Silva v. Holme

NOURSE, P. J.

This is an appeal by the six defendants from a judgment in favor of plaintiff, Frank A. Silva, doing business under the name J & S Liquor Company, in an action on the following promissory note:

“$5,000.00 Oakland, California, May 29, 1946. Six months after date, for value received, we jointly and severally, promise to pay to J & S Liquor Co. or order, at Richmond, California the sum of Five Thousand Dollars, in lawful money of the United States, with interest thereon in like lawful money from date hereof until paid, at the rate of six (6) per cent per annum, said interest payable at

maturity;

and in case of default in the payment of said interest as the same shall become due, then such interest so in default shall be added to and become a part of the principal and thereafter bear the same rate of interest; and at any time during default in the payment of said interest as the same shall become due, the whole amount of said principal sum and interest, shall at the option of the holder of this note, become immediately due and payable without notice.

C. G. Holme, Jr.

H. Bicklehaupt

Witness to signatures: C. F. Phelps_

M. H. Ezell Lester A. High

R. J. Mulcahy_

Frank E. Cox”

[463]

In January, 1946, the defendants were the members of the board of directors of Food Facilities, Inc., a California corporation working in the frozen food locker field, hereinafter called the corporation. The corporation needed additional funds for its operations but did not have an authorization from the Commissioner of Corporations for the issue of more stock. Two of the defendants Mr. Mulcahy and Dr. High approached plaintiff to obtain funds from him; they represented that after they would have received permission to issue stock plaintiff would get stock in the corporation for the amount he would provide and in the meantime it would be considered a loan. From plaintiff’s confused and contradictory testimony it is evident that he did not form any clear idea who—either the corporation, all defendants or only those who approached him—would be considered to have received the loan, but he testified repeatedly that it w7as represented to him that the loan would be secured by a promissory note signed by “all the persons interested,” “all the persons whose names now appear on it.” In a similar manner funds were obtained from others not involved in this suit, the total amount obtained being approximately $30,000. Plaintiff provided $5,000; on January 3, 1946, he gave a check for that amount payable to defendant High on which plaintiff had written “Adv[ance] for investment for Locker Company, Food Facilities, Inc.” The receipt signed for High by the witness Ezell, secretary of the corporation, stated that it was a temporary receipt for $5,000 received for the use of the corporation, a regular instrument to be furnished as soon as the lawyer would have it typed. According to the testimony of defendant High “things happened—didn’t go right”; those who had provided funds "were called in and given personal notes by the members of the board of directors. Plaintiff received his note, on which the action was brought, in a letter dated June 4, 1946, of Ezell as secretary of the corporation in which it is said that the note was in accordance with the agreement of May 31, 1946, which agreement is not further explained. In June, 1946, Dr. High and the members of the board of directors approached the witness Kelso to help them work out a reorganization or rehabilitation of the corporation which they said “had hit a snag.” Kelso testified that the plan of rehabilitation on which he and the board of directors worked was that said old board of directors would make good a deficit of $25,000 in the assets of the corporation, if they were freed from the personal obligation of the