Corbett v. Benioff

SPENCE, J.

Plaintiffs brought this action to recover a money judgment against defendants. Defendants answered and filed a cross-complaint seeking to recover a money judgment against plaintiffs. The cause was tried by the court sitting without a jury, and from a judgment in favor of defendants and cross-complainants the plaintiffs and cross-defendants appeal.

The pleadings are lengthy and reveal that both sides claimed a right of recovery arising out of the somewhat complicated dealings between the parties. From the pleadings and evidence it appears that both plaintiffs and defendants were independently speculating in stocks and owed certain obligations in connection with their operations. They entered into an agreement whereby certain stocks of defendants were turned over to plaintiffs, who in turn executed a declaration of trust in favor of defendants.

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Plaintiffs thereby agreed that they held said stocks in trust for defendants; that said stocks would be placed “with the Humboldt Bank under its trust investment savings plan”; that all profits thereon would belong to defendants; and that plaintiffs would execute all orders of defendants with respect to the sale or exchange of said stocks. It was further provided by the terms of said declaration of trust that plaintiffs could at their option place certain specified stocks of their own in said trust investment savings plan and that the provisions relating to defendants’ rights to profits, and so forth, should not apply to plaintiffs’ stocks. Under the trust investment savings plan, entered into with the Humboldt Bank in the name of plaintiffs alone pursuant to the agreement between plaintiffs and defendants, plaintiffs borrowed the sum of $20,000 from the bank, which loan was secured by said stocks. This money was apparently used to pay off the prior obligations of defendants on said stocks and, as part of the general agreement between the parties, defendants loaned certain money to plaintiffs to pay off the prior obligations on plaintiffs’ stocks. Subsequently some of defendants’ stocks so held under the trust investment savings plan were sold upon defendants’ orders as agreed, but the controversy here arose out of the alleged unauthorized sale of fifty shares of Los Angeles First National Bank stock belonging to defendants and included in the trust. On November 14, 1928, this stock was sold and a block of General Motors stock was purchased by the bank, all upon instructions from plaintiffs. The main issue on the trial of the cause was whether this sale and purchase was authorized by defendants. The trial court found against plaintiffs on this issue and there is ample evidence to support this finding. Defendants denied any such authorization and testified that these unauthorized transactions were concealed from them for almost a year despite the fact that they had frequently demanded a statement of their affairs. They further testified to facts showing that plaintiffs had led them to believe that said bank stock was still included in the trust after the sale thereof and that plaintiffs had endeavored to purchase defendants’ entire interest in the trust prior to the time that defendants learned of said unauthorized sale.