Opinion
Rehearing Denied March 16, 1937.
Hearing Granted by Supreme Court April 26, 1937.
Appeal from Superior Court, Los Angeles County; Robert W. Kenny, Judge.
Action by Herbert Hellman Aronson and a minor coplaintiff, by Daniel Aronson, the guardian of their estates, and by the named plaintiff individually, against the Bank of America National Trust & Savings Association. From a judgment of dismissal and an order denying permission to amend the complaint after the sustaining of a general demurrer, plaintiffs appeal.
Judgment and order reversed.
Page 824
COUNSEL
Mitchell, Silberberg, Roth & Knupp and Livingston & Livingston, all of Los Angeles, for appellants.
Edmund Nelson, G. L. Berrey, Freston & Files, and James A. McLaughlin, all of Los Angeles (Louis Ferrari, of San Francisco, and Ralph E. Lewis and Sydney Wetzler, both of Los Angeles, of counsel), for respondents.
OPINION
CRAIL, Presiding Justice.
This appeal is taken from a judgment of dismissal entered after a general demurrer to plaintiffs’ complaint was sustained without leave to amend, and from an order denying a motion for permission to amend.
The action is one for damages, based upon alleged unlawful transfers of certificates of stock by certain banking corporations. For the sake of brevity and clearness we set forth the facts informally which are alleged in the complaint and in the proposed amended complaint and which are admitted by the demurrer to be true, rather than in the formal way in which they are set forth in said complaints. These pleadings fill 101 pages of the printed transcript. In 1920 plaintiffs’ mother died intestate, leaving as her sole heirs the plaintiffs, who were minors. Two administrators were appointed in 1920 and continued to act until October 5, 1925, at which time their account was settled and approved by the court and the estate distributed to the plaintiffs who were still minors. It was ordered by the decree of distribution that all property of every kind and nature belonging to said estate, whether described in said decree or not, be distributed to the plaintiffs. Although the stock in question was inventoried as an asset of the estate, no accounting of the transfers thereof was ever made to the probate court. Of the original stock certificates which are alleged to have been unlawfully transferred, some stood in the name of the decedent and the remainder in the name of the estate of such decedent. Complaint is made of four separate wrongful transfers, occurring on the following dates: May 25, 1925; March 27, 1925; November 16, 1926; and June 13, 1927. It will be noted that two of these transfers took place prior to the distribution of the mother’s estate, and that the other two occurred subsequent thereto.
The certificates in question were for shares of stock in certain banking corporations, of which both administrators were directors and one administrator was the president of one of the corporations. The old certificates were canceled and new certificates issued without any order of court, or other authority for such transfer; in two instances, upon the indorsement of one administrator only, and in the other two instances, upon the indorsement of both. One transfer was made directly to one administrator in his personal capacity, another was made to a company bearing the family name of the administrators, and the other two were made to third persons who were "dummies" for the administrators. Thereafter, by means of various consolidations and mergers, defendant bank succeeded to the assets and liabilities of the banking corporations which are alleged to have unlawfully transferred the stock certificates in question.
Since April 21, 1926, one or more persons have been the duly appointed and acting general guardians of the persons and estates of the plaintiffs. Neither the plaintiffs nor their guardians have demanded of any of the above-mentioned banks that a certificate be issued to them for the shares of stock which are the subject of the alleged conversions. The complaint in this action was filed on January 7, 1936, almost nine years after the last alleged conversion. One of the plaintiffs was a minor at the time the complaint was filed; the other had reached his majority less than two years prior thereto.
The demurrer was sustained, and plaintiffs were denied leave to amend by the trial court apparently upon the ground that the complaint and proposed amended complaint disclosed that the cause of action was barred by the statute of limitations (Code Civ.Proc. § 339) and that the facts, which were disclosed, were such that it would be impossible for the plaintiffs to state a cause of action which would not be barred by the statute of limitations.
In this respect we are asked to decide whether or not the running of the statutory period where there is a general guardian of a minor is a bar to a subsequent action by the minor. The primary contention of the defendant (respondent) is that the answer to the question is yes. We are of the view that the answer is no.
In deciding the question we have before us the decision of the Supreme Court in denying a petition for hearing, after the decision of the Appellate Court, in Maier v. Harbor Center Land Co., 41 Cal.App. 79, 182 P. 345, 346. In that case, an action was brought by a guardian ad litem, on behalf of a minor, seeking to cancel a contract for the purchase of realty and to recover money paid under the contract. Respondent contended that the statute of limitations barred the action because, prior to the appointment of the guardian ad litem, the minor had been represented by a general guardian who was at all times competent to sue in behalf of the minor. In denying the petition for hearing, the Supreme Court made the following statement: "We desire, however, to say, in respect to the claims made under the statute of limitations, that in our opinion a complete answer to all such claims is to be found in section 352 of our Code of Civil Procedure, in view of which the statute of limitations could not commence to run prior to the attainment of his majority by the minor." Said section reads as follows: "If a person entitled to bring an action, mentioned in chapter three of this title, be, at the time the cause of action accrued. * * * within the age of majority * * the time of such disability is not a part of the time limited for the commencement of the action."
Defendant relies upon a sentence contained in Patchett v. Pacific Coast Ry. Co., 100 Cal. 505, 509, 35 P. 73, 75, to the effect that, when a cause of action "vests in an executor, guardian, or trustee" who is under no legal disability, the statute will commence to run, despite the disability of a minor heir, ward, or beneficiary. We cannot accept that language as the law of this case. In that case, the court was considering a trustee-beneficiary relationship solely. As we shall hereafter point out, a guardian-ward relationship is inherently different. The question as to a guardian-ward relationship was not involved in the case. The insertion of the word "guardian" was an inadvertence. In any event, the word, so inserted, was mere obiter dictum.
It will be noted that respondent’s contention is conditioned upon the vesting of the cause of action in the guardian. Our Supreme Court has concluded this argument also by holding that such cause of action vests in the ward and not in the guardian. Dixon v. Gries (Cardozo), 106 Cal. 506, 39 P. 857. Since the right of action vests in the ward, it is not affected by the failure of his guardian to sue within the prescribed period, and the rule that when a right of action in a trustee holding legal title becomes barred by limitation the right of the cestui que trust is also barred has no application. Brown v. Midland Nat. Bank (Tex.Civ.App.) 268 S.W. 226.
The underlying reason for the difference in the rule as to the running of the statute, which is applied to guardians, and that which is applied to executors, administrators, and trustees, is clearly shown in the case of O’Shea v. Wilkinson, 95 Cal. 454, 30 P. 588, 589, wherein the court states: "An executor, administrator, or trustee of an express trust, or a person expressly authorized by statute, may sue or be sued without joining with him the persons for whose benefit the action is prosecuted, but a guardian does not belong to any of these classes. The guardian appears in the action simply to manage and take care of the interests of the infant when he [the infant] is a party to the action, and [the guardian] ‘is no more a party to the action than the attorney, who appears in an action for one who has attained his majority, is a party to the suit in which he enters his appearance.’ Emeric v. Alvarado, 64 Cal. 529, 2 P. 418; Justice v. Ott, 87 Cal. 530, 25 P. 691." A further distinction lies in the fact that, although the guardian could have commenced the action within time and failed to do so, the ward, because of his incompetency, may have been--indeed is presumed to have been--unable to impart to his guardian sufficient facts to disclose the existence of a cause of action, was under certain difficulties with regard to testifying about them, and by reason of the same disability may have been totally unaware of his rights. The incompetent should not be penalized for his disabilities. To meet this situation, section 352 of the Code of Civil Procedure and other similar statutes, tolling the statute of limitations during the continuance of the period of disability in certain specified cases, were enacted.
The rule which we have adopted as prevailing in this case has been generally adopted in the other jurisdictions of the United States. For a summary of the cases on the subject see 6 A.L.R. 1690, entitled, "II. Appointment of General Guardian for Infant. a. Where Right of Action is in Infant."
The contention is next made by defendant that the causes of action based upon the conversions which took place prior to the settling of the final account of the administrators are barred by former section 1637 of the Code of Civil Procedure, now section 931 of the Probate Code. While it is true that those Code sections dealing with the conclusiveness of an order settling a final account could be set up as a defense to an action as between the estate and persons interested in the estate and also, as between the executor or administrator and those interested in the estate, it is obvious that those sections have no application to a third party, such as respondent bank, which has no interest in the estate. The liability of the respondent was not involved in the proceedings by which the administrators undertook to settle their affairs with the heirs at law.
It is next contended in support of the judgment that the cause of action for the conversions which occurred prior to distribution remained in the administrators thereafter and that, since the statute of limitations has run against the administrators, it constitutes a bar to the present action by the heirs. With this contention we are unable to agree. When the decree of distribution was made, the causes of action for such conversions were vested absolutely in the distributees [Stoner v. Security Trust Co., 47 Cal.App. 216, 190 P. 500, Lindley v. United States (C.C.A.) 59 F.2d 336, and MacKay v. Clark Rig Bldg. Co., 5 Cal.App.(2d) 44, 42 P.2d 341], who at that time were under the disability of minority.
The remaining contentions of defendant deal with the question whether or not a cause of action is stated in the amended complaint, irrespective of the statute of limitations. Defendant argues that no duty is imposed upon a banking corporation to inquire into the authority of an administrator to make such a transfer. Such contention finds no support, however, for the general rule is that a corporation is chargeable with notice of restrictions imposed upon the powers of executors and administrators by the general law and is bound at its peril to see that the provisions of the law have been complied with. Volume 12, Fletcher’s Cyclopedia of Corporations (Perm.Ed.1932) § 5549. Before canceling a certificate and issuing a new one, it is the duty of the corporation to know whether there is authority in the person demanding the transfer to make it. Quay v. Presidio, etc., R. Co., 82 Cal. 1, 22 P. 925; Tafft v. Presidio, etc., R. Co., 84 Cal. 131, 24 P. 436, 11 L.R.A. 125, 18 Am.St.Rep. 166.
Defendant further contends that a demand for the issuance of certificates representing the shares of stock must be made prior to the bringing of the action for conversion. Such is not the law. Ham v. Henderson, 50 Cal. 367; Scriber v. Masten, 11 Cal. 303; Mier v. Southern California Ice Co., 56 Cal.App. 512, 206 P. 83. The rule is no different in the case of conversion of shares of stock than in the case of other types of personal property. The bringing of the action is a sufficient demand. That the unauthorized transfer of such certificates constitutes a conversion cannot be doubted. Tafft v. Presidio, etc., R. Co., 84 Cal. 131, 24 P. 436, 11 L.R.A. 125, 18 Am.St.Rep. 166.
The remaining contentions of defendant are concerned with uncertainties and ambiguities in the pleadings. In our view of the pleadings these uncertainties and ambiguities, if any, either have been eliminated by the proposed amended complaint, or are capable of being eliminated by further amendment. At least the plaintiffs are entitled to try to eliminate them if they desire to do so, and their motion for permission to amend indicates that they do desire to try. We do not deem it necessary to set forth these minor contentions in detail. In order to promote justice, great liberality should be allowed in permitting amendments to complaints before trial, to the end that cases may be tried upon the merits. George v. Simpson, 14 Cal.App.(2d) 571, 58 P.2d 666.
Judgment and order reversed.
We concur: WOOD, J.; McCOMB, Justice pro tem.