Johnson v. Boadway Bros.

STEPHENS, J.,

pro

tem.

This is an action wherein the plaintiff asks a judgment in rescission of a certain stock subscription payment contract and for the return of $5,000 paid thereon. Judgment went for plaintiff as prayed and defendant appeals upon a bill of exceptions and upon the judgment-roll.

There is little conflict between the parties in the evidence. Defendant was a corporation engaged in the department store business in Pasadena. In the summer of 1922 it sold its own preferred stock for the announced purpose of securing a lease on designated property in Hollywood, a district within the corporate limits of Los Angeles, and to procure the erection and equipment of a suitable building upon the leased ground for the establishment therein of a department

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store. Such, a lease was executed August 7, 1922. Prior to the actual execution of the lease a stock-selling campaign was conducted in Hollywood, with Mr. O. K Boadway, vice-president of the defendant corporation, in active charge, and a number of business men of Hollywood, one of them Mr. B. T. Taft, being very active. The plan was publicly and directly to plaintiff announced, that the enterprise would enhance the value of property in the vicinity of the store. Plaintiff owned property on Hollywood Boulevard near by, and believing this new business would increase the value of his holding he subscribed in the sum of $5,000. This sum was put in escrow, and later, after the escrow had been declared off, he was requested to release the money, but he would not do it until after being shown an instrument dated August 31, 1922, wherein it was recited, under “whereas” clauses, that $50,000 provided for by the contemplated lease had not been deposited in escrow; that pending same the lease had been withheld by lessor; that a bond had been executed to lessor in lieu of deposit; that therefore the lease would be retained by the lessor to be delivered and become effective when

bona fide

subscriptions equal to $200,000 at par had been received and had been approved by the lessor, the lessor retaining the option to deliver the lease at any time under any condition of subscription; that if within 30 days thereafter such.subscriptions had not been obtained and paid for in cash lessor reserved the right to terminate the agreement and lease. The instrument also contained the following: “. . . said corporation undertakes and agrees to give all of said ‘Hollywood subscribers’ . . . the right and option to rescind the subscription of each subscriber within 30 days after the termination of this agreement and the cancellation of said lease, and to receive back upon such conditions everything of value paid or turned over to said corporation, together with all evidences of indebtedness given to said corporation.” Thereafter on the fourteenth day of February, 1923, plaintiff served his notice of rescission and on February 20th brought this action. There is evidence to the effect that Boadway told plaintiff that the business would be established by Christmas, 1922; that Taft represented to plaintiff that Mr. Greenwood, a local banker, had agreed to take $1,000 of the stock. There were also other representations as