Nunemacher v. Western Motor Transport Co.

FINCH, P. J.

— Two causes of action are stated in the complaint. In the first it is alleged that the plaintiff was induced by false and fraudulent representations made by defendant to purchase 100 shares of its treasury stock at $100 a share, to the plaintiff’s damage in the sum of $5,629. In the second it is alleged that the defendant is indebted to the plaintiff for services performed in the sum of $527.50. The court entered judgment in favor of the defendant on the first cause of action and in favor of the plaintiff on the second. The defendant has appealed from the part of the judgment which is against it, but has presented no argument in support of its appeal. It is deemed, therefore, that such appeal has been abandoned. The plaintiff has appealed from the judgment in favor of defendant on the first cause of action. It is conceded that there is a substantial conflict in the evidence bearing upon some of the alleged false representations, but the plaintiff contends that the evidence shows without dispute that the stock salesman of the defendant falsely “represented to the plaintiff that the business of the defendant was a good and profitable business and . . . was making a profit at the time” the representations were made.

The defendant operated certain passenger stage lines from about December 1, 1919, to November, 1921. During that period it acquired other stage lines, which it operated until the latter date. Its property was then taken over by the California Transit Company. In the month of June, 1920, a certified public accountant, employed by a person who thereafter purchased a large number of shares of the defendant’s capital stock, audited the books of the corporation and made a written report thereof, dated June 20, 1920. The report

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covers the period from December 1, 1919, to May 31, 1920. It appears therefrom that up to the latter date the defendant had issued 1,201 shares of stock and that the net worth of the corporation was $121,899.95; that for the six months covered by the report the respective monthly receipts, almost entirely from the sale of tickets, were $2,336.75, $2,235.90, $2,662.28, $5,246.74, $5,525.70, and $10,272.47; and that the corresponding monthly expenses were $3,148.77, $2,890.17, $3,207.22, $5,095.74, $5,321.26, and $6,776.76. From these figures it appears that the business was conducted at a loss during the first half of the period and at a profit during the succeeding three months. The evidence shows and the court found that the report correctly sets forth the business of the defendant up to May 31, 1920. The defendant employed the same accountant to audit its books for the remaining seven months of the year 1920. Neither party questions the accuracy of the report of that audit, dated January 31, 1921. It appears therefrom that up to December 31, 1920, the corporation had issued a total of 1,935 shares of stock and that the net worth' of the corporation was then $170,287.53. The monthly receipts and expenses are not stated, but the total amount received from the sale of tickets during the seven months was $112,363.17, and the amount of the expenses was $135,621.66. The accountant included in the expenses a charge of $15,666.52 for depreciation of automobiles, equipment, furniture, and fixtures. During the year 1920 A. J. Hanford was president of the corporation and Oscar H. Klatt was secretary. John M. Jackson was its stock sales agent.