Strahan v. Rodney

California Court of Appeal May 10, 1950 No. Civ. 17466Published

Before: Moore

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Holding. The court held that the appellant was liable for damages resulting from the sale of void corporate stock, finding that the appellant's actions created an ostensible agency and that the sale of stock issued in violation of a permit constituted fraud.

Issues

Did the trial court have jurisdiction over the action for damages?
Was there sufficient evidence to establish an agency relationship between the appellant and the individuals who sold the stock?
Did the sale of stock issued in violation of a permit constitute fraud resulting in damage to the respondent?

Disposition. Affirmed

Quotations verified verbatim against the opinion

“The test of jurisdiction of a court is found in the nature of the case made by the complaint and in the relief sought.”

“From such facts, an inference of agency was irresistible, at least an ostensible agency which is clearly established by the acts of appellant.”

“Stock certificates exchanged for services instead of cash as required by the commissioner’s permit are utterly without value and the offer by a director of the corporation to sell such certificates constitutes a fraud.”

MOORE, P. J.

Respondent obtained judgment against appellant for the sum of $1,750 as damages resulting from the sale of certain corporate shares to respondent.

It appears that defendants had organized Vitalife Laboratories prior to October 22, 1945, for a total capitalization of

[449]

10,000 shares. To defendant Sorensen 5,100 shares were issued; 2,000 to one Kroeckel and 2,900 to appellant. Notwithstanding that a permit of the state Corporation Commissioner had on the last mentioned date authorized the issuance of the capital stock for cash only at $1.00 per share, the permit had been ignored and 2,900 shares issued to appellant for the sum of $1,000 and some services. At the time of its issuance appellant was the secretary and director of the corporation. On April 19,1946, the defendant Boyle called upon respondent for the purpose of inducing him to purchase the stock of one of his codirectors. Thereafter appellant delivered his stock certificate for the 2,900 shares to Boyle and the latter paid the $1,750 to appellant. In the following month respondent called upon appellant to inquire as to the whereabouts of the stock. Appellant told him to take the matter up with Boyle who was handling the transaction. On October 9, 1946, at a shareholders’ meeting of the corporation, the issue of the stock to appellant was by resolution declared void by reason of its noncomplianee with the terms of the permit.

In his complaint for damages respondent alleged two counts. (1) For money had and received in the sum of $1,750 and (2) an action for damages in the sum of $2,320 alleging Boyle and Sorensen to have been the agents of appellant in seeking a sale. The first cause of action having been abandoned, judgment was entered in the sum of $1,750 against appellant only.

Appellant demands a reversal on three grounds, to wit, (1) want of jurisdiction in the court below; (2) want of evidence of the agency of either Boyle or Sorensen; (3) want of proof of any faults or representations by appellant resulting in damage to respondent.

In support of his contention that the court was without jurisdiction appellant argues that the second cause of action was predicated on the same set of facts as those alleged in the first count, citing

Strahan v. Rodney

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MOORE, P. J.

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