Commercial Building Co. v. Levy

California Court of Appeal Aug 28, 1930 No. Docket No. 7021.Published

Before: Parker

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Holding. A subscription agreement for corporate stock is void when it provides for deferred payment despite a permit from the Commissioner of Corporations authorizing the sale of such stock for cash only.

Issues

Whether a stock subscription agreement providing for deferred payment violates a permit authorizing the sale of stock for cash only under the Corporate Securities Act.

Disposition. reversed

Quotations verified verbatim against the opinion

“When the courts have definitely held that under the provisions of the Blue Sky Act a sale of stock, pursuant to a permit to sell for cash, cannot be sold on a written promise to pay, it would seem only too clear that the effect of the decisions could not be avoided by substituting an oral promise to pay.”

“No matter how the facts are turned or from what viewpoint we approach the question, we find a complete answer in the, cited cases.”

“The purpose of the Corporate Securities Act was and is to protect purchasers of stock or securities.”

PARKER, J.,

pro

tem.

This is an action to recover money alleged to be due upon a subscription for the capital stock of the plaintiff corporation. From a judgment for plaintiff the defendant appeals. The agreement sued upon is as follows:

“For the purpose of erecting a modern building on the so called ‘Music Hall’ property on North First Street in San Jose, California. I hereby subscribe for five shares of the capital stock of the Commercial Building Company (a corporation organized under the laws of the State of California and having a capital stock of three hundred thousand dollars divided into three thousand shares of the par value of $100. each) and I agree to pay for such shares so subscribed by me one hundred (100) dollars per share, payable as follows: On or before December 1, 1924. I under

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stand that the terms, conditions and provisions contained in the amended permit issued by the Commissioner of Corporations of the State of California,

copy of which is printed on the reverse side of this subscription are made a part hereof.

“Dated this 10th day of March, 1924.

“Name (signed) Barney B. Levy.”

On the reverse side appeared the amended permit of the corporation commissioner. The salient points of this permit are that the corporation was granted permission to sell 1150 shares of its capital stock in exchange for $115,000 cash, lawful money of the United States heretofore advanced by appellant. Also to sell and issue 850 shares of its capital stock at par for cash lawful money of the United States for the uses and purposes recited in the application. This amended permit was dated July 12, 1922. It is admitted that the stock involved and for the payment of which recovery was had is embraced in the 850 shares last referred to. It is admitted further that in pursuance of the subscription the stock was actually issued in the name of defendant and was, together with the subscription agreement, deposited as a pledge on a loan made to the corporation. It is further a fact that the demand on the defendant for the money claimed was accompanied with a notice that the stock had been so issued to him and that he would make the payment direct to the lender bank where he would receive his stock.

Commercial Building Co. v. Levy

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PARKER, J.,

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