JEFFERSON v. FRENCH CO

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District Court of Appeal, First District, Division 1, California.

Carl E. JEFFERSON, Plaintiff and Appellant, v. J. E. FRENCH CO., J. E. French, Jr., H. Wallace Hickman, Defendants and Respondents.*

No. 19022.

Decided: May 23, 1960

Lew M. Warden, Jr., Oakland, for appellant. Morrison, Foerster, Holloway, Shuman & Clark, Robert D. Raven, Russell E. Teasdale, San Francisco, for respondents.

This appeal presents but one question: Does the two-year period of limitation imposed by section 339, subdivision 1, Code of Civil Procedure, apply to an action upon an oral contract of employment in which appellant seeks an accounting to determine the amount that may be owing to him? We hold that it does apply.

The appeal is from a judgment following the sustaining of a demurrer without leave to amend. In his complaint, appellant alleged an oral contract of employment as manager of a retail automobile sales agency, at a stipulated monthly salary plus 10% of the annual profits, payable annually. He further alleged that he performed during the years 1953 through 1958. He received his salary, and for 1955, 1956, and 1957 only, he received certain amounts as his percentage of profits. He claims that there is a balance due for his percentage of profits, and asks for an accounting to determine the amount due for each of the six years. If the two-year statute applies, the action was filed in time as to the years 1957 and 1958, but not as to prior years. Upon the sustaining of the demurrer, appellant had a judgment entered terminating the entire action. At the oral argument, appellant's counsel stated that this was done because not enough is involved for the years 1957 and 1958 to make it worth while to proceed, so that, if we were to conclude that Code of Civil Procedure, § 339, subdivision 1, applies, the judgment should be affirmed.

It seems clear that an accounting is proper in such an action as this. Appellant's compensation was dependent upon the profits of his employer's business, and the employer therefore had a duty to account to him. Nelson v. Abraham, 29 Cal.2d 745, 751, 177 P.2d 931; Kessloff v. Pearson, 37 Cal.2d 609, 613, 233 P.2d 899; Bishop v. Kelley, 100 CalApp.2d 775, 783, 224 P.2d 814; Brea v. McGlashan, 3 Cal.App.2d 454, 460, 39 P.2d 877; Arbuckle v. Clifford F. Reid, Inc., 118 Cal.App. 272, 277, 4 P.2d 978.

Appellant urges that an action for an accounting is not governed by Code of Civil Procedure, § 339, subdivision 1,1 but by Code of Civil Procedure, § 343.2 He admits that the two-year statute would govern if the accounting feature of the action were not present, but he asserts that an action for an accounting is ‘[a]n action for relief not hereinbefore provided for * * *.’ (Code Civ.Proc. § 343). It is true that nowhere in the preceding sections (Code Civ.Proc. §§ 335–342) nor in the succeeding sections (Code Civ.Proc. §§ 344–349.2) is there any mention of an action for an accounting. But appellant misconceives the nature of California's statutes of limitation. ‘[T]he nature of the right sued upon and not the form of action nor the relief demanded determines the applicability of the statute of limitations under our code.’ Maguire v. Hibernia Savings & Loan Soc., 23 Cal.2d 719, 733, 146 P.2d 673, 680, 151 A.L.R. 1062. The principle is an old one, and has often been applied: Lord v. Morris, 1861, 18 Cal. 482; Clausen v. Meister, 1892, 93 Cal. 555, 29 P. 232; Banks v. Stockton, 1906, 149 Cal. 599, 87 P. 83; Williams v. Southern Pacific R. Co., 1907, 150 Cal. 624, 89 P. 599; Bell v. Bank of California, 1908, 153 Cal. 234, 94 P. 889; Union Tool Co. v. Farmers' & Merchants' Nat. Bank, 1923, 192 Cal. 40, 51, 218 P. 424, 28 A.L.R. 1417; People v. Union Oil Co., 1957, 48 Cal.2d 476, 482–483, 310 P.2d 409.

In this case the ‘nature of the right sued upon’ falls squarely within section 339, subdivision 1, Code of Civil Procedure, ‘an action upon a contract * * * not founded upon an instrument of writing.’ ‘Accounting’ is a remedy, and does not determine the ‘nature of the right sued upon.’ It is appropriate in a variety of circumstances, depending upon the ‘nature of the right sued upon,’ to which various of our periods of limitations may apply.

The foregoing principles have been applied in cases very similar to this. In Bell v. Bank of California, supra, 153 Cal. 234, 94 P. 889, an action was brought against a pledgee for improperly selling shares of stock. It was filed within four years, but more than three years, after the cause of action arose. An accounting was demanded. The court held that the action was barred by Code of Civil Procedure, § 338, subdivision 3. The opinion states, ‘It makes no difference that the plaintiff seeks an accounting to determine the value of the stock so transferred. In so far as this may be regarded as an action to recover the value of such property, the gist of the action is the wrongful conversion. The accounting, if it be a proper case for an accounting at all, is merely incidental to the main purpose of the action. The nature of the right sued upon, and not the form of the action nor the relief demanded, determines the applicability of the statute of limitations under our code. * * * It is argued that the complaint should be sustained as a bill in equity for an accounting of all of the transactions of the bank with reference to the security, but the accounting sought, if a case for an accounting is made, would be only incidental to the main relief sought, which is either a redemption of the property sold, or a recovery of its value. Where there can be no relief upon the main ground, the bill will not be retained for the mere purpose of having an accounting which can lead to no useful purpose.’ 153 Cal. at pages 242–244, 94 P. at pages 893, 894.

Bendien v. Solov, 89 Cal.App.2d 904, 202 P.2d 372, was an action for an accounting predicated upon an oral agreement whereby plaintiffs agreed to furnish money for the purchase and rehabilitation of various parcels of real estate, plaintiffs to receive their money back plus half the profits when the property was sold. All of the property was sold before June 1, 1942, and the action was filed March 8, 1946, less than four but more than two years after the last sale. The court held the action barred by Code of Civil Procedure, § 339, subdivision 1, saying: ‘There is no merit in plaintiffs' contention that the two-year statute of limitations is inapplicable to the present case because their suit was for an accounting. Entitling the action ‘Complaint for an Accounting’ does not change the character of the action. The character of the action is to be determined not from the relief demanded but from the allegations of the complaint. (Cf., Bell v. Bank of California, 153 Cal. 234, 243, 94 P. 889; Miller & Lux v. Batz, 131 Cal. 402, 405, 63 P. 680; Maguire v. Hibernia Savings & Loan Soc., 23 Cal.2d 719, 733, 146 P.2d 673, 151 A.L.R. 1062.)' 89 Cal.App.2d at page 907, 202 P.2d at page 374.

In Tostevin v. Douglas, 160 Cal.App.2d 321, 325 P.2d 130, the action was for breach of an oral contract of employment. Plaintiff asked for declaratory relief and an accounting. The court held, citing the Bendien case, that Code of Civil Procedure, § 339, subdivision 1, applied and not Code of Civil Procedure, § 343. Compare Lataillade v. Orena, 91 Cal. 565, 577, 27 P. 924.

The principle, and its application to the present case, seem quite clear to us. However, there is some confusion in the California cases, both those relied upon by appellant and certain others, and to these we now turn.

Appellant relies upon five cases, in four of which there is language indicating that Code of Civil Procedure, § 343, applies to an action for accounting. The first is West v. Russell, 1888, 74 Cal. 544, 16 P. 392. The action was for a breach of a written contract, and for an accounting thereunder. The court pointed out that the statute of limitations had commenced to run on January 1, 1857, and the suit was commenced May 1, 1886. It stated, apparently without any consideration of the question as to which code section was appropriate, that the four-year period had run several times, so that the result would be correct in any event, and cited Code of Civil Procedure, § 343. The opinion contains no discussion of the point here involved, and cites no authority, although Lord v. Morris, cited supra, was then on the books.

The second case is McArthur v. Blaisdell, 1911, 159 Cal. 604, 115 P. 52. This was an action for an accounting under a written agreement which was claimed to be one of partnership. On appeal, the court below having found that there was no partnership, it was urged, and the Supreme Court held, that a trust relationship on the part of the defendant toward the plaintiff had been established by the contract. The action was brought July 20, 1903, and defendant completed the contract on July 21, 1899. The action was thus brough within four years, so that, even if Code of Civil Procedure, § 337, subdivision 1, were applied, the action was timely, and the result is correct. The court held the action timely, but without any discussion of the point here at issue, and without citing any authority, it cited Code of Civil Procedure, § 343. The case is distinguished in Bendien v. Solov, supra.

The third case is Swan v. Smith, 1929, 102 Cal.App. 541, 283 P. 829. Defendant collected certain moneys for plaintiff under an oral agreement, but did not pay them over. The moneys were collected between March 25 and June 24, 1922. The action was commenced December 10, 1925. The agreement was oral. The court held that defendant was an agent of plaintiff and owed him a duty to account, and that the duty of an agent to account, by analogy to a trusteeship or a partnership, is governed by Code of Civil Procedure, § 343, citing Freeman v. Donohoe, 65 Cal.App. 65, 223 P. 431. It does not appear when the defendant repudiated the duties of his agency, and this is of some importance, as the statute would start to run from the date of repudiation. The court did not consider the question here under consideration, and did not cite any authority as to the nature of our statutes of limitation. The case may be distinguished on the theory that an agency is different from the ordinary ‘contract, obligation or liability not founded upon an instrument of writing’ and is therefore not within Code of Civil Procedure, § 339, subdivision 1. It not so distinguishable, we think that the decision is wrong. In Freeman v. Donohoe, supra, 65 Cal.App. 65, 223, p. 431, cited in the Swan case, it appeared that there was a written partnership agreement, and the court held (as one of two alternate grounds of decision) that Code of Civil Procedure, § 337, subdivision 1, the four-year statute dealing with obligations founded upon an instrument in writing, applied rather than Code of Civil Procedure, § 339, subdivision 1. 65 Cal.App. at page 81, 223 P. at page 438. The other ground, that Code of Civil Procedure, § 343, applies to an action for an accounting between partners because it is an action in equity rather than an action at law, seems to us clearly wrong, and no authority is cited to support it, nor are any of the decisions of the Supreme Court, cited earlier in this opinion, discussed. In partnership cases, also, the statute does not ordinarily start to run until there is some definite repudiation, by conduct or otherwise, of a partner's duty to account to his copartners.

The fourth case is Austin v. Harry E. Jones, Inc., 1939, 30 Cal.App.2d 362, 86 P.2d 379. This, too, was an action for an accounting. It was based on an oral agreement whereby the parties were to build houses on plaintiff's land, the profits to be split between them. The court held that Code of Civil Procedure, § 343, applied, not Code of Civil Procedure, section 339, subdivision 1, citing solely the West and McArthur cases, supra. The court merely stated that in an action for an accounting Code of Civil Procedure, § 343, is the applicable section. For the reasons already stated, we decline to follow this decision, which is directly contrary to the Bendien case, supra.

The fifth case is St. James Church of Christ Holiness v. Superior Court, 1955, 135 Cal.App.2d 352, 287 P.2d 387. The case does not deal with the statute of limitations at all.

There are four other cases which appellant has overlooked. In Allsopp v. Joshua Hendy Machine Works, 1907, 5 Cal.App. 228, 234, 90 P. 39, there is a dictum that Code of Civil Procedure, § 343, applies to an action for an accounting, citing West v. Russell, supra. The real grounds of decision are, first, that defendant relied on the wrong statutes, Code of Civil Procedure, §§ 337 and 339, subdivision 1, instead of Code of Civil Procedure, § 338, subdivision 3, and that in any event, the action being for breach of trust, the statute would not start to run until the trustee in some way repudiated his duties. In Re Estate of McCabe, 1947, 80 Cal.App.2d 823, 826, 183 P.2d 72, 75, a proceeding was brought under Probate Code, § 1121, to require a testamentary trustee to account. The proceeding was commenced more than three years, but less than four years, after the petitioning beneficiary came of age. The court below held that the proceeding was barred by Code of Civil Procedure, § 338, subdivision 3. The appellate court held that this was error, being strongly of the opinion that the statutes of limitation were not applicable at all. But the court also said that ‘[A]ctions in equity, including proceedings for an accounting, where a specific and definite provision has not otherwise been made in the code, are governed by the provisions of section 343, Code Civ.Proc. * * *.’ The language is broader than necessary, but the holding is not applicable to the case at bar. We mention the case because it cites, inter alia, McArthur v. Blaisdell, supra, and Freeman v. Donohoe, supra. People v. Taliaferro, 1957, 149 Cal.App.2d 822, 309 P.2d 48, was an appeal from a default judgment in an action by the people under Revenue & Taxation Code, section 3651 et seq., for the rents received by defendant while the property was tax deeded to the state. Defendant relied on Code of Civil Procedure, §§ 339 and 340. The court did not have to pass upon these questions at all, but proceeded to do so. For that purpose, all that the court had to hold was that those sections do not apply. It would appear that Code of Civil Procedure, § 336, would apply. Nevertheless, the court, solely on the authority of Austin v. Harry E. Jones, Inc., supra, said that an action for an accounting falls within Code of Civil Procedure, § 343. In the very recent case of Schaefer v. Berinstein, 180 Cal.App.2d 107, 4 Cal.Rptr. 236, there is a statement, citing only People v. Taliaferro, supra, that insofar as an accounting was sought in the case, such relief would be barred by Code of Civil Procedure, § 343. The court, at pages 128–129 of 180 Cal.App.2d, at pages 251–252 of 4 Cal.Rptr. demonstrates that the action is barred by other sections in any event, so that the statement regarding the accounting was unnecessary to the decision.

We are of the opinion that the statements in the foregoing cases that an action for an accounting is governed by Code of Civil Procedure, § 343, are not sound law. We hold that appellant's action is one ‘upon a contract * * * not founded upon an instrument of writing,’ and that it is therefore barred by Code of Civil Procedure, § 339, subdivision 1.

Affirmed.

FOOTNOTES

1.  ‘Within two years. 1. An action upon a contract, obligation or liability not founded upon an instrument of writing * * *.’

2.  ‘Actions for relief not hereinbefore provided for. An action for relief not hereinbefore provided for must be commenced within four years after the cause of action shall have accrued.’

DUNIWAY, Justice.

BRAY, P. J., and TOBRINER, J., concur.