—This is an action to cancel a trust deed and note. Respondent, a widow, was the owner of certain real property, subject to a mortgage of $1535.29, located in the city of Ontario, San Bernardino County. Parcel 1 was an unimproved city block. Parcel 2 consisted of a lot which was improved with a store building and under lease by paying tenants at a monthly rental of $100. Both parcels were valuable properties. It appeared that respondent was willing to sell these properties to avoid the cares of rental, upkeep, and the like, and to transform the vacant block into securities that would return an income. In San Jose there lived one DeWitt C. Rucker, a real estate and insurance man. His family and Mrs. Frankish’s family were close and old time friends. One of respondent’s intimate friends was the betrothed of Mr. Rucker.

From the complaint and the testimony it-appears that respondent sought out Mr. Rucker to sell her vacant lot for a post-office site. Rucker induced her to turn these properties over to the General Insurance Securities Company (for brevity’s sake hereinafter referred to as the GIS), a Nevada corporation, with headquarters in Los Angeles. The National Title Insurance Company, a corporation, one of the appellants herein, was trustee under the trust deed involved.

Among the many representations made, respondent was told by Rucker that for her properties this corporation would give her $40,000 worth of gold notes, secured by upwards of a million dollars’ worth of pledged securities.

The evidence shows that she relied absolutely upon Mr. Rucker, who was acting as her broker. He was to receive from her a 5 per cent commission for the transaction. He also sought a like commission from the CIS.

During this time he was agent for the GIS, and on July 10, 1933, he was elected as one of the directors of the company. On March 4, 1933, he submitted a report to the GIS as a member of their executive committee.

On February 3, 1933, respondent deeded the property to the GIS. On March 23, 1933, she received a naked $40,000 promissory note from it and never received any gold notes secured by pledges of a million dollars or otherwise. In

1932, the GIS commenced negotiations to secure a controlling interest in the Intermountain Title Guarantee Company, a corporation (hereinafter referred to as the Intermountain), one of the appellants herein. Its principal place of business was in Salt Lake City, Utah. From January to June, 1933, the GIS secured from 51 per cent to 93 per cent of the capital stock of the Intermountain. The stock of another corporation, the Federal Mortgage Company (hereinafter called the Federal), was wholly owned by the GIS.

Respondent claimed that these two corporations were but a few of the numerous lesser companies owned or partially owned by the GIS and that the GIS was in fact acting as a “parent or holding company”.

After paying off the mortgage of $1535.29, on March 23,

1933, the GIS conveyed the property deeded by Mrs. Frankish to the Federal, -which company it wholly owned, with directions to it to issue a promissory note for $20,000, secured by a trust deed on the property to the other company, i. e., the Intermountain, which was-done in accordance with the request. Hence, on that date the title to the property was in the Federal, subject to a trust deed of $20,000 held by the Intermountain.

The minute books of the GIS. disclose the following entry.in reference to the Frankish deal: “That the proposition presented, be accepted, subject to the approval of the Corporation Commissioner. ’ ’ The corporation commissioner’s permit allowed it to issue to respondent its series A, first lien collateral gold notes in an amount of not to exceed $60,000, as consideration for the real and personal properties described in its application for the permit. Respondent claims the GIS violated the terms of this permit in taking over the Frankish property and giving her a mere promissory note unsecured by anything.

Within a year or so from the date of the receipt of the deed from Mrs. Frankish, the GIS went into bankruptcy. Prior to this time, however, the GIS was unable, or failed to deliver to her the $40,000 in gold notes. Negotiations were kept in abeyance for some period of time as between the GIS and respondent, due to some claimed agreement whereby it was to return the property to her free and clear of all incumbrances. It allowed her for several months to collect the rents from the property, due to the fact that the GIS had not paid all of the interest on its promissory note to her and because she had no funds of her own. After considerable controversy the Federal, on January 3, 1934, deeded the property, subject to the $20,000 trust deed, to DeWitt C. Rucker, as trustee for Adele Frankish. This was done apparently for the purpose of attempting to perfect some arrangements for the return of the property to respondent in accordance with the negotiations with the GIS. In July, 1935, Rucker, as trustee, conveyed his equity to respondent.

Appellant claims that in addition to the GIS paying off the mortgage on respondent’s property, she collected in rent and was paid a sum totaling $1360, in cash, all of which was paid to her prior to November, 1933, excepting the sum of $150, which was collected subsequent to that date. The GIS also charged her with $666.67, as commission due Rucker, and title charges in the sum of $156.

Appellants claim that the findings of the court that plaintiff had been defrauded are not supported by the evidence and are contrary to the evidence and the law. As to this issue, generally speaking, the court found; •

It is to be noted in this case that the Federal, although served with summons, did not appear in the action, and its default was subsequently entered. The GIS was not made a party defendant.

We have carefully examined the record at length on the issue of fraud as between respondent and the GIS, the Federal, and their agent, Rucker, and will hereafter quote some of the testimony bearing on this issue. We are firmly convinced that the detailed findings of the trial court on this issue are amply supported by the evidence. Whether the Intermountain had notice of the fraudulent transactions, as found by the trial court, will be considered and discussed later in this opinion.

The court made further findings as to which appellants make the same objections. The court found that respondent exercised reasonable diligence in attempting to rescind promptly under the circumstances. The pertinent portions of those findings may be thus stated:

Appellants strongly maintain that respondent knew every material fact entitling her to rescind and that she may not rightfully delay indefinitely the ascertainment of her rights, and that the delay in the instant case was fatal to a recovery, - citing McCray v. Title Ins. & Trust Co., 12 Cal. App. (2d) 537 [ 55 Pac. (2d) 1234 ]; Victor Oil Co. v. Drum, 184 Cal. 226, at 243 [ 193 Pac. 243 ]; Stevens v. Bryson, 135 Cal. App. 684, 686 [ 27 Pac. (2d) 932 ]; Oppenheimer v. Clunie, 142 Cal. 313, 320 [ 75 Pac. 899 ] ; Hannah v. Steinman, 159 Cal. 142 [ 112 Pac. 1094 ],

It is the general rule in courts of equity that a party desiring to rescind, must do so promptly, if he is free from duress, menace, undue influence or disability and is aware of his rights to rescind (Civ. Code, sec. 1691; Bailey v. Fox, 78 Cal. 389, 396 [ 20 Pac. 868 ]), and that if, after discovering the facts, he conducts himself as though the contract were valid and in full force, he waives all right of election to rescind, based on the known facts. (Evans v. Duke, 140 Cal. 22 [ 73 Pac. 732 ].)

Respondent defends this finding of the court on the theory that appellants did not plead laches, but did plead waiver, or that respondent ratified and affirmed the trust deed in question, and cites Victor Oil Co. v. Drum, supra, wherein it was stated at page 243: 11 We might also add that laches is a defense and not a condition of relief, and, if it does not appear on the face of the complaint, must be affirmatively pleaded and proven by the defendants.”

Respondent further contends that the instant action is not one for rescission but is a case of cancellation based on fraud. The record discloses that from the time Mrs. Frankish discovered the fraud negotiations continued between her and the CIS or between her and Rucker as a representative of G-IS for the return of the property to her free and clear of incumbrances and that the whole matter was left open for their action until appellant attempted to foreclose the trust deed. Then this suit was instituted. At no time did GIS or anyone else repudiate the transaction or refuse to continue the negotiations with her or to hand her back the property clear of the incumbrance.

The detailed facts related in the findings are adequately supported by the evidence.

In the recent case of Potter v. Contra Costa Realty Co., 220 Cal. 31 [ 29 Pac. (2d) 189 ], our Supreme Court has clearly defined the rule applicable to the facts disclosed in the instant case and clearly distinguishes the effect of the cases above cited. In that case Mrs. Potter made a contract to buy a lot on February 11, 1916, agreeing to pay $1,000 for it. On December 12, 1921, she completed her pasunents and demanded a deed. Some controversy arose about water mains, construction of sidewalks, etc. In November, 1929, nearly eight years after the full payment of the purchase price, the negotiations finally terminated, notice of rescission was given, and the money paid in was demanded. The lower court held that she was guilty of laches which barred her right to rescind. In reversing the judgment that court stated:

The court further recites: “that defendant in the course of the negotiations promised to fulfill its obligations, and did not, until 1929, in any way repudiate the same. That she had a right to rescind for failure of consideration is clear, and she did not lose that right by her indulgence of defendant in reliance upon its promise to perform. . . .

We quote a few excerpts from the testimony given in support of this point. Referring to Mr. Rucker, Mrs. Frankish stated:

Mrs. Frankish told how, along in November, 1933, she learned of the existence of the trust deed against her property. In the meantime, she had received nothing but the promissory note and a few occasional payments. Her testimony in reference to this subject is as follows:

Later, in December, she went to the company’s office in Los Angeles. She wanted the payments they had promised her in the interim. Her testimony is as follows:

Along in the early part of 1934, the negotiations were still continuing. At that time Mr. Rucker informed Mrs. Frankish that he “had a very good proposition on whereby he was going to get a large market in my building”. Mrs. Frankish testified that he said: “ ‘ will you be willing to wait (this was early in January) for a few months until we get this deal through, and then we will go back to paying you your regular interest’. . . . He was dickering with the Fisher Company of Riverside to rent the property for this market, which he succeeded in making this deal with the Fisher Company and they moved in.” Mrs. Frankish then testified that Mr. Rucker had never informed her that he held the property as trustee for her.

It also appears from the minutes of the executive committee of the GIS dated January 3, 1934, that the corporation recognized their obligation to return the property to Mrs. Frankish free and clear of all incumbrances, for we find those minutes read in part as follows:

We believe it is obvious from the foregoing testimony and by the excerpts from the minutes, that negotiations or plans were instituted to return this property free and clear of encumbrances to Mrs. Frankish and that she relied upon these representations. It may be noted that Rucker was even handed a lot of stock, including 400 shares of the preferred capital stock of Intermountain, to pay off Intermountain and satisfy it and to have it release or cancel the trust deed. The book value, as of April 19, 1933, of such preferred Intermountain shares, was $85 per share. Under this evidence we are impelled to hold that the intent of the parties was to leave the negotiations open. Under the rule above cited, the doctrine of laches would not apply. [Mills v. Richmond Co., Inc., 63 Cal. App. 594 [ 219 Pac. 465 ] ; Walker v. Harbor Business Blocks Co., 181 Cal. 773 [ 186 Pac. 356 ]; Grotheer v. Panama Pacific Land Co., 41 Cal. App. 19 [ 181 Pac. 667 ] ; Sherratt v. Hellman Com. T. & S. Bank, 112 Cal. App. 542 [ 297 Pac. 582 ] ; Curtis v. Title Guarantee etc. Co., 3 Cal. App. (2d) 612, 621, 622 [ 40 Pac. (2d) 562 , 42 Pac. (2d) 323 ].)

Further objection is made to the findings with reference to lack of restoration prior to rescission. The court specifically found:

Appellants contend that “the person who has been misled is required, as soon as he learns the truth, with all reasonable diligence to disaffirm the contract, or abandon the transaction, and give the other party an opportunity of rescinding it, and of restoring both of them to their original position. He is not allowed to go on and derive all possible benefits from the transaction, and then claim to be relieved from his own obligations by a rescission or a refusal to perform on his own part.” (Citing Pomeroy’s Equity Jurisprudence, 4th ed., sec. 897.) “He must restore to the other party everything of value which he has received from him under the contract; or must offer to restore the same, upon condition that such party shall do likewise, unless the latter is unable or positively refuses to do so.” (Civ. Code, see. 1691, subd. 2.)

The evidence discloses the fact that the GIS did pay off the mortgage in the sum of $1535.29 that was against the Frankish property at the time of the transfer to it. ’ It is also true that respondent received payments of interest and collected rents on the property for a period after the transfer, amounting to the sum of $1360. Appellants apparently forget that respondent was, during all of this time, entitled to a payment of interest at the rate of six per cent on the gold bonds or the promissory note which was due her under her agreement. This sum would offset any and all amounts actually received by her.

It is also claimed by respondent that the GIS agreed to assume the small mortgage on the property in the original transaction. (Peterson v. Wagner, 52 Cal. App. 1 [ 198 Pac. 25 ] ; 4 Cal. Jur. 768.) We feel that the finding as to restitution is amply supported by the evidence.

The trial court made a further finding that the permits of the corporation commissioner had been disregarded in reference to the transactions. Appellants complain of this finding in this, that it is not supported by the evidence. A permit was issued by the corporation commissioner to the GIS to issue its securities, to wit, 30,992 class A, series 1, shares, and 60,688, class B shares, in exchange for certificates evidencing the issued and outstanding preferred and common shares of Intermountain. A similar permit was issued March 15, 1933, expiring June 15, 1933, allowing the GIS to sell and issue to Charles W. Bollinson and Adele Frankish its series A, first lien collateral gold notes in an amount of not to exceed $60,000, as consideration for the real and personal property described in the application for the permit, with certain reservations and conditions. It is apparent from the record that no securities were sold or issued to Mrs. Frankish under the second permit above mentioned. The first permit mentioned becomes involved in so far as it may substantially affect the purported exchange of securities between the GIS and the Intermountain. Appellants contend that they were innocent purchasers for value of the '$20,000 trust deed on the Frankish property and that it was by virtue of an exchange agreement and the authority of this permit, that they parted with value.

Respondent contends that at no time thereunder did GIS transfer unto Intermountain any of the capital stock of GIS and that all of such shares of Intermountain stock acquired by GIS was paid for by GIS with other considerations, and not by capital stock of GTS and that in all respects such transaction between these two corporations was carried out in complete disregard of the above-mentioned permit, and also in substantial disregard of the written contract between the two corporations.

The contract to which reference is made was dated October 7, 1932, between the GIS and the Intermountain, wherein Intermountain agreed to purchase 2,917 shares of the capital stock of the Belt Fire Insurance Company (another subsidiary) at a value of $58,341.01, together with notes secured by mortgages and/or trust deeds of a face value of $35,000. Intermountain, in consideration of this sale, agreed to transfer to GIS all of the capital stock of the Intermountain Securities Corporation, a company to be organized, which company was to own 28 per cent interest in the various plants owned by the Intermountain, stock subscription notes, and other assets. The Intermountain also agreed to use their best efforts to cause to be exchanged, not less than 51 per cent of the preferred and common stock of the Intermountain, for the capital stock of the GIS, within one year from the date of the agreement, on the basis therein specified.

The evidence indicates that the GIS acquired in the transaction, from 51 per cent to at least 80 per cent of the stock of the Intermountain.

Respondent further advances the theory that the GIS had no permit which would authorize it to issue its promissory note in the sum of $40,000 in exchange for the Frankish properties and therefore the note being a security, disposed of by the GIS without obtaining a permit so to do, was in violation of the Corporate Securities Act; that these transactions were consequently void as a matter of law.

It is true that a sale or issue materially deviating from the conditions of the permit is invalid by the language of the act. (Domenigoni v. Imperial Live Stock & Mortgage Co., 189 Cal. 467 [ 209 Pac. 36 ]; Becker v. Stineman, 115 Cal. App. 740 [ 2 Pac. (2d) 444 ]; 6A Cal. Jur. 605, see. 338.) It was held in the case of Herkner v. Rubin, 126 Cal. App. 677 [14 Pac. (2d) 1043], that where a permit required a sale for cash but deliveries were paid for by merchandise instead of cash, the agreement was void. We believe that it will be unnecessary to a proper determination of the ultimate decision to pass upon the question of the permit or to give further consideration to the legal effect of the contract and the exchange thereunder if there was other sufficient evidence to support the finding of the court that the Intermountain had notice of the alleged fraudulent transaction and was not an innocent bona fide purchaser for value.

The fundamental rule may be thus stated. To be a bona fide purchaser one must have purchased in good faith and for a valuable consideration and must have had no knowledge or notice of prior rights at the time of his purchase or at any time prior to payment of the purchase money. (25 Cal. Jur., p. 821, sec. 268.)

Guided by the light of this rule, let us review portions of the evidence bearing upon this phase of the controversy. It must be remembered that among the officers and directors of the GIS as of January 17, 1933, as disclosed in a statement prepared by them were DeWitt C. Rucker, vice-president in charge of fire operations, director of real estate and insurance since 1919 for San Jose and San Francisco, past president of the San Jose Realty Board; W. Herman Schroder, director of Belt Fire Insurance Company; R. G. Kemp, director, vice-president and manager of the Intermountain Title Guarantee Company and eleven or twelve others of equal or greater importance. This data submitted to respondent contained the following statement:

The minutes of the GIS dated January 28, 1933, read in part as follows:

This resolution was later rescinded by the GIS because it was in conflict with certain permits issued by the corporation commissioner. The minutes of the Intermountain as of January 31, 1933, indicate that among the six or seven persons elected as directors of that corporation were R. G. Kemp, general manager and secretary-treasurer, and W. Herman Schroder. At this meeting the Intermountain authorized a conversion of their stock for the stock of the GIS. Mervyn Hope, a member of the executive committee of the GIS was also elected vice-president of the Intermountain. Mr. Kemp, representing the Intermountain, came from Salt Lake City to Los Angeles to investigate the proposed deal with GIS and was shown the corporation commissioner’s permit. Of interest is an analytical report of various subsidiaries by a committee composed of Mervyn Hope, J. W. Frawley and DeWitt C. Rucker, as of March 4, 1933, wherein they report as follows:

This date is prior to the date of the trust deed given by the Federal to the Intermountain.

On November 17, 1933, by resolution, we find that GIS favored Intermountain with a release of any and all dividends due on the Intermountain preferred stock. The minutes are replete with authorizations of contributions from the GIS to the Inter mountain. On July 27, 1933, such a contribution was authorized in the sum of $50,000, to settle a judgment and have sufficient available assets to extend the operations of the Intermountain.

All parties are agreed that the Federal was never indebted to the Intermountain and that at the time of the execution of the trust deed by the Federal in favor of the Inter mountain, no consideration passed between them. After hearing all the evidence the trial court found, and we think properly so: “that as a part of such contract Intermountain agreed to transfer to GIS certain of the capital stock of such corporation by indirect means . . .

Appellants are quite insistent that the facts, as established, do not under any stretch of the imagination constitute notice to the Intermountain, and as vehemently claim their status to be that of a bona fide purchaser for a valuable consideration. In support of their position they cite Mercantile Nat. Bank v. Parsons, 54 Minn. 56 [ 55 N. W. 825 , 40 Am. St. Rep. 299 ] (1893), an action to foreclose a mortgage, wherein this language was used: “Generally, and for most purposes, a corporation is a legal entity distinct from the body of its stockholders; and in any event, to render the knowledge of the individual corporators the knowledge of the corporation it must be the knowledge of all the corporators.” Also cited is Lothian v. Wood, 55 Cal. 159 ; Utah Const. Co. v. Western Pac. Ry. Co., 174 Cal. 156 [ 162 Pac. 631 ] ; Havens v. Dale, 18 Cal. 359 ; Ross v. Wellman, 102 Cal. 1 [ 36 Pac. 402 ],

It seems to be the well-settled rule that where a plaintiff attacks a conveyance as being in fraud of his rights, it is incumbent upon him first to show the fraudulent intent of the vendor. The burden then shifts to the purchaser to show a valuable consideration, and, this shown, the burden again shifts to the plaintiff, who must show the vendee’s knowledge of the fraudulent intent of the vendor. (Boss v. Wellman, supra.)

The state of facts here disclosed does not present a case where an agent gains knowledge in the commission of acts in which he has an interest hostile and adverse to his principal, which furnishes a basis for an exception to the general rule announced in the above cited cases, but clearly herein all the acts of the common agents of all companies were conceived, arranged, and performed for the benefit of the respective companies, not for the agent himself, and each company derived and retained the benefit of the acts in question. The GIS received a credit of $20,000 on this trust deed and the Intermountain received a note in that same amount secured by a trust deed on the property.

From the foregoing, it follows that in so far as the GIS and the Intermountain as corporate entities are concerned, both had knowledge of the fraud perpetrated, both were recipients of benefit therefrom, and both, by their legal and corporate agents, participated therein. Under these circumstances, in arriving at the ultimate conclusion, we need but refer to the well-reasoned case of Verder v. American Loan Soc., 1 Cal. (2d) 17, at page 27 [ 32 Pac. (2d) 1081 ], wherein our Supreme Court said :

“The agents of each company being the same, acting at the same instant in dual capacities in the transaction of their principals’ business inter sese, were carriers of such knowledge to both principals synchronously, with the result that each company principal is charged with all the knowledge and acts of its agents, gained or performed in transacting the business of the respective companies.” (Citing McKenney v. Ellsworth, 165 Cal. 326 [132 Pac. 75]; Williams v. Hasshagen, 166 Cal. 386, 393 [ 137 Pac. 9 ]; National Bank of San Mateo v. Whitney, 40 Cal. App. 276 [ 180 Pac. 845 ]; Live Oak Cemetery Ass'n v. Adamson, 106 Cal. App. (Supp.) 783 [ 288 Pac. 29 ].) See, also, Blue Diamond Plaster Co. v. Industrial Acc. Com., 188 Cal. 403 [ 205 Pac. 678 ]; Gonzalez v. Interstate Guaranty Co., 218 Cal. 612 [ 24 Pac. (2d) 462 ],

In the lig'ht of the reasoning expressed, we are of the opinion that the judgment of the trial court must be and is accordingly affirmed.

Barnard, P. J., and Marks, J., concurred.

A petition by respondent to have the cause heard in the Supreme Court, after judgment in the District Court of Appeal, was denied by the Supreme Court on April 6, 1939.