Zeh v. Alameda Community Hotel Corp.

TUTTLE, J., pro tem.

This is an action brought to1 cancel a subscription for shares of capital stock and recover the amount paid for the same. A demurrer to the second amended complaint therein was sustained without leave to amend, and judgment rendered for defendant. This appeal is taken from the judgment so entered.

Prom the allegations of the. complaint it appears that plaintiff subscribed for thirty shares of preferred stock in defendant corporation, and paid the sum of $3,000 for the same. This sale was made through an agent of the defendant, and plaintiff seeks to set aside the transaction upon the following alleged false and fraudulent representations made by said agent in inducing plaintiff to make the purchase:

“A. That the preferred stock of said Alameda Community Hotel Corporation then and there, and to-wit, in the said City of Alameda, County of Alameda, and State of California, on the said 11th day of April, 1928, provided for the payment of and paid and would pay to the owners of the said preferred stock interest at the rate of seven per cent (7%) per annum; and

“B. That if the said plaintiff herein would invest three thousand dollars ($3,000.00) in the purchase of the said

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preferred stock the said Alameda Community Hotel Corporation would pay to the said plaintiff herein

interest

upon her such investment at the rate of seven per cent (7%) per annum. ’ ’

Do the foregoing allegations constitute actionable fraud ? The law applicable to this situation is well expressed in Black on Rescission and Cancellation, volume 2, at page 957, in the following language: “As a general rule, statements made to persons to induce them to subscribe for stock in a corporation, having relation to its future earnings, expected profits or dividends, or the successful conduct of its business, are merely matters of opinion, on which the subscribers have no right to rely, and though they prove to have been false when made, or even to have been made with no expectation of their ever being realized, still they furnish no ground for rescinding the contract of subscription.” This is the rule in California. (12 Cal Jur., p. 729.) It is based upon the fundamental principle that predictions as to future events are ordinarily regarded as nonactionable expressions of opinion. (26 Cal. Jur., p. 1087.) “No man stands condemned in the law because hope springs in his breast or because, out of the fullness of his heart his mouth speaketh in that regard. Therefore the law does not interdict prophesying the expression of sanguine business hopes and beliefs in events to come.”