Wread v. Coffey-Murray, Inc.

STURTEVANT, J.

From a judgment following an order granting the motion of the defendants for a nonsuit in an action for an accounting the plaintiff has appealed. The pleadings were copious. On the trial counsel stipulated in open court minutely regarding the issues. The judgment roll in a former action between the same parties was freely used by each of them. After the case had been so presented the defendants made a motion for a nonsuit, their motion was granted, judgment thereon was entered, and from that judgment the plaintiff has appealed.

On October 17, 1932, and prior thereto, W. E. Wread had been engaged in installing overhead doors. The record does not disclose that he had a factory, shop, or any equipment. At all times he referred to his overhead doors as an “invention” but as will hereinafter appear he held no patentable rights. On October 17, 1932, Wread, J. T. Coffey and P. B. Murray entered into a written contract. In substance that contract recited that W. E. Wread was the inventor and designer of a useful invention, the overhead door; that he had applied for and would apply for letters patent; that the parties to said contract intended to organize a corporation to manufacture and sell overhead doors; that the parties would form a corporation having a capital stock of $24,000 divided into 2,400 shares of the par value each of $10; that the corporation should have three directors; and that the corporation would take over said invention; that upon its organization an application would be made to the commissioner of corporations for a permit to sell stock; that upon receipt of the permit Wread would assign to the corporation his invention and improvements thereof; that Coffey and Murray, as soon as the permit issued, would advance to the corporation the sum of $500 as working capital, and that they would promote the said business; that the capital stock authorized by the permit would be issued to said persons in equal amounts, and that Wread should receive a salary of not less than $200 per month.

At about the same time a corporation, the defendant, was formed under the name of “Easy Overhead Door Corporation”. On November 18, 1932, the commissioner of corporations delivered a permit authorizing the corporation to issue

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to Coffey, Wread, and Murray, ten shares of stock each for $10 per share, such sums to stand against debts of the applicant theretofore paid by said persons. On or prior to December 5, 1932, Murray paid to the corporation, or for its use, $350, Coffey paid $445, but the record does not show that Wread paid in anything. On December 5, 1932, the corporation issued twenty shares to each of said persons. Each of said persons was elected a director. Coffey was elected president, Murray was elected secretary, and Wread was elected treasurer and vice president. On or about November 10, 1932, Easy Overhead Door Corporation engaged in the business theretofore conducted by Wread, and since has continued to install overhead doors. He participated until May 17, 1933, when he left the organization and ceased to take part in its operations. He has never assigned to said corporation his right, title and interest in and to said invention and in and to any letters patent issued under said or any subsequent applications. In another action, hereinafter more particularly referred to, the trial court made a finding that the device was not patentable. Hence Wread paid nothing for his stock. But, as we have stated, the permit provided that it should have been paid for in cash or by the payment of corporate debts in the full sum of $10 per share. An issue of stock at variance with said terms of said permit was prohibited and made a felony by the express provisions of the statute. (Secs. 3, 16, 17 and 18, Stats. 1931, p. 937 [Deering’s Gen. Laws, 1937, Act 3814].) Such issue was void. (Civ. Code, see. 1598.) On September 21, 1933, Wread resigned as director, treasurer, and vice president, and established a separate place of business. On January 31, 1934, he wrote defendants: “You and each of you will please take notice that I have elected to declare void that certain stock and the certificate evidencing the same, issued to me in Easy Overhead Door Corporation, a corporation, for the reason that the stock was not issued in conformity with, or in substantial conformity with any authorization granted to the corporation by the commissioner of corporations of the state of California, and I hereby offer to do each and everything required of me to be done to void the said stock and the certificate evidencing the same. Please govern yourselves accordingly.”