Lathrop v. National Sugar Co.

SHAW, J.

Action for damages on account of fraud and deceit alleged to have been practiced by appellants upon plaintiff in the sale to him of certain shares of corporate stock of the National Sugar Company. Prom the judgment entered in favor of plaintiff, and an order denying their motion for a new trial, defendants appeal.

The action as originally brought included among the defendants the National Sugar Company, as to which, however, and other defendants not appealing, the same was dismissed at the time of the trial. Defendant Stewart was the president of the corporation and a stockholder therein. Defendants Wayne and McGraw were copartners doing business as stock brokers in Los Angeles under the firm name of Wayne & McGraw. In July, 1907, plaintiff purchased from Wayne & McGraw certain shares of the capital stock of said corporation, for which he paid the sum of $740, and received a certificate therefor. The complaint alleges that in order to persuade and induce plaintiff to purchase the stock the defendants Stewart, Wayne and McGraw made certain representations to plaintiff upon which he relied and was thereby induced to make the purchase, and that said representations were false and untrue, and when made by defendants known

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by them to be false and untrue. Briefly stated, these alleged false representations were to the effect .that the National Sugar Company owned valuable patents and patent rights of machinery, devices and processes for manufacturing and refining a high grade of marketable sugar from wood charcoal at a cost below that of any other known process for the manufacture of sugar; that said process was entirely practicable, that it had been in every way tested and that its results were a certainty, and by the use thereof great profits could be made; that the proceeds of the sale of stock in said corporation were to be used in the installation and equipment of a plant for carrying out the purposes of the corporation, and that defendant Stewart exhibited to plaintiff a machine and device in operation, whereby sugar; was apparently, but not in fact, being produced from wood and carbon," or charcoal; that it was falsely claimed that the sugar was made from wood and charcoal; that the stock of said corporation would be of great value and far in excess of the amount paid by plaintiff therefor; that defendants conspired together for the purpose of falsely making such representations to plaintiff, with the intent to use the corporation as a scheme and device in the selling of stock to this plaintiff.