff was deprived as security.

“From the foregoing it follows that in so far as the Mortgage Co. and the Loan Society, as corporate entities, are concerned, both had knowledge of the fraud perpetrated on plaintiff, both were recipients of benefit therefrom, and both, by their legal and corporate agents, participated therein.

“If the Loan Society were free and doing business under the law and in regular course, this conclusion would determine the rights and duties of the parties herein, but, it appears that subsequent to the time when this fraud was accomplished, the Loan Society was taken over under the law by the defendant Commissioner for liquidation, and he now claims such a change of status in the affairs affecting the rights and duties previously existing between plaintiff and the Loan Society has occurred in the eyes of the law, that, notwithstanding the culpability of the Loan Society, the investors therein, as creditors thereof, have in turn become innocent third parties in respect to plaintiff and her claims; that the Commissioner, as a liquidating receiver, took the assets of the Loan Society, including the property here involved, under the law which operated as an equitable attachment, fixing and determining the rights of all persons claiming to share in such assets as of the date of taking. And that having so taken prior to the commencement of an action herein by plaintiff, the rights of innocent creditors of the Loan Society are paramount to those of plaintiff, and may be asserted by such receiver, even though they would not be available to the Loan Society. And here again, the defendant Commissioner claims that there attaches and becomes operative in favor of the creditors of the Loan Society, whom he represents as receiver, the rule or maxim in equity that if one of two innocent parties must suffer through the fault of a third, he, by whose conduct the fraud was made possible, should bear the loss.

“It seems to be established by the weight of authority, that while an operating receiver takes the assets of a corporation subject to all equities outstanding against it, a liquidating receiver acts in the dual capacity of representing the corporation, as such, and also its creditors, and that in the latter capacity, he may claim rights and advance defenses, not available to the corporation.

“The authorities, however, do not extend this claim to include all cases where a loss will be sustained by creditors if a third party’s claim is allowed against the insolvent, but only to include such cases as where the dealings of the insolvent were in fraud of the creditor’s rights, or where the dealings in question were had directly between the third party claimant and the insolvent corporation. All of the authorities cited by defendant on this phase of the case fall into one or the other of such classes. All deal with positive acts either of the insolvent in fraud of its creditors, or in direct dealings with the claimant, and in them it is- announced that the receiver may interpose defenses, such as illegality, estoppel, laches and other equitable defenses, or assert claims on behalf of the innocent creditors, as against such third party, which the corporation he represents may not be permitted to do.

“In the case at bar, plaintiff had no part in the fraudulent dealings. She was innocent of knowledge of their transaction or existence until August 20, 1932. Nothing can be charged to her by way of act or conduct in fraud of the creditors. By the fraud here in question, her note has been delivered into the hands of the Trustee named in her trust deed, and her trust deed security has been destroyed by a reconveyance by that Trustee. She seeks to recover nothing from the assets of the Loan Society, but from the Trustee she seeks her note and trust deed, and from the court a decree annulling the deed of reconveyance by that Trustee, and a reinstating of her trust deed to its former status, both as a subsisting instrument and on the record. It is true if such is done, the title now held by the Loan Society will become burdened with such trust deed, and to that extent, its creditors will suffer a prospective loss. This loss, however, would not be direct but consequential, and therefore could not be made amenable to the rule in equity relating to allocation of loss between two equally innocent parties, first, because plaintiff’s rights cannot be denied simply because some third party will suffer consequentially by a judgment against one who has violated such rights, and second, because it cannot be said that plaintiff in anywise was at fault or negligent in leaving her note and trust deed with the Mortgage Co. for collection.

“In connection with this latter proposition, it is claimed by defendant that plaintiff was guilty of negligence in endorsing and delivering her note to the Mortgage Co. for collection, thus furnishing that Company with the indicia of title upon which a purchaser in good faith or other innocent third party might rely, with the result of an estoppel arising against plaintiff. Upon examining the Kundert application for a loan, which in fact was the Mortgage Company’s application by proxy, it is found recited therein in section 34 that the Loan Society is ‘ordered to pay full amount of the A. M. Co. of Calif’s, demand to release present encumbrances now ■ of record against the above described property and charge this loan account’. And in section 44 it is recited that the proceeds of the loan are to be used ‘in repayment of present encumbrances now of record against the property herein described and held by the A. M. Co. of Calif.’.

“The officers and directors of the Mortgage Co. knew that the plaintiff held the encumbrance, and knew of the loan account. The same officers as officers and directors of the Loan Society, who examined and passed on this loan application, knew the same things, and therefore the Loan Society knew them, and when the loan was approved and the note and trust deed accepted, the Loan Society was charged with full knowledge of the true status of the plaintiff’s note and trust deed, and that it was then owned by plaintiff. Furthermore, when the Loan Society trust deed was recorded, the former trust deed of plaintiff was still of record. While it may be claimed that plaintiff by endorsing and delivering the note to the Mortgage Co. for collection made it possible for the Mortgage Co. to commit fraud, nevertheless it must also be determined that the Loan Society was aware of plaintiff’s ownership of the note and trust deed and that it was superior to its newly recorded trust deed. And by directing that such previous loan should be released and charged to the Mortgage Company’s loan account, it knew that no money was to be passed by the Loan Society to the Mortgage Co. with which to discharge plaintiff’s note.

“In respect to the defendant’s claim that the maxim in equity above referred to enlarges the field of defense over that defined by section 3543 of the Civil Code wherein the basis of the defense is negligence of the plaintiff—not that plaintiff made it possible for the fraud to be committed, in all the cases cited from California, negligence of plaintiff is found as the basis of the estoppel and the ground of denying relief.

“ It is also claimed by defendant that plaintiff, by her action herein, is in effect, seeking to rescind the endorsement and delivery of the note to the Mortgage Co., and that such can not be done after insolvency of the Mortgage Co., and cites many cases in support of its claim. It is sufficient to say, after examining all the authorities cited, that, while there is some conflict among authorities, it is the declared law in California that the right to rescind is not to be denied on the mere fact of insolvency of the corporation but for the reason that the party seeking rescission has participated in the management of the insolvent corporation, or for some other particular cause such as would create an estoppel, or under some other doctrine analogous to equitable doctrine of laches. (People v. California etc. Trust Co., 19 Cal. App. 414, 418 [126 Pac. 516].) Plaintiff herein falls within neither of these classes. [Burningham v. Burke, 67 Utah, 90 (245 Pac. 977, 46 A. L. R., p. 466)— this authority inserted by this court.]

“As creditors of the Loan Society, the investors whom the defendant Building and Loan Commissioner represents, and for whom he claims a status of innocent third parties, were all creditors prior to the date of the perpetration of the fraud herein. There is no evidence in the stipulation of facts from which it could even be inferred that any one of them became an investor after January 19, 1931, the date of recordation of the reconveyance under plaintiff’s trust deed. The Mortgage Co. went into the hands of a Federal Receiver on April 7, 1931, and the Loan Society was taken over by the statutory receiver on April 6, 1931. It must be concluded then that none of these creditors parted with anything upon the assumption that the Loan Society was the owner of the new note and trust deed, and that they constituted part of the assets of the Loan Society. On the contrary, it appears that these creditors have at present the benefits of the fraud by which plaintiff lost her security, and by which the Loan Society gained the property in question, and that they suffered no detriment by reason of reliance upon any acts of plaintiff in endorsing and delivering her note to the Mortgage Co. The Building and Loan Commissioner holds property free and clear of plaintiff’s trust deed, under a state of facts which neither he, as receiver, nor the creditors of the Loan Society are entitled in equity or good .conscience to hold and keep free and clear as against the burden of plaintiff’s trust deed. (Dox v. R. E. Lomax Co., 29 Cal. App. 718, 721, 722 [156 Pac. 874].)

“ Defendant also claims that by filing her claim with the receiver of the Mortgage Co. covering the amount of the note she delivered to that Company for collection, plaintiff has elected her remedy and should be now precluded from claiming this, a different one.

“The Federal Receiver was appointed on April 7, 1931, within three months after plaintiff delivered her note for collection. During these months, it was repeatedly represented to her that the note was not yet collected. Without any knowledge that her note had been delivered to the Trustee and that the Trustee had reconveyed, she presented a claim to the Mortgage Co. receiver on November 18, 1931, for $21,000.00, comprising items, among which she recites: ‘Securities delivered for collection on which payment has not been made . . . $10,000.00’, accompanied .by a copy of the Mortgage Company’s receipt. It was not until August 20, 1932, that she learned of the delivery of her note to the Trustee and of the reconveyance and its attendant fraud. On September 28, 1932, she commenced this action. The filing of the claim was in the ordinary course of receivership proceedings, and was equivalent only to a demand for the securities, and can not be held in law to be an election of remedy which would preclude the party from subsequently asserting another. To constitute a bar, the two remedies must be inconsistent on the same state of facts, and knowledge of the existence of the facts must be present. Furthermore, the doctrine of election of remedies is applicable only where the remedy first sought is a real remedy available to the plaintiff. If the plaintiff is mistaken and undertakes to avail herself of a remedy to which she is not entitled, she is not prevented from subsequently availing herself of the one to which she is entitled under the facts of the case. The doctrine is generally regarded as an application or extension of the law of estoppel, and to make it applicable there must be present a showing of such inconsistency of position on a given and known set of facts as to afford a bar by the election of one over the other in the first instance. (10 Cal. Jur., Election of Remedies.)

“Since taking title to the property here in question, the Commissioner has expended a substantial sum of the Loan Society’s money in repairs and betterments, besides the money expended in acquiring title through the enforcement of the trust deed. This is asserted as an additional equitable reason why plaintiff should be denied relief, with suggestion that such amount should be repaid should plaintiff prevail. Plaintiff opposes this and demands an accounting for rents collected by the Receiver. It seems clear that neither contention is sound. What defendant expended w;as as owner on its own property for its own- benefit, and in return it has received the rents from the property. Plaintiff certainly has no claim whatever over the rents, nor is there any method created by law, nor any scheme in equity by which plaintiff’s rights or interest in the property may be subjected to this claim. It did not arise through plaintiff’s fault, and cannot be made a lien against the trust deed interest of plaintiff nor upon the property. If there exists any loss after crediting the rents against the cost of maintenance and repair by the defendant, it must of necessity be borne by defendant.

“From the foregoing it follows that plaintiff is entitled to recover possession of her note and trust deed from the Title Company upon demand therefor, and for a decree annulling the request for reconveyance and the reconveyance executed by the Title Company- and recorded in the office of the County Recorder, and for a decree establishing plaintiff’s note as a valid and subsisting obligation, and that the trust deed securing said note is a valid and subsisting encumbrance upon the real property described therein, and is prior and superior to the trust deed encumbrance in favor of the Loan Society and to the Trustee’s deed conveying title to the Loan Society, and superior to all title or interest of the Loan Society in and to said property.”

The demand of plaintiff is not such a “claim” that it must be first presented to the Commissioner pursuant to section 13.16 of the California Building and Loan Act (Deering’s General Laws, vol. 1, pp. 509, 510, Act 986), before an action may be founded upon it. See Bollinger v. Wright, 143 Cal. 292 [76 Pac. 1108], Newport v. Hatton, 195 Cal. 132 [231 Pac. 987], and Wahlefeld’s Estate, 105 Cal. App. 770 [288 Pac. 870].

The judgment is affirmed.

Langdon, J., Shenk, J., and Waste, C. J., concurred.


author: SHENK, J.

text:
    [L. A. No. 13957.
    In Bank.
    May 17, 1934.]
    In the Matter of the Estate of CHRISTOPHER H. FRANK, Deceased. EVA L. FRANK, Appellant, v. LINNIE DUNCAN et al., Respondents.

      Raymond J. .Kirkpatrick and John J. Selover for Appellant.
    Russell H. Pray and William N. Deatherage for Respondents.
   SHENK, J.

The appeal herein is from an order admitting to probate the last will and testament of Christopher H. Frank, deceased.

The decedent left a last will by which he bequeathed his estate to his five children. He named one of his daughters, Linnie Duncan, executrix. He expressly omitted any bequest to his wife, Eva L. Frank. The latter instituted a contest and opposition to the probate of the will on the grounds of the alleged unsoundness of mind and incompetency of the testator to execute a will, and undue influence alleged to have been exercised upon the testator by his children. The court found the testator to have been of sound and disposing mind and competent to make a will; that the will was his own voluntary act; and that no undue influence was exercised upon him. The court entered its order admitting the will to probate. The appeal is by the contestant.

The contentions on the appeal are that the burden rested on the proponent to prove that the testator at the time the will was executed was free from any undue influence; that the burden was not met; and that there was no proof that there was any estate upon which the will could operate. A sufficient answer to the last contention is that the contestant concedes the existence of personal property of the value of $100 and a claim in the sum of $3,000 against three of the children of the deceased. The petition for letters alleged the existence of an equitable claim against the widow of the decedent based on the alleged right to have set aside certain transfers of property made by the testator in his lifetime to the contestant. The court found the existence of property not to exceed $25,000 in value. This is sufficient to support the order admitting the will to probate on this issue. (Estate of Rees, 60 Cal. App. 92 [212 Pac. 234].)

The contention that the burden of proof rested upon the proponent is based on testimony that the attorney who drafted the will was also the attorney for the daughter Linnie Duncan, prior to the time of the events involved. The contestant relies upon this as creating a confidential relationship between the daughter, Linnie Duncan, and the testator, and, because of the added circumstance that her attorney prepared the will, it is claimed that the burden of proof shifted to the proponent.

An examination of the record refutes any intimation that the fact that the attorney prepared the will bears any relation to any part which Linnie Duncan may have taken in the execution of the will, and the evidence does not show that she took any part at all. The record shows affirmatively that the decedent had been a client of the same attorney for some time. In the absence of any showing of active participation on the part of Linnie Duncan and of a showing that she unduly benefited under the terms of the will, and there is no showing as to either, the principles stated in Estate of Lances, 216 Cal. 397 [14 Pac. (2d) 768], relied upon by the contestant, do not apply. The appeal is without merit.

The order is affirmed.

Preston, J., Langdon, J., Waste, C. J., and Seawell, J., concurred.


author: WASTE, C. J.

text:
    [Crim. No. 3706.
    In Bank.
    May 17, 1934.]
    THE PEOPLE, Respondent, v. LEE DWIGHT MURPHY, Appellant.
    Frederic H. Vercoe, Public Defender, for Appellant.

      U. S. Webb, Attorney-General, and Warner I. Praul, Deputy Attorney-General, for Respondent.
   WASTE, C. J.

Defendant was indicted for the murder of his wife in Los Angeles County. The cause was tried by the court sitting without a jury, a jury having been waived. At the conclusion of the evidence defendant was found guilty of murder in the first degree and sentenced to suffer the extreme penalty. He appeals from the judgment.

The evidence is conclusive that the decedent died as the result of injuries inflicted upon her by the defendant while administering to her a severe and apparently unprovoked beating. Defendant concedes the sufficiency of the evidence connecting him with the homicide. He states in his opening brief that “the deceased died on December 11th (1926), as a result of the injuries inflicted by appellant”. The details of the cruel treatment imposed upon the decedent, who at the time had been married to the defendant for approximately two weeks, need not be set forth at any great length. Suffice it to say that the defendant, by the use of a belt, belt buckle and his fists had bruised and battered his victim’s entire body and had broken her jaws. Other treatment of a sordid and shocking nature need not be described. The injuries were inflicted on the evening of November 30, 1926, while the parties were in their apartment in Long Beach. They proved fatal eleven days later. Defendant was not apprehended until July, 1933, approximately six and one-half years after the commission of the homicide. He was arrested in Pittsburgh, Pennsylvania, and returned to this state for trial.

At the conclusion of the prosecution’s case, the defendant took the stand in his own defense. He testified that during the day on which the homicide was committed he had purchased and consumed approximately three bottles of “bitters” possessing an alcoholic content in excess of fifty per cent by volume; that he remembered being in the apartment with his wife, the decedent, during the early part of the fatal evening; that the next thing he remembered was that he found himself wandering aimlessly along an ocean pier; that he concluded he “must have hurt” the decedent; that he returned home and found his wife suffering from the effects of the beating imposed; that he begged her forgiveness and undertook to make her comfortable during the remainder of the night; that he left the next morning when the owner of the apartment informed him the police were seeking him; that subsequently upon learning of his wife’s death he left the city and state. As already indicated, he successfully avoided apprehension for several years. Defendant called no other witnesses.

Upon this appeal he raises no objection to the sufficiency of the evidence to establish the homicide or his connection therewith. Nor does he charge any error in the admission or rejection of evidence. He urges but one point, namely, the insufficiency of the evidence to establish the degree of the murder as that of the first. In support thereof defendant urges that he “was in such a disordered state of mind from the (voluntary) use of intoxicating liquor at the time he inflicted the injuries upon the deceased, from which she subsequently died, that he was not capable mentally of forming a clear, wilful, deliberate and premeditated intent to kill her which would make the crime murder in the first degree”. He insists that he inflicted the injuries on the decedent “while he was in a drunken and sexual frenzy and as the result of a sudden heat and passion”. From this he concludes that “the proper and justifiable verdict under the evidence would have been a verdict finding (him) guilty of murder in the second degree”. He therefore requests this court to accordingly modify the judgment under the power conferred upon it by the 1927 amendment to section 1181 of the Penal Code, by which amendment appellate courts are authorized to modify a judgment when the evidence indicates that the defendant is “not guilty of the degree of the crime of which he was convicted, but guilty of a lesser degree thereof”. He refers to the case of People v. Kelley, 208 Cal. 387, 391 [281 Pac. 609], wherein the court reduced the gravity of the crime of which the defendant stood convicted. The facts of the Kelley case, supra, are wholly dissimilar to those at bar. In the Kelley case the evidence merely indicated that the victim of the homicide had died as the result of injuries incurred while engaged in a voluntary sexual debauch with the defendant. It nowhere appeared therein that the defendant had deliberately and intentionally inflicted the fatal injuries. They appeared to be the natural result of the orgy engaged in by the parties. In other words, the decedent in the Kelley case was killed under circumstances tending to show an accidental or unpremeditated killing. For that reason this court felt constrained, under the law, to declare the offense to be that of manslaughter.

Such is not the present case. Here the fatal injuries were deliberately and intentionally inflicted, while the defendant was engaged in subjecting the decedent to a severe and unprovoked beating. The fact that he had previously imbibed intoxicants does not serve to exonerate him from the consequences flowing from his unlawful acts. Voluntary intoxication is never an excuse for crime. (Sec. 22, Pen. Code; People v. Burkhart, 211 Cal. 726, 730, 731 [297 Pac. 11].) Of course, whenever the existence of any particular purpose, motive or intent is a necessary element to constitute any particular species or degree of crime, the trier of the facts in determining whether such purpose, motive or intent actuated the accused in the perpetration of the offense, may properly take into consideration the fact that he was intoxicated at the time. (Authorities supra.) However, the weight to be accorded to evidence of intoxication, and whether such intoxication precluded the accused from forming a specific intention to kill and murder, which intent is a necessary element in murder of the first degree, are matters essentially for the determination of the trier of the facts. (People v. Yeager, 194 Cal. 452, 474 [229 Pac. 40]; People v. Sainz, 162 Cal. 242, 245 [121 Pac. 922].) From an examination of the entire record we cannot say that defendant, by reason of the use of intoxicants, was so disordered mentally at the time of the attack on the decedent as to preclude the resultant killing from being of that “willful, deliberate and premeditated” character designated in section 189 of the Penal Code as murder in the first degree. It is significant, that defendant when on the stand testified in detail as to what transpired immediately before and immediately subsequent to the wrongful assault on the decedent. As to these events his reeolléction was reasonably vivid. His memory was faulty only as to the period during which the fatal injuries were being inflicted. In view of this the trial court might very properly discount or reject defendant’s testimony as to the extent of his intoxication and conclude that defendant was not so inebriated as to be unable to appreciate the character and gravity of his deliberate and wrongful acts.

Moreover, as indicative of defendant’s state of mind at the time of the attack, the father of the decedent testified to a conversation in which the decedent stated to the witness that the defendant while beating her declared: “I once killed a girl in Fresno, and I don’t know if I will kill you or not.” The evidence of this conversation was admitted on the theory that it constituted a dying declaration. From this evidence the trier of the facts might reasonably conclude that defendant fully appreciated the gravity and wrongful character of his acts.

However, we need not rest an affirmance of the judgment solely on the foregoing reasoning. There are certain kinds of murder which carry with them conclusive evidence of premeditation. These the legislature has enumerated in the statute (sec. 189, Pen. Code) and has taken upon itself the responsibility of saying that they shall be deemed and held to be murder in the first degree. These cases are of two classes. When the killing is perpetrated by means of poison, lying in wait or torture, the means used is held to be conclusive evidence of premeditation. When the killing is done in the perpetration or attempt to perpetrate arson, rape, robbery, burglary or mayhem, the occasion is made conclusive evidence of premeditation. (People v. Sanchez, 24 Cal. 17, 29, 30; People v. Milton, 145 Cal. 169, 170 [78 Pac. 549].) If a case falls within either of these classes the statute determines that the killing is wilful, deliberate and premeditated and the trier of the facts has no alternative but to find the offender guilty of murder in the first degree.

In our opinion the brutal and shocking treatment to which the decedent was subjected, and as a result of which she died, constituted torture of an aggravated character within the meaning of the statute. The statute therefore conclusively designates the resulting homicide as murder in the first degree.

The judgment is affirmed.

Preston, J., Shenk, J., Langdon, J., and Seawell, J., concurred.


text:
    [L. A. No. 13980.
    In Bank.
    May 17, 1934.]
    JAMES SIMPSON et al., Appellants, v. ROBERT C. GILLIS et al., Respondents.

      Thorwald Siegfried, Sydney Sanner and John A'. Fleming for Appellants.
    Ernest C. Carman, Goudge, Robinson & Hughes, David A. Sondel, Tanner, Odell & Taft and Swanwich, Donnelly & Proudfit for Respondents.
   SHENK, J.

The plaintiffs appealed from a judgment entered upon an order sustaining the defendants’ demurrer to the first amended complaint without leave to amend, and from an order taxing costs.

By their action the plaintiffs sought to impress a trust upon certain real and personal property which it is alleged was created by virtue of the following facts appearing from said first amended complaint:

Prior to June, 1921, Huntington Beach Methodist Assembly was a subsidiary nonprofit corporation of Southern California Conference of the Methodist Episcopal Church, and was authorized by the latter to issue founders’ certificates to persons who desired to invest $1,000 or more each ■in a tract of land whereon was to be founded a so-called Chautauqua project to be known as Pacific Palisades Association. Two hundred and seventy-five persons became purchasers of founders’ certificates at $1,000 each. The certificate provided that the holder was entitled to select a lot of land of the appraised value of $1,000 from a tract of 1,068 acres situate on the ocean front near Santa Monica in Los Angeles County, “acquired under contract” by the subsidiary assembly, and to receive a leasehold interest for a renewable 99-year term, the leases to be modeled after the leases issued at Lake Chautauqua, New York, and Ocean Grove, New Jersey. It further provided “that if the certificate holder does not select a lot within one year he may surrender this certificate and upon ninety days’ notice in writing shall be repaid the sum of one thousand dollars with interest at the rate of six per cent per annum from this date”.

The defendant Pacific Palisades Association was incorporated on August 9, 1921, pursuant to title XVII, part 4, division 1, of the Civil Code (see. 649 et seq.), which provides for the incorporation of colleges and seminaries of learning. It is alleged that the assembly transferred to the association the sum of $275,000 paid by the holders of founders’ certificates for the purpose of using it to acquire the 1,068-acre tract.

On January 14, 1922, designated as “Founders’ Day’’, and thereafter, each of the 275 holders of founders’ certificates selected a lot, and became a leaseholder of the lot selected by him pursuant to the terms of a lease modeled upon leases used in similar projects, and which provided for a 99-year term renewable without fee. The lease rental was the sum of $1,000 or more, depending upon the appraised valuation of the lot selected, payable upon execution and delivery of the lease, and a further sum not exceeding one per cent per annum on the appraised valuation. In addition the lessee was entitled to receive season tickets admitting him and his family to all meetings held by or under the auspices of the association. The lessee agreed to erect a dwelling-house within three years, subject to certain restrictions, and upon the lessee’s failure to comply with this provision the association reserved the right to cancel the lease and return the amount paid as the appraised value of the lot with interest at seven per cent per annum. In addition to the ordinary provisions of a lease, there appeared the particular provision that should the lessor “hereafter decide to discontinue the work for which it is incorporated or to sell or dispose of its holdings in this tract, then it will sell and convey to’’ the lessee the premises leased upon the further payment of $10.

Between June 1, 1921, and July 11, 1923, and thereafter more than 1500 persons in addition to the 275 “founders" became lessees or owners of lots in lands acquired by the Pacific Palisades Association and by December, 1925, the sums paid for a total of 2,397 of such interests approximated more than $4,780,000. All or many of said persons were communicants of the Methodist Episcopal Church and entered into the religious life of the community.

The plaintiffs, thirteen in number, are some of the original holders of founders’ certificates, or assignees thereof, or otherwise owners or lessees of lots in the land acquired by the Pacific Palisades Association, and sue in the action on their own behalf and on behalf of all of said 2,397 owners of similar interests.

The defendant Pacific Palisades Association on July 5, 1923, took title to the 1,068-acre tract above mentioned, for which it is alleged to have paid the sum of $660,000. On June 23, 1923, the association acquired a 32-aere tract in Los Angeles County from the defendant, Robert C. Gillis, for the sum of $65,000. On the same date it also acquired a tract of 825 acres in Los Angeles County, subject to an encumbrance of $150,000, for the sum of $850,000. The purchase price of said tracts, approximating a total of 1925 acres, is stated to be $1,575,000. The payments made by the owners of leasehold interests in lots, averaging about five lots to the acre, purchased from the defendant Pacific Palisades Association, constituted the source from which payment of the purchase price of lands so acquired was made. All of the lands so acquired have been platted and designated as and are referred to in the complaint as tract 9300. It is stated that of the 1925 acres embraced within tract 9300 there remained unsold on December 31, 1925, 1313 acres thereof unsubdivided and 423 subdivided lots, together with 6168 feet of ocean beach frontage.

It is alleged that sales of lots in tract 9300 showed a decline from $1,088,000 in the first six months of 1924, to $580,600 in the second six months of that year, and to less than $250,000 for the year 1925. On January 11, 1926, the association purchased 226 acres adjacent to tract 9300, called the Huntington Palisades Tract, for which it paid $1,625,000. The plan was to subdivide and sell lots from this tract purely as a real estate venture, there being no intention to combine with the sale access to the religious and educational activities of the association.

The defendant Robert C. Gillis was one of the 275 original holders of founders’ certificates, and became a member of the board of trustees of Pacific Palisades Association. He owned practically all of the capital stock of the defendant Santa Monica Land and Water Company. About January 11, 1926, when the Huntington Palisades tract was purchased by the defendant Pacific Palisades Association, it made a contract with Santa Monica Land and Water Company to appoint and it did appoint the latter its exclusive agent to sell lots in said Huntington Palisades for a commission to it of twenty-five per cent. The association made a similar contract with Santa Monica Land and Water Company to sell lots in tract 9300. The plaintiffs allege that during this period the financial affairs of the association were approaching an insolvent condition.

On April 1, 1926, the association executed a deed of trust conveying the legal title to said Huntington Palisades tract and said tract 9300 to the defendant California Trust Company to secure a $3,500,000 bond issue. On March 31, 1928, the association entered into an agreement, recorded in June, 1931, with the defendant Robert C. Gillis, whereby the association transferred to Gillis all of the property described in the trust indenture, that is, all of the real and personal property of the association with certain exceptions and reservations which comprised the portions of the property used or to be used for institutional purposes and school sites, as well as the parcels leased for 99-year terms, reserving also equipment necessary for the maintenance and operation of its buildings and grounds, certain cash reserves, and the right to conduct the educational and institutional activities of the association. Gillis agreed to pay to the association $250,000 in sums of $25,000 per annum, payable in monthly installments. Gillis was also obligated to pay to the association twenty-five per cent of the net profits derived from the sales of lots from the tracts, the monthly installments to apply as a credit against such payments. Gillis agreed to discharge all the bonded and other indebtedness against the property, including the $3,500,000 bond issue, and all taxes, assessments and other encumbrances, which, together with expenses of subdivision and commissions, except advertising and sales expenses, were allowed as a deduction against the amounts realized on sales. The plaintiffs allege that the property conveyed by said agreement had a value of $9,000,000. On April 30, 1928, Gillis assigned the agreement and property rights conveyed thereby to the defendant Pacific Land Corporation, Ltd., in exchange for the capital stock of that corporation.

On December 29, 1930, the defendant California Trust Company, pursuant to the terms of the trust indenture, sold to the state of California for the sum of $1,000,000, 3,333 feet of beach land reserved to the Pacific Palisades Association in the agreement with Gillis. It is alleged that Gillis obtained the benefit of the purchase price of this frontage under his contracts as well as the benefit of balances owing on sales made on March 15, 1927, to Los Angeles Mountain Park Company of 750 acres for the sum of $1,200,000, and of the Bundy Bath House on August 18, 1927, to Will Rogers for $105,000, and a sale of another tract of 1420 feet of ocean front to Santa Monica Land and Water Company on April 4, 1927, for $285,000 and later also sold to Will Rogers. Shortly after the transfer to Gillis on August 4, 1928, Gillis sold to’ Rogers for $214,872 an additional 306 feet of ocean front, including the so-called Lighthouse, a bathing resort originally, so it is stated, intended for use as part of the development of tract 9300. There was also sold to Rogers another 100 feet adjacent to the Lighthouse for the sum of $80,000. On December 29, 1930, Gillis’ alter ego, Pacific Land Corporation, entered into a contract for the sale of 2,411 feet of ocean front to the county of Los Angeles for the sum of $723,500. It is alleged that the sums realized on these sales and of other sales of lots to lessees in tract 9300 would have discharged in full the $3,500,000 bonded indebtedness. It is also shown by the complaint that the principal of said bond issue has in fact been discharged to the extent of $2,204,500.

The foregoing facts, together with many conclusions of the plaintiffs respecting the legal effect thereof, are set forth in four purported causes of action in the first amended complaint. The plaintiffs allege that a trust was created in favor of the plaintiffs and those they represent as the beneficial owners of the property acquired by the defendant Pacific Palisades Association; that the defendants have repudiated the trust; and that the transfer to Gillis was a violation of the trust and a fraud upon the plaintiffs. They seek a declaration to the foregoing effect, an accounting, and the appointment of a new trustee or corporation to be organized and known as “Tract 9300 Association” in which the owners and lessees of lots in said tract will be entitled to membership and to which the alleged trust estate shall be set over and by which it shall be administered under the direction of the court, and for judgment against any of the defendants who might be found chargeable with the receipt of any part of such alleged trust estate.

The defendants’ demurrer was interposed on general and special grounds and was sustained by the court without leave to amend. Subsequently the plaintiffs on notice applied for permission to make certain amendments to the first amended complaint, which was refused by the court. By such amendment it was sought to show that the persons who became trustees of Pacific Palisades Association were the former trustees of Huntington Beach Methodist Assembly, which thereafter transacted no business; that the defendant Pacific Palisades Association conducted and continued to operate and maintain a Chautauqua assembly on a portion of said tract 9300; and other allegations which it is unnecessary to note specifically.

The plaintiffs were not entitled to have their motion granted as a matter of right. The granting or refusal thereof was a matter largely in the discretion of the court. A further review of this ruling is not necessary inasmuch as the allegations contained in the amendments sought to be made would not compel or justify a different conclusion on this appeal.

The question presented is whether the plaintiffs under any view of the facts disclosed have stated or can state a cause of action for relief as against the defendants. Our conclusion that the plaintiffs have not done so and cannot do so finds support without consideration of the application of the statute of frauds, the statute of limitations or the doctrine of laches, or of the question whether the complaint was defective as to form or parties.

The theory of the plaintiffs is that the payment of the $275,000 by the original holders of founders’ certificates and all moneys subsequently paid by persons who became lessees or owners of lots in tract 9300 constituted a transfer of the legal title to such funds only, and that the beneficial ownership thereof was retained or separated from the legal title so as to constitute the lessees the beneficial owners in legal contemplation of the corporate assets of Pacific Palisades Association. Unless such a trust was created by that or some other means, the plaintiffs cannot pursue the present remedy for any alleged violation of their duty or abuse of their power by the defendants. The duty in such event is, by section 651c of the Civil Code, cast upon the attorney-general.

The outcome under the theory that an express trust was created depends upon whether there was an intention on the part of the original holders of founders’ certificates and the lessees to transfer and of the Pacific Palisades Association to receive only the bare legal title to the funds paid to the latter, or its predecessor Huntington Beach Methodist Assembly, and to create a beneficial or equitable estate therein in favor of the lessees.

In the first place the lot owners and lessees had no active part in the creation of the corporate existence of the defendant Pacific Palisades Association. The corporation was organized without capital stock by the former trustees of Huntington Beach Methodist Assembly, and the trustees, governing as a board, constitute its only members. The plaintiffs therefore are not suing and cannot sue as stockholders or members of the corporation. Therefore whether an express trust was in fact created depends on whether an intention to create such a trust was expressed in the instruments of transfer involved. (Burling v. Newlands, 112 Cal. 476, 494 [44 Pac. 810].)

Assuming, without deciding, that an express trust may have been created at the time in question for the objects and purposes stated by the plaintiffs, pertinent facts alleged and the instruments and documents pleaded and relied upon by the plaintiffs show not only an absence of any such intention, but, on the contrary, affirmatively indicate that an express trust for any purpose, with the plaintiffs as beneficial owners of the property, was not expressed or intended. It may be said that the memorial in which, under the facts pleaded, such intention should appear, is the instrument by which such funds were transferred by the original holders of founders’ certificates and by the lessees. The lease in use, the form of which appeared in the Founders’ Hand Book issued to the holders of founders’ certificates, is not complicated or misleading. It provides that the lessor lets the described lot of land to the lessee in consideration of the “payments, rents, covenants and agreements” stated therein for a renewable 99-year term. As hereinbefore noted, the only other rights and interest transferred to the lessee were the right to attend the religious and educational meetings conducted under the auspices of the association and the right to receive a deed for the property upon the payment of an additional sum of $10, in the event the lessor should decide to discontinue the work for which it was incorporated and sell and dispose of its holdings in the tract. Clearly an express trust is not created by the provisions of this instrument. The plaintiffs also rely upon the declarations and representations contained in the founders’ certificate or receipt given in exchange for the initial $1,000 paid therefor by each of the 275 holders. This certificate stated that the corporation, Pacific Palisades Association, is to be formed for the purpose of founding on the 1,068-acre tract a religious and educational center similar to that at Lake Chautauqua, New York; that the land is being acquired under the authority of the Southern California Conference of the Methodist Episcopal Church. It outlined the plan to lease lots in the tract and the general terms of the lease, and stated how and when the holder might make his selection of a lot. It contained the provision hereinbefore noted that if a selection was not made within a year, the holder was entitled to the return of his money with interest. This is plain negation of any interest to create the trust alleged. The certificate or receipt represented an investment of $1,000, which could be surrendered for a lease on the terms represented (Pacific Palisades Assn. v. Menninger, 219 Cal. 257 [26 Pac. (2d) 303]), or for repayment of the amount with interest.

Other documents are relied upon by the plaintiffs to show the intent to create an express trust as stated. Assuming these to be pertinent for the purpose, they, too, negative the existence of any such intent. There was issued by the association a founder’s handbook, in which the purposes and objects of the association were enlarged upon, especially as to its social, intellectual and spiritual aims, the beauty of the surroundings, and high standards available to all residents and visitors, the “priceless values” of which “go with the lots”. Some of the institutional features to be inaugurated, and the development, financial and appraisal plans and work were described. The form of lease was set out in full and, in addition, a summary of its salient features with a statement of the value to the prospective lessee of the permanency of the educational features which might be insured by the investment. Provisions in the lease which permitted cancellation thereof by the association on repayment, with interest, of the sum received as the cash payment, it was explained, were included for the purpose of insuring to any lessee not in sympathy with the development “a fair profit on his investment”. In this summary and explanation there was specially noted the provision of the lease that a deed to the leased premises was to pass to the leaseholder in the event the institution discontinued its educational activities. The purpose of this was stated to be that, although the institution was designed to have perpetual existence, the provision was included to protect fully the rights of all in the event of its unexpected discontinuance. There is nothing in the foregoing that does not distinctly define the rights of the lessees, and the fact clearly appears that the benefits to be derived by the lessees in addition to the interest transferred to them were the benefits specifically described, which were purely incidental to the development of the objects and purposes of the association, and the statement thereof did not constitute the lessees the beneficial owners of the property to be developed as an educational and religious institution for their “benefit”.

Further negation, if any further be needed, of any existing rights of ownership or control by the lessees in the property reserved for institutional or other purposes is contained in the articles of incorporation of the Pacific Palisades Association, which the plaintiffs also rely upon and incorporate as an exhibit. The articles provided that the members of the board of trustees shall be nominated by the Southern California Conference of the Methodist Episcopal Church. The board of trustees was given power to fill vacancies by election from the nominees of the conference. The purposes, objects and powers of the association were as permitted by sections 649 et seq. of the Civil Code. It was declared in the articles that the corporation had been promoted by the conference for the purposes expressed therein and that all by-laws and ordinances necessary and proper in the exercise of the powers and to advance the interests of the corporation were to be subject to the consent and approval of the conference. They also provided that the membership of the corporation consisted of the signers of the articles and the members of the board of trustees. Dividends were not to be declared but profits were required to be devoted exclusively to the purposes of the corporation. The following specific provision appears: “Should the Board of Trustees at any time deem it wise to discontinue this institution, it may do so by and with the consent of said Conference. In 'such ease the Board of Trustees shall dispose of the property and assets of the corporation in the manner directed by said Conference, or pay over to said Conference, the net proceeds of its assets, after payment of all its obligations. The Board of Trustees shall make an annual report of the business and condition of the corporation to said Conference.” The articles also provided that the board of trustees might nominate an advisory committee, the members thereof to be elected by the conference, to consult with the board on the business and work of the corporation. The framework of the organization shows that it was intended to receive, buy, hold and sell both the legal title and the beneficial interest in real and personal property, but, if this is not so, that the beneficial interest was to be held only by the Southern California Conference of the Methodist Episcopal Church.

The plaintiffs advance the alternative claim that the facts alleged are sufficient to constitute a cause of action on the theory either that a resulting trust or a constructive trust in the property exists. The claim is not tenable on either theory. There is nothing in the facts alleged to show that the land purchased by the association was to be or was paid for with money owned by the lessees. The statement of the project and the terms of the pertinent documents show conclusively that the certificate holders and lessees paid money in return for an interest which was conveyed to them. The consideration was for the interest or investment which was received. The money then became the property of the association and was dealt with as its own. It is not necessary to note all the difficulties in an attempt to support the theory of a resulting trust. It is enough to note that the facts alleged do not give rise to the natural presumption that the certificate holders or lessees were the real owners of the property and that title was taken in the name of the corporation merely as a matter of convenience and arrangement between them. Where this natural presumption is lacking a trust does not result. (Woodside v. Hewel, 109 Cal. 481, 485 [42 Pac. 152]; Lezinsky v. Mason Malt W. D. Co., 185 Cal. 240, 247, 251 [196 Pac. 884].) The plaintiffs rely on the case of Leviston v. Tonningsen, 212 Cal. 656 [299 Pac. 724], But in that case the fact that title to the property in question was deeded to oné without consideration merely to facilitate the redemption of the property was held to support the finding and conclusion that the title was held subject to a voluntary resulting trust.

A constructive trust arises by virtue of an act committed by one who wrongfully detains property or who obtains it by fraud, violation of a trust, or other wrongful act, and the holder thereupon is a trustee thereof for the true owner. (Secs. 2217, 2223, 2224, Civ. Code.) In this respect the plaintiffs allege and contend that the acts of the defendants Pacific Palisades Association and Robert C. Gillis, hereinbefore outlined, constituted a fraud on the plaintiffs, and that this wrong or fraud and the repudiation of the alleged trust relationship have given rise to a constructive trust. It has been seen that the funds came into the possession of the defendant, Pacific Palisades Association, in the first instance, as the owner of both the legal and beneficial title thereto, i. e., without being impressed with any trust in favor of the lessees as the beneficial owners thereof. Any dealings in relation to that property thereafter were, therefore, on behalf of the corporation, and, whether conformable to the powers and duties of the board of trustees of the association, or of the other defendants, they were not a fraud upon any right of the lessees and not a violation of any trust as to them. A constructive trust cannot, therefore, be said to have arisen by virtue of such acts. Nor can it be said that a constructive trust arose by virtue of the alleged repudiation of a trust which never existed.

Thus the cause of the plaintiffs in this action must stand or fall on their claim that an express trust was created. This claim they have failed to establish. The facts on the other hand are conclusive that their standing in the transactions with the defendant, Pacific Palisades Association, is that of purchasers of an interest in property which they have received. Inasmuch as the plaintiffs have failed to state a cause of action sufficient to impress a trust on the funds or the property on any theory, an accounting is not required.

The plaintiffs have also appealed from an order taxing costs on the ground that the allowance of an item of some $169 representing the cost to the defendants of taking the depositions of certain of the plaintiffs was erroneous. The record shows that said plaintiffs were duly examined before a notary public, their depositions were transcribed but were not signed or used for the reason that the cause proceeded no further than the ruling on the demurrer. The plaintiffs argue that a deposition is not a deposition until it has been signed, and directed to the clerk of the court as provided by section 2032 of the Code of Civil Procedure. Section 2021 of the same code gives the right to take the deposition of an adverse party at any time after service of summons or the appearance of the defendant. Even though no issue of fact has been joined and the depositions are never used, the prevailing party is entitled to costs thereon. (California etc. Co. v. Schiappa-Pietra, 151 Cal. 732, 745 [91 Pac. 593]; Lindy v. McChesney, 141 Cal. 351, 353 [74 Pac. 1034].) The question whether the expenditure was necessary or was incurred in good faith was primarily for the trial court. (Murphy v. F. D. Cornell Co., 110 Cal. App. 452, 455 [294 Pac. 490].) No showing of an abuse of the court’s discretion is presented. The foregoing decisions and the decisions relied upon by the plaintiffs do not presuppose necessarily that the depositions taken had reached the finished state insisted upon before costs could be taxed in respect to them.

The judgment and the order taxing costs are, and each is, affirmed.

Preston, J., Langdon, J., Waste, C. J., and Seawell, J., concurred.


text:
    [L. A. No. 14014.
    In Bank.
    May 17, 1934.]
    JAMES McD. MITCHELL et al., Respondents, v. UNION DRILLING AND PETROLEUM COMPANY (a Corporation), Appellant.

      Newby & Newby and Dee Holder for Appellant.
    George W. Nilsson and Monto W. Shirley for Respondents.
   PRESTON, J.

Appeal on judgment-roll by defendant Union Drilling and' Petroleum Company, hereinafter called the “drilling company”, from judgment for plaintiffs. The facts found by the court are as follows:

Plaintiffs, owners of lots 67, 69 and 70 of Tract 639, Los Angeles, on November 6, 1923, executed to one Roy W. Perkins an oil and gas lease on said property, reserving to themselves a twenty-five per cent royalty of the gross production from the demised premises. On March 28, 1924, Perkins completed a producing well on lot 70. On May 21, 1924, said lessee transferred to defendant drilling company practically all of his rights under said lease. The lease contained the following clauses, material to this inquiry: “3. This lease, subject to earlier determination as hereinafter provided, shall remain in force for ... 20 years from and after the date of this instrument, provided oil or gas or other hydrocarbon substances are produced and saved in paying quantities, and as much longer thereafter as oil or gas or other hydrocarbon substances in paying quantities are produced from the wells on said premises.”

“5. The lessee agrees to drill upon said premises not less than three „ . . wells for the production of oil or gas, and to protect as far as possible the oil and gas in the said leased premises from drainage by contiguous wells. ...”

“16. In the event of the breach by the lessee of any of the terms or conditions of this lease and failure to remedy the same within thirty . . . days after ivritt.cn notice of such breach, this lease and demise and all of the rights of the lessee hereunder shall thereupon and thereby, at the option of the lessors, forthwith cease and determine; ...”

On April 13, 1928, said drilling company quitclaimed to plaintiffs lot 67, leaving only lots 69 and 70 affected by this action. The drilling company operated the above-mentioned well and paid a royalty to plaintiffs on the oil and gas thereby produced until March, 1927, subsequent to which time it made no effort to produce oil or gas or to pay plaintiffs any royalty or rental. In fact, in violation of the covenants of said lease, the drilling company connived in the action of its president, who operated a well on contiguous lands, thereby draining oil from plaintiffs’ property. On numerous occasions between March, 1927, and the date of filing this suit, plaintiffs requested defendant drilling company to produce the well located on their land, to protect said land against drainage and otherwise comply with the terms of the lease, or to quitclaim and return said land to them, but the drilling company refused to do either.

Finally, on March 12, 1930, plaintiffs served a notice of default on said company, giving it thirty days to remedy its conduct. Nothing was done by it and on April 30, 1930, notice of termination of the lease was served upon it. Pursuant to the lease, sixty days thereafter were allowed it to remove from the premises fixtures, improvements and personal property. This likewise was not done. Plaintiffs did not waive the default, either actually or constructively, but later brought this action.

The complaint was in six counts. The first was to quiet title. The second pleaded termination of the lease for failure to produce oil as covenanted. The third pleaded a forfeiture after failure to remedy the breach as provided by paragraph 16 of the lease. The fourth pleaded an action for damages for failure to protect plaintiff’s property against drainage from wells on contiguous lands. The fifth pleaded an action for damages for failure to produce oil from the existing well. The sixth was an action for wrongfully holding over after termination of the lease.

Defendants answered, denying the essential allegations set forth in the several causes of action and affirmatively alleging, in defense, that the lease was modified by a later agreement between the parties which relieved defendant from drilling further wells on the premises, pending the development of surrounding territory, and preserved its rights under the lease until such time as surrounding development would indicate whether additional expenditures for the development of plaintiffs’ property would be justified. On issues so joined the case went to trial.

The court thereafter, on motion of defendants, granted a nonsuit as to causes of action five and six. The trial, which was being conducted before the court, sitting without a jury, was continued and at the conclusion of the hearing the court found the facts to be substantially as first herein-above related.

The court further found that although the lease provided that the lessee should drill three wells on the property, the parties, by an agreement dated April 28', 1924, relieved defendant company from drilling the two additional wells, until it was determined that a deeper sand existed, but did not relieve it from complying with any of the other terms of the lease. The court then concluded, as a matter of law, that by reason of the failure to produce or save from said well, after March, 1927, oil, gas or other hydrocarbon substances, said lease was terminated by the provisions of paragraph 3 thereof; that by reason of defendant company’s failure to remedy the defaults called to its attention by plaintiffs’ notice of March 12, 1930, the lease was terminated by plaintiffs, as provided in paragraph 16 thereof, by notice of termination served upon said defendant April 30, 1930; that defendants were without right or interest in the property; that plaintiffs were entitled to exclusive possession of the demised premises, together with all personal property, fixtures and improvements placed thereon by the lessee and there remaining on June 30, 1930, and, lastly, that plaintiffs were entitled to damages against defendant company in the sum of $4,513, which sum was, on motion for new trial, reduced to $2,256.50.

Judgment followed for plaintiffs, quieting their title to lots 69 and 70, declaring the lease terminated by plaintiffs as of April 30, 1930, declaring a forfeiture by defendants of all personal property remaining on the premises on June 30, 1930, and awarding plaintiffs, as damages for failure to produce oil and gas from the leased premises and to protect the oil and gas in said premises from drainage by contiguous wells from April 1, 1927, to November 1, 1931, the sum of $2,256.50, plaintiffs to also receive their costs. Defendant drilling company appealed on the judgment-roll alone.

Appellant does not complain of the decree is so far as it quiets plaintiffs’ title to the property. But appellant insists that that portion of the judgment awarding damages is unsupported by the findings and is contradictory thereto; that plaintiffs, having elected to treat the lease as terminated, may not, at the same time, treat it as in existence for the purpose of recovering damages thereunder. In this connection attention is called to the fact that although the judgment declares that the lease was terminated by plaintiffs on April 30, 1930, the court, in its conclusions of law, found, first, that the lease was terminated by the provisions of paragraph 3 thereof (above quoted) in March, 1927, and, secondly, that it was terminated by plaintiffs on April 30, 1930.

We find no difficulty in resolving this inconsistency in support of the declaration of the judgment. To hold that the lease terminated by its own terms in March, 1927, would be to so interpret paragraph 3 thereof as to place the contract in full control of one of the parties to the injury of the other party. Obviously, it was never contemplated that the lessee might terminate the lease at will by simply stopping the production of a completed well and, in reliance upon said provision, escape all responsibility to the other party for such wrongful act. The declaration of the judgment that plaintiffs terminated the lease as of April 30, 1930, is sufficiently supported by the findings and by proper construction of the plain provisions of the lease, particularly the above-quoted paragraph 16 thereof.

It follows that it was proper for the court to award damages for breach of the covenants of the lease, including such damages as would naturally flow from the breach committed. Furthermore, counts III and IV of the complaint proceed on the theory that the plaintiffs suffered by reason of the failure of the defendants to “protect, as far as possible, the oil and gas in said leased premises from drainage by contiguous wells”; that the defendants continuously from March, 1927, to the time of' trial, drained oil from beneath plaintiffs’ property to their damage in the sum of $7,500. The court found that the plaintiffs had suffered damages as alleged in count IV in the sum of $2,256.50. Under any theory of the case the plaintiffs were entitled to damages up to April 30, 1930. It is insisted, however, that any damages awarded for a period subsequent to that date would come within the allegations of the counts as to which a nonsuit was granted. This is not necessarily so, so far as the judgment-roll discloses. The allegations of count IV are broad enough to permit proof of damage to the time of trial, as the defendants remained in possession and continued to drain the plaintiffs’ land up to that time. The court found the amount of damages suffered by the plaintiffs to the time of trial, and it must be assumed in support of the findings and judgment that the proof, which is not before us, was sufficient to support the finding.

The judgment is affirmed.

Shenk, J., Langdon, J., and Waste, O. J., concurred.