139 Cal. App. 143 | Cal. Ct. App. | 1934
The defendants Herbert R. Freeland and the Metropolitan Casualty Insurance Company of New York appeal from a judgment of the trial court in favor of Lucius Powers, who was the original plaintiff in the action. Pending this appeal Lucius Powers died and M. T. Mc-Elligott, as executor of his last will and testament, was duly substituted in the place of said deceased as respondent in this appeal.
The amended complaint filed in the action sought the recovery of the sum of $10,116.67 which was alleged to have been paid by the plaintiff to the defendant H. R. Freeland as the purchase price of 2,020 shares of class A common capital stock of the Hollywood Dry Corporation. The complaint alleged that the plaintiff was induced to purchase the stock and to pay the above-mentioned amount therefor by reason of certain false and fraudulent representations respecting the value of the stock and the financial
Because of a certain contention of appellants to which consideration will hereafter be given, it will be proper first to determine whether this action was one that was instituted for the purpose of accomplishing a rescission of the purchase of stock or whether it was an action that was brought for the purpose of recovering compensation for the damage occasioned to the plaintiff through the fraud which was alleged to have been practiced upon him by the defendant Freeland and his agent, Hadley.
It is our opinion that the action was one for rescission. The amended complaint contained an appropriate allegation that the plaintiff upon discovery of the fraud had given to the defendant Freeland timely notice of his election to rescind the purchase, that he had offered to restore to Freeland the stock and everything else of value which he had received and had demanded that Freeland repay to him the sum of money which plaintiff had paid for the stock. The prayer of the complaint was for a judgment against the defendants for the exact amount which plaintiff had paid for the stock and “that the court decree that the contract for the purchase of said stock was duly and regularly rescinded, and that plaintiff Lucius Powers has not been, and is not now, a stockholder of the Hollywood Dry Corporation”. The trial court made a finding that the plaintiff,
The trial court found that the defendant Freeland, both individually and through his employee, Hadley, made seven specific representations to the plaintiff relative to the stock and to the sale of said stock, that all of such representations were false, fraudulent and untrue, and were known to be such by Freeland, that they were made by Freeland with the intention that plaintiff should rely upon them, that plaintiff believed the representations and acted upon them to his detriment and that Freeland, at all times material to the cause of action alleged in the complaint, knew that plaintiff was acting under the belief that the false, fraudulent and untrue statements made to him by Freeland were true.
The seven representations which the court found were false and fraudulent may be epitomized as follows: (1) That the Hollywood Dry Corporation, immediately prior to August 20, 1929, and for many months prior thereto, had made large profits through the manufacture and sale of its products and that during the year 1929 the said corporation had made substantial profits from the operation of its business. (2) That the sale of class A common capital stock to plaintiff was authorized and directed by the corporation for the purpose of increasing the working capital of said cor
The above-described findings are attacked on the familiar ground that they are lacking in evidentiary support. Those representations which relate to the book value of 'the stock at the time the contract of sale was made and to its future value and with respect to the business of the corporation at the time of the negotiations for the sale of stock and its prospect for enjoying good business in the future and with respect to the declaration of future dividends are said to
In entering upon a consideration of the above-specified contentions it may be conceded that a statement of mere opinion, although false, may not form the basis of an action by which the recovery of damages or the remedy of rescission on the ground of fraud is sought. However, whether a statement amounts merely to an expression of opinion or whether it shall be deemed to be a positive declaration of fact depends, in the final analysis, on the circumstances of the case and is a question for the trial court to determine (French v. Freeman, 191 Cal. 579, 585 [217 Pac. 515] ; Stockton v. Hind, 51 Cal. App. 131, 136 [196 Pac. 122]). It is evident that the trial court determined that the above-described representations which were found to have been made by Freeland and his employee were statements of fact. Unless, therefore, the record shows that the whole circumstantial background of the case is such that we must declare that the representations of Freeland and his employee were not statements of fact, but were mere expressions of opinion, we are not justified in disturbing those findings of the trial court which are obviously based on the assumption that the representations were positive statements of fact. For a proper determination of this problem some consideration of the circumstances which surrounded the making of the various representations as they are disclosed by the record is required.
The record shows that evidence which established the following facts was produced during the trial: Freeland began his negotiations for the sale of stock with the plaintiff, Lucius Powers, during the month of April, 1929. At this time he stated that he considered that the stock was a very high-grade stock and that the company was going to make
It is our opinion that, taking into consideration the above-mentioned facts and circumstances, we are not warranted in sustaining the contention of appellants that all of the various representations which were made by appellant Free-land and by his employee were purely opinion statements. Undoubtedly, it must be conceded that among them are some which may properly be so characterized. General state
Appellants further contend that, if it be assumed that the various representations specified in the findings were made and that they were false statements of fact, nevertheless the evidence wholly fails to support the trial court’s finding that they were made knowingly. In other words, it is contended that proof of scienter was wholly lacking. It is a primary rule of the law of fraud that to
Appellants strenuously maintain that the trial court erroneously admitted certain evidence which was wholly incompetent and which was highly prejudicial to them. During the course of the trial evidence was produced which showed that the Hollywood Dry Corporation listed among its assets a certain unsecured promissory note executed by an eastern corporation known as the Hollywood Dry Eastern Corporation. The evidence showed that this note was given to the California corporation as consideration for the exten
The principal complaint which is here raised to the admission of the above-mentioned evidence is that it was pure hearsay testimony not within any exception to tho hearsay rule and that it formed the basis for the opinion of the witness that the note had no value. It must, we think, be conceded that, as a general rule, an expert witness is not permitted to give an opinion which is based upon information gained from the statements of other persons outside the courtroom for the obvious reason that the opinion of the witness thus depends entirely upon purely hearsay declarations (Jones on Evidence, sec. 376; Nelson v. Painless Parker, 104 Cal. App. 770, 778 [286 Pac. 1078]). However, it is established that a witness who is called to testify regarding the value of property should, so far as is practicable, detail the facts upon which his conclusion or judgment is based even though the facts upon which he
Appellants make the further point that the trial court found that the notice by which Lucius Powers communicated to Freeland his election to rescind the contract of purchase and to return to Freeland the stock certificate and everything of value which he had received in connection with the purchase of stock was sent to Freeland by mail and that it was received by the addressee after this action was commenced. It is urged that this finding of fact, which is amply supported by the evidence, conclusively shows that the action was prematurely brought and that the judgment permitting Powers to recover the money which he had paid for the stock is incorrect, particularly since it does not require respondent to surrender the stock certificate and the dividend of $252.50 admittedly received by Powers during his lifetime.
We have heretofore indicated our opinion that this action was one that was brought for the purpose of accomplishing the rescission of the transaction whereby Powers purchased from Freeland 2,020 shares of stock of the Hollywood Dry Corporation. We recognize the general rule which is applicable to one who desires to rescind a contract. It is fully stated in section 1691 of the Civil Code. We understand that a person desiring to rescind must do so promptly upon discovery of the facts which he claims entitle him to rescind and that he must restore or offer to restore to the other party everything of value which he has received under the contract. It must be conceded that notice of rescission and offer of restoration is a condition precedent to the bringing of an .action to accomplish rescission save in exceptional cases, where, by reason of the circumstances, restoration or offer of restoration is not essential (California etc. Co. v. Schiappa-Pietra, 151 Cal. 732, 739 [91 Pac. 593]). It is our opinion that this is one of the exceptional cases. The trial court found that the stock which Powers purchased from Freeland “did not at any time or at all have a book value of $6.50 per share but that said stock was in truth and in fact wholly worth
The final contention of appellants on this appeal is that the judgment against the surety company on Free-land’s bond permitted recovery from the surety company for the sum of $5,000, the amount of the bond “with interest thereon from March 16, 1930, to the entry of judgment”. It is urged that the provision of the judgment permitting the recovery of interest on the amount of the bond prior to the entry of judgment is erroneous since it exceeds by the amount of interest allowed the full amount for which the surety became obligated. A most casual reading of the judgment demonstrates that appellants are entirely mistaken in this contention and that the judgment against the appellant Metropolitan Casualty Company of New York does not include the allowance of any interest on the amount of the bond prior to the entry of judgment.
For the reasons stated herein the judgment is affirmed.