Crittenden v. Credit Foncier Des Etats Unis

In the early part of 1912 certain persons in Paris, France, and San Francisco, decided to form a corporation, the chief object of which was to borrow money in Europe and lend it in America. At that time the interest rate in France was approximately two per cent lower than in the United States. Henry Brunner, who lived in Paris, but who had formerly been a resident of San Francisco, was mainly responsible for the plan. He interested Tilden C. Tognazzini, of San Francisco, in the formation of the corporation. William C. Crittenden (appellant herein), a practicing attorney in 'San Francisco, heard of the proposed enterprise, came to Tognazzini and requested participation therein. After some discussion, it was agreed that Crittenden should become one of ten incorporators to be selected from San Francisco. Appellant agr&|d to purchase 400 shares of the capital stock, and later subscribed therefor, paying $9,643.20. The corporation was organized in Paris in November, 1912, with Brunner and Tognazzini as members of the board of directors. The name of this corporation was Credit Foncier des Etats Unis. Just prior to the formation of that corporation, the organizers thereof had caused to be formed in Delaware, U. S. A., a corporation by the name of Credit Foncier of the United States, Incorporated. The latter corporation was

Many specifications “wherein the evidence is alleged to be insufficient to justify the decision” were made by appellant, but in his brief he concisely states the contention on which he relies. It is as follows: “That the consideration inducing him to purchase said stock was the promise on the part of the promoters of the defendant, the ‘Paris Corporation, ’ and the promise of the defendant itself, the ‘Paris Corporation,’ as shown by its by-laws, to loan money in America and particularly in California; that the defendant, the ‘Paris Corporation, ’ failed to loan any money in America or in California in violation of its agreement; that the consideration having failed, the plaintiff and appellant was entitled to rescind the purchase of the said stock and recover the money paid therefor.” First, let us examine the record as to the promise so claimed to be shown by the by-laws. It is not shown in the by-laws that the corporation is to loan money in California. The by-laws read: “The principal purpose of this corporation is to carry on in America, and especially in the United States of America, either alone, or in association with other concerns or individuals, or as agent for the account of the third parties, a general business of making loans on mortgages or mortgage securities.”

Appellant alleges in his third amended complaint that promoters of respondent promised and represented to him that they were engaged in organizing in Paris, France, “a corporation having for its principal purpose the carrying on in America and especially in the United States of America, but more particularly in what is known as the ‘Pacific Coast Territory, ’ a general business of making loans of money on mortgages and mortgage securities,” and that “when said corporation was organized the said corporation would perform each of said acts as its sole business.” The court

We now consider the point of appellant’s contention “that the defendant failed to loan any money in America or California in violation of its agreement.” Eespondent did not lend any money in the United States, and the court so found, but was this in violation of any agreement ? Tilden C. Tognazzini, sworn as a witness on behalf of plaintiff, testified on cross-examination: “I believe Mr. Crittenden came to me and asked to join this group, at the solicitation of Mr. Bardman, I think he told me at that time. I remember telling Mr. Crittenden that I did not think he should join, being an attorney, and having already one attorney as one of the group. ... I don’t remember just exactly what took place, but my impression is that I rather discouraged Mr. Crittenden, on that theory. ... As to what was said, we had a great many talks in those days; we used to meet daily I think and I perhaps told him exactly what I told the rest ■—what I expected this corporation would do under certain conditions then existing, which was the only logical thing I could have told him, of course.” As to the conditions existing about the time these conversations were had relative to forming the corporation (prior to August, 1912), the record shows definitely that the rate of interest in France and Europe generally was about two per cent per annum lower than in the United States. This motivated the organization of the corporation. The organizers planned to borrow money at the lower rate then current in Europe and loan it at the higher rate in the United States. The evidence shows that wars in the Balkan states unsettled the financial condition of Europe in 1913. The witness Tognazzini was asked why the corporation did not invest any money in the United States. He answered: “At the time this organization was formed, and which was again the motive for organizing the company, it was on account of money being much cheaper in France than it was here. I would say that within a

Statements to the effect that the “corporation when organized would invest its funds largely in the securities offered in the Pacific Coast Territory,” made under the circumstances shown by the evidence in this case, were merely expressions of opinion. (Jefferson v. Hewitt, 95 Cal. 535 [ 30 Pac. 772 ].) On cross-examination appellant stated that he and Mr. Tognazzini “discussed what in effect this corporation was going to do after its organization. I don’t remember him using the word ‘promise.’ He never used the word ‘intend’ or ‘intended.’ He simply, as far as I remember, stated that the corporation was going to do this, such and such.” The findings of the court show that the statements were made without any fraudulent purpose. Appellant testified that Mr. Tognazzini, who was the only person who made any statements to him concerning the proposed corporation, acted in good faith.

There is a finding of the court that directly negatives failure of consideration. In appellant’s complaint it is alleged that the “said corporation has, without cause, abandoned or is about to abandon, the sole object and purposes thereof and now intends to liquidate its affairs.” In another part of the complaint it is alleged that the capital stock of the corporation is 40,000 shares; “that the entire amount has been issued and is now outstanding; that of this total sum four hundred shares only were issued to this plaintiff; that a majority of the stock has been issued to and is now held by persons who, at all times referred to herein, have been and now are in active control of the said

The judgment is affirmed.

Tyler, P. J., and Knight, J., concurred.