Mitchell v. J. H. Roth & Co.

DOOLING, J.,

pro

tem.

The plaintiff in this action and her assignor, Mrs. Riley, who is plaintiff’s sister, were each induced to purchase shares of the capital stock of Transcontinental Petroleum Corporation by certain representations of defendant Lowery, which representations the trial court found were false and fraudulent. Pursuant to her agreement with Lowery, plaintiff delivered to Lowery sixty-seven shares of the capital stock of Shell Union Oil Company, which Lowery represented to her would be hypothecated with a bank as security for a loan to cover one-half the purchase price of the Transcontinental Petroleum Corporation stock which she was buying, with the assurance that the Shell Union stock would remain the property of plaintiff and in no event would be sold. In like manner Mrs. Riley paid to Lowery $750 which was received as payment of one-half the purchase price of the stock which Mrs. Riley agreed to buy. Among the false representations made by Lowery was a representation that the stock had a present value of $25 per share, and that on April 1, 1929, it would be placed on the stock market at $35, and that he could dispose of the stock purchased by plaintiff and her assignor for them at that time for $35 per share, thus netting them each a profit of $10 per share on the transaction. On June 18, 1929, plaintiff and' her assignor having learned in the meantime that the stock which they had thus agreed to purchase was practically worthless, served notice of rescission on the defendants, and this action followed. The court found that throughout the transactions defendant Lowery was acting as agent for defendants J. H. Roth and J. PI. Roth & Company and gave judgment against all three for $1905, the value of the Shell Union stock which had in the meantime been sold, and $750, the amount paid by Mrs. Riley.

[98]

From this judgment defendants Roth and J. H. Roth & Company prosecute this appeal. Appellants make three points on appeal: 1. That the contracts for the purchase of the Transcontinental stock were illegal because in violation of section 26, article IV, of the California Constitution; 2. That plaintiff and her assignor did not rescind promptly as required by section 1691 of the Civil Code; 3. That the finding that defendant Lowery was the agent of J. H. Roth finds no support in the evidence.