Olive BENNETT, Ernest A. Abadie, as Executor of the Will of Elisabeth Abadie, Deceased, Wilada Rappe, Dorothy Warren Guril and Gloria Kemper, an Incompetent Person, by B. W. Kemper, Guardian of her Estate, Plaintiffs and Appellants, v. The HIBERNIA BANK, a corporation, et al., Defendants and Respondents.*
Plaintiffs appeal from a judgment entered upon the sustaining of a demurrer without leave to amend to their first amended complaint. This pleading alleges a cause of action for declaratory relief to determine plaintiffs' rights, if any, in the Hibernia Savings & Loan Society and the Hibernia Bank. The basic right asserted by plaintiffs dates back to 1860. The first amended complaint is a lengthy document, which sets forth the pertinent facts in great detail. In many respects, it is substantially patterned on the complaint involved in Maguire v. Hibernia S. & L. Soc., 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062. So far as necessary to give point to the discussion that follows, the allegations of the first amended complaint are as follows:
In the year 1859 Hibernia was first organized. The organizers purported to act under an enabling statute of 1853 which provided for the organization of stock corporations, and not for what we call ‘mutual’ or ‘membership’ corporations, and did not specifically refer to banks, providing expressly only for the incorporation of manufacturing, mining, mechanical or chemical enterprises, or one engaging in any species of trade or commerce.1
The charter of Hibernia of 1859 provided for 6,000 shares of capital stock with a $100 par value, and thus for a total capitalization of $600,000. The certificate of incorporation recites that the incorporators ‘have associated ourselves together for the purpose of forming a Society * * * the object for which it is formed is, that by means of it the members thereof may be enabled to find a secure and profitable investment for small savings, and may have an opportunity of obtaining from it the use of a moderate capital.’ By-laws were adopted in the form of a contract between the members. One by-law provided: ‘Those who shall sign these By-Laws * * * and pay the entrance fee of two dollars, shall be styled and considered members of this Corporation. Those, who, in addition to the above, shall hold one or more shares of its Stock, shall further be styled and considered Stockholders.’
The membership fee of two dollars was non-refundable. Other by-laws provided that a member was entitled to one share of stock for each $100 deposited to his credit up to 20 shares; that deposits of over $2,000 were to be simple deposits, but the depositor was to share equally in all dividends and losses. It was also provided that the trustees of the society were to be elected by the shareholders and that the president was to be elected by the society. These by-laws could be amended only by a 3/4 vote of the ‘shares' represented at a meeting.
It is alleged that after incorporation the ‘members' of the corporation alone exercised the right to vote and to elect the trustees and to amend the by-laws; that no dividends were ever declared or paid on the outstanding stock; that all dividends were paid to the members based on their deposits; that Hibernia of 1859 issued shares from June 14, 1859, to November 29, 1861, but that between that date and June 27, 1863, all shares were voluntarily surrendered and cancelled with the exception of 4 shares which could not be found. Thereafter, so it is averred, the corporation had no stockholders and the ‘members' were the sole owners of the corporation, and were recognized as such.
The appellants claim an interest in the corporation descending from one Callaghan Curtin, who on October 27, 1860, signed the by-laws, paid his two dollar membership fee, deposited $3,500 in the bank, and so became a ‘member’ of Hibernia of 1859. From 1860 until April 3, 1914, Curtin maintained an account in Hibernia which at no time fell below $100. On April 3, 1914, he assigned this account to Mary Curtin, who thereupon withdrew the funds. On the death of Callaghan Curtin in 1914 his estate, including ‘any other property not known or discovered,’ was distributed to Mary Curtin. The appellants are the heirs of Mary Curtin who died January 18, 1951.
Going back to the history of Hibernia, it appears that in 1862 the Legislature provided for the incorporation of savings banks with or without capital stock. (Stats. of 1862, p. 199.) The directors of such corporations having no capital stock were required to retain at least 5 per cent of the net profits to constitute a reserve fund. Members were apparently subject to personal liability. In 1864 (Stats. of 1863–1864, p. 531) the Legislature amended the 1862 act to permit savings banks ‘claiming in good faith to be incorporated under the laws of this State’ to incorporate under the 1862 act by filing a required certificate. Thereafter, the trustees passed a resolution to incorporate under the 1862 act as a no capital stock corporation, and on August 29, 1864, the required certificate was filed by the president and secretary.
The next pertinent date appearing in the first amended complaint is September 29, 1864. On that date the board of directors purported to adopt new by-laws. One provision was to the effect that all persons who were members of the society on August 29, 1864 ‘shall be deemed and considered members of this corporation, and the signatures of such persons to an agreement on their part to become members of this corporation, and retifying and confirming the incorporation of said The Hibernia Savings and Loan Society, * * * shall be procured as speedily as may be.
‘Other persons may be allowed to become members of this corporation by a vote of the Board of Directors, and not otherwise. Membership shall not pass with the ownership of moneys deposited with or under control of the corporation.’ On information and belief appellants aver that Callaghan Curtin signed said agreement and thereby became a member of Hibernia of 1864.
The by-laws of 1864 did not provide any method by which they could be amended. The board of directors on several occasions purported to exercise this power. One by-law was thus adopted in 1868. This by-law provided that membership was restricted to those who were members on August 29, 1864, and who had at that time not less than $100 to their credit. This by-law also provided that ‘No one shall be deemed a member whose account is once closed.’
At this point, for the sake of clarity, a fact should be mentioned of which we can and do take judicial notice. In February of 1944 the California Supreme Court decided the case of Maguire v. Hibernia S. & L. Soc., 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062, and companion cases. It was there held that a complaint for declaratory relief that was admittedly used as the model for the present pleadings, and which was based upon facts substantially similar to those here averred, stated a valid cause of action as against a general demurrer. In those cases the Supreme Court, without deciding the merits as to the nature of the plaintiffs' rights in Hibernia, if any, held that a complaint for declaratory relief stated a cause of action if it alleges an actual case or controversy and requests an adjudication of plaintiff's rights; that such a complaint need not necessarily show that the plaintiff is entitled to a favorable declaration, and that the trial court should render a judgment embodying its determination, favorable or unfavorable, and should not dismiss the action.
It is next averred that in 1945, at the instigation of Hibernia, the Legislature enacted section 29a of the Bank Act. Stats. of 1945, Chap. 512, p. 1017. By that amendment it was provided that any corporation created under the laws of this state which had been carrying on a banking business for 20 years and which had no capital stock, could bring an action to determine the persons entitled to membership therein and who had any interest in its property or assets, naming as defendants ‘all persons appearing and designated upon the books and records of the corporation as members therein, and all other persons who are known to the plaintiff to claim to be members therein, or to claim any right or interest in the property or assets of the corporation, and other persons unknown claiming any such right of membership in the plaintiff corporation, or any right, title or interest in the property or assets of the plaintiff corporation.’ The statute provides for personal service on all known defendants residing in the state whose address is known, service on defendants outside the state whose address is known, and service upon defendants whose address was unknown and upon all unknown defendants by publication in a newspaper of general circulation in the county of plaintiff corporation's principal place of business once a week for four consecutive weeks, and the mailing of a copy of the summons and complaint where personal service was lacking to each defendant whose names and addresses are known, but if their addresses were unknown, addressed to them at the county seat of the county in which the action is commenced. The act also provided for the posting of notice on the bank's premises and at the courthouse, and for the recording of a notice of the pendency of the action. The act then provides: ‘The judgment after it has become final shall be conclusive against all of the persons named in the summons and complaint who have been served, and against all unknown persons, as stated in the complaint and summons, who have been served by publication, and said judgment shall have the effect of a judgment in rem.’
It is next averred that pursuant to this statute, Hibernia, on October 11, 1945, filed such an action against certain named defendants and averring that Hibernia did not know of any others who claimed to be members. In this complaint Hibernia did not name Callaghan or Mary Curtin as members. Plaintiffs in the present action aver that when this complaint was filed the books and records of Hibernia disclosed that Callaghan Curtin, or his successors, were, or claimed to be, members of the society, and that Hibernia knew of the address of Callaghan Curtin during his lifetime and the address of Mary Curtin after his death. The first amended complaint here involved then avers that in the 1945 bank action personal service was made on certain of the named defendants, and service was made upon others including ‘persons unknown’ by posting and publication. Thereafter, in that action, fifteen of those who are named defendants in the instant case, filed their answer admitting the allegations of the complaint and alleging that they were the only persons entitled to membership in Hibernia and the sole persons entitled to its assets. Default of all other defendants was duly entered. On January 7, 1946, a judgment was entered in that action naming the individual defendants in the present action as the sole members and owners of Hibernia.
In the instant case it is next alleged that in 1947 Hibernia was reorganized as a stock corporation, the reserve fund of some seven million dollars was capitalized, and stock representing this capitalization was issued to those fifteen defendants in lieu of their present and existing interests in the corporation as members thereof; that neither Callaghan nor Mary Curtin was served with a copy of the summons or complaint in the bank action, nor were they mentioned in that complaint, although the records of the bank would have disclosed that Callaghan Curtin was a member of the society and had a right in the property and assets of Hibernia from 1860 until his death in 1914, and that such rights were inherited by Mary Curtin upon Callaghan's death. It is further averred that plaintiffs, who are the successors of Mary Curtin who died on January 18, 1951, had no knowledge of their rights or of the facts alleged in their complaint until 1952. In this connection it is alleged that in October of 1951 a friend of Olive Bennett called that plaintiff's attention to a newspaper article referring to the settlement of claims by early depositors; that Olive Bennett knew that her grandfather had been an early depositor in Hibernia; that upon investigation by her attorneys this plaintiff then discovered that her grandfather had signed the by-laws of 1860 and paid the two dollar membership fee, and thus had become a ‘member’ of the society; that in July of 1952 she first learned of the action brought by Hibernia under section 29a of the Bank Act and of the entry of judgment entered in that action. This was the first date upon which plaintiffs secured knowledge of their rights, if any. This action was filed on January 15, 1953. The first amended complaint alleges an actual controversy and seeks a declaration of plaintiffs' rights and to set aside the default judgment.
The demurrer of defendants not only charged that the first amended complaint did not state a cause of action, but pleaded the statute of limitations and laches, and particularly urged that the cause of action pleaded, if any, was barred by the judgment under section 29a of the Bank Act. The demurrer was sustained without leave to amend, judgment was entered, and this appeal taken.
At the inception of this appeal we are met with a controversy over the nature of the cause of action attempted to be pleaded. The respondents urge that the primary cause of action pleaded is an action to set aside the 1946 judgment, and not one for declaratory relief. Appellants argue that the main gist of the action is to secure a determination of their right to membership in the society, and that the prayer to set aside the 1946 judgment is only incidental to that; that the setting aside of the judgment would avail them nothing without a determination of their rights to membership. The distinction between the two types of action is important. If this is an action to vacate a judgment then we would have to pass on the merits of appellants' claim to membership. The rule seems to be well settled that ‘Equity will not overturn a judgment unless it appears that a like judgment would not follow. It is incumbent upon the complainant to plead and prove that the result in the main action would have been different had the fraud or mistake not occurred.’ Wilson v. Wilson, 55 Cal.App.2d 421, 427, 130 P.2d 782, 785. But if the action is one for declaratory relief a different rule applies. The Maguire case, 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062, held that in such an action the complaint is good against a general demurrer if it pleads a controversy over membership, and that it is immaterial, on demurrer, whether, as a matter of law or fact, the complaint avers facts showing that the asserted claim is valid or invalid. In either event a controversy has been pleaded and the plaintiff is entitled to a determination of that claim, favorable or unfavorable.
We agree with appellants that this action is primarily one for a declaratory judgment, and that the prayer to set aside the 1946 judgment is merely incidental to that cause of action. If the 1946 judgment is set aside as to appellants, that relief would avail them nothing without an ultimate determination of their interests in Hibernia. Obviously, the main action is for declaratory relief, and, according to the Maguire case, 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062, all that need be pleaded in such an action is a controversy over membership. The fact that the court here should, if a proper case is made out, set aside the 1946 judgment as to appellants, does not necessarily make the action one to set aside the judgment, thus requiring a decision on the merits. An examination of the pleading demonstrates that this is a single action for declaratory relief to determine the interest, if any, appellants have in Hibernia, and that the prayer for setting aside the judgment is merely incidental to the main relief and cause of action pleaded. The situation here presented is not different in principle from one where in a quiet title action it is also sought to vacate a judgment or to void an instrument under which the adverse parties claim. In such situations it is well settled that the incidental relief prayed for does not convert the action into one to set aside the judgment or instrument. The proper rule is stated in Parsons v. Weis, 144 Cal. 410, 414, 77 P. 1007, 1009, as follows: ‘The complaint states only a single cause of action, viz., to quiet the plaintiff's title, as against the defendant, to the land therein described, and, as incidental thereto, for the purpose of making the judgment more effective, to have the instrument under which the defendant asserts title declared void.’ See also Thompson v. Moore, 8 Cal.2d 367, 65 P.2d 800, 109 A.L.R. 1027; California Trust Co. v. Cohn, 214 Cal. 619, 7 P.2d 297; Wood v. Roach, 125 Cal.App. 631, 14 P.2d 170.
The case of Vincent v. Security-First Nat. Bk., 67 Cal.App.2d 602, 155 P.2d 63, cited by respondents does not hold to the contrary. That case merely held that where there was no controversy over a probate decree as entered, and no ground pleaded for setting aside that decree, there was no controversy. That case is in point only if it be held that no ground is pleaded for setting the judgment aside. In that event the judgment would be a bar. But if any ground is pleaded for setting the judgment aside, then we are right back to the Maguire case. 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062. That case holds that a complaint, substantially the same as the one here involved, stated a cause of action for declaratory relief good as against a general demurrer. Thus, the only questions that this court should decide at the present time is whether any ground for setting aside the 1946 judgment has been pleaded, and whether the statute of limitations has run on the judgment so as to make it binding.
Respondents attack this approach to the problem, contending that this court must do the very thing the Supreme Court expressly refused to do in the Maguire case, 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062, namely, determine the validity or invalidity of appellants' claim to membership. They must concede, of course, that such was not done in the Maguire case, supra, but they urge that that case has, in effect, been overruled by the later case of Essick v. City of Los Angeles, 34 Cal.2d 614, 213 P.2d 492. There the plaintiffs filed an action against the city and others for declaratory relief, seeking to have declared void certain ordinances and a resolution of the city council. Defendants moved in the trial court to dismiss the action on the grounds that the court had no jurisdiction of the controversy because the complaint presented no justiciable controversy, and because, under the facts alleged, it was not necessary or proper to make a declaration of rights of the parties. The motion was granted, and plaintiffs appealed. The court then considered the allegations of the complaint and found that they did not state a justiciable controversy on the merits. Then, citing the Maguire case, 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062, and another case, the court held that it was error for the trial court to have entered a judgment of dismissal but it should have ‘entered its judgment decreeing expressly (as is implied by the judgment of dismissal) that the plaintiffs are not entitled to the declarations in their favor * * *.’ 34 Cal.2d at page 624, 213 P.2d at page 499. The Supreme Court then modified the judgment by striking the judgment of dismissal, by declaring the application for a conditional use permit was not void and did not violate the city charter, and by holding that the resolution issuing it was valid “as against all contentions of plaintiffs at issue in this suit.” 34 Cal.2d at page 625, 213 P.2d at page 499. The judgment so modified was affirmed.
It will be noted that in that case the court did pass on the merits of the cause of action pleaded. But the court, far from overruling or qualifying the rule of the Maguire case, 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062, purported to be following it, and cited it with approval. It is a fair interpretation of the case that what it actually holds is that where the complaint does not allege facts showing a real controversy, but discloses in fact that no controversy exists, the trial court should decide the case on a demurrer or motion to dismiss by holding that, as a matter of law, no justiciable controversy has been presented. But that is fundamentally different from the situation here involved. Here there certainly is a real dispute as to whether these plaintiffs have any interest in Hibernia. The reasons why this is so have been pointed out at length in the Maguire case. 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062. It certainly would reflect on the orderly and fair administration of justice for the Supreme Court to hold, as it did in the Maguire case, supra, as to one set of litigants, that it was improper for the trial court to determine on demurrer whether the plaintiffs there involved were entitled to a favorable or unfavorable determination of their rights, and then for a District Court of Appeal to hold, as to another set of litigants, that the Supreme Court, in effect, was wrong in that case, that it should have passed on the membership issue, and that the appellate court will pass on that issue. It must be remembered that, in both the Maguire case, 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062, and this case, so far as membership is concerned, the pleadings on this issue are substantially the same and the same legal issue is presented. Both sets of litigants are entitled to the same treatment. If the Maguire case is to be overruled this should be done by the Supreme Court and not by an intermediate appellate court.
Thus, the only basic question for this court to determine is the legal effect of the 1946 judgment. This, of course, was not involved in the Maguire case, supra. In considering this point we must assume that the facts alleged prior to 1946 present a justiciable controversy over the issue of membership in the corporation. If the 1946 judgment, as a matter of law, bars any action by plaintiffs to have their claim of membership decided, if that judgment as a matter of law cannot be set aside, then there would be no justiciable controversy and the rule of the Essick case, 34 Cal.2d 614, 213 P.2d 492, would be applicable. See also Vincent v. Security-First Nat. Bk., 67 Cal.App.2d 602, 155 P.2d 63. Equally true it is that if the statute of limitations has run on an action to set aside the judgment, such point can and should be decided on demurrer, and no case or controversy is presented. Maguire v. Hibernia S. & L. Soc., 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062. But if that judgment, or the statute of limitations, is not a bar, then plaintiffs have alleged a case or controversy for declaratory relief, the merits of which should not be passed on by demurrer. Maguire case, supra. We pass to a consideration of those questions.
First, what is the effect, if any, of the 1946 judgment on the rights asserted by appellants? Does it validly determine that appellants have no rights in Hibernia? Is it res judicata of the entire proceedings?
Section 29a of the Bank Act provides:
‘Said action shall be commenced by the filing of a verified complaint, and there shall be included as defendants in such action all persons appearing and designated upon the books and records of the corporation as members therein, and all other persons who are known to the plaintiff to claim to be members therein, or to claim any right or interest in the property or assets of the corporation, and other persons unknown claiming any such right of membership in the plaintiff corporation * * *.
‘Each of the defendants residing in the state of California whose place of residence is known to the plaintiff shall be served personally with said summons * * *.’
The act also provides that as to defendants whose addresses are unknown that a copy of the complaint and summons shall be mailed to them addressed to the county seat of the county in which the action is commenced. This statute was modeled on the McEnerney Act passed after the 1906 fire and earthquake in San Francisco.
The first amended complaint alleges that the books and records of Hibernia disclosed that Callaghan Curtin up to the time of his death in 1914 was, or claimed to be, a member of the bank, or claimed a right or interest in the property or assets of the corporation, and that such claim or right passed to his successors, but that neither Callaghan, nor Mary, nor her successors were named in the complaint, nor was a copy of the summons and complaint served upon them although the address of Mary Curtin, who resided in this state, was known to Hibernia, nor was a copy mailed to Callaghan or Mary at the county seat of the county in which the action was commenced.
Appellants argue that under section 29a either Callaghan or Mary Curtin should have been named in the complaint as ‘persons appearing and designated upon the books and records of the corporation as members therein, and all other persons who are known to the plaintiff to claim to be members therein, or to claim any right or interest in the property or assets of the corporation.’
The pertinent provisions of the first amended complaint read as follows:
‘The Hibernia Savings and Loan Society knew, as disclosed by its books and records, that said Callaghan Curtin, up to the time of his death, was, or claimed to be, a member of The Hibernia Savings and Loan Society, and had or claimed rights of membership in said corporation and rights and interests in its property and assets; that said membership, rights of membership, and rights and interests in the property and assets of said corporation, passed to the successors of said Callaghan Curtin upon his death.’
‘* * * said defendants knew that Callaghan Curtin, during his lifetime, was a member of said corporation, and that, upon his death, his successors became entitled to membership in said corporation and had a right or interest in its property or assets.’
‘* * * said right of membership therein and said right in the property and assets thereof * * * was distributed to Mary G. Curtin as sole devisee * * * had vested in said Mary G. Curtin; all of which was then, and ever since has been, known to defendants herein, or could have been ascertained by inspection of the records of The Hibernia Savings and Loan Society and the records of said Superior Court of the State of California, in and for the County of Santa Clara.’
‘Said Mary G. Curtin (Travers), up to the time of her death, although knowing that Callaghan Curtin was one of the early depositors of The Hibernia Savings and Loan Society, had no knowledge of the fact that he was a member thereof, or was possessed of any of the rights of a member thereof, and plaintiffs herein had no such knowledge until about the month of June, 1952.’
Do these allegations aver that plaintiffs are in any of the groups named in section 29a? There is no clear direct allegation that at the time of filing the action by Hibernia that Callaghan Curtin appeared on the books as a member. In fact, the pleading of the by-laws would seem to indicate that upon the closing of the account rightly or wrongly he no longer appeared upon the books of the bank as a member. Thus, the question is really whether the first amended complaint sets forth facts sufficient to show that either Callaghan or Mary Curtin were in the class of ‘all other persons who are known to the plaintiff to claim to be members therein, or to claim any right or interest in the property or assets of the corporation.’
The parties differ as to how this provision should be interpreted, both arguing at some length as to the proper meaning of the word ‘claim’ as used in the section. The main argument of respondents is that since it is alleged that Mary had no knowledge of the fact that Callaghan was a member, or was possessed of the rights of a member, and appellants had no such knowledge until June of 1952, that this shows that appellants did not know that they had a ‘claim.’ This, it is urged, is equivalent to alleging that at no time until June of 1952 did Mary or appellants ‘claim’ membership. Therefore, say respondents, when the suit was filed Mary and appellants were not persons ‘claiming’ to be members, and, since Callaghan was then dead, he was certainly not then ‘claiming’ to be a member. Appellants in effect argue that the phrase ‘all other persons who are known to the plaintiff to claim to be members' necessarily must include persons who the bank then knew or should have known had a claim, whether or not the persons themselves asserted a claim. It is argued that any other construction would allow the bank to destroy, without notice, property interests of persons whom they knew or should have known had an interest, and that this could not have been the intent of the Legislature.
There is merit in appellants' argument. The construction contended for is substantially the interpretation given to similar language appearing in the McEnerney Act of 1906, St.1906, Ex.Sess., p. 78, which statute was admittedly the model for the one here involved. That statute required summons to be served on persons who are known to the plaintiff ‘to claim’ any interest P. 356, 363, 8 L.R.A.,N.S., 682, the court In Title & Document Restoration Co. v. Kerrigan, 150 Cal. 289, at page 317, 88 P. 356, 363, 8 L.R.A.N.S., 682, the court stated: ‘* * * so far as substituted service upon a class of unknown claimants is permitted at all, in proceedings which are merely quasi in rem, it rests upon the ground of necessity, and that this necessity will not justify the omission of personal service upon all who could with reasonable diligence be ascertained and found. * * * We have no doubt that, where the statute is thus careful to secure actual notice to known claimants, it should not be construed as intended to permit a plaintiff to willfully or negligently close his eyes to the means of knowledge and thus secure a decree by publication and posting alone, as against persons whose identity he might have learned by the use of due effort. For the purpose of this statute the adverse claimants whom plaintiff ‘knows or of whom he has been informed’ include all as to whom he would by reasonable inquiry have had knowledge or information. * * * ‘the means of knowledge is equivalent to knowledge.’'
In the instant case the allegations are to the effect that the bank knew or should have known of the claim of Mary Curtin, even though she herself did not know of the claim. In other words, it is argued that Mary is a person whose claim was or should have been known to the bank, but who did not claim an interest at the time suit was filed because of ignorance of her rights. Although this is somewhat broader than the interpretation of the statute made by the court in the Kerrigan case, supra, because in that case the person involved knew of her rights while here she did not, and the statute was there extended to include persons whom the plaintiff should have known claimed such rights, we think such interpretation a proper one. If the statute here involved had expressly provided that the bank could serve constructively persons whom it knew or should have known had rights in Hibernia but were ignorant of such rights because the bank in violation of its fiduciary duty to members had kept such members in ignorance of their rights, the unreasonable nature of the statute would be obvious. If it be assumed that the appellants were in fact members of Hibernia, a point we do not decide for reasons already stated, but a point we must assume in discussing the point now involved, then the bank and its trustees were, of course, in a fiduciary relationship with all its members. Based on such assumption, the bank and its trustees owed the members a positive duty of disclosure. Had this duty been performed at the time the 1946 action was filed, of course, Mary would have claimed her interest and thereby would have fallen directly into the class protected by the statute. Yet respondents are asking that the statute be interpreted to mean that even if the bank knew or should have known that Mary had an interest but was ignorant of it because the bank or its trustees violated its fiduciary duties toward her by keeping her in ignorance of her rights, that the bank was under no duty to serve her. So interpreted, the statute would be unreasonable and probably unconstitutional. See, generally, Title & Document Restoration Co. v. Kerrigan, 150 Cal. 289, 88 P. 356, 8 L.R.A.,N.S., 682; Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865; People v. One 1941 Chrysler 6 Touring Sedan, 81 Cal.App.2d 18, 183 P.2d 368. It must be remembered that there is here involved a fund of over seven million dollars accumulated by a membership bank. In such a bank the members are the owners. If the allegations of the first amended complaint are true, which we must here assume, and if plaintiffs are members, a point we do not pass on but assume, then the 1946 action was an apparent attempt by the few then in control of the bank to destroy, for the benefit of those few, the rights of the many. It must be the law that when the bank determined to ascertain the ownership of this fund, since it and its trustees were in a fiduciary position to all its members, it owed a duty to these members to discover and notify these owners of the proceedings to declare membership. The records of those persons who had paid a membership fee and signed the by-laws were in the possession of Hibernia. It knew that the persons involved in the Maguire case, 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062, claimed to be members. It knew that there were other persons such as appellants who, if they knew of their rights, would claim to be members. Yet, according to the allegations of the first amended complaint, the bank made no attempt to locate these persons or to notify them of their rights, but attempted to cancel their rights, if any, by the 1946 action, in violation of the bank's fiduciary duty.
For these reasons it must be held that, if there is merit in appellants' claim to a proprietary interest in the bank, there was noncompliance with the statute so far as service is concerned.
Of course, this ruling is predicated on the assumption that Mary Curtin in 1945 had a proprietary interest in Hibernia. Of course, if she had no such interest, then the bank and its trustees owed her no fiduciary duty and did not know whe claimed an interest, and the 1946 judgment would be binding on her and her successors. Respondents argue, therefore, that on this appeal we should determine whether she has such an interest. But to do this would be in direct violation of the rule of the Maguire case. 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062. Although the allegations in the first amended complaint here involved differ in several respects from those in the Maguire case, except for the 1946 judgment and the statute of limitations as to such judgment, the problems involved as to membership are substantially the same in the two cases. As already pointed out, if the plaintiffs in the Maguire case were entitled to a declaration of their rights, if any, in Hibernia, so are the appellants here entitled to such a determination. The fact that appellants pleaded the facts as to the 1946 judgment does not change the legal situation. If they were members, that judgment, for reasons already stated, does not constitute a bar to this action. That brings us right back to the question of membership—right back to the rule of the Maguire case, supra. The question of membership should not be passed on by demurrer in a declaratory relief action. The appellants are entitled to a declaration, favorable or unfavorable, of their legal position. This they have not had. We should not attempt to make such declaration on this appeal.
Of course, and as the Maguire case held, the statute of limitations may be raised on demurrer. The questions here presented are whether the statute of limitations ever runs on a judgment which is void for lack of jurisdiction but where the invalidity does not appear on the face of the judgment, and, if so, what statute of limitations is here involved? In the instant case the judgment was entered in January of 1946. This action was filed in January of 1953. Discovery of their rights was made by plaintiffs in 1952.
The parties dispute, at some length, the question as to whether any statute of limitations is applicable to a void judgment, even where the invalidity does not appear on the face of the judgment. Cases can be and are cited that apparently hold both ways on the subject. We do not find it necessary to decide this question. We will assume, for the purposes of this opinion, that, as respondents contend, some statute of limitations does run on such a judgment. The basic questions are what statute, and when does it begain to run? It is a general rule that the beneficiary of an express trust ‘is entitled to rely on the trustee's fidelity and the statute does not begin to run until he has knowledge or notice of repudiation of the trust or of the act constituting the breach.’ 1 Witkin, California Procedure, p. 660; see also Cortelyou v. Imperial Land Co., 166 Cal. 14, 134 P. 981; England v. Winslow, 196 Cal. 260, 237 P. 542; Kornbau v. Evans, 66 Cal.App.2d 677, 152 P.2d 651; Martin v. Bank of America N. T. & S. Ass'n, 4 Cal.App.2d 431, 41 P.2d 200; San Leandro Canning Co., Inc., v. Perillo, 211 Cal. 482, 295 P. 1026. Thus, the proper statute is the three-year provision of section 338, subd. 4, of the Code of Civil Procedure which provides that ‘the cause of action in such case [is] not to be deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.’ Such discovery is alleged to have been made in 1952. Therefore, it would appear that, for pleading purposes, the complaint filed in 1953 was filed well within the three-year-period.
As already pointed out in discussing the res judicata point, the trustees, and later the board of directors of Hibernia, were in a fiduciary position to its members. This was necessarily impied, if not directly held, in the Maguire case. 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062. That case held that the statute of limitations had not there run on analogy to the cases that hold that no statute runs against a stockholder until he has knowledge that his rights have been denied.
Respondents attempt to argue many points as to why Callaghan or Mary Curtin should have acquired knowledge of their rights long prior to 1946. But the Maguire case held that the statute had not, as a matter of law, then run. Most of the arguments now made on this point were or could have been made in the Maguire case, and the Supreme Court held them unsound. We, too, find them unconvincing. Once it is assumed that the appellants have a proprietary interest, then the fiduciary relationship existing prevented the statute from running.
The respondents make a lengthy argument that the complaint in the instant case differs from that in the Maguire case, 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062, in alleging, on information and belief, that Callaghan signed the by-laws of 1864. One of those by-laws provided that ‘Membership shall not pass with the ownership of moneys deposited with or under the control of the corporation.’ In the Maguire case, supra, the plaintiffs were relying on membership in Hibernia of 1859. Respondents argue that if Callaghan signed the by-laws of 1864 then he and Mary in 1914, as a matter of law, upon the assignment of the account and Callaghan's death, had notice of the repudiation. There may or may not be merit in these arguments. But they, basically, are merely another attempt to get this court on this appeal to pass on the merits of the question of membership, a point not now involved. Certainly the arguments do not establish, without question, that appellants or their predecessors had knowledge in 1914, or earlier. The questioned by-law is capable of being interpreted as separating the ownership rights from the mere rights of a depositor, that is, of accomplishing a separation of the proprietary interest created upon the signing of the by-laws and payment of the membership fee, from the debtor-creditor relationship created by a mere deposit. It can be reasonably inferred that membership may have been retained on the closing of the account and may have been inherited by Mary. Thus, a repudiation, under this view, would not have been brought to her attention. Moreover, even if membership terminated in 1914, a point we do not now decide, Callaghan, as a member until that time, may have had some right in the then accumulated reserve fund, but since there was no liquidation of the corporation at that time, there was no legal necessity of asserting this right in 1914. Under this view, Callaghan's ownership in the proportionate share of the surplus continued to exist until knowledge of its conversion was brought home to him or to his successors in 1952.
The parties also argue as to whether the allegation on information and belief that Callaghan signed the by-laws of 1864, the records being in possession of respondents, is binding on a general demurrer. In view of the discussion above, it is not necessary to decide that point.
Thus, the only question as to the statute of limitations is when the statute started to run, if it did start to run, on the 1946 judgment. As already pointed out, the action, in cases of violation of an express trust, do not run until discovery of the repudiation. Discovery is alleged to have occurred in 1952. But, say respondents, appellants were put on notice in 1945 when the action was filed because it was a matter of great notoriety. Assuming breach of the trust, actual and not constructive notice was required. MacDermot v. Hayes, 175 Cal. 95, 170 P. 616.
Respondents next bring forth the novel argument that since Mary is dead there is no way of proving the allegation that she did not have actual knowledge prior to 1952, and that without that proof the statute of limitations is a bar. The point requires scant consideration. On a demurrer, we must accept the allegations of the first amended complaint as true. We must assume that appellants can prove these allegations by direct or indirect evidence. See, generally, Hobart v. Hobart Estate Co., 26 Cal.2d 412, 159 P.2d 958.
The other points on the statute of limitations were either disposed of in the Maguire case, 23 Cal.2d 719, 146 P.2d 673, 151 A.L.R. 1062, or are answered by the holding that it must be assumed on this appeal that a fiduciary relationship existed.
We conclude that the trial court erred in sustaining the general demurrer and in dismissing the action. We do not decide that in some respects the complaint is not subject to special demurrer, but are sending the action back to the trial court which, in its discretion, may require clarification of any uncertainties and ambiguities that may exist.
The judgment appealed from is reversed.
1. Whether membership bank corporations could legally be organized under that act is an interesting question. In People v. Perrin, 56 Cal. 345, it was held that the state was estopped from questioning the validity of a membership corporation organized under the 1853 act by the enactment of subsequent legislation expressly permitting the organization of membership corporations. If membership banks were illegally organized under the 1853 act, the legal effect of such illegality presents some debatable questions. Was a corporation so illegally organized a de facto corporation whose legality only the state could attack? Did it become an unincorporated association between the members imposing upon them individual liability? Was the incorporation void so as to render the agreement between the members unenforceable? These are interesting questions, but for reasons later to be discussed, they need not now be decided.
PETERS, Presiding Justice.
BRAY and FRED B. WOOD, JJ., concur.