Davies v. Acware Plastics

MOORE, P. J.

The court below found against plaintiff’s allegation that he had been fraudulently induced to invest $5,000 in the stock of the corporate defendant. He demands a reversal of the ensuing judgment on the grounds of (1) insufficiency of the evidence, (2) erroneous construction of section 25152 of the Corporations Code.

Appellant purchased his stock from respondent Gummo who was president and treasurer of Acware Plastics, and owner of two thirds of its capital stock. Through a friend of his family, appellant made the acquaintance of Gummo in November, 1947. Thereafter they corresponded with reference to appellant’s employment, his investment and the finances of the corporation. On December 11, 1947, Gummo wrote him that “our only problem now is one of working capital. . . . We should sell around $25,000 worth of stock to be used as working capital.” Appellant came to Los Angeles on February 20, 1948. On the following day he handed to Gummo a check in the amount of $5,000, made payable to appellant, which he endorsed “Ray Davies, Jr. Payable to Acware Plastics for stock.” Two days later a certificate for 50 shares of the capital stock of the corporation was delivered to appellant.

The court found: On or about the 23d day of February, 1948, Gummo sold and delivered to plaintiff 50 shares of his personally owned stock of Acware Plastics for $5,000; at the time of such sale plaintiff was fully informed that he was purchasing privately owned stock of Gummo; Gummo was not

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the issuer or underwriter thereof; the sale was made by Gummo for his own account and “was not made, directly or indirectly for the benefit of Acware Plastics or any underwriter of said stock and said sale was not made for the direct or indirect promotion of any scheme or enterprise with the intent of violating or evading any provision of the California Corporate Securities Law.”

Appellant contends that the stock transferred to him was not the personally owned stock of Gummo; that in any event the sale was made for the benefit of the corporation and since no permit had been granted by the Commissioner of Corporations for the sale or issuance thereof to plaintiff, the sale was in violation of the Corporate Securities Act (Corporations Code, § 25000 et seq.) and therefore void.