Kempton v. Floribel Land & Improvement Co.

The appeal is on the judgment-roll. The only matter to be determined is whether or not the

The plaintiffs sued the corporation and the two principal stockholders. It was alleged that in 1911 the corporation entered into a contract, set forth as an exhibit, to convey to the plaintiffs, upon their payment in installments of $750, a lot of land in Marin County. Payments aggregating $675 were made under the contract and on July 16, 1917, the plaintiffs tendered the balance, demanding conveyance. The defendant corporation refused to convey and it cannot do so. It was alleged “that plaintiffs now elect to treat said inability and refusal of said defendant to perform said contract, as a rescission by said defendant, Floribel Land and Jmprovement Company, a corporation, of said contract, as of date July 16, 1917.” It was further alleged that up to the date of the so-called rescission the plaintiffs had performed all the obligations of the contract binding on them, and that in performance of the contract they had paid to the corporation the various sums of money aggregating $675, “which said sums by said inability and refusal of defendant as aforesaid became and are the property of these plaintiffs, in the hands of the defendant corporation.” The prayer was in terms for the return of the money paid with interest from the respective dates of payment. The findings, conclusions of law, and judgment followed the allegations of the complaint, except that interest was allowed on the aggregate amount of the payments from July 16, 1917. By demurrer the appellants pleaded the bar of the statute of three years against stockholders’ liability. (Code Civ. Proc., sec. 359.)

The code section has received frequent consideration by the supreme court in cases which have made familiar the clear distinction between the accrual of a cause of action on an existing obligation of the corporation and the incurring of the liability of the obligation by the corporation, from which latter point the time begins to run in favor of the stockholder on his collateral statutory liability. Under these, cases the bar of the statute may be raised in favor of the stockholder before suit can be brought on an original contract of the corporation which does not mature or is not

In that case the suit was against the stockholders only, a prior judgment against the corporation being relied upon as establishing the amount of damages suffered by the plaintiffs from injuries caused their crops by the breach of a condition of a lease from the corporation to them. In reliance upon two other cases the plaintiffs in that case contended the statute had not run against the stockholders because, they asserted, .the action was upon an implied contract which arose at the time the damages were sustained. Commenting on this claim, in his able opinion, Mr. Chief Justice Angellotti said: “Nothing said in. Yule v. Bishop, 133 Cal. 574 , [ 62 Pac. 98 , 65 Pac. 1094 ], or in Coulter Dry Goods Co. v. Wentworth Hotel Co., 171 Cal. 500 , [ 153 Pac. 939 ], in discussing Yule v. Bishop, supports counsel in this regard. The decision in Yule v. Bishop, supra, was based upon the ground that under our statutes and decisions the original obligation of the corporation had been extinguished by payment by the indorser of a note of the corporation, such payment by a surety being held to be ‘full performance’ of the obligation within the meaning of section 1473 of the Civil Code. ... Of course, there is no analogy between such a case and one where the plaintiff’s only possible claim is for damages for a breach of an obligation created by a contract Avhieh has in no way been performed or ex-tingAiished. ” (Chambers v. Farnham, 182 Cal. 191 , [ 187 Pac. 733 ].)

The present ease is not one where the plaintiffs’ only possible claim is for damages for the breach of the obligation, nor was the obligation one which had not been extinguished. [1] When it becomes clear that the vendor will not or cannot convey in accordance with the terms of his contract, the vendee may sue for damages for the breach, or he may sue in equity for specific performance or alternative damages, or he may. treat the contract as rescinded by consent and sue at law for the money theretofore paid on account of the purchase price of the land, to be recovered not as damages, but as money had and received by the de

These authorities show that the present case is within the reason of the rule announced in Yule v. Bishop, 133 Cal. 574 , [ 62 Pac. 68 , 65 Pac. 1094 ], and not within that on which Chambers v. Farnham, 182 Cal. 191 , [ 187 Pac. 732 ], was decided. The action was not on the old obligation to convey but on the new obligation to repay money to which the plaintiffs were entitled. The action was brought within

Langdon, P. J., and Nourse, J"., concurred.

A petition to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on May 6, 1920.

Angellotti, C. J., Shaw, J., Wilbur, J., and Lennon, J., concurred.

Olney, J., dissented.