Miller v. Bechtel Corp.

663 P.2d 177, 33 Cal. 3d 868, 191 Cal. Rptr. 619, 1983 Cal. LEXIS 187

• Court: California Supreme Court
• Decided: May 19, 1983
• Docket: S.F. 24429
• Status: Published

Opinions

Opinion

MOSK, J.

In this action, plaintiff Florrie Miller, the former wife of defendant H. Eric Miller (Miller), seeks damages and an order setting aside a portion of a property settlement agreement and the decree of dissolution which approved the agreement, on the ground, inter alia, that Miller and other defendants misrepresented the value of certain stock owned by the community, and that they were guilty of other acts of misconduct which led to her consent to the agreement.

The Millers were married in 1940. They separated in 1969. Following negotiations through their respective attorneys, the parties executed a marital settlement agreement on September 14, 1971. On December 17 of that year the superior court ordered an interlocutory decree of dissolution which approved the agreement, as amended on October 29, 1971. The final judgment of dissolution was entered on July 25, 1972.

Miller had been employed by Bechtel Corporation since 1956. Beginning in 1967, he purchased stock in Bechtel and two related corporations (hereinafter collectively referred to as Bechtel) pursuant to a stockholders’ agreement which provided that the shares could not be sold, assigned, or transferred, without giving Bechtel the right to purchase them at a price stated in the agreement. The stated price could be increased with the concurrence of the holders of two-thirds of Bechtel’s stock. This restriction applied specifically to transfers effected by marital property settlement contracts.

At the time the Millers signed the marital settlement agreement in September 1971, the value assigned in the stockholders’ agreement to the Bechtel stock purchased by Miller over the years was $294,000. Following discussions among Ross E. Hamlin, plaintiff’s attorney, Paul R. Haerle, Miller’s attorney, and Willis S. Slusser, an officer of Bechtel, regarding the terms of the stockholders’ agreement and the rights which Bechtel would exercise under it, plaintiff consented in the marital settlement agreement to relinquish her interest in the stock to Miller in exchange for $147,000, i.e., one-half of the $294,000 value set in the stockholders’ agreement. The parties acknowledged in the marital settlement agreement that the securities were subject to an option by Bechtel to purchase them at the price set forth in the stockholders’ agreement.

In January 1978, plaintiff filed a complaint containing nine causes of action. The first and ninth counts alleged that Miller, Hamlin, Haerle, Slusser, Bechtel and others¹ were guilty of intentional and negligent misrepresentations. The gravamen of these counts is that the market value of the stock was higher than the $294,000 attributed to it by defendants, and that if defendants had not made the misrepresentation, plaintiff would not have relinquished her interest for $147,000 but would have sought a share of the proceeds of the stock when Miller sold it.

According to the first count, defendants deliberately misrepresented the “aggregate value” of the Bechtel stock at $294,000, although they knew that it was worth more than $1 million in 1971, in order to induce plaintiff to relinquish her interest for less than its true worth. It was alleged that Miller sold the shares for over $2 million in 1977, and that plaintiff had no knowledge of the “true value” until February 1977. The ninth cause of action, which sounded in negligent misrepresentation, averred that defendants had no reasonable grounds for believing that the $294,000 value was correct, that this figure had no relationship to such factors as the assets and profits of Bechtel, and that defendants had no information regarding the true value of the stock when they told plaintiff that it was worth $294,000.² Plaintiff prayed for compensatory and punitive damages, as well as an order to set aside the portion of the marital settlement agreement and the dissolution decree which divided the community property. Defendants in their answers denied that they were guilty of misrepresentation and alleged that the action was barred by the statute of limitations and the doctrine of res judicata.

Defendants moved for summary judgment. For purpose of the motions, the parties stipulated that there was a triable issue of fact as to whether the value of Miller’s stock on September 14, 1971, the date the marital settlement agreement was signed, was greater than the price attributed to it in the stockholders’ agreement.

Defendants’ affidavits in support of the motions declared that Haerle, Miller’s attorney, represented to Hamlin, plaintiff’s attorney, during the discussions which led to the agreement, that the Bechtel stock was worth $294,000 according to the stockholders’ agreement. Slusser told Hamlin that if Miller attempted to transfer the stock to plaintiff in trust or otherwise, Bechtel would exercise its right under the stockholders’ agreement to purchase the shares, in accordance with the provisions of that agreement.

Defendants’ declarations further established that, following the signing of the agreement, but before the final judgment of dissolution was entered, plaintiff sought the advice of a family friend who was a stockbroker regarding the terms of the agreement. The broker examined it in detail and recommended various changes, including a suggestion that the proceeds of the Bechtel stock be placed in a previously created trust for the Miller children upon redemption, and that Miller hold only a life estate in the proceeds. Plaintiff transmitted the report to Hamlin and asked that he review it.

Shortly thereafter, she consulted another attorney, who reviewed the agreement with Hamlin to clarify certain provisions. Hamlin thereafter withdrew from representation of plaintiff. Later in 1972, plaintiff’s attorney wrote Miller’s counsel a number of times regarding implementation and interpretation of various provisions of the agreement. In October, he requested a copy of the shareholders’ agreement and information “as to the basis of valuation of the Bechtel shares.” Plaintiff then sought the advice of a third attorney who, in February 1973, reiterated the request made in the October letter, and threatened to file suit to obtain the information if it was not disclosed voluntarily. Such an action was not filed and, so far as the record shows, the information was not provided and the request was not renewed.

In plaintiff’s declaration in opposition to the motions for summary judgment, she stated that she could not ascertain the “true value” of the Bechtel stock until Miller redeemed it in 1977 because Bechtel was a “closed” corporation which “jealously guarded” its financial records.

The trial court granted the motions as to all defendants except Hamlin, plaintiff’s attorney, and the law firm of which he was a member. Plaintiff appeals from the ensuing judgment.³

In a lengthy memorandum opinion, the trial court explained the reasons for its decision as follows: First, the representation of Bechtel, Slusser, the Thelen firm, Haerle, Plageman and Miller, that the Bechtel stock was worth $294,000 “pursuant to the shareholders’ agreement” was accurate, and these defendants were not guilty of concealing the value of the stock; second, the decree of dissolution approving the property settlement agreement was res judicata, and the value of the shares for the purpose of the dissolution proceeding was conclusively determined by the final judgment in that proceeding.

Finally, the court concluded that plaintiff was barred by the statute of limitations from proceeding with the action. Section 337, subdivision 3, of the Code of Civil Procedure provides for a four-year period of limitations for actions for rescission of written contracts, and section 338, subdivision 4, sets forth a three-year limitation period for tort actions based on fraud or mistake. Both statutes provide that a cause of action for fraud or mistake does not accrue until the facts constituting the fraud or mistake are discovered by the aggrieved party. The trial court determined that plaintiff’s first and ninth causes of action were barred even if the four-year limitation period of section 337, subdivision 3, were applied, because she had “constructive notice or presumed knowledge sufficient to put her on inquiry in 1971 and 1972 as to the value of the stock.”

We agree with the trial court’s determination that plaintiff is barred from pursuing her action against these defendants by the statute of limitations. Our determination is made in the light of the well-established rules relating to the consideration of motions for summary judgment. The purpose of such a motion is to determine if there are any triable issues of material fact, or whether the moving party is entitled to judgment as a matter of law. The affidavits in support of and in opposition to the motion must be made on personal knowledge and must set forth admissible evidence as to which the affiant is competent to testify. (Code Civ. Proc., § 437c.) The affidavits of the moving party are strictly construed, while those of the party opposing the motion are liberally construed, and doubts as to the propriety of granting the motion must be resolved in favor of the party opposing the motion. (Stationers Corp. v. Dun & Bradstreet, Inc. (1965) 62 Cal.2d 412, 417 [42 Cal.Rptr. 449, 398 P.2d 785].)

The declarations establish that plaintiff knew at the time she entered into the marital settlement agreement that the value of the Bechtel stock was determined by the price attributed to it in the shareholders’ agreement. She claims, however, that she was not aware that that agreement provided that the price was determined by a vote of the shareholders of the corporation rather than by some objective standard. While this may be correct, it is also uncontroverted that she did not inquire as to the method by which the value of the stock was determined before she signed the marital settlement agreement and that, although she made inquiry thereafter, she failed to pursue the matter.

In her declaration in opposition to the motions for summary judgment, plaintiff offered no explanation for her failure to make any inquiries in this regard before signing the marital settlement agreement. She did attempt, however, to excuse her omission by a statement that she would not have received a reply to such an inquiry because Bechtel was a “closed” corporation which “jealously guarded” its financial records.

There is nothing in the record to substantiate her claim that upon appropriate inquiry Bechtel would have refused to reveal the method of valuation.⁴ And, because the statement in plaintiff’s declaration regarding Bechtel’s presumed reaction to her inquiry was not a fact within her personal knowledge, the trial court was not required to accept it as true for the purpose of passing on the motion for summary judgment. (Code Civ. Proc., § 437c.)

Plaintiff asserts, however, that she had no duty to make inquiry regarding the accuracy of the representations as to the value of the stock because Miller had an obligation as a fiduciary to provide her with Ml and correct information as to their worth. (Citing Vai v. Bank of America (1961) 56 Cal.2d 329, 342 [15 Cal.Rptr. 71, 364 P.2d 247].)

Even assuming the correctness of this assertion, however, if she became aware of facts which would make a reasonably prudent person suspicious, she had a duty to investigate further, and she was charged with knowledge of matters which would have been revealed by such an investigation. (Bedolla v. Logan & Frazer (1975) 52 Cal.App.3d 118, 131 [125 Cal.Rptr. 59].)

The declarations establish without question that attorneys who represented plaintiff following HaMin’s withdrawal as her lawyer entertained serious doubts whether the value attributed to the stock in the property settlement agreement accurately reflected its “true value.” They not only wrote Miller’s lawyer on two separate occasions requesting a copy of the shareholders’ agreement, but specifically sought information regarding the method used to establish a value for the shares, and threatened to file suit if the information sought was not forthcoming. The first inquiry was made before the final decree of dissolution was entered, and the second seven months thereafter, well within the period of limitations. Since plaintiff’s representatives chose not to pursue their inquiry further despite their suspicions, she is charged with knowledge of facts which would have been revealed if she had pursued the investigation. As we conclude above, we cannot assume that such an inquiry would have been unavailing.

Moreover, although we do not suggest that a plaintiff in an action for fraud against a fiduciary is charged with knowledge which could have been gained by examining public records, in the present case, after plaintiff’s suspicions had been aroused, she could have discovered, by consulting such records, that the value of the Bechtel stock had increased by 270 percent nine months after she signed the property settlement agreement, and one month before the final decree of dissolution was entered.⁵ This information, which could have been obtained without the necessity for legal process, would at the very least have reinforced plaintiff’s doubts whether the “true value” of the stock was as represented in the property settlement agreement.⁶

Thus, the trial court was justified in concluding that plaintiff was charged with knowledge of the method employed for assigning a value to the stock in the shareholders’ agreement, and in sustaining defendants’ motions for summary judgment.

Plaintiff’s remaining causes of action are also barred by the statute of limitations. The second, third and seventh causes of action, against all defendants, allege various acts of misrepresentation and concealment. Although plaintiff alleges that she did not become aware of some of these acts or omissions until 1977 or 1978, she makes no claim either in the complaint or her declaration that she could not, with reasonable diligence, have discovered the facts upon which these causes of action are based prior to the expiration of the limitation period.

The fourth, fifth and sixth causes of action are asserted only against Miller. They seek to set aside the portions of the marital settlement agreement and the decree of dissolution which divided the community property. The fourth alleges that plaintiff was “intimidated” by defendants into relinquishing her interest in the stock by threats that Miller would lose his job if she did not do so, and the sixth asserts that at the time she signed the agreement plaintiff was under great emotional strain and lacked the capacity to consent to its terms. These causes of action are barred as a matter of law. Plaintiff does not allege that either the effect of the alleged “intimidation” or her incapacity extended beyond the time she signed the agreement in September 1971. In fact, in the months following execution of the agreement, she signed a will to carry out its provisions, consulted two attorneys and a financial adviser concerning its terms and their implementation, and twice signed amendments to the agreement, the last time in October 1976.

The fifth cause of action states that plaintiff was mistaken as to the law and the facts in various respects. She makes no claim that she was unable to discover these mistakes within the limitation period, except as to the “true value” of the stock, and what we have said above makes it clear that plaintiff cannot escape the bar of the statute of limitations on this ground.

The judgment is affirmed.

Richardson, J., Broussard, J., Reynoso, J., and Rouse, J.,

* concurred.

1 Joined as defendants in the action were Thelen, Martin, Johnson & Bridges, the law firm in which Haerle was a partner; William H. Plageman, Jr., an attorney with the Thelen firm who performed services for Miller; and Hession, Creedon, Hamlin, Kelly, Hanson & Farbstein, the law firm in which plaintiff’s own attorney, Hamlin, was a member.

2 The remaining causes of action will be discussed infra.

3 The term “defendants” in later portions of this opinion will refer to all defendants except Hamlin and his law firm. The eighth cause of action was alleged only against them.

4 While Hamlin’s declaration in support of the motion for summary judgment asserts Haerle stated that any attempt to subpoena Bechtel records in order to “verify the terms of the stock purchase agreement and the purchase price fixed therein” would place Miller’s job at risk, the failure to obtain such verification was irrelevant, as the trial court concluded, because the representations made by Haerle and Slusser as to the terms of the agreement were in fact accurate.

5 Plaintiff states in her briefs on appeal that the files of the California Corporations Commissioner show that Bechtel filed an application to “adjust” the price of its stock to $135 a share on June 23, 1972, an increase of 270 percent over the value assigned to it in the marital settlement agreement.

6 Tresemer v. Barke (1978) 86 Cal.App.3d 656, 665 [150 Cal.Rptr. 384, 12 A.L.R.4th 27], relied on by plaintiff, is not contrary to our conclusion. There, the plaintiff’s complaint alleged facts which were sufficient to raise the issue whether she had exercised due diligence to discover the cause of her injury before the statute of limitations had expired, and the defendant’s declaration in support of his motion for summary judgment did not contradict these allegations. By contrast, in the present case, the declarations filed in connection with the motions for summary judgment set forth facts which justify the trial court’s conclusion that plaintiff was charged with knowledge of the matters upon which she now bases her claim.

Assigned by the Chairperson of the Judicial Council.