Johnson v. Boadway Bros.

This is an action wherein the plaintiff asks a judgment in rescission of a certain stock subscription payment contract and for the return of $5,000 paid thereon. Judgment went for plaintiff as prayed and defendant appeals upon a bill of exceptions and upon the judgment-roll.

There is little conflict between the parties in the evidence. Defendant was a corporation engaged in the department store business in Pasadena. In the summer of 1922 it sold its own preferred stock for the announced purpose of securing a lease on designated property in Hollywood, a district within the corporate limits of Los Angeles, and to procure the erection and equipment of a suitable building upon the leased ground for the establishment therein of a department

A meeting was held in Mr. Taft’s office in January, 1923, concerning which plaintiff testified: “I had definite information at the mass meeting in January, 1923, that the defendant did not intend to establish and equip and maintain a store on that particular corner.” A receiver in bankruptcy was in charge of defendant’s business from November, 1922, to February 3, 1923. They were never adjudged bankrupt. On February 3, 1923, there was a change in the personnel of defendant’s officers. The corporation became the Tooker-Jordan Co. A statement of condition of the business as of February 3, 1923, was introduced in connection with Mr. Jordan’s (the new vice-president) testimony that the business was in a good condition. The lease herein referred to was rescinded July 20, 1923.

The first point urged by appellant was under the subhead: “No damage or injury is alleged or shown.” Plaintiff purchased the stock upon condition that a building would be erected at a certain place and a department store opened therein. The evidence is strongly convincing that this was the controlling motive and condition of plaintiff’s investment. There was evidence to support the finding that this consideration failed. Mr. Justice Shaw, in Withers v. Moore, 140 Cal. 591 , at page 600 [ 74 Pac. 159 , 162], quoted from page 399 of Anson on Contracts with approval, as follows: “The difficulty which has always arisen, and must needs continue to arise with regard to conditions precedent, consists in discovering whether or not the parties to a contract regarded the particular term as essential. If they did, the term is a condition; its failure discharges the contract.” See, also, Fountain v. Semi-Tropic L. & W. Co., 99 Cal. 677 [ 34 Pac. 497 ]. It seems to us that the allegations of the complaint are sufficient and the proof ample upon which to base a finding that the establishment of the store was the controlling condition of the contract and the failure to establish the same was a substantial injury.

The third point urged by appellant was under the subhead: “Defendant’s motion for nonsuit should have been granted.” It is true that the trial court was abrupt in its ruling on the motion for nonsuit and should have permitted counsel to fully state the grounds of the motion whether or not it desired to hear argument. However, we believe there was sufficient evidence before the court to require a response by evidence from the defendant, and we do not believe there was any ground upon which the court could have ordered a nonsuit. It appears from the evidence that a large sum of money was subscribed for the purpose of leasing land and erecting a building for the purpose of conducting thereon and therein a department store. That the land leased was of no importance. Even if a building had been erected, that would perhaps have been of no importance, except that both of these were necessary for the important thing—the establishment and maintenance of a department store. This was not done. Instead, the funds

The fourth point urged by appellant was under the subhead: “The action was premature.” The enterprise was to have gone on with rapidity. It was represented that it was to be in operation by Christmas: Instead, the vicissitudes related under the last-treated subhead were known by plaintiff. It appears to us that not only was plaintiff not premature in his action, but had he delayed he would have been in grave danger of legally waiving any objection to his investment being used in the general conduct of the business instead of for the real purpose—the establishment of a business in Hollywood. Section 1691 of the Civil Code reads, in part: “Rescission, when not effected by consent, can be accomplished only by the use, on the part of the party rescinding, of reasonable diligence to comply with the following rules: (1) He must rescind promptly, upon discovering the facts which entitle him to rescind, if he is free from duress, menace, undue influence, or disability, and is aware of his right to rescind ...”

The fifth point urged by appellant was under the subhead:'“Findings of fact not supported by the evidence.” We have expressed ourselves sufficiently on this point under the other points already treated. We think the complaint was sufficient and that the evidence supports the findings of fact and the judgment.

We do not attach the same importance to the agreement of August 31, 1922, as does the appellant. It was entered into by Edward 0. Palmer, one of the lessees, and Boadway Brothers and without the knowledge of plaintiff until after its execution. It could not bind plaintiff, although we do not think it would have changed matters had he signed it.

Judgment affirmed.

Works, P. J., and Craig, J., concurred.

A petition by appellant to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on May 17, 1928.

All the Justices concurred.