AZEVEDO ET AL v. AZEVEDO ET AL

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District Court of Appeal, Third District, California.

AZEVEDO ET AL. v. AZEVEDO ET AL.

Civ. 6622.

Decided: February 13, 1942

Cross & Brandt, of San Francisco, for appellants. J. E. McCurdy, of San Mateo, and J. W. Coleberd, of South San Francisco, for respondents.

This action was commenced to compel an accounting arising out of a written contract. At the close of plaintiffs' case the court granted a motion for nonsuit upon the following grounds:

1. That plaintiffs had failed to prove sufficient facts to entitle them to a judgment;

2. That the action was barred by section 337, subdivision 1; section 338, subdivision 4; section 339, subdivision 1; and section 343 of the Code of Civil Procedure;

3. That recovery was barred by laches.

The appeal is from a judgment of nonsuit.

The facts proven may be summarized as follows: Prior to February 8, 1926, the Azevedo family lived near Half Moon Bay. Antone V. Azevedo was the father. The mother was named Anna. The two sons are the defendants in this action. They were all engaged in extensive farming activities. Evidently with an intention to retire from active management, the father, on said date, executed with his sons an instrument which was a conditional sales contract. By the terms of the agreement Antone V. Azevedo agreed to sell to Antone Azevedo, Jr., and Frank Azevedo, and they agreed to buy, 90 head of cattle, more or less, 12 horses and colts, certain hogs and other livestock, dairying and farming machinery, implements, tools and utensils, dairying business, interests in the leaseholds belonging or appertaining to the ranches upon which the personal property was located, for the sum of $8400. Title to all of the property was retained by the vendor, Antone V. Azevedo, until such time as all of the property had been paid for in full by the vendees. Payment in full for the property was to be made within three years after the date of the agreement. In addition to the usual provisions contained in a conditional sales agreement, there were the clauses which read as follows:

“That all net profits made and received from the operation and conducting of the same are to be paid annually and on or before the first day of November of each year, to said party of the first part, and be applied on account of the purchase price of said personal property. * * *

“It is further understood and agreed that title to all of said personal property shall remain in the party of the first part until he has been paid the full purchase price thereof, and that should it be to the interest of the parties hereto, that some of said personal property, such as cattle and hogs, should be sold, that the same may be sold, but that the entire sale price thereof shall be paid to the party of the first part and apply on account of the balance due under this agreement.”

In the complaint which was filed on March 31, 1938, it is alleged that after the making of the agreement, Antone V. Azevedo assigned to his wife Annie Azevedo, (also known as Anna Azevedo), all of his right, title and interest in and to said agreement and the personal property therein described, together with all moneys due, or to become due, by virtue of said agreement; that on the 4th day of July 1937, Annie Azevedo died; that the plaintiffs are the duly appointed, qualified and acting administrator and administratrix, respectively, of the estate of Annie Azevedo; that Antone V. Azevedo and Annie Azevedo were the father and mother, respectively of the defendants; that in pursuance of the agreement, the property mentioned therein was delivered to, and accepted by defendants on or about the date of the agreement; and that ever since, they have been, and now are, in possession of the same, except what they have sold; that defendants have sold various articles of property mentioned in the agreement, and have been paid therefor, amounting in all to approximately $8,400; that they have paid on account of this sum only $2,765; that a demand has been made on defendants for an accounting, which they have refused to make; and it is prayed that defendants be ordered to account to plaintiffs, and that defendants be ordered to pay over to plaintiffs the amount ascertained to be due by said accounting. Defendants admitted in their answer, the execution of the agreement; the death of Annie Azevedo, the appointment and qualification of plaintiffs as administrator and administratrix, respectively, of her estate; that Antone V. Azevedo and Annie Azevedo were the father and mother, respectively, of defendants; the delivery to defendants by Antone V. Azevedo of the property mentioned in the agreement, the demand for the accounting, and that they had refused to give the same. The remaining allegations of the complaint were denied. Defendants set up as defenses the statute of limitations, alleging that the action was barred by subdivision 1 of section 337, by subdivision 4 of section 338, by subdivision 1 of section 339, and by the provisions of section 343, all of the Code of Civil Procedure. In addition, they set up the defense of laches.

Evidence produced by plaintiffs showed that respondents had, in 1926, sold a number of head of livestock, and some equipment, for which no credit had been given the vendor upon the purchase price, and no account had ever been rendered. Except for the bar of the statute of limitations, plaintiffs established a prima facie case.

As we view the action, it is brought to recover upon the contract. Respondents agreed therein to credit the amount received from such sales upon the purchase price, and failed to do so. Judgment is prayed for the amount which may be found due. Section 337, subdivision 1 of the Code of Civil Procedure, which fixed a four year limitation upon actions founded upon instruments in writing, is therefore applicable and bars recovery. This would be true whether or not the Statute began to run when such sales were made, or at the end of the three years allowed in the contract for performance. More than four years elapsed before the action was commenced, whichever starting–point is adopted.

It is earnestly contended by appellants that the action is brought to enforce a voluntary trust, and that the action is not barred because it did not commence to run until the time of the repudiation. They rely upon the following sections of the Civil Code:

“2216. A voluntary trust is an obligation arising out of a personal confidence reposed in, and voluntarily accepted by, one for the benefit of another.”

“2219. Everyone who voluntarily assumes a relation of personal confidence with another is deemed a trustee, within the meaning of this chapter, not only as to the person who reposes such confidence, but also as to all persons of whose affairs he thus acquires information which was given to such person in the like confidence, or over whose affairs he, by such confidence, obtains any control.”

They urge, in attempting to establish a trust, that the relations between father and sons were proven to have been both confidential and fiduciary. Assuming that the existence of such relations may be inferred from the evidence, such proof does not make out a voluntary trust. Parties under such circumstances may contract in the same manner, and under the same legal principles, as others who have no relationship of the character mentioned, and the statute of limitations relating to written instruments, is applicable. The failure to apply the proceeds from the sale upon the purchase price was, nevertheless, nothing more than a breach of contract. If the question of fraud, deceit, or undue influence were involved, the contention would have some merit. No such issues are involved. Furthermore, section 2221 of the Civil Code provides: “Subject to the provisions of section eight hundred and fifty–two, a voluntary trust is created, as to the trustor and beneficiary, by any words or acts of the trustor, indicating with reasonable certainty: 1. An intention on the part of the trustor to create a trust, and, 2. The subject, purpose and beneficiary of the trust.”

In Dingwell v. Seymour, 91 Cal.App. 483, at page 508, 267 P. 327, at page 337, it is said: “The five essential elements of every valid, voluntary trust are: (1) The intention to create the trust; (2) the subject–matter of the trust; (3) the purpose of the trust; (4) the beneficiary of the trust; and (5) the acceptance of the trust by the trustee. The deed or instrument containing the trust must indicate with reasonable certainty each and every one of these essential elements. Sections 2221 and 2222, Civ.Code.”

We think that the proofs fail to establish a voluntary trust. If any trust relation appears at all in the proof, it would be an involuntary one. As stated in section 2223 of the Civil Code: “One who wrongfully detains a thing is an involuntary trustee thereof, for the benefit of the owner.”

In that event, the action would be barred because “the period of limitation begins to run upon the doing of the wrongful act by which the trust was created.” 25 Cal.Jur. 274, sec. 135. The wrong, if any, consisted in failing to account for sales of property described in the contract.

In view of what we have said, we deem it unnecessary to discuss the question of laches.

The court did not err in granting the motion for nonsuit, and accordingly, the judgment is affirmed.

I dissent. The prevailing opinion is based on the theory that this action is brought to recover on a contract––that respondents had agreed to pay the amount received from sales to the vendor, and had failed to do so. In other words, when respondents sold something, possession of which had been turned over to them under the conditional sales contract, and received the money therefor, the vendor accepted their credit in place of the article sold. With this I am unable to agree. It is my view that in making sales, respondents were acting as agents of the vendor. They had no title, the same being reserved in the vendor. Therefore, they could only have been acting as agents in conveying title of the vendor to the purchasers––and this they were authorized to do by the terms of the contract. Had it been the intention of the parties, that when respondents made a sale, the amount received from same was simply a debt due from them to the vendor, there would have been no meaning to the provision in the contract that title was retained in the vendor. Title retention was the vendor's security, and if he had been willing to accept the credit of the respondents without security, he would not have bothered with a conditional sales agreement, but would have sold them the articles unconditionally and accepted their credit. If the intention of the agreement was that respondents, in making sales, were the agents of the vendor and were to hold the money received in trust, to be delivered to him, then respondents were trustees of a voluntary trust, and the statute of limitations would not commence to run until a repudiation of the trust was brought to the notice of the equitable owner. 25 Cal.Jur. 271, 272, and cases cited therein. There was no repudiation here until a demand for an accounting was refused by respondents just shortly before the action was commenced.

Sections 2216, 2219, and 2221 of the Civil Code, quoted in the prevailing opinion, set out the requirements of a voluntary trust. In brief, section 2219, supra, provides that “Everyone who voluntarily assumes a relation of personal confidence with another is deemed a trustee * * *”. Section 2216, supra, provides that: “A voluntary trust is an obligation arising out of a personal confidence reposed in, and voluntarily accepted by, one for the benefit of another”; and section 2221, supra, provides that: “* * * a voluntary trust is created, as to the trustor and beneficiary, by any words or acts of the trustor, indicating with reasonable certainty: 1. An intention on the part of the trustor to create a trust, and, 2. The subject, purpose and beneficiary of the trust.” Applying these sections to the present case, it appears that by section 2219 of the Civil Code, when respondents undertook to act as agent in selling the personal property, said sales being authorized by the agreement, they became trustees of the money which they were authorized to receive, but which the agreement provided belonged to Antone V. Azevedo. By the provisions of section 2216 of the Civil Code, this was a voluntary trust because it arose out of a personal confidence reposed in respondents, both by reason of their being the sons of Antone V. Azevedo, and also by reason of the relation of principal and agent. The agreement gave respondents the right to make sales but imposed upon them the duty of turning the money over to Antone V. Azevedo, and by signing this agreement and making the sales therein authorized, respondents voluntarily accepted the relation of principal and agent. Under the provisions of section 2221 of the Civil Code, Antone V. Azevedo became trustor of the trust by placing his personal property in the possession of the respondents, with title reserved in himself, but permitting sales to be made, and indicating in the agreement that any moneys collected from sales should be held for his account. The subject of the trust was the money to be received from sales; the purpose of the trust was to permit respondents to sell personal property which, through obsolescence or old age, would have been to their detriment to retain; and the beneficiary of the trust was Antone V. Azevedo, his heirs, executors, administrators and assigns. (The contract expressly states that it shall bind and inure the heirs, executors, administrators and assigns of the respective parties.)

The prevailing opinion cites the case of Dingwell v. Seymour, 91 Cal.App. 483, at page 508, 267 P. 327, at page 337, as laying down the test of a voluntary trust. That case states: “The five essential elements of every valid, voluntary trust are: (1) The intention to create the trust; (2) the subject matter of the trust; (3) the purpose of the trust; (4) the beneficiary of the trust; and (5) the acceptance of the trust by the trustee. The deed or instrument containing the trust must indicate with reasonable certainty each and every one of these essential elements. Sections 2221 and 2222, Civ. Code.”

The use of the words “deed or instrument” in the case might indicate that it was the court's opinion that a voluntary trust could only be created by a written instrument. The court was there dealing with a trust created by a written instrument, and unquestionably had that in mind, but the court, unfortunately, did not limit the language to voluntary trusts created by an instrument in writing and those dealing with realty, which must be created by an instrument in writing. Voluntary or express trusts concerning anything except realty may be created by an oral agreement. 25 Cal.Jur. 154, and cases therein cited. In the case of Dingwell v. Seymour, supra, the court, in stating that all five elements must appear in the deed or instrument, cites sections 2221 and 2222 of the Civil Code, as its only authority for that statement. However, each of those sections expressly provides that a voluntary trust is created by any words or acts indicating the requisite elements of the trust. Hence, the statute anticipates and provides that at least some of the elements of the trust may be found in the acts of the parties.

In conclusion, it is my opinion that the true rule in cases of the type now before the court is set forth in the case of Allsopp v. Joshua Hendy Machine Works, 5 Cal.App. 228, at page 234, 90 P. 39 at page 42, where the court quotes with approval the following: “As long as the relation of principal and agent continues there is a privity between the parties, and there is nothing to set the statute in operation as to claims and accounts between them. The position of the agent is that of a trustee, and claims against him are governed by a rule similar to that controlling trustees. The assertion by the agent of an adverse right, or his failure to discharge a duty to his principal arising out of his agency, does not set the statute in motion until called to the attention of the principal, or until he knows, or with reasonable diligence might have known, thereof.”

TUTTLE, Justice.

THOMPSON, Acting P. J., concurred.

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