Bacon v. Grosse

This is an appeal by the defendant Charles E. Grosse from a judgment requiring the transfer to the plaintiff of certificates evidencing the ownership of twenty thousand dollars of bonds, and .two hundred shares of the capital stock, of Producers’ Transportation Company, a California corporation. Grosse also appeals from an order denying his motion for a new trial.

It appears that said corporation had authorized an issue of three million five hundred thousand dollars of bonds of the denomination of one thousand dollars each. Said bonds, together with the capital stock of the Producers’ Transportation Company, came into the ownership or under the control of Union Oil Company of California, one of the defendants.

The complaint alleges that the plaintiff, through his agent, W. N. Hamaker, applied to the Union Oil Company to purchase twenty thousand dollars of said bonds and a like amount of stock, but was informed that the subscription should be made in the name of a stockholder of the Union Oil Company or of one of its affiliated companies. Thereupon plaintiff applied to the defendant Crosse, who was a stockholder pf the Union Oil Company, for permission to subscribé for and' purchase such bonds and stock in Crosse’s name. The permission was granted, and a written subscription for twenty thousand dollars of said bonds and stock presented to the Union Oil Company. At the same time Crosse subscribed for a like amount of the bonds and stock in his own behalf. The Union Oil Company awarded and set apart to the plaintiff twenty bonds of the Producers’ Transportation Company and two hundred shares of its capital stock and set apart a like amount of said bonds and stock to Crosse. Pull payment for said bonds and stock was made' by the plaintiff and Crosse, each of them paying to the said Union Oil Company the sum of twenty thousand dollars. On the twenty-eighth day of July, 1909, Crosse executed and delivered to plaintiff bills of sale purporting to transfer to plaintiff twenty bonds and a certificate for two hundred shares of the capital stock of the said Producers’ Transportation Company. Notwithstanding such assignments, notice of which was given to the Union Oil Company, a single certificate for four hundred shares of the capital stock of the Producers’ Transportation Company was issued in the name of Crosse-and delivered to him. The bonds were not issued directly to the purchasers, but were delivered to the Los Angeles Trust & Savings Bank, which, on its part, furnished to the purchasers receipts or certificates reciting that said Trust & Savings Bank held the bonds in trust for such respective purchasers. Such a re

The complaint alleges that the stock and bonds are rapidly advancing in price and that they are now worth in excess of twenty-six thousand dollars. The prayer is for judgment for the sum of forty thousand dollars, that the defendant Grosse be required to surrender to the Producers’ Transportation Company the certificate for four hundred shares of the capital stock and that said certificate be canceled and a new certificate issued tq the plaintiff for two hundred shares; that Grosse be directed to surrender to the Los Angeles Trust & Savings Bank the trustee’s certificate for the forty bonds and that said certificate be canceled and a new one issued to plaintiff for twenty bonds.

Answers were filed denying many of the allegations of the complaint. The answer of the defendant Grosse also set up as. an affirmative defense that the device whereby plaintiff subscribed for stock and bonds of' the Producers’ Transportation Company in the name of said defendant Grosse was a fraud upon the "Onion Oil Company and its stockholders in that it evaded and thwarted the object and intention of said Union Oil Company to limit the right of subscribing to said stock and bonds to the holders of its stock or that of its two affiliated companies. It also alleged a failure of the consideration upon which Grosse permitted plaintiff’s agent Ha-maker to use his (Grosse’s) subscription rights for plaintiff’s benefit, and set up that prior to the filing of his answer he had offered to return plaintiff the sum of twenty thousand dollars paid by him, together with interest, which offer had been refused.

The findings were in favor of plaintiff and followed, substantially, the allegations of the complaint. "With the excep

The findings, so far as they set forth the transaction between plaintiff and Crosse, are fully sustained by documentary evidence, the authenticity of which is not questioned. A circular of the Union Oil Company, offering the stock and bonds of the Producers’ Transportation Company for subscription, had been sent to each of its stockholders and Crosse had received a copy thereof. On July 17, 1909, Hamalcer, who was connected with the First National Bank of Los Angeles, wrote to Crosse a letter, in which he used this language: “For one of our very good customers I very much desire the subscription privileges of some holder of stock of the Union Oil Co. or its affiliated companies, for the bonds, together with the bonus stock, of the Producers’ Transportation Co. ... I recall your having been a very heavy owner of this stock and if you are not going to consume all of your subscription privileges, I would like the same up to $20,000, and am holding that amount with which to pay the same and would make cash payment to the company immediately on their advice to you of allotment.” To this letter Crosse replied on July 18th, stating, in effect, that he desired to subscribe for twenty thousand dollars of the bonds and stock himself, and going on as follows: “Considering the matter still further, I will take $20,000 worth of the bonds, and you may fill out the blank for as much more as you think you want and can get, and all of the excess over a $20,000 allotment you may have. ... If the subscription should be scaled down, however, you will have to provide only for such an amount, in excess of the $20,000, which I want, as the allotment calls for. ’ ’ With this letter he inclosed a form of subscription for the stock and bonds with his name signed thereto, but with the amount subscribed for left in blank. This form Hamaker filled in for forty thousand dollars and he'deposited it with the Union Oil Company, paying at the same time three thousand dollars, the amount of the deposit required upon a

Hamaker testified that, before he communicated with Grosse, Bacon had informed him he desired to invest twenty thousand dollars in the bonds and stock of the Producers’ Transportation Company, that he (Hamaker) had applied to the Union Oil Company to purchase twenty thousand dollars of such bonds and stock and had been told by the secretary of the company that he had no right to subscribe, but that “if he could get in touch with some stockholder of either the Union Oil Company or its two affiliated companies he undoubtedly would have no trouble.” At the trial the Union Oil Company, by its attorney, declared that it was not concerned in the question whether the plaintiff or Grosse should become the owner of the stock and bonds in dispute. No stockholder of the Union Oil Company or of its affiliated companies has ever, so far as the record discloses, complained of the fact that this subscription was made by Grosse for plaintiff’s benefit.

Under these circumstances we think there is no force in appellant’s contention that this transaction constituted a fraud of which the appellant is entitled to complain. The Union Oil Company, as the owner of the stock and bonds of the Producers’ Transportation Company, was not bound by any rule of law to limit the sale to its own stockholders. The circular which it issued did undoubtedly thus confine the offer, but there was nothing in its terms to prohibit a stockholder from subscribing for more bonds than he intended to retain on his own account or from subscribing on behalf of some one not a stockholder. The circular did not prohibit the transfer of rights, after a subscription should have been made. It did not even assume to grant to the stockholders the absolute" right to receive bonds and stock of the Producers’ Company in proportion to their holdings in the Union Oil Com-

The■ evidence is entirely inconsistent with the appellant’s filaim that Hamaker made misrepresentations to him. The terms of the circular were known to him. Hamaker’s communications were entirely by letter. The letters made no statement which was not in accord with the offer contained

Nor does the evidence sustain the claim of a failure or want of consideration. In Grosse’s letter to Hamaker under date of July 18th the appellant used this language: “I am willing to subscribe for any amount you may name, and as much more additional for myself, providing you will get the bank, or some private individual, to lend me such assistance as I may require from time to time.” Upon the clause last quoted, appellant bases the argument that his consent to the proposed transfer of a part of his subscription rights was made conditional upon Hamaker’s agreement to provide at any future time for such credit as he might desire. But we think this a strained construction of the letter. In view of the declarations immediately following the portion of the letter above quoted, there is strong ground for saying that any condition which Grosse may have intended to attach to his consent was withdrawn by later statements in the same letter. In any event, the condition must have been intended to apply only to such “assistance” as might be required in making the payment for Grosse’s subscription for twenty thousand' dollars of bonds and stock of the Producers’ Transportation Company. The court found that Grosse did not, at any time prior to November 22, 1909, call upon or request Hamaker to get for him “financial assistance in the matter of loans and money.” At that date Grosse had already made his final payment on the stock and .bonds subscribed for by him. The finding that he had not requested assistance before November 22d is supported by Hamaker’s testimony, and this finding fully meets the claim of a failure of consideration. If no

In this connection complaint is made of an alleged error occurring during the cross-examination of Hamaker. Appellant was seeking to lay a foundation for impeaching Hamaker’s testimony by asking him whether he had not, in giving his deposition, made answers to the effect that Grosse had sought bis aid in obtaining loans at a time prior to November, 1909. One of these questions was answered, whereupon the court, upon the suggestion of plaintiff’s counsel, said that the entire deposition might go in, and that defendant Grosse would have the benefit of any part of it that tended to impeach Hamaker. This ruling is assigned as error. As a general proposition, the appellant is no doubt correct in his contention that the offer by him of a part of the deposition would not necessarily have authorized the plaintiff to introduce the rest of it. The adverse party would have been limited to the offer of such other parts as related to “the same subject.” (Code Civ. Proc., sec. 1854; Zibbell v. Southern Pacific Co., 160 Cal. 237 , 250, [ 116 Pac. 513 ].) But from the record before us it does not appear that error was committed or that any prejudice resulted from the course pursued in this instance. The contents of the deposition are not incorporated in the statement on motion for new trial. We have no means of knowing whether it contained anything that was inadmissible, under the rule above referred to, or, if inadmissible, injurious. Under these circumstances, the well established rule that error will not be presumed, but must be affirmatively made to appear,. prevents favorable consideration of the point urged. (Dyer v. Leach, 91 Cal. 191 , [ 25 Am. St. Rep. 171 , 27 Pac. 598 ]; Kurts v. Forquer, 94 Cal. 91 , [ 29 Pac. 413 ]; Estate of Angle, 148 Cal. 102 , [ 82 Pac. 668 ].)

It is urged that, if Hamaker was not bound to, or did not, secure loans for Grosse, there was no consideration for the latter’s undertaking to subscribe on Bacon’s behalf. Grosse, it is said, received nothing. But it is not necessary to the existence of a good consideration that a benefit should be conferred upon the promisor. It is enough that a “prejudice be suffered or agreed to be suffered” by the promisee. (Civ.

What we have said sufficiently answers most of the claims of the appellant, not already mentioned, with respect to the rulings of the court in the admission and rejection of evidence. Some rulings complained of consisted in sustaining objections to questions asked of Grosse relative to his understanding of the meaning of the letters exchanged between himself and Hamaker. The letters were perfectly plain and evidence to vary their contents was, under elementary rules of law, inadmissible. So, too, evidence designed to show that Grosse was ignorant of the terms upon which the stock and bonds were being offered by the Union Oil Company was incompetent. He had received one of the circulars and this circular clearly expressed the terms upon which subscriptions were invited. In view of what we have said on the subject of consideration, the inquiries attempted to be made on the subject of Grosse’s efforts, after payment for and issuance of the stock and the trustee’s certificate for . bonds, to secure loans through Hamaker had no bearing upon any material matter.

The court made no finding in response to the allegation that the stock and bonds were rapidly increasing in value. Nor was any evidence offered in support of this allegation. It is contended that no equitable relief could properly be granted to plaintiff in the absence of proof that the stock and bonds which he claimed had some peculiar value or that for some reason a judgment for money damages would not afford him adequate relief. If this were simply an action for the conversion of personal property, or for the specific enforcement of a contract to sell personal property, the contention would be unanswerable. Undoubtedly it is the general rule that equity will not compel the delivery of specific personal property wrongfully withheld, nor enforce the specific performance of a contract to sell chattels, unless it is shown that money damages for the breach of the obligation would not afford adequate relief. (Senter v. Davis, 38 Cal. 450 ; Harle v. Haggin, 131 App. Div. 742 , [ 116 N. Y. Supp. 51 ]; Civ. Code, see. 3387].) This rule has often been ap

But this is not a mere action for conversion nor is it one to enforce a contract to sell. In such cases the wrong to be redressed is one cognizable in a court of law, and equity would afford relief only upon a showing that the remedy at law is inadequate. Here, however, the action is, in effect, one to enforce a trust, a kind of action which is within the peculiar province of a court of equity. Under the agreement here alleged and proved, the appellant did not agree to sell to Bacon stock and bonds which he owned. He agreed to subscribe .in his name, but on Bacon’s behalf, for stock and bonds to be issued. The subscription price was to be paid and was paid by Bacon. When the stock and bonds were issued to the defendant he became a trustee for the plaintiff and in an action by the beneficiary to enforce the trust, the defaulting trustee will not be permitted to say that his beneficiary should be remitted to an action at law. In Johnson v. Brooks, 93 N. Y. 337 , where the plaintiff sued to compel the transfer of stock and bonds which had been bought with plaintiff’s money and issued to the defendant, this distinction was clearly made. In sustaining the plaintiff’s right to the relief sought, the court used this language: “It is needless, however, to pursue this inquiry further, for the appellant cannot get over the fact that he obtained the shares and bonds under circumstances which prevent him from setting up ownership as against the plaintiff and imposes upon him at least a quasi fiduciary relation which he cannot evade without the consent of the real owner.” The same rule is declared in Cowles v. Whitman, 10 Conn. 120 , [ 25 Am. Dec. 60 ], and Kimball v. Morton, 5 N. J. Eq. 26 , [ 53 Am. Dec. 661 ]. Similarly, in Krohn v. Williamson, 62 Fed. 869 , upon facts presenting a like question, Judge Taft, after conceding that courts of equity will not, ordinarily, decree the specific performance of an obligation to transfer personal property, goes on as follows: “But the controlling reason why, in this case, the delivery of the stock in specie should be de

Appellant’s demurrer to the complaint was overruled. That the complaint stated a cause of action sufficiently appears from what has been stated, and if, in some particulars, the specifications of uncertainty or ambiguity were well taken, we cannot see that the defendant was in any degree prejudiced by the overruling of the demurrer. The real nature of the cause of action was plainly disclosed and hill of exceptions shows that the case was tried by both the parties with a full understanding of the basis of plaintiff’s claims.

The judgment and the order appealed from are affirmed.

Shaw, J., and Angellotti, J., concurred.