Opinion
Hearing Granted by Supreme Court Oct. 20, 1933.
Appeal from Superior Court, Los Angeles County; Samuel R. Blake, Judge.
Action by Harry T. Young, trustee for Ralph R. Martin and others, against the Three For One Oil Royalties, and others. Judgment for defendants, and plaintiff appeals.
COUNSEL
W. C. Dalzell, of Los Angeles, for appellant.
Haas & Dunnigan, Walter F. Haas, and H. C. Johnston, all of Los Angeles, and McCaughan & McCaughan and Phil N. McCaughan, all of Long Beach, for respondents.
OPINION
CONREY, Presiding Justice.
This action was commenced by complaint filed May 10, 1929. It was tried upon the amended complaint filed August 29, 1929, and the answers thereto. The action is brought by the plaintiff as trustee for Ralph R. Martin, Albert H. Bailey, and C. P. Wiand (assignee of E. D. Lindley) to recover moneys paid by the plaintiff trustee’s said beneficiaries to R. G. Welch as agent for the other defendants and for the Long Beach National Bank, in consideration of the issuance by said bank to said purchasers, of certain certificates of beneficial interest in three oil leases which had been assigned to the bank as trustee by the lessees, who were Dallas, Boland, McKie, and R. G. Welch. In the certificates the trust was described as "Three For One Oil Royalties." The plaintiff appeals from the judgment.
As found by the court, the Martin purchase was made on February 10, 1923; the Bailey purchase on March 1, 1923; and the Lindley purchase on April 12, 1923. It thus appears that this action was not commenced until a date more than six years subsequent to the time of the said purchases; the same being the times when the moneys were paid therefor. The court decided that the statute of limitations had run against each and all of the alleged causes of action prior to the date of commencement of the action.
As the record on appeal consists of the clerk’s transcript and reporter’s transcript, we have no specifications of error other than those set forth in the brief of appellant. In the specifications there found, we find no objection to the first three findings of fact, and therefore we may assume without question that those findings are sustained by the evidence. The first of these findings is: "That the Three For One Oil Royalties was a common-law trust and was known to be such by the plaintiffs Ralph R. Martin, Albert H. Bailey and E. D. Lindley at the time each of them purchased his certificate of beneficial interest therein, and each of them knew at that time that he was buying a beneficial interest or unit in the proceeds and avails arising and growing out of said trust." The second finding states the dates of the several purchases of certificates. The third finding is as follows: "That at the time each of said plaintiffs purchased his said certificate, neither the said Three For One Oil Royalties, nor the trustee, nor any one of these defendants, nor any one acting for or in behalf of them, or either of them, had obtained from the Commissioner of Corporations of the state of California a permit authorizing the sale of said certificates, and that because of the failure to so obtain such permit the certificates issued to plaintiffs Ralph R. Martin, Albert H. Bailey and E. D. Lindley respectively were void and invalid." And it is conceded, without any contention to the contrary, that no permit had been obtained, and that for that reason the certificates were void. In re Girard, 186 Cal. 718, 200 P. 593.
We have no doubt that this action is barred by limitation, unless the facts bring it within the terms of the exception stated in section 338, subd. 4, of the Code of Civil Procedure. According to that section, the period prescribed is three years, for "an action for relief on the ground of fraud or mistake. The cause of action in such case not to be deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake." In this case there is persuasive evidence that the purchasers did not discover such facts until a time less than three years before the complaint was filed, although the court made no finding on this point. It does not appear that the vendors of the certificates made any statement to the purchasers that a permit had been issued by the commissioner. In fact, the vendors had been advised by the commissioner, in accordance with the opinion held by him at that time, that such certificates might be issued lawfully without obtaining any "permit" from the Commissioner of Corporations. But appellant contends that even upon the basis of these facts, the sale of the certificates was fraudulent.
In Boss v. Silent Drama Syndicate, 82 Cal.App. 109, 255 P. 225, 227, the plaintiff was the purchaser of a certificate of stock in an unincorporated association. It was held by the court that the fact that the sale had been made in good faith, and in reliance upon a statement made by the Commissioner of Corporations that no permit was necessary, was not a defense to an action brought by the purchaser as an action to recover damages arising out of fraud and deceit of the defendant in issuing the certificates of stock. The court declared that in such case the defendants are legally responsible for their acts, even though those acts were done through mistake and without any fraudulent intent. This was so, because the sale carried with it an implied representation that the certificate was genuine, and since the certificate was void, the purchase was made "on what in law amounted to a false representation." In that case, however, the action was brought within two years from the date of the transaction. No question of limitation of time was there presented, and there is nothing to indicate that the court was considering or attempting to determine the point of time when the right of action accrued to the plaintiff. In the case at bar it was not found, and apparently it is not true, that there was any false representation actually made, or any concealment of the facts, or that there was any confidential relation between the parties. By reason of a mistake of law, honestly lodged in the minds of the vendors, they sold and issued these certificates, which by reason of the terms of the statute were void. Nevertheless, the fact remains that the sale of the certificates, and their issuance, constituted a representation that the bank was authorized to issue the certificates. This necessarily included an implied representation that the Commissioner of Corporations had issued a permit for the issuance of such certificates. In accordance with decisions directly in point, it follows that in such case an innocent purchaser, unaware of the fact that the representation was false, and without knowledge of facts which would impose the duty of inquiry, may sue for the appropriate relief. Further, with reference to section 338, subd. 4, Code of Civil Procedure: "It appears to be settled in this state that, if fraud enters into a cause of action, the latter clause of this subdivision will apply and the cause of action will not be deemed to have accrued until the facts are discovered, regardless of the form or character of the action." Lightner Mining Co. v. Lane, 161 Cal. 689, 702, 120 P. 771, 777, Ann. Cas. 1913C, 1093. In MacDonald v. Reich & Lievre, Inc., 100 Cal.App. 736, 281 P. 106, where the facts were very much like those of the case at bar, the same rule, and for the same reason, was approved. We conclude that the causes of action herein were not barred by limitation of time.
It is contended by respondents that the Long Beach National Bank, being a banking corporation organized under the laws of the United States, was not subject to regulation by state laws, and that all national banking associations are specifically excepted from the provisions of the Corporate Securities Act of California by the terms of subdivision 3 of section 2 of that act. It is true that said section of the Corporate Securities Act, at the time when the certificates in question here were issued, excepted from its definition of the word "company," "all national banking associations and other corporations organized and existing under and by virtue of the acts of the congress of the United States." Stats. 1917, p. 673. The decisions cited by respondents as bearing upon this question apparently are confined to cases relating to stocks or securities of national banks, or rights of depositors, or other direct obligations, all of which are held to be free from state legislative interference. We have not been directed to any decisions which hold that when a national bank undertakes to assume the responsibilities of a trust, it does not thereby subject itself to state laws governing the subject-matter of the trust. Probably it was in recognition of the need of a better definition that the exception found in section 2 of the Corporate Securities Act with respect to national banks has been amended to read as follows: "Any security issued by and representing an interest in or a direct obligation of a national bank," etc. Corporate Securities Act, § 2 (b), subd. 3, Deering’s Gen. Laws, 1931 Ed., Act 3814, p. 1927. We think that the contention of respondents that in the instant case the trustee, before issuing said "certificates of beneficial interest," was not obligated to procure a permit therefor, is without merit.
Since, in our opinion, the judgment should be reversed, and since in the event of a new trial the record may be different in some respects from the present record, we deem it unnecessary to discuss the various other questions presented in the briefs of counsel.
The judgment is reversed.
We concur: HOUSER, J.; YORK, J.