Browne v. San Gabriel River Rock Co.

JAMES, J.

In this action respondent secured a judgment enforcing rescission of a contract for the sale of corporate stock. The cause of action was based upon the alleged fraudulent representation made by the agent of the corporation that the stock was “nonassessable.” The appeal is from the judgment and from an order denying defendant a new trial.

The trial court found that the representation had been made as alleged, and if there was any evidence presented which would sustain that finding, it must here be assumed to be correct, for in such a condition this court has not the duty nor privilege of weighing the proof. The sale of defendant’s stock was made through the vice-president of the corporation. The only substantial evidence of any representation as to the nonassessable quality of the stock was furnished by the testimony pf respondent. He testified that a man named Peck, who appears to have been respondent’s agent in negotiating for the purchase of the stock, told Mm that the shares were nonassessable. If the proof had stopped theré it would not have been sufficient to establish the charge that the alleged

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false representation had been made by any one acting for the corporation. But plaintiff testified that the vice-president of defendant also said that the stock was nonassessable. This was denied by the official mentioned, and it was upon this conflicting state of the evidence that the court made the finding which resolved the facts against defendant.

The main and controlling question presented for consideration is whether the representation that corporate stock is non-assessable is an expression of opinion as to the law regulating the matter of assessment, upon which no action can be predicated, or is a representation of fact. The determination of this question requires an examination of the statutes of this state, under the laws of which defendant holds its corporate existence. Preliminarily it may be declared that where the law in mandatory terms imposes the duty upon officers of a corporation to levy assessments in any contingency, so that an assessment charge may not be avoided through either the acts of the directors or by agreement with the person subscribing for stock, then and in that case there can be no misrepresentation which will furnish ground for rescission. Our Civil Code, however, in section 331, provides: