Savage v. Mayer

GIBSON, C. J.

This is an appeal from a judgment for plaintiff in the amount of $26,400, found to have been wrongfully retained by defendant as secret profits while acting in a fiduciary capacity.

Plaintiff was introduced to defendant in October, 1944, and after several meetings, primarily of a social nature, defendant asked if plaintiff would be interested in forming a group to undertake the management of a certain corporation by purchasing a controlling interest in its stock. Defendant explained that he knew a man named Gentles who owned 12,000 shares of the stock and that if defendant and plaintiff together would purchase another 12,000 shares the three would be in a position to bargain with the persons then controlling the corporation. Plaintiff agreed to the plan, and at a meeting in Los Angeles, in which plaintiff was introduced to Gentles, the latter agreed to join them. It was arranged that defendant should go to San Francisco and, with the assistance of Gentles, purchase the necessary shares on the stock exchange at the market price. Plaintiff and defendant were each to take one-half of the stock so purchased.

A few days later defendant informed plaintiff that 6,000 shares had been procured through the San Francisco Stock Exchange at $20 a share, which he said was the lowest quotation he could get. Defendant told plaintiff that 3,000 of these shares, which he had bought for him, were being held by a Los Angeles bank. The shares were accompanied by a draft drawn in defendant’s favor for $60,000, and

[550]

plaintiff, believing that defendant had procured the shares for him at that price, paid the draft and took delivery of the stock. About one week later defendant informed plaintiff that Gentles had been able to procure an additional 6,000 shares for them at $20 a share, and that 3,000 of these shares had been purchased for plaintiff and were being held by the bank. Plaintiff took delivery of this stock, paying a second draft for $60,000 drawn in defendant’s favor. Several weeks later defendant told plaintiff that he had found that the persons then in control of the corporation were unwilling to deal with them while Gentles was “in the picture” and that it would be necessary for plaintiff and defendant together to take half of Gentles’ stock at $20 a share. Defendant said that other interests would purchase the remainder of Gentles’ stock. Plaintiff thereafter sent $60,000 to defendant with which to buy 3,000 shares of Gentles’ stock on his behalf.