Conrad v. Hauser

THOMAS, J.

On December 31, 1915, at Los Angeles, California, this defendant, together with two others—Charles W. Fox and F. H. Evans—made, executed, and delivered a certain promissory note by the terms of which each promised to pay to the Halberg-Mier Automatic Press Company, or order, the sum of $18,000, the note being set out

in limo verba

in the complaint. On the same day this note was transferred, by the payee therein named, to the Commercial National Bank of Los Angeles. Prior to the actual transfer, however, the bank refused to discount or to accept the note unless the same was indorsed by some person or persons in whose financial ability it had confidence. Plaintiff, having previously been requested by the makers of the note to act in the capacity of indorser, and admittedly fulfilling the requirements above referred to, signed his name on the back thereof, thereby guaranteeing payment of the same. Upon maturity of the paper, defendant refused to pay it, or any portion thereof, although the other two makers, Fox and Evans, paid their proportionate share, i. e., each the sum of $6,000. Thereupon the bank called upon plaintiff to make good on his indorsement to the extent of the amount remaining unpaid on the note, and, rather than stand a suit thereon, the latter paid the sum of $6,000 to the holder thereof. The action is brought, not upon the note, but to recover of Hauser the amount so paid by plaintiff in the former’s behalf.

The board of directors of the Halberg-Mier Automatic Press Company was composed of the following named per

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sons: J. T. Merrill, Julius Conrad (plaintiff), H. S. Ryerson, Charles W. Fox, and F. H. Evans, the first three of whom were also the president, vice-president, and secretary-treasurer, respectively, of that company. By his answer, defendant admits the execution of the note, but attempts to avoid payment of the sum so paid in his behalf by plaintiff on the ground that the two officers first above named, as such officials, directors, and agents of said company, procured defendant’s signature thereto, together with the signatures of Pox and Evans, by means of the following false and fraudulent representations, to wit: That there were 550,005 shares of the capital stock of said company issued and outstanding, and that there were still 449,995 shares of the same stock undisposed of; that said company was “free from debt and that it had no liabilities whatever”; that said company owned and controlled the patent of a certain printing-press known as the Halbert-Mier Automatic Press; that the company was in need of money and that it would require a large amount for the purpose of purchasing machinery and equipping a plant for the purpose of manufacturing and selling such printing-press; that it was the intention of said company to sell a portion of the treasury stock, using the money so obtained in placing its product on the market; that if this defendant, together with Pox and Evans, would purchase 30,000 shares of such treasury stock at a price of sixty cents per share, executing their note in payment therefor, they, the officers mentioned, had arranged with the Commercial National Bank of Los Angeles to discount the note for said company, and that the latter would deposit the money so received with said bank to its credit, such sum to be used in purchasing and installing machinery in a plant to be operated for the purpose of manufacturing and marketing the printing-press, the patent to which was controlled by it; and that in the event the money was so secured, the 'machinery necessary to fully equip the plant would be purchased and installed within ninety days, whereupon the company would commence operations. The answer further avers that defendant relied upon these representations, and, believing them to be .true, was induced to and did, together with Pox and Evans, purchase said shares of stock, and execute the note in question in payment therefor, whereupon the note was by the bank dis