trust in a whole tract or parcel of land does not preclude proof of a trust in a part thereof. Osborne v. Endicott, 6 Cal. 149. This whole theory assumes that the conveyance to A. is made with the knowledge and consent, express or implied, of B., who pays the price, that the whole transaction is in pursuance of a common understanding or arrangement. "If the conveyance is taken by A. secretly, contrary to B.'s wishes, in violation of a duty owed to him, or in fraud of his rights, the trust which arises in B.'s favor is not resulting, but is a constructive trust." Note to section 1037, Pom. Eq. Jur., and cases there cited. And it matters not whether the conveyance be taken to one or several, whether jointly or severally, the trust results to the man who advances the purchase money. Constructive trusts arise in that class of cases where there is no intention of the parties to create a trust, and usually contrary to the intention of the party holding the legal title, and where there is no express or implied, written or verbal, declaration of a trust. "They arise when the legal title to property is obtained by a person in violation, express or implied, of some duty owed to the one who is equitably entitled, and when the property thus obtained is held in hostility to his beneficial rights of ownership." Pom. Eq. Jur. § 1044. In most cases of constructive trust, pure and simple, an element of fraud, actual or constructive, is the basis upon which the trust is founded. Equity sometimes proceeds upon the maxim that an intention to fulfill an obligation should be imputed, and assumes that the purchaser intended to act in pursuance of his fiduciary duty, as in case of a trustee who uses trust funds to pay for property purchased in his own name, though no doubt in many such cases the intention is to violate duty.

From the foregoing brief definitions of resulting and constructive trusts, it becomes apparent that the facts of the present case, as found by the court, and the evidence combined, causes it to fall within the principle of a resulting trust. The plaintiff in effect paid $200 of the purchase price. Although at the date of payment it was intended as a payment pro tanto for the land for which he had contracted, yet when the defendants subsequently purchased the whole tract, and agreed to convey to plaintiff that portion which he had agreed to purchase, this sum was deducted from the price paid, thus virtually placing plaintiff in the position of one who advanced a portion of the purchase money. We have said the facts as found by the court and the evidence combined show this condition of things. Unfortunately, however, for this theory, there is nothing either in the complaint or in the findings to support it. According to the complaint, plaintiff made a purchase of a tract of land, paid part of the purchase money, and was to pay the residue within one year.

His vendor then sold the land to defendants, who had full notice, and refused to consummate the transaction and convey the property, wherefore he seeks the specific performance of the contract. The findings show that the contract was verbal, and fail to show such part performance as to authorize a decree for specific performance. There is nothing averred in the complaint, or found by the court, which places the defendants in a different position from that which the original vendor would have occupied had he not conveyed. The evidence tends to show, not that defendants are liable as purchasers with notice, but that, by virtue of having advanced a portion of the purchase price, plaintiff acquired, as against them, a right not inherent in him as a purchaser, but which equity gives to him by virtue of his relation to the defendants, and devolves upon the latter a duty not arising in their character of purchasers, but growing out of the fact that in making such purchase they availed themselves of the money paid by plaintiff, out of which a new relation sprang, viz. that of trustee and beneficiary, or a resulting trust in favor of plaintiff. This new relation being foreign to anything contained in the pleading or findings, we are not authorized to invoke it, even in aid of the judgment. The order and judgment appealed from should be reversed, with leave to the plaintiff to amend his complaint, if he shall be so advised.

We concur: TEMPLE, C.; BELCHER, C.

GAROUTTE and MCFARLAND, JJ. For the reasons given in the foregoing opinion the judgment and order appealed from are reversed, with leave to the plaintiff to amend his complaint, if he shall be so advised.

HARRISON, J. I concur in the judgment.

(99 Cal. 617) REED et al. v. NORTON. (No. 19,127.) (Supreme Court of California. Oct. 6, 1893.) MECHANICS' LIENS-ENFORCEMENT-PLEADING AND PROOF.

Where the complaint in an action to foreclose a mechanic's lien alleges that there was no contract between the owner and the person who erected the building, there can be no judgment on proof that there was, and it is error for the court, on finding the latter, and without an amendment, to render judgment for plaintiff to the extent of 25 per cent. of the contract price, which the owner failed to keep back, as required by the statute.

Department 2. Appeal from superior court, San Luis Obispo county; W. B. Cope, Judge.

Consolidated actions by C. H. Reed and others against Thomas Norton and another. From a judgment for plaintiffs, and an order denying a new trial, defendant Norton appeals. Affirmed in part, and reversed in part.

Wm. Shipsey and Graves & Graves, for appellant. J. M. Wilcoxon, for respondents.

MCFARLAND, J. This is a consolidation of eight actions to foreclose liens under the mechanic's lien law against defendant Thomas Norton, the owner of the building in question, and Thomas Helm, original contractor. Judgment went for all the plaintiffs except Knight, and Norton appeals from the judgment, and from an order denying his motion for a new trial.

The case was here on a former appeal. 90 Cal. 590, 26 Pac. Rep. 767, and 27 Pac. Rep. 426. At that time the trial court had held that the written contract between Norton and Helm was void for want of proper recordation, etc., and had given judgment for plaintiffs for the full amount of their claims, which amount exceeded 25 per cent. of the contract price. On that appeal this court held that errors had been committed with respect to two of the liens, (those of Smith & Waite and Knight,) but it also held that the court below erred in finding that the written contract between Norton and Helm was void, and for these reasons the judg ment was reversed. In the opinion it was said that Norton did not retain, for 35 days, 25 per cent. of the contract price, and that "he is responsible to that extent, but no further, to those who make good their claim to it." But there was no point raised or decided as to the sufficiency of the complaints, as they then stood, to sustain judgments, upon the theory that there was a valid written contract between Norton and Helm. As a fact the complaints-all except that of Schwartz, Beebee & Co.-expressly aver that there was no contract between Norton and Helm. The averments are that the lastnamed persons did sign a written contract by which Helm was to construct the building for $5,500, but that neither the contract nor a memorandum thereof was recorded before the work was commenced, or at any time; and that Helm was merely the "agent" of Norton, and as such agent bought the materials for which the liens were filed. When the remittitur went down after the first appeal the complaints were not amended so as to aver a valid contract between defendants Norton and Helm; but for the purpose of further fortifying the original position, that there was no such valid contract, each of the complaints was amended by adding thereto a clause averring that "said defendants mutually agreed to, and did, abrogate, cancel, and annul said contract;" that, after work had been commenced, Norton filed in the recorder's office "what purported to be a memorandum thereof, but which was not a memorandum of the same;" and that they merely conspired together to pretend that the contract price was only $5,500, whereas the reasonable value of the materials and labor was $9,000. At the trial respondents first introduced, over the objection and ex

ception of appellant, the written contract between Norton and Helm, and then immediately introduced the said Helm as a witness, who testified substantially that the contract was a mere sham; that Norton was to "run the job," and he (Helm) was "to work on it by the day;" that he "signed the contract in evidence merely as a guaranty that Norton would have a proper job done;" and that he (Helm) "never employed anybody to do anything on this building," "never hired a man nor discharged a man,' and "did not buy any of the lumber that went into the building." But the court found that there was such a contract, and that a memorandum thereof was recorded; that Norton and Helm did not conspire to abrogate and annul, and did not abrogate and annul, said contract; that "all of said plaintiffs, and their several assignors, at all times while they, and each of them, were furnishing materials for, and performing labor upon, said building, treated said contract between said Norton and Helm as valid and subsisting;" that they made their contracts for materials and labor with said Helm individually, not as "agent;" that "at no time during the erection and construction of said building was defendant Helm otherwise connected therewith than as contractor, as aforesaid;" and that the plaintiffs, under said contract, are entitled to liens "for the payment to each of a pro rata portion of the sum of $1,375," which last sum is 25 per cent. of the said contract price of $5,500.

We do not see how the judgment can be affirmed without violating well-settled principles. "A plaintiff must recover, if at all. upon the cause of action set out in the complaint, and not upon some other, which may be developed by the proofs." Mondran v. Goux, 51 Cal. 151. "The consequence of a variance between the averments in a pleading and the proof are the same under our system of practice as at common law, except that they may be, to a great extent, obviated by amendments to pleadings, which are allowed with great liberality." Stout v. Shuster, 28 Cal. 65. See, also, Johnson v. Moss, 45 Cal. 515; Goss v. Strelitz, 54 Cal. 641. In the complaints in the case at bar the respondents' causes of action are based upon averments of facts which the findings show not to be true; and the judgment is based upon facts which are denied in the complaints. The allegata and probata, as shown by the findings, do not agree. In an action to enforce the lien of a mechanic or material man, the complaint must show, either that the building was constructed under a valid statutory contract, or that it was not; and a complaint upon the one theory will not warrant a judgment rendered upon the other. In their complaints respondents allege the facts, and go upon the theory that there was no contract, that they dealt directly with the owner of the building, and that he is liable for the whole of their

claims. The court finds and proceeds upon the theory that these averments of respondents are not true, that there was a valid. contract, and that respondents dealt directly with Helm as contractor, and not with Norton. The judgment must therefore be reversed. Upon the theory on which it was rendered, the complaint does not state facts sufficient to constitute a cause of action. The respondents Schwartz, Beebee & Co. aver in their complaint that they sold the materials for which they claim their lien directly to the appellant, Norton, and contracted with him personally. The court finds this averment to be true. It also finds all the other issues as to the liens of these respondents in their favor; and, as there is a fair conflict of evidence as to these issues, the judgment, so far as it relates to these respondents, should stand. The judgment and order denying a new trial are reversed, and the cause remanded, except as to that part of the judgment which is in favor of respondents L. Schwartz, W. L. Beebee, and A. Jones, and, as to said last-named respondents, the judgment and order appealed from are affirmed.

We concur: DE HAVEN, J., FITZGERALD, J.

(93 Cal. 612)

HUNT v. WARD. (No. 19,152.) (Supreme Court of California. Oct. 6, 1893.) CORPORATIONS-LIABILITY OF STOCKHOLDERS— LIMITATION OF ACTIONS.

1. Though under the general rule, as expressed in the title of the statute of limitations, (Code Civil Proc. §§ 312-363,) actions can be commenced within the prescribed periods "after the cause of action has accrued," section 359 declares that the title does not affect actions against stockholders of a corporation to enforce a liability created by law, but that such actions must be brought within three years after "the liability was created," and therefore an action against a stockholder to enforce his liability for a debt of the corporation cannot be brought after three years after the debt was created, even though no cause of action may have accrued.

2. This is not affected by the clause of the constitution declaring the liability of stockholders of corporations, since the statement of a right in the constitution is always subject to reasonable statutory limitations of the time within which it may be enforced, unless the constitution itself otherwise declares.

Department 2. Appeal from superior court, Los Angeles county; Walter Van Dyke, Judge.

Action by John W. Hunt against Edwin Ward. From a judgment for plaintiff, and an order denying a new trial, defendant appeals. Reversed.

Lee & Scott, for appellant. Wells, Monroe & Lee, for respondent.

MCFARLAND, J. Action to recover of defendant, Ward, his proportionate share of the alleged indebtedness of a corporation in which he was a stockholder. Judgment went for plaintiff, from which, and from an or

der denying a new trial, said defendant appeals.

Appellant contends, among other things, that the complaint does not state facts sufficient to constitute a cause of action, and that the action is barred by section 359, Code Civil Proc. It is averred in the complaint that on February 20, 1888, a certain corporation called the Exchange Block Company made and delivered to respondent its promissory note for $7,500, payable one year after date, with 12 per cent. per annum interest, and also executed to respondent a mortgage on certain corporate property to secure said note; that afterwards respondent foreclosed said mortgage, and that after the sale of the mortgaged premises there was a deficiency of $3,291.50, for which judgment was docketed against said corporation on January 9, 1891, and that the same is wholly unsatisfied; and that during the times mentioned appellant owned such a number of shares of the corporate stock as would make his proportionate share of said deficiency judgment $827.50, for which last-mentioned sum judgment is prayed in this present action against appellant. It will be observed that there is no averment of the time of the incurring of the indebtedness or liability for which the note was given, or of the nature of such indebtedness,-the facts upon which it was founded; the only averment on the subject being the making and execution of the note and mortgage. The complaint bases the right to recover on the making of the note and the judgment against the corporation; but, as the liability of a stockholder is a separate and independent one, commencing with and dependent upon the original indebtedness, it is doubtful if the averments of the complaint in the case at bar are sufficient. Indeed, such averments were directly held by this court in Tilden v. Gashwiler, No. 4,053, decided in 1875, to be insufficient. In that case the complaint did aver that the corporation was indebted to plaintiff's assignor in a stated sum of money, and that in consideration of such indebtedness it made its promissory note, upon which it was sought to hold the stockholder; but the trial court sustained a general demurrer upon the ground that the liability of the stockholder was upon the original indebtedness, and not upon the note, and that there was no averment of facts showing such indebtedness. The plaintiff appealed, and the appellate court, after a most elaborate argument, as shown by the briefs in the record, affirmed the judgment. But as that case was not reported, and there was no written opinion delivered in it,-it being simply noticed in 50 Cal. 668, under the head of "Cases not Reported,"-it cannot be taken as known generally to the bar, and therefore should not have much, if any, weight as authority. We allude to it merely to show how the court viewed the question at that time, and to illustrate the

possible danger of relying upon such averments as those contained in the complaint in the case at bar; and, as we think that appellant's plea of the statute of limitations is a perfect defense to this action, we prefer not to say more upon the question above suggested, leaving its final decision to some case in which it must necessarily be determined.

As the note of the corporation is alleged to have been made on February 20, 1888, the liability of the stockholder was created, under any view, at least as early as the date of the note; and this present action was not commenced within three years after that date. The statutes of limitation of this state are contained in tit. 2, part 2, Code Civil Proc. §§ 312-363; and the general rule, as expressed in said title, is that actions can be commenced within the prescribed periods after the cause of action shall have accrued. But section 359 provides that "this title does not affect actions against stockholders of a corporation enforce a liability created by law; but such actions must be brought within three years after *

串

to

* the liability was created." And it was definitely settled in the cases of Green V. Beckman, 59 Cal. 545, and Moore v. Boyd, 74 Cal. 167, 15 Pac. Rep. 670, that a stockholder's liability is a "liability created by law," within the meaning of said section 359. We do not see how this plain, clear language of section 359 can be explained away by any rule or any number of rules of construction. There is no room for the play of interpretation when the language under review leaves no doubt as to the meaning of those who used it. The legislature, having in former sections of said title 2 declared the general rule that actions should be commenced within the prescribed periods after the accruing of the cause of action, by section 359 deliberately provided that such rule should not apply to an action against a stockholder to enforce his liability for his proportionate share of the corporate debts, but that such action should be brought within three years after the liability was created. Of course, there is a clear and wide distinction between the creation of a liability and the accruing of a cause of action thereon, and section 359, ex industria, emphasizes that distinction. A liability may be absolute or contingent; it may be unconditional or limited; it may be presently enforceable by action, or there may be time given for its performance; but, whatever its character, it is created by the consummation of the contract, act, or omission by which the liability is incurred. If the appellant, before the maturity of the note, had sold his stock to a third person, who held it when the note matured, the appellant, and not the third person, would have been liable as a stockholder; which illustrates, if illustration be needed of a thing so plain, the meaning of the words, "after

the liability was created," as used in said section 359.

It is sought to overcome the plain language of the Code by supposing a case where the corporation had given a note not due until more than three years after date, and suggesting that in such a case the statute would have run against the stockholders before the accruing of any right of action against them. But if we assume that in such a case, according to respondent's view, the stockholders could be sued only upon the note, still the situation-called by counsel "an anomalous condition of affairs"-would be the result of the voluntary act of the creditor done in the face of the law. Such a condition of affairs would not be the necessary outcome of the law, for the Code gives the creditor ample room and time to subject stockholders to their independent liability for the indebtedness of the corporation. But if he chooses to make a contract with the corporation, by which its payment of the indebtedness is postponed beyond the three-years limitation in favor of the stockholders, he simply does an act which practically waives his right against the latter,-assuming, of course, that his only cause of action against the stockholders is upon the note of the corporation. It must be remembered that the right to pursue the stockholder at all does not exist at common law, but is solely the creature of the written law; and that it must be exercised upon the conditions and within the limits which the written law prescribes. The invocation by respondent of the clause of the state constitution declaring the liability of stockholders of corporations does not strengthen his position, for the statement of a right in a constitution is always subject to reasonable statutory limitations of the time within which it may be enforced, unless otherwise declared in the constitution itself; and three years is certainly not an unreasonable period of imitation. We see, therefore, no reason for disregarding the plain language of section 359. We need not inquire into the policy of the section; but, as certificates of stock of many corporations pass frequently from hand to hand, it may well be assumed that the legislature intended to protect temporary stockholders from the power of officers of corporations and their creditors to indefinitely extend the enforcement of liabilities created while they happened to be holders of stock. If the policy be unwise or bad, it is for the legislature to change it.

No cases have been cited where the point here involved was before the court; the question is res integra. The case nearest in point is that of Redington v. Cornwell, 90 Cal. 63, 27 Pac. Rep. 40, where the corporation had given its promissory note in consideration of a mutual open account, and the court, in considering the application of the statute of limitation to stockholders, used

this language: "The averment as to the mutual open account in the third amended complaint is of doubtful sufficiency to extend the period of limitation even against the corporation. As to the stockholders, it can have no effect whatever, even though sufficiently alleged. The corporation had no more power to extend the period of limitation as against the stockholders by a mutual open account than by making its promissory note. The liability of the stockholders is created and exists by statute. It arises when a debt is contracted by the corporation. It is limited to three years from the time it arises, and it is well settled in this state that the corporation has no power to extend that limitation without direct authority from the stockholders."

As the foregoing views are determinative of the case in favor of appellant, it is not necessary to discuss the admissibility in evidence of the judgment against the corporation, or any of the other questions argued by counsel. The judgment and order appealed from are reversed, and the cause remanded.

We concur: DE HAVEN, J.; FITZGERALD, J.

(99 Cal. 604)

BANK OF SHASTA v. BOYD et al. (No. 18,149.)

(Supreme Court of California. Oct. 5, 1893.) ESTOPPEL-NOTE TO CORPORATION-PLEADINGSHAM ANSWER.

1. The maker of a note is estopped from denying that the payee is or was a corporation, by his having dealt with it as such, and received the consideration of the note.

2. Where it appears from the copies of a note and mortgage sued on, and which are set out in the complaint, that the action is not barred, an unverified answer setting up the statute of limitations, since it admits the due execution of the note and mortgage, is properly stricken out as sham.

3. In an action on a note made to plaintiff, an allegation in the complaint that plaintiff is the owner is unnecessary, and may be treated as surplusage, and a general denial raises no issue.

4. In an action on a note, an allegation in the complaint tha. it has not been paid is material, and, when the complaint is unverified, the issue of nonpayment is raised by a general denial, so that the answer cannot be stricken out as sham.

Commissioners' decision. Department 2. Appeal from superior court, Lassen county; W. T. Masten, Judge.

Action by the Bank of Shasta against James T. Boyd and another. From a judgment for plaintiff, defendant James T. Boyd appeals. Reversed.

Spencer & Raker, for appellant. Clay W. Taylor, J. Chadbourne, and C. McClaskey, for respondent.

VANCLIEF, C. On August 4, 1884, the defendants made to plaintiff their joint and several promissory note for the sum of $2,v.34P.no.3-22

000, payable two years after date, and at the same time, to secure the payment of said note, executed to plaintiff a mortgage on certain lands situate in the county of Lassen. This action was commenced in Lassen county on July 28, 1890, to foreclose the mortgage, and to obtain a personal judgment for deficiency, etc. Copies of the note and mortgage were set out in, and made parts of, the complaint. The complaint was not verified. James T. Boyd, for himself alone, filed and served the following,-an unverified answer: "(1) That he denies generally and specifically each and every allegation thereof contained in plaintiff's said complaint. (2) For a further and separate and second defense to plaintiff's complaint filed herein, the said defendant, James T. Boyd, alleges and avers as follows, to wit: That plaintiff's cause of action is barred by the provisions of section 337 of the Code of Civil

Procedure of the state of California." Plaintiff's attorney moved, on the complaint and answer, to strike out this answer, on the grounds that it was "sham and irrelevant, because the allegations of the complaint are admitted," and "that said answer is not filed in good faith." The court granted the motion, and decreed a foreclosure, to all which defendant excepted. From this final decree the defendant James T. Boyd brings this appeal on the judgment roll, containing a bill of exceptions showing the facts above stated.

1. Counsel for appellant contend that the answer raised a material issue as to whether the plaintiff was a corporation. It is to be observed, in the first place, that the defendants, having dealt with plaintiff as a corporation, and received from it the consideration of the note, are estopped from denying that it was and is a corporation. Association v. Clark, 67 Cal. 634, 8 Pac. Rep. 445; Oregonian Ry. Co. v. Oregon Ry. & Nav. Co., 10 Sawy. 464, 22 Fed. Rep. 245; Cowell v. Springs Co., 100 U. S. 61; Close v. Glenwood Cemetery, 107 U. S. 466, 2 Sup. Ct. Rep. 267; Bigelow, Estop. pp. 527-529, and cases there cited; Mor. Corp. § 750; Spel. Corp. § 44. In the second place, as a general rule, the issue cannot be raised by a general denial of all allegations of the complaint, as in this case. Navigation Co. v. Wright, 8 Cal. 585; SteamBoat Co. v. Sewall, 78 Me. 167, 3 Atl. Rep. 181; Mor. Corp. § 772; Spel. Corp. §§ 46, 47. To say that a plaintiff, suing as a corporation, is not a corporation, is to say it has not legal capacity to sue, and it is said this defense must be specially pleaded; but, inasmuch as defendants in this case were estopped from denying that plaintiff was a corporation, it is unnecessary to decide this question.

2. It is claimed that the plea of the statute of limitations tendered a material issue, and therefore should not have been stricken out. The ready answer to this is that on the face of the pleadings it appeared to be sham. Not being verified, the answer admitted the