Austin v. Massachusetts Bonding & Ins. Co.

• Decision Date: 11 September 1961
• Citation: 56 Cal.2d 596,364 P.2d 681,15 Cal.Rptr. 817
• Court: California Supreme Court
• Parties: , 364 P.2d 681 Harry E. AUSTIN et al., Plaintiffs and Appellants, v. MASSACHUSETTS BONDING & INSURANCE COMPANY, Defendant and Respondent. * S. F. 20690.

Page 817

15 Cal.Rptr. 817

56 Cal.2d 596, 364 P.2d 681

Harry E. AUSTIN et al., Plaintiffs and Appellants, v. MASSACHUSETTS BONDING & INSURANCE COMPANY, Defendant and Respondent. ^*

S. F. 20690.

Supreme Court of California, In Bank.

Sept. 11, 1961.

Johnson & Harmon and Robert H. Johnson, San Francisco, for plaintiffs and appellants.

Weinstock, Anderson, Maloney & Chase and Harold J. Chase, San Francisco, for defendant and respondent.

GIBSON, Chief Justice.

Certain of the plaintiffs appeal from a judgment entered in favor of defendant Massachusetts Bonding & Insurance Company after its general demurrer to an amended complaint was sustained without leave to amend.

Plaintiffs on September 19, 1957, brought an action against Pacific States Securities Corporation, some of its officers, and certain defendants sued under fictitious names, to recover securities and moneys. The complaint, without making any distinction between those sued by their true names and those designated by fictitious names, alleged that 'defendants' acted as brokers and agents for plaintiffs and refused to deliver securities and moneys which they had received on behalf of plaintiffs. It was also alleged that defendants, in making a license application on behalf of Pacific, 'filed therewith surety bond in the sum of $5,000 for the faithful performance of its duties as a licensed broker' and that defendants and each of them held out and represented that defendant Bunce had power to act for Pacific and that 'they, the said defendants,' were duly licensed to act as brokers. Plaintiffs averred that they did not know the true names of the defendants sued under fictitious names, and leave was asked to amend the complaint to show the true names when discovered.

The amended complaint was filed with leave of court on October 8, 1959. It repeats substantially the allegations of the original complaint as to the plaintiffs who have appealed, substitutes Massachusetts Bonding for one of the defendants designated by a fictitious name, alleges that Massachusetts Bonding executed the surety bond, makes the bond a part of the pleading, and adds allegations of fraudulent conduct by Bunce and of negligence by other officers of Pacific. The bond provides that any person who sustains an injury covered by it may bring an action on the bond within two years from the time the act or default complained of occurred. ¹

The position of Massachusetts Bonding is that the action against it is barred because the amended complaint, which for the first time named it as a party, was filed more than two years after the rights of plaintiffs accrued. Plaintiffs contend that the action against the bonding company must be regarded as having been commenced by the original complaint, which was filed within the two-year period. Although Massachusetts Bonding relies on the contractual limitation, authorities concerning the statute of limitations are applicable by analogy.

Where a complaint sets forth, or attempts to set forth, a cause of action against a defendant designated by fictitious name and his true name is thereafter discovered and substituted by amendment, he is considered a party to the action from its commencement so that the statute of limitations stops running as of the date of the earlier pleading. Hoffman v. Keeton, 132 Cal. 195, 196-197, 65 P. 264; Farris v. Merritt, 63 Cal. 118, 119; Day v. Western Loan & Bldg. Co., 42 Cal.App.2d 226, 231 et seq., 108 P.2d 702; see Stanley v. Kawakami, 127 Cal.App.2d 277, 278, 273 P.2d 709; Sullivan v. Wright, 124 Cal.App.2d 836, 838, 269 P.2d 671; Kolodziejski v. Hover, 124 Cal.App.2d 731, 733, 269 P.2d 163; Gates v. Wendling Nathan Co., 27 Cal.App.2d 307, 314 et seq., 81 P.2d 173. In the original complaint a cause of action was stated against the defendant designated by fictitious name in whose place Massachusetts Bonding was later substituted, but the character of the legal obligation of Massachusetts Bonding alleged in the amended complaint is different from that set forth in the original complaint. The first complaint alleged that the 'defendants' (which necessarily included those designated by fictitious names) were brokers for plaintiffs and refused to deliver securities and moneys to which plaintiffs were entitled. There was no allegation that any of the defendants executed the surety bond or that any of them was being sued as a surety rather than as a principal. Thus the action against the fictitiously named defendant who subsequently was replaced by Massachusetts Bonding was one for refusal to deliver property as a principal whereas in the amended complaint Massachusetts Bonding was sued as surety on the bond. The decisive question is whether under these circumstances the amendment relates back to the original complaint for purposes of the statute of limitations.

The modern rule with respect to actions involving parties designated by their true names in the original complaint is that, where an amendment is sought after the statute of limitations has run, the amended complaint will be deemed filed as of the date of the original complaint provided recovery is sought in both pleadings on the same general set of facts. Eichler Homes of San Mateo, Inc. v. Superior Court, 1961, 55 Cal.2d 845, 13 Cal.Rptr. 194; Brooks v. E. J. Willing Truck Transp. Co., 1953, 40 Cal.2d 669, 681, 255 P.2d 802; Wennerholm v. Stanford University School of Medicine, 1942, 20 Cal.2d 713, 718, 128 P.2d 522; 141 A.L.R. 1358; Stockwell v. McAlvay, 1937, 10 Cal.2d 368, 375, 74 P.2d 504. This rule is the result of a development which, in furtherance of the policy that cases should be decided on their merits, gradually broadened the right of a party to amend a pleading without incurring the bar of the statute of limitations.

Some early cases held that an amendment stating any new cause of action could not relate back and that a plaintiff could not amend so as to change the legal theory of his action. Hackett v. Bank of California, 1881, 57 Cal. 335, 336; Anderson v. Mayers, 1875, 50 Cal. 525, 527. Subsequent cases held that a mere change in legal theory would not prevent an amendment from relating back but that an amendment would not relate back if it set forth 'a wholly different cause of action,' i. e., 'a wholly different legal liability or obligation.' Wells v. Lloyd IV, 1936, 6 Cal.2d 70, 88, 56 P.2d 517; Frost v. Witter, 1901, 132 Cal. 421, 424 et seq., 64 P. 705; cf. Klopstock v. Superior, Court, 1941, 17 Cal.2d 13, 19 et seq., 108 P.2d 906, 910, 135 A.L.R. 318. In the Klopstock case it was unnecessary to consider whether the right of a party to amend should be further broadened, since we held that the amendment there involved was proper under the 'wholly different cause of action' test. This test was referred to in Wennerholm v. Stanford University School of Medicine, 1942, 20 Cal.2d 713, 717-718, 128 P.2d 522, 141 A.L.R. 1358, but after setting forth the modern rule permitting relation back of amendments based on the same general set of facts, the opinion concluded that no different cause of action was stated where the amendment did not essentially change the factual situation upon which recovery was predicated. The later cases of Eichler Homes of San Mateo, Inc. v. Superior Court, 1961, 55 Cal.2d 845, 13 Cal.Rptr. 194, and Brooks v. E. J. Willig Truck Transp. Co., 1953, 40 Cal.2d 669, 255 P.2d 802, rely solely on the modern rule without mentioning the older test.

The rule...