254 P. 942 | Cal. Ct. App. | 1927
The defendant corporation has appealed from an adverse judgment in an action for the rescission of a sale of corporate stock and for the recovery of the purchase price paid therefor.
The complaint contained two causes of action, the first based upon alleged fraud and the second upon a void sale, it being alleged with reference to the latter that the sale was not made in conformity with the terms of the permit issued by the commissioner of corporations. The action was tried without a jury, the trial court finding that the sale was free from fraud, but was made contrary to the terms of the corporation commissioner's permit and was therefore illegal. Judgment in plaintiff's favor was thereupon entered for the repayment to him of the amount of purchase price, with interest.
The record discloses the following facts: Appellant was incorporated under the laws of this state in January, 1919, with a capital stock of 5,000 shares of the par value of $100 each, and on February 17, 1919, was granted a permit by the commissioner of corporations to sell 4,000 shares of its stock at par for cash, upon certain conditions specified in said permit and hereinafter referred to. About April 5, 1920, respondent G.J. Otten purchased 15 shares of said stock, paying therefor $1,500. At that time he was employed by appellant at its plant as temporary night watchman and continued in that employment for approximately *85 six weeks. On November 18, 1920, he served notice of rescission of the sale and offered to return the stock upon the grounds of fraud and misrepresentation, and failure of consideration; and made demand for the return of the purchase price paid. Appellant refused to accept the return of the stock, or to refund the purchase price, and as a result respondent, on April 5, 1921, commenced this action.
[1] Among the other facts found by the trial court were the following: That the permit for the sale of said stock "had incorporated therein the following condition: `This permit is issued upon the condition that a true copy thereof be exhibited and delivered to each prospective subscriber for, or purchaser of, said securities, before his subscription therefor shall be taken or any sale thereof made to him'; and that, at the time of the sale of said stock by the defendant and its officers and agents to the plaintiff, the said condition was not observed . . . that a copy of this permit was never shown nor exhibited to the plaintiff by the defendant or its officers or agents, or anyone else, nor a copy thereof given to plaintiff, either before or at the time of purchase of said stock or at any time thereafter."
Section 4 of the Corporate Securities Act of this state provides in part that if an application for the sale of stock is granted "the commissioner shall issue to the applicant a permit authorizing it to issue and dispose of securities, as therein provided, in this state, in such amounts and for such considerations and upon such terms and conditions as the commissioner may in said permit provide . . ."; and section 14 of said act declares that "Every officer, agent, or employee of any company, and every other person, who knowingly authorizes, directs, or aids in the issue or sale of, or issues or executes, or sells, or causes or assists in causing to be issued, executed, or sold, any security, in nonconformity with a permit of the commissioner then in effect authorizing such issue, or contrary to the provisions of this act, or of the Constitution of this state . . . is guilty of a public offense and shall be punished by imprisonment" or by a fine, or by both such fine and imprisonment. (Stats. 1917, pp. 676 and 680.)
In the case of Smith v. Bach,
In the instant case, the trial court having found that the sale of said stock to respondent was made in violation of the terms of said permit, the act of selling constituted a public offense, as such offense is defined by section 14 of said act; and it follows under the authorities above cited that the sale was illegal and void, which entitled respondent to recover the purchase price paid upon tendering the return of the stock.
Appellant has presented considerable argument in its brief and cited a number of authorities in support of the contention it makes that under the provisions of the Corporate Securities Act "a failure to exhibit the permit (in violation of the terms thereof) does not make the issuance of the stock void." We think that question is not involved, it being the illegality of the sale of the stock and not the illegality of the issuance of the stock which justifies the judgment in respondent's favor for the return of the purchase price paid.
[2] It is also urged that the evidence is insufficient to support the finding that a copy of said permit was not exhibited or delivered to respondent. With respect thereto the record shows that the finding mentioned is based upon respondent's testimony alone, the treasurer of said corporation, who negotiated the sale, having died about two years prior to the trial of the action; and appellant claims that respondent's testimony is "so contradictory, uncertain, evasive, and hazy to be unworthy of belief" and is therefore insufficient to overcome the presumptions of law that a person is innocent of a crime or wrong, and that the law has *87 been obeyed. (Subds. 1 and 33, sec. 1963, Code Civ. Proc.) Matters going to the credibility of a witness, however, and to apparent inconsistencies in his testimony are for the consideration and determination of the trial court, and since the testimony of respondent cannot be said to be inherently improbable or impossible of belief, the acceptance thereof by the trial court is controlling on appeal.
[3] We find no merit in appellant's point relating to the asserted insufficiencies of the notice of rescission, for assuming that under the circumstances of a void sale the services of a notice of rescission is essential, the form and substance of the one served by respondent met all legal requirements, the rescission being placed upon the two distinct grounds of fraud and total failure of consideration.
[4] Nor can we sustain appellant's contention that it was beyond the right of the corporation commissioner to impose as a condition for the sale of the stock that a copy of the permit should be exhibited and delivered to each prospective subscriber, for there is no express limitation in the statute placed upon his power relating to the conditions he may impose; and he may in fact, under section 4 of said act, even deny the issuance of a permit in any form, if in his judgment the plan of business disclosed by the application does not meet the demands of the statute.
For the reason above stated the judgment is affirmed.
Tyler, P.J., and Cashin, J., concurred.
A petition 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 23, 1927. *88