Action by J. V. Roberts against Henry B. True and wife. From a judgment for plaintiff and an order denying a motion for a new trial, defendants appeal. Judgment and order reversed.

Laird & Packard and H. L. Packard, for appellants. Fay & Claflin and C. L. Claflin, for respondent.

SHAW, J. This is an action for the specific performance of a parol agreement to convey real estate. Judgment was rendered for plaintiff, from which, and an order denying their motion for a new trial, defendants appeal.

Defendants are husband and wife. For the purpose of securing the payment of a certain promissory note Henry B. True executed and delivered to plaintiff, Roberts, what purports on its face to be a deed of trust in the usual form (except that Roberts, the payee of the note, is made trustee therein with power of sale in case of default in the payment of the said note, but which instrument defendant Henry B. True alleges to have intended and understood to be a mortgage), whereby he conveyed to Roberts the legal title to the real estate in question. The note was not paid, and Roberts and Henry B. True made an oral agreement whereby plaintiff agreed to surrender the note and discharge such deed of trust, in consideration of which defendant Henry B. True was to convey the property to plaintiff and plaintiff was to lease the same to him for a term of three years. Pursuant to this agreement, plaintiff delivered the note to defendant Mary True, and on January 18, 1898, made the following indorsement upon the margin of the record of the deed of trust: "Full payment and satisfaction of the within trust deed hereby acknowledged. J. V. Roberts. Signed and acknowledged before me this 18th day of Jan., 1898, F. S. Benson, County Recorder, by J. W. Crosland, Deputy Recorder." And on or about January 20, 1898, plaintiff executed to True a lease of the said premises for a term of three years. On May 18, 1898, defendant Henry B. True filed a declaration of homestead upon the property, and thereafter refused to execute a deed to the land in accordance with his agreement with plaintiff; hence this suit.

The principal contention of appellants is that, as Mary True was not a party to the agreement, its terms cannot be enforced as against her rights which accrued by virtue of the filing of the declaration of homestead by her husband. It is unnecessary to enter upon a discussion of this point, as it is clear that plaintiff was not entitled to judgment for another reason.

The instrument is a deed of trust in the usual form, whereby the legal title to the property was vested in Roberts (Kraft Co. v. Bryan, 140 Cal. 73-80, 73 Pac. 745); and, unless the indorsement upon the margin of

the record of the deed of trust constitutes a reconveyance, it follows that the legal title remains in Roberts. By express statutory provision the lien of a recorded mortgage may be satisfied by an indorsement upon the margin of the record, as made here (Civ. Code, 2938); but such an indorsement is lacking in all the essential elements requisite to a transfer of title. This indorsement does not purport to be a conveyance of the land; none of the formalities requisite to a legal transfer of title were observed in making it. Such reconveyance of the property provided to be made in the deed of trust upon payment of the indebtedness as security for which it was given can only be made by an instrument in writing couched in suitable and apt words of transfer, duly executed and delivered. None of these formalities were observed. There was no reconveyance, and the legal title to the property is still vested in Roberts, whose duty it is, under the terms of the deed, to reconvey the property if the indebtedness has been paid (Civ. Code, § 871), and whose right it is thereunder to execute the trust, by selling the property, if the indebtedness be unpaid. Koch v. Briggs, 14 Cal. 256, 73 Am. Dec. 651; Bateman v. Burr, 57 Cal. 480. The indorsement upon the margin of the record was a futile act, unavailing for the purpose of discharging the deed of trust.

The rights of Mary True, accruing to her by virtue of the declaration of homestead, are subject to the deed of trust, and those holding thereunder. Civ. Code, § 865; King v. Gotz, 70 Cal. 236, 11 Pac. 656; Sacramento Bank v. Alcorn, 121 Cal. 379, 53 Pac. 813. There is no redemption from a sale thereunder. Koch v. Briggs, 14 Cal. 257, 73 Am. Dec. 651. The expiration of the statutory time which bars an action to foreclose a mortgage or recover a debt does not apply to the execution of the power of sale for nonpayment of a debt secured by a deed of trust. Grant v. Burr, 54 Cal. 298. The fact that the title to the property, as well as the power to sell, is vested in Roberts, who was payee of the note secured by the deed of trust, does not affect his right to a sale of the property. Mayhall v. Eppinger, 137 Cal. 7, 69 Pac. 489.

Judgment and order are reversed.

We concur: ALLEN, P. J.; TAGGART, J

(7 Cal. App. 387) RICHARDS v. FARMERS' & MERCHANTS' BANK et al. (Civ. 403.)

(Court of Appeal, Third District, California. Jan. 11, 1908. Rehearing Denied by Supreme Court, March 10, 1908.)

1. PLEADING-DEMURRER-ADMISSIONS BY DE

MURRER.

A demurrer admits the allegations of the complaint to be true, and for the purpose of deciding the demurrer the facts as alleged and so admitted to be true must constitute the sole

guide in the determination of the propositions of law presented.

[Ed. Note. For cases in point, see Cent. Dig. vol. 39, Pleading, §§ 525-534.]

2. CANCELLATION OF INSTRUMENTS-RIGHT OF ACTION-CONDITIONS PRECEDENT-RESTORATION OF FORMER STATUS OF PARTIES.

Generally a party seeking rescission upon the ground of fraud must, as to the subjectmatter or consideration of the contract, place the other party in statu quo, or offer so to do, before he would be entitled to relief, but he is not required to restore that which, in any event, he would be entitled to retain, nor is he bound to restore what he has received where it is of no value whatever to either of the parties, or where he has merely received the individual promissory note of the other party, or where the contract is absolutely void, or where it clearly appears that the other party could not possibly have been injuriously affected by a failure to restore, or where, without his fault, there have been peculiar complications which make it impossible for him to offer full restoration, although the circumstances are such that a court of chancery may by a final decree fully adjust the equities between the parties.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 8, Cancellation of Instruments, § 32.] 3. CONTRACTS-CONSTRUCTION IN PLEADINGS. Where a pleaded instrument is, because of the uncertainty of its language, susceptible of more than one construction as to its nature or as to the purpose intended by the parties to be attained by it, the construction of the party pleading it should be accepted, if such construction be reasonable, where the essential facts stated in the complaint are at least pro re nata admitted to be true.

4. CANCELLATION OF INSTRUMENTS-RIGHT OF ACTION-CONDITIONS PRECEDENT-RESTORATION OF CONSIDERATION.

Certain instruments drawn up in settlement of pending suits recited that plaintiff, having examined defendants' books and papers, was satisfied with the accounts between them as kept by defendants, that a part of the money advanced by him and mentioned in the complaints was properly disbursed by defendants, and that the balance thereof he had just received, in consideration for which he released defendants from all claims of every kind which he then had or might or could have made against them. The complaint in an action to set aside the instruments, after setting them out, alleged that true and accurate accounts of the transactions between the parties were not exhibited to plaintiff when the instruments were executed, that he was thus fraudulently misled by defendants for the purpose of cheating him, and that facts learned subsequent to the execution of the instruments convinced him that the settlement was not a just and honest one; there being still due him a large sum of money in excess of the sum received by him. Held, on demurrer, that, in view of the allegations of the complaint and the theory upon which the suit proceeded, the instruments simply meant that a settlement of the differences between the parties had been reached, and that the sum paid plaintiff was, under all the facts then known to him, a just and equitable basis of such settlement, and not a mere "buying of peace" by defendants, and hence plaintiff, having received less than was due him, and being entitled to retain in any event the sum received, was not obliged to restore it to defendants, or offer so to do, before bringing suit to rescind the instruments and for an accounting.

that

share; that they and the defendant bank, which was the depositary of the profits of the business, entered into a conspiracy to defraud plaintiff of his share in the profits; that plaintiff then brought suits against defendants, which were settled by agreement as shown by the instruments; that, to induce plaintiff to accept in settlement the sum given him, he was allowed to examine the defendants' books and accounts, but that only fictitious books and accounts, and not all of them, were exhibited to him the defendant corporation and the other defendants did not keep true accounts of the transactions between plaintiff and defendants; that the defendant corporation in obtaining the instruments parted with no valuable consideration; and that the sum paid plaintiff under the instruments was only a part of that justly due him-was not demurrable for ambiguity, the conspiracy being clearly enough charged, and, where the partners were referred to as "the defendants," the reference to the bank as the "defendant corporation" making the allegations sufficiently clear to enable defendants to know who and what were meant.

6. LIMITATION OF ACTIONS RELIEF ON GROUND OF FRAUD-DISCOVERY OF Fraud. By the express provisions of Code Civ. Proc. 338, an action to rescind certain instruments on the ground of fraud is not barred, though the instruments were executed more than three years before its commencement, where it is shown that the fraud relied on was discovered within a year of the filing of the complaint. 7. CANCELLATION OF INSTRUMENTS-ACTIONS -“LACHES.”

Though a suit to rescind certain instruments on the ground of fraud was not brought until almost a year after plaintiff's discovery of the fraud, the delay was not laches, under Civ. Code, § 1691, providing that suits to rescind must be promptly brought, where plaintiff was entitled in any event to retain what he received under the instrument, and defendants therefore were unharmed by the delay.

[Ed. Note. For cases in point, see Cent. Dig. vol. 8, Cancellation of Instruments, §§ 49–54. For other definitions, see Words and Phrases, vol. 5, pp. 3969-3972; vol. 8, p. 7700.] 8. SAME.

The rule as to laches invoked by courts of equity in analogy to statutory limitations of the time within which actions may be brought in courts of law to discourage the assertion of stale claims does not involve the laches contemplated by Civ. Code, § 1691, which provides that, upon discovering the fraud, rescission must be promptly sought, if the defrauded party is free from duress and aware of his right to rescind.

Appeal from Superior Court, San Joaquin County; F. H. Smith, Judge.

Action by L. A. Richards against the Farmers' & Merchants' Bank and others. From a judgment for defendants, plaintiff appeals. Reversed.

William Hoff Cook and S. A. D. Gray, for appellant. Nicol & Orr and Bud & Thompson, for respondents.

HART, J. A demurrer to the second amended complaint having been sustained, with leave to amend, and plaintiff refusing to amend within the time allowed him by the court, judgment was entered against him. This appeal is from said judgment.

The suit was commenced for the purpose of obtaining a decree of the court rescinding and setting aside two certain instruments, re

leasing defendants of all certain claims growing out of the affairs of an alleged partnership made by plaintiff against them, and acknowledging satisfaction of said claims, to recover which two suits were previously instituted by the plaintiff against the defendants and pending at the time of the execution of said releases-one in San Joaquin | county and the other in Contra Costa county -and for an accounting of the affairs of said partnership. The plaintiff and the defendants Guernsey, Fraser, and Rosenbaum in the month of December, 1891, purchased, as partners, it is alleged, a large tract of land in San Joaquin county known as the "Sargent Tract," comprising about 3,000 acres, It is alleged that the purchase price of the land was at the rate of $40 per acre, and that the agreement and understanding was that each of the said alleged partners was to pay an equal proportion, according to the extent of his interest, of the aggregate sum for the purchase of said land. The complaint charges that the defendants, named as partners, had management of the transaction, and so manipulated it and the payments made by the plaintiff that he, in fact, paid at the rate of more than $75 per acre for his share in the land, while the other partners paid at the rate of $40 per acre for their respective shares. The defendant bank, it is alleged, was the depositary of the profits of the business of said partnership, and that a conspiracy was entered into between said bank and said other defendants to so manipulate the funds belonging to said partnership so deposited with said bank as to defraud plaintiff of his proper share of the same. It is charged that the certain instruments of release and satisfaction referred to were procured from plaintiff by the defendants by means of fraud and deceit on the part of said defendants for the purpose of defrauding plaintiff, and that plaintiff, having learned of the misrepresentations and fraud thus practiced upon him after executing said instruments, and within one year from the date of the execution of the same, instituted this suit for their rescission and for an accounting. The complaint alleges that the defendants are indebted to plaintiff in an amount exceeding the sum of $15,000, received by him at the time of the execution of the releases mentioned. The plaintiff does not offer to restore, nor does he in fact restore, the sum so received by him. The contention of the respondents is, and the court below so held, that the complaint does not state a cause of action for rescission, because the plaintiff has not restored, nor offered to restore, to the defendants said sum of $15,000 paid to him in consideration of the execution of the instruments which it is sought to have rescinded. Upon the solution of this proposition rests the determination of the question of whether the objection to the complaint presented by the general demurrer is tenable. The court below also held the com

plaint to be obnoxious to the criticism involved in the special demurrer, that it is ambiguous and uncertain. The defendants further claim and so charge in their special demurrer that plaintiff's right of action is barred by the statute of limitations and by laches. The instruments executed by plaintiff acknowledging satisfaction of any claims held or claimed to have been held by him against the defendants read as follows:

"I, L. A. Richards, plaintiff in that certain action now pending in the superior court of the county of San Joaquin, state of California, wherein D. A. Guernsey, P. B. Fraser, and D. S. Rosenbaum are defendants, and plaintiff also in that certain action now pending in the superior court of Contra Costa county, state of California, wherein Farmers' & Merchants' Bank of Stockton, P. B. Fraser, and D. S. Rosenbaum are defendants, do hereby declare that I have examined all accounts and transactions at any time heretofore had, kept, and taken by said defendants and by each of them respecting, relating to, or in anywise concerning any matter or business. in which I was or now am in any manner or at all interested, and upon and after such examination I am satisfied with the accounts kept by said defendants and by any of them. I have examined in company with my attorneys, C. H. Fairall and Grove L. Johnson, all of the books and papers of Farmers' & Merchants' Bank of Stockton, Cal., relating to, appertaining, and concerning any and all of my transactions with said bank as a depositor, and from such examination I find that all moneys by me deposited or placed with said bank were duly and properly and upon checks credited to my account, and that the same were duly, properly, and upon checks drawn by me paid out by said bank, and that I have not now and had not had since March 21, 1894, any money in said bank belonging to me. I further declare that I have examined the books, papers, and accounts of P. B. Fraser and D. S. Rosenbaum, in company with my said attorneys, and therefrom I learn that the sum of $40,000 mentioned in my complaint in the said action now pending in the superior court of Contra Costa county was by them properly expended and disbursed in accordance with my directions given to them, and that upon the 29th day of September, 1890, the balance of said sum remaining after the payment of the amounts due from me to the San Joaquin Valley Bank, and upon notes owing then by me to said P. B. Fraser and D. S. Rosenbaum and for the costs of abstracts made for me, was by me received from said Fraser and Rosenbaum, and then deposited by me in said Farmers' & Merchants' Bank, and that there has not been since the 29th day of September, 1890, and is not now, any sum of money whatever due or owing or unpaid to me by said Fraser or Rosenbaum for or on account of the transactions mentioned and set out in my said complaint in said action now pend

ing in said Contra Costa county, and in consideration of the foregoing I hereby acknowledge satisfaction in full of any and all claims and demands that I now have or might have or could make against said Farmers' & Merchants' Bank, P. B. Fraser, D. S. Rosenbaum, and D. A. Guernsey, or against any or either of them. Witness my hand this 16th day of December, 1902. L. A. Richards. Witness: C. H. Fairall, F. D. Nicol, Grove L. Johnson, Ed. R. Thompson."

"For and in consideration of the sum of fifteen thousand dollars, to me in hand paid by D. S. Rosenbaum, P. B. Fraser, and D. A. Guernsey, the receipt of which is hereby acknowledged, I, L. A. Richards, hereby release and acquit said P. B. Fraser, D. S. Rosenbaum and D. A. Guernsey, and the Farmers' & Merchants' Bank of Stockton, California, of and from any and all claims and demands of every kind, name and nature, which I now have or might or could make against the said named parties, or any or either of them; and I hereby acknowledge satisfaction in full of all actions and causes of action, either ir law or in equity, which I now have or now maintain, or which I might now have or might now maintain, as against the said nam ed parties and as against each and every one of them. In witness whereof I have hereunto set my hand and seal this 15th day of December, 1902. L. A. Richards. [Seal.] Witness: F. D. Nicol."

The complaint charges that the foregoing instruments were signed and delivered by the plaintiff to the defendants "through the false representations of the defendants, made by them with the purpose of cheating and defrauding plaintiff, and at their urgent solicitation and request." The complaint further avers that, after executing said instruments, plaintiff received information that at the time he so signed and delivered the same to the defendants the latter had not shown to him or to his attorneys "all of their books of account, books, papers or accounts as herein recited," and "that the books, books of account, accounts and papers then exhibited to him and his said attorneys, as therein recited, were not true and correct, but were false and fictitious, as the defendants then and there well knew, but of which fact plaintiff was then ignorant, and that plaintiff thereupon engaged an expert accountant to examine the papers, books of account, books and papers of the defendants"; that upon information received from said expert accountant, and from information obtained through certain depositions of the defendants, Fraser, Rosenbaum, and Guernsey, taken in a certain action pending in the superior court of San Joaquin county, wherein this plaintiff was plaintiff and the defendants herein were defendants, the plaintiff charges that "the defendant corporation and the other defendants did not keep true and correct books of account of the transactions and business between the plaintiff and the

defendants in relation to the matters hereinbefore alleged"; that "the defendants did not exhibit to the plaintiff all of their ac counts, books, or papers, or true and correct books of account, or accounts or papers, as recited in the aforesaid instruments." The true and correct books of account, etc., it is alleged, if they had been exhibited to plaintiff and his attorneys at the time the said instruments were executed, would have shown the recitals therein to be untrue. It is further alleged "that in obtaining said instruments from plaintiff the defendant corporation parted with no valuable consideration, or other consideration, and that at the time of the execution and delivery of said instruments the said sum of $15,000 therein recited was due, owing, and unpaid to plaintiff, and the defendants were then and there indebted to plaintiff in the sum of $15,000, in addition to the sums and amounts set forth in paragraph 6 of this complaint." After alleging that the plaintiff was induced to sign said instruments through misrepresentations and "a designed suppression of the truth" on the part of the defendants, the complaint avers that the recitals contained in said instruments do not state the truth; that there are certain large amounts, representing the profits of the alleged partnership, which were never accounted for by the defendants; and that plaintiff, through the alleged fraud perpetrated by the defendants, was deprived of his just proportion thereof, and he, therefore, asks for an accounting.

For the purposes of the case, the demurrer admits the allegations of the complaint to be true, and for the purposes of this decision, therefore, the facts as alleged and so admitted to be true must constitute the sole guide by which we must be governed in the determination of the propositions of law presented and necessary to be decided. The general rule as to rescission is that where a party desires to rescind, upon the ground of fraud, an executed contract by which he has received from the other party thereto something of value, he must, before he is entitled to such relief, either restore, or offer to restore, to said other party whatever of value he has so received. In other words, the party seeking rescission must, as to the subject-matter or consideration of the contract sought to be rescinded, place the other party to such contract in statu quo, or offer to do so, before he would be entitled to a rescission of the contract. This has always been the general rule as to rescission practiced in courts of equity and is the express rule in California. Section 1691, Civ. Code. See, also, Matteson v. Wagoner, 147 Cal. 744, 82 Pac. 436; Richards v. Fraser, 122 Cal. 457, 55 Pac. 246; Kelley v. Owens, 120 Cal. 502, 47 Pac. 369, 52 Pac. 797; Rohrbacher v. Kleebauer, 119 Cal. 260, 51 Pac. 34; Jurgens v. N. Y. Life Ins. Co., 114 Cal. 161, 45 Pac. 1054, 46 Pac. 386; Maddock v. Russell, 109

Cal. 417, 42 Pac. 139; Bank v. Wickersham, 99 Cal. 655, 34 Pac. 444; Marten v. Burns Wine Co., 99 Cal. 355, 33 Pac. 1107; Gamble v. Tripp, 99 Cal. 223, 33 Pac. S51; Cal. Farm & Fruit Co. (a corporation) and Dugald Scott v. Leopoldo Schiappa-Pietra et al., (Cal.) 91 Pac. 593. There are, however, exceptions to this general rule. See cases cited. Among these exceptions is where "one who attempts to rescind a transaction on the ground of fraud is not required to restore that which, in any event, he would be entitled to retain." Richards v. Fraser, supra. Or, "for instance, where the thing received by the plaintiff is of no value whatever to either of the parties; or where the plaintiff has merely received the individual promissory note of the defendant; or where the contract is absolutely void; or where it clearly appears that the defendant could not possibly have been injuriously affected by a failure to restore; or where, without any fault of plaintiff, there have been peculiar complications which make it impossible for plaintiff to offer full restoration, although the circumstances are such that a court of chancery may by a final decree fully adjust the equities between the parties." Kelley v. Owens, supra.

The question here is: Was it the duty of the plaintiff, under the facts as pleaded, and which, as seen, must, for the purposes of this decision, be deemed to be true to restore or offer in good faith to restore the sum of $15,000, received by him from the defendants at the time of the execution of the instruments of release and satisfaction, as a condition precedent to his right to a rescission of the transaction evidenced by said instruments? If, under the pleaded facts, the plaintiff is, in any event, entitled to retain the money so received by him, then the transaction is within one of the exceptions referred to in the authorities cited, and restoration or offer to restore is consequently unnecessary, and it would therefore follow that the order sustaining the demurrer upon the general ground is erroneous. The learned judge of the court below, who filed an opinion setting forth his reasons for sustaining the general demurrer, and which is printed in respondents' brief, concedes the soundness of the position as thus stated, for he says: "If the $15,000 was paid as and for an adjustment of the accounts, or as the balance due to plaintiff upon a settlement of the accounts or as the amount agreed by all parties to be due, then plaintiff is entitled to retain the same whether such amount was arrived at by means of false and fraudulent accounts which concealed the true balance, or from an adjustment of true and correct accounts." But the learned judge does not so interpret the instruments, but declares that "it appears that the $15,000 was paid for the express purpose of preventing and estopping the plaintiff from prosecuting other and future actions against the defendants, or

either or any of them, and that he now asks to be allowed to prosecute the very claims which he agreed not to prosecute, and at the same time retain the consideration for the agreement not to prosecute," and from this construction of the nature and intention of the instruments concludes that plaintiff must first, before he can prosecute his original cause of action, "restore the consideration for which he agreed not to do so."

We are, in view of the allegations of the complaint and the theory upon which the suit necessarily proceeds, unable to assent to the interpretation of the instruments thus given them by the trial court. There can be no doubt that the instruments involve an agreement not to prosecute any cause of action then pending between the parties at the instigation of plaintiff, and also that the plaintiff would not press any further claims he might have against the defendants. But these instruments, as we understand them from the averments of the complaint and the fair and reasonable intendments thereof, simply mean, and were intended to mean, that a settlement of the differences between the parties had been reached and that the sum of $15,000, paid by the defendants to plaintiff, was, under all the facts then known to plaintiff, a just and equitable basis of such settlement. In other words, we do not understand that the releases were intended by the partiesthe plaintiff on the one side and the defendants on the other-for the purpose of merely evidencing the "buying of peace" by the defendants, without regard to whether the sum received by plaintiff was in fact due him or not, but as a settlement of the accounts be tween the parties, and, the facts being admitted by the demurrer, the settlement must be construed to mean an admission upon the part of the defendants, Fraser, Rosenbaum, and Guernsey, that at the time of such settlement there was at least that much due plaintiff as his share of the profits of the business in which, as partners, the parties had been engaged. There is no express language in the releases authorizing or warranting any other construction of the transaction evidenced thereby than that given here. We think that where a pleaded instrument is, because of the uncertainty of the language in which it is expressed, susceptible of more than one construction as to its nature or as to the purpose intended by the parties to be attained by it, the construction of the party pleading it should be accepted, if such construction be reasonable, where, as here, the essential facts stated in the complaint are at least pro re nata admitted to be true. The complaint alleges that the instruments releasing the defendants of all claims or debts and causes of action inuring to the plaintiff by reason of the partnership affairs of the parties were obtained through the fraudulent representations and the designed suppression of the truth by the defendants; that true and correct accounts of the transactions of the al