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(209 P.) affirmative defenses failed to state a de-, 6. Set-off and counterclalm 44(1)-Claim of fense, for the reasons we have given.

either defendant proper subject of counterThe judgment is affirmed.

claim in action on joint and several note.

A valid claim of either defendant is propFULLERTON. MITCHELL and TOL er subject of counterclaim in action on joint or MAN, JJ., concur.

several liability of makers of a note.

In Bank.

Appeal from Superior Court, Los Angeles County; L. H. Valentine, Judge..

Action by Henry F. Whittier against Mrs. WHITTIER v. VISSCHER et al. (L. A. 7117.) |W. E. Visscher and others. Judgment for

plaintiff, and defendants, other than Mrs. (Supreme Court of California. Aug. 18, 1922.) |

E. M. Dixon, appeal. Reversed. 1. Judgment Om714(1)-Conclusive in subsec. E. McDowell and Frederick Gros, both

quent action involving same question, though of Los Angeles, for appellants. . different subject-matter.

Bicksler, Smith & Parker and Arthur G. Though action by the makers of a nonnego- Baker, all of Los Angeles, for respondent. tiable note against D., the payee, and W., assignee, thereof, to avoid it on the ground of SLOANE, J. This action was originally fraud, was begun after W. had assigned the begun by one Eva B. Clark, as plaintiff, to note to C., so that the judgment for defendants therein would not be available as res' judicata

recover on a promissory note. The note, of the issue of fraud in a subsequent action on

conceded to be nonnegotiable, was for the the note by C. against the makers, yet, the

sum of $4,750, and was executed by appeloriginal action having been also to re-establish

lants and defendants Mrs. W. E. Visscher W.'s liability as indorser on another note re- and Hugo Kraght Visscher to defendant leased as part of the same transaction and de- Mrs. E. M. Dixon. Before suit was instipendent on the same issue of fraud, W., sub | tuted, the note had been indorsed by the sequently taking a reassignment of the note giv

payee, Mrs. Dixon, to Henry F. Whittier, en to D. and suing the makers thereon, could by reason of his own privity with the original

the present plaintiff and respondent, and judgment plead it as res judicata of the defense

by him indorsed without recourse to the of fraud; a former judgment between the same

original plaintiff, Eva B. Clark, who there parties being conclusive, not only as to the sub after brought this action to recover from the ject-matter in controversy in the action on Visschers, the makers of the note, and from which it is based, but also in other actions in Mrs. Dixon, the first indorser. Mrs. Dixon volving the same question.

having failed to appear and answer, her 2. Parties in 59(2)-No abuse of discretion to

default was regularly entered. allow subsequent assignee of noto sued on to

The Visschers answered, and by way of debe substituted as plaintiff.

fense set up fraud, misrepresentation, and Where, after action is begun on a note, it failure of consideration in the procurement is assigned, it is not an abuse of discretion to of the note sued on. The undisputed facts allow the assignee to be substituted as plaintiff show that the note was given as part of in the action.

the consideration for 924 shares of the cap

ital stock of a corporation existing under 3. Corporations Om 247–Stock holder's liability on corporate note held not affected by sale of

the name of Brinks Express Company. The

defendant Mrs. E. M. Dixon owned 921 of the her stock to payee.

924 shares, and the remaining 3 belonged to A stockholder's liability on a corporation's

The tonote was not affected by a sale of her stock to other directors of the corporation. the payee, who as part consideration released tal corporate stock consisted of 1,392 shares. her from liability as indorser, but did not oth The corporation was at the time indebted erwise release the corporation or its prior to defendant Mrs. W. E. Visscher in the sum stockholders from liability thereon.

of $5,000, evidenced by a promissory note for

that amount executed by the corporation, 4. Set-off and counterclaim m34(1) - Stockholder's liability arises on contract.

upon which note the respondent Whittier was Relative to right of counterclaim under

liable as an indorser. The entire consideraCode Civ. Proc. § 438, subd. 2, a stockholder's tion for the 924 shares of stock received by liability on account of note of the corporation the Visschers was the note sued on and the is one arising on contract.

release of respondent Whittier from liability

as indorser on the $5,000 note of the cor5. Limitation of actions 129 - Running

poration. The liability upon the $5,000 note against counterclaim stopped by commencement of main action.

itself does not seem to have been released A counterclaim, not barred at commence

as to the corporation or any of its stockholdment of the action in which it is interposed, is ers, other than the respondent. unaffected by subsequent running of the stat- ' The fraud alleged in the transaction need ute before it is pleaded.

| not be set out in detail. It is sufficiert to For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

say that it consisted of alleged representa- , note owned by a stranger to the record, who tions by the owners of the stock with re- took the assignment before the commencegard to the value, character, and extent of ment of the suit. Had Eva B. Clark rethe business of the corporation, which, if mained the plaintiff in the present suit and shown to be false and fraudulent, and if the owner of the note, this earlier judgment available to the appellant defendants under could not be pleaded as an estoppel to a retheir answer, would constitute a sufficient trial of the issue of fraud as against her. defense to recovery in this action. The ap- Does the fact that respondent, Whittier, took pellant defendants also set up by supple- a reassignment of the note and was substimental answer as a cross-demand their claim tuted as plaintiff in this case pending trial, against Mrs. E. M. Dixon, the original payee give any greater vitality to the earlier judg. of the note in suit, for her stockholder's 11- ment than it would have had for or against ability on the indebtedness of the corporation his assignor? evidenced by the $5,000 note held by Mrs. Assuming that this might not be the case Visscher. These defenses were denied and if the only interest of the respondent in the excluded from the evidence by the trial former action had been in connection with court, and the judgment appealed from, for the ownership of the note, it must be borne the full amount of the note sued on, was in mind that such action involved the regiven for the respondent, who, pending the scission oỉ the entire contract for the purtrial, had procured a reassignment of the chase and sale of the corporation stock, for note to himself, and was substituted as which the note was only part of the considerplaintiff in place of his former assignee, Eva ation. The release of respondent from his B. Clark, the original plaintiff. It is upon liability as indorser of the $5,000 note of the rulings of the trial court, defeating the the corporation held by Mrs. Visscher was special defense and the counterclaim of ap- also one of the considerations for the shares pellants, that the controversy arises on this of stock, and the action for rescission had appeal.

for one of its purposes the restoration of [1] The respondent plaintiff interposed as respondent's liability as such indorser. He a plea in bar to the defense of fraud in pro- | was therefore a proper and necessary party curement of the note a judgment in another to the action for rescission for that reason, action in which the same issue of fraud had quite independently of any interest in the been tried and determined adversely to the note sought to be cancelled, and the judg. same averments contained in their answer ment was conclusive as to this defense of in this action. It was stipulated between fraud upon respondent's liability as indorser the parties on the trial that the plaintiffs of the corporation note. in the former action were the same persons Conceding, then, that respondent could not as the defendants prosecuting this appeal, be brought into privity with the former judg. and that the defendants in the former action ment by a reassignment from Eva B. Clark, were the respondent Whittier and the de- who was not a party to the first suit, we are fendant Mrs. E. M. Dixon in this case. The of the opinion that, when his right to enforce cause of action was for rescission of the payment on the reassigned note was ques. contract under which the corporate stock tioned on the ground of this alleged fraud in was obtained, and to cancel the note in suit, its procurement, he could plead a former and re-establish the liability of the respond- adjudication of that issue by virtue of his ent as indorser of the corporation note. The own relation to the suit in which the adjudiallegations of fraud, misrepresentation, and cation was made. The relief sought against failure of consideration were identical with respondent to re-establish his liability as inthe averments of the answer before us. | dorser of the corporation note depended upon Judgment was for the defendants, negativing | precisely the same state of facts as to the the allegations of fraud, and upholding the alleged fraud as would the cancellation of validity of the note. On appeal the judg- the note, the fraud in the transfer of the ment was affirmed by the District Court of stock, which transfer was the consideration Appeal, and a rehearing in this court was for both the note in suit and the release of denied. Visscher v. Whittier, 188 Pac. 1029. respondent's liability on the other note. A

It is the contention of appellants, however, former "judgment between the same parties that the bar of the judgment is defeated by is conclusive, not only as to the subject-matreason of the fact, which is disclosed by the ter in controversy in the action upon which récord here, that the action in which the it is based, but also in all other actions injudgment was obtained was begun some 10 volving the same question.” Bingham V. days after the note sought to be avoided had Kearney, 136 Çal. 177, 68 Pac. 597; Southern been assigned to Eva B. Clark, and Eva B. Pac. Co. v. Edmunds, 168 Cal. 418, 143 Pac. Clark was never made a party to the action. | 597; Curtis v. Upton, 175 Cal, 331, 165 Pac. The court at no time acquired jurisdiction of 935; Koehler v. Holt Manfg. Co., 146 Cal. the real party in interest in the note, and 337, 80 Pac. 73; Kinderman y. Shipley (Cal. was clearly without power to give a judg- App.) 190 Pac. 472. It follows, then, that ment which would affect the status of the the operation of the judgment pleaded in

(209 P.) bar in favor of respondent does not rise up-, liability or in its enforcement, where it arises on any privity in such action, dependent on a contract of the corporation, to differenupon the reassignment of the note. While tiate it from a direct contract by the indisuch assignment may not invest respondent vidual so far as concerns the remedy of the with any right to plead the former adjudica- parties. The following decisions in situation which Eva B. Clark. bis assignor, did tions analogous to that presented here have not possess, it did not deprive him, of the held the stockholder's liability to be conright to rely upon his own privity with the tractual in its nature: Dennis V. Superior judgment pleaded.

Court, 91 Cal. 548, 27 Pac. 1031; Kennedy [2] We do not think there was any abuse v. Calif. Sav. Bank, 97 Cal. 93, 31 Pac. 846, of discretion in the permission of the court 33 Am. St. Rep. 163; Royal Trust Co. v. for a substitution of respondent as plaintiff MacBean, 168 Cal. 642, 144 Pac. 139; Linin this action upon his becoming owner of inger v. Botsford, 32 Cal. App. 386, 163 Pac. the note in suit. When the substitution was 63; Miller & Lux v. Katz, 10 Cal. App. 576, made, there was some suggestion in the dis- 102 Pac. 946; Platt v. Wilmot, 193 U. S. cussion between court and counsel to the 603, 24 Sup. Ct. 542, 48 £, Ed. 809; Bank effect that the change in parties plaintiff v. Farnum, 176 U. S. 640, 20 Sup. Ct. 506, would not affect appellants' defenses; but | 44 L. Ed. 619; Whitman v. Oxford, 176 U. this conversation seems to have been on the S. 559, 20 Sup. Ct. 477, 44 L. Ed. 587. We theory that respondent had no privity in are therefore of the opinion that such an exthe litigation pleaded, other than through isting liability of a plaintiff to the defendownership of the assigned note.

ant may be pleaded by way of counterclaim. [3] We will consider next the cross-com- [5] It is next contended that the claim in plaint set up in appellants' supplemental an- this case is barred by the statute of limitaswer. As already pointed out, when appel- tions. It is conceded that it was not so lants became the owners of the 924 shares barred when the original action was begun, of the stock of the corporation, there was and the authorities in this state seem to be no release or extinguishment of the liability agreed that, if the right of action relied on of the corporation or of its prior stockhold-was alive at the commencement of the suit, ers on the indebtedness evidenced by the cor- the statute does not run against it, when, as porate note for $5,000 already held by Mrs. in this case, the full statutory period has Visscher. We do not think that there is expired thereafter during the pendency of any merit in the contention of the respond the action and before the claim is pleaded as ent that the transactions under which the a cross-complaint. Lyon v. Petty, 65 Cal. Visschers purchased this stock in any way 322, 4 Pac. 103; Perkins v. West Coast affected liability under the $5,000 note, other Lumber Co., 120 Cal. 27, 52 Pac. 118; Mcthan as to respondent's liability as an in- Dougald v. Hulet, 132 Cal. 154, 64 Pac. 278; dorser. Mrs. Visscher, then, at the time of | Bliss v. Sneath, 103 Cal. 43, 36 Pac, 1029; the commencement of this suit to recover Id., 119 Cal. 526, 51 Pac. 848;. Maryland against her and Hugo K, Visscher, had a Casualty Co. v. Shafer et al. (Cal. App.) 208 valid cause of action against Mrs. Dixon, the Pac. 197. The same rule is stated in 24 R. original payee of this nonnegotiable note C. L. § 43, as declarative of the common law, sued on, for her stockholder's liability on the as follows: corporation note upon which a separate judgment might have been obtained by her.

"If, however, a counterclaim or set-off is not

barred at the commencement of the action in [4] Respondent further objects, however,

which it is pleaded, it does not become so barthat a stockholder's liability, which, as in red afterward during the pendency of that ac. this case, does not arise out of the transaction, and in pleading the statute of limitations tion sued upon, is not a proper matter of to a counterclaim it must be shown that the cross-complaint or counterclaim; that it is bar of the statute had matured when the originot a cause of action “arising on contract" nal action was commenced, and it is not suffias specified in subdivision 2 of section 438 | cient to aver a bar when the counterclaim was of the Code of Civil Precedure, but is purely a liability imposed by statute. While it is true that it is the authority of the statute [6] Respondents' remaining objection to which creates the general liability of the this cross-complaint, that it cannot be mainstockholder on the corporation indebtedness, tained in this action because it only runs as in a case like this, it is the contract of the l a set-off in favor of one of the defendants corporation which creates the indebtedness. | is not tenable. This is an action on a joint In assuming the status of a stockholder, each and several liability of the makers of a owner of shares of stock in effect empowers promissory note. Payment by either would the corporation by its act to bind him by its extinguish the right of action of the plaintiff obligations. It is a separate independent against both. It naturally follows that the liability, but it is created by and arises on set-off of a valid claim of either may be the contract. There is nothing that we can interposed with the same result. Miller v. discover in the creation of the stockholder's Murphy, 186 Cal. 344, 199 Pac. 525; Austin

filed.”

v. Feland, 8 Mo. 309; Ruby v. Baker, 106 | the result to insured and the means by which Kan. 859, 190 Pac. 6, 10 A. L. R. 1247. that result was brought about.

By reason of error in the exclusion of evi- 6. Insurance 66911) - Defondant insurer dence of appellants' counterclaim, the judg entitled, under policy against death by acciment is reversed.

dental means, to instruction on ordinary inci.

dents of plowing, whereby deceased met acWe concur: SHAW, C. J.; LENNON, J.; | cident. WASTE, J.; RICHARDS, Justice pro tem.; In such action, where there was evidence MYERS, Justice pro tem.

that insured's death was caused by lurching of a plow he was using in hard ground, insurer was entitled to an instruction that, if there was no more lurch to the plow than was ordinarily incident to the plowing which insured

was doing, it was not an accident for which inOGILVIE v. ÆTNA LIFE INS. CO. OF sured could recover. HARTFORD, CONN. (L. A. 6502.)

7. Trial On 235(2) - Instruction that theory (Supreme Court of California. Aug. 14, 1922.cannot be established, where faots are conRehearing Denied Sept. 11, 1922.)

sistent with contrary theory, properly refused.

An instruction that a theory cannot be es1. Evidence 318(4), 333(1)-County sur- tablished in a civil case, where facts consistent

geon's unsworn report of autopsy findings with it are also consistent with a contrary thehearsay, and not admissible as a public rec-ory, was properly refused, since the theory the ord.

jury deemed most probable would be established In action by beneficiary on an insurance pol- | by a preponderance of evidence. icy, an unsworn written report of autopsy find

8. Insurance 646(6)_Trial 1296(7)-Erings, made by the county surgeon to the coro

ror to instruct that defendant must prove that ner on insured's death, was hearsay, and not re

disease was proximate cause of death, in suit ceivable as a public record.

on policy against death by accidental means. 2. Appeal and error 1050(1)-Error in ad.

In an action on a policy against death by mitting Unsworn report of autopsy findings accidental means, it was error to instruct that held not cured by subsequent testimony. defendant must prove by a preponderance of

In an action on an insurance policy, error evidence that disease was the proximate cause in admitting, for plaintiff, surgeon's unsworn of death, and to refuse insurer's requested spewritten report of autopsy findings held not cur-cific instructions to the contrary; nor was this ed by his testifying as to the report at the error cured by conflicting instructions that instance of defendant, where plaintiff by anoth- plaintiff must prove that death resulted from er witness made use of the report to the detri- injuries effected solely through external and ment of defendant.

accidental means. 3. Evidence C 220(1) - Lack of denial does 9. Insurance 669(11) - Instruction as to not show an admission.

disease being proximate cause of death, in Where persons not under duty to speak are action on policy insuring against death by ac. merely shown to have made no denials, an cidental means, held error. admission is not thereby shown, especially In an action on a policy against death by where the authority of such persons to make accidental means, it was error to instruct that admissions is doubtful.

the presence of disease as a proximate contrib. 4. Insurance Co 449—“Accidental death” and

uting cause of insured's death would be imma

terial, unless it was also found that the dis“death by accidental means" defined.

ease itself would have caused death at approxiWhere death results from an act, but was

mately the same time without the accident have not designed and not anticipated by deceased,

ing occurred. though it be in consequence of some act voluntarily done by him, it is "accidental death"; 10. Evidence on 20 (1)-Court could judicially wbere death is caused by some act of deceased I notice that plowing was not incident to occunot designed or intentionally done by him, it is pation of real estate and investments. "death by accidental means."

The court should judicially notice that plow[Ed. Note.-For other definitions, see Words ing was not incident to the occupation of "real and Phrases, First and Second Series, Accident estate and investments," notwithstanding that -Accidental.)

men in this business have been known to plow. 5. Insurance 669(11)-Instruction improp. 11. Insuranco F531-Proviso reducing amount,

er, under policy against death by accidental if injury received while doing act pertaining means, which failed to distinguish accidental to more hazardous occupation, covers isolatresult to insured and means producing result. ed and casual acts, where occupation is not

In an action on a policy against "death actually changed. by accidental means," as distinguished from Under a policy insuring against death by "accidental death," an instruction was improper accidental means, which provides that the which told the jury that, if death of insured amount recoverable shall be reduced if insured was due to a rupture caused by a strain, but is injured doing acts pertaining to an occupawas an unexpected result thereof, plaintiff could tion more hazardous than that for which insurrecover, since this fails to distinguish between ded, it is not necessary, in order for the proviso

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

e re

(209 P.) to become operative, to show that insured had, alleged that his death was caused and was actually changed his occupation; that is, that contributed to by disease. the act in which he was engaged when injured The issues, so far as the right of recovery was "habitual,” as distinguished from "casual.”

is concerned, may be stated as follows: (1) 12. Insurance C 646(8) - Insurer has bur Did Mr. Ogilvie sustain an injury through

den of proving accident occurred in more haz. accidental means? (2) If so, did such injury ardous occupation than that for which in solely cause his death, or was his death consured.

tributed to by a pre-existing condition of disWhere insurer seeks to reduce amount re ease? The evidence was amply sufficient to. coverable, because insured met accident in an

support a finding in favor of the defendant occupation more hazardous than that against

upon each of these issues, and as such a findwhich insured, the burden is on insurer to show

ing, upon either issue, would have precluded certain occupations are in fact more dangerous than others, and not merely that he so classi

recovery, it becomes important to consider fies them.

the claimed errors.

[1] Upon the trial the plaintiff offered in 13. Trial 37-Omission to assume burden of

evidence the written report of his findings proof waived by proceeding as if issues were

made by Dr. Wagner, the county autopsy properly presented. Right to object to omission to assume bur

surgeon, to the coroner, and filed with the den of proof may be waived by proceeding county clerk. It was received in evidence throughout trial as if the particular issue had over the objection of the defendant on the been properly presented.

ground that it was hearsay and incompetent,

and that Dr. Wagner was then present in In Bank,

court and available as a witness. Counsel for Appeal from Superior Court, Los Angeles defendant stipulated that Dr. Wagner was County; Paul J. McCormick, Judge.

the duly qualified and acting autopsy surAction by Hattie L. Ogilvie against the geon, and that the examination and th Ætna Life Insurance Company of Hartford,

port were regularly made by him in the per

formance of his official duties. This is the Conn. From a judgment for plaintiff, defend.

only basis suggested to us for its admissiant appeals. Reversed.

bility in evidence, and it should have been Gibson, Dunn & Crutcher and Norman s. excluded as hearsay. It was an unsworn Sterry, all of Los Angeles (Henry F. Prince, I statement, not subiect to

statement, not subject to cross-examination, of Los Angeles, of counsel), for appellant. made by a stranger to this action, and made

Meserve & Meserve, of Los Angeles, for in the course of a proceeding to which this respondent.

defendant was neither party nor privy. Va

rious sorts of public records are made reMYERS. Justice pro tem. Plaintiff ceivable as prima facie evidence by virtue of brought this action as beneficiary under a express provision of statute, but we have policy issued by the defendant insuring plain-| been cited to no such statute as applicable to tiff's husband "against disability or death re- this report. sulting directly and independently of all | [2] It is claimed that this error, was renother causes from bodily injuries effected dered harmless by the fact that the defendsolely through external, violent, and acci- ant afterward called Dr. Wagner as its witdental means." Defendant appeals from the ness, and proved by him the same facts emjudgment on verdict in favor of the plaintiff bodied in his report, as to the physical: findfor the full amount of the policy. It is con- ings. We would be inclined to adopt this ceded that the evidence is legally sufficient view, if the use made by the plaintiff of this to support the verdict, and the appeal is pred- report had gone no further. But the plainicated solely upon claimed errors of law in tiff then called Dr. Pallette as her witness, the admission and rejection of evidence and and, after defining and explaining to the jury the giving and refusal of instructions.

the meaning of certain technical words The allegation of the complaint was to the found in the report, he testified that the exeffect that the assured, while assisting a pression, "moderate degree of senile changes," Japanese in doing some plowing, met with an as used in the report, had no definite and accident, "in substance, that the said plow fixed meaning in the medical profession. He which the said James G. Ogilvie was using was then asked "whether or not that report at said time, came in contact with a root or shows any disease or diseased condition of other obstruction unforeseen, causing said the heart”? This question was objected to plow and its plow handle to be given a severe upon the grounds, among others, "that the wrench, thereby causing the said James G. statement itself is not admissible"; "that it Ogilvie to be given a severe wrench and is not permissible for this witness to explain strain," as a result of which his heart was what is meant by another surgeon in making ruptured, and he died therefrom five days the report"; and that "it is not shown that later. 'Defendant denied that assured sus- this witness was present at the examination, tained any injury from accidental means, and or has any knowledge or means of knowing

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

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