Zirker v. Baber

MUSSELL, J.

This is an appeal by plaintiffs from a judgment in favor of defendant James Dallas in an action on a common count for money had and received.

In July, 1954, defendant James L. Dallas owned a 70 per cent interest in the Waldman Motor Company, a partnership in La Jolla, and the remaining interest therein was owned by H. Stephen King. The La Jolla Garage, Inc., was formed by an amendment of the articles of incorporation of the Community Broadcasting Company in order to take over the assets and business of the Waldman Motor Company. Application was made to the Division of Corporations of the State of California for a permit to issue securities for the assets of the Waldman Motor Company. A permit was issued by the Corporations Commissioner conditioned on the issuance of shares of stock only to the extent of the net worth of the assets transferred to the La Jolla Garage Corporation.

On November 30, 1954, the La Jolla Garage Corporation issued 1,400 shares of its class A stock, par value $10 per share, to Dallas for his 70 per cent interest in the Waldman Motor Company partnership and 600 shares were issued to H. Stephen King for his 30 per cent interest therein. However, this stock was issued prior to a determination of the net worth of the assets transferred and an accountant was subsequently employed to determine the net worth as of November 30, 1954, the date of the transfer. The balance sheet showed that the net worth of the assets was $4.87 per share instead of $10 per share as required by the permit. Shortly after receiving the accountant’s statement, the secretary of the corporation, who was also its attorney, advised King, Dallas and Joseph Baber that the net worth as shown on the balance sheet was too low for the amount of stock that had been issued and that something had to be done about it, that “it was one of two things, either the statement that was prepared was incorrect and had to be corrected, or else the stock that was outstanding would have to be transferred back and a lesser number of shares in the same percentage would have to be issued.” The 1,400 shares issued to Dallas were never deliv

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ered to him because of conditions imposed by the Corporations Commissioner.

Defendant Joseph Baber, who was an employee of the La Jolla Garage, entered into an agreement in writing with Dallas on January 14, 1955, in which Dallas agreed to sell and Baber agreed to buy 50 per cent of the net worth of the La Jolla Garage Corporation for the sum of $10,000 and Dallas agreed to execute any and all necessary documents necessary to transfer said interest to Baber. Baber obtained the sum of $10,000 from the plaintiffs Clarence H. Zirker and Agnes Jean Zirker and Baber paid said sum to Howard Clayton, the attorney and secretary of the corporation. The money was placed in the trustee account of the law firm of Luce, Forward, Kunzel and Seripps. On January 27, 1955, Clayton paid said sum to Dallas upon obtaining a written authorization so to do from Baber.