Citizens' Savings Bank of San Diego v. MacK

LENNON, J.

The plaintiff by this action sought to restrain by injunction the defendant Bentley Ostrich Farm from canceling certain certificates of its corporate capital stock standing on its books in the name of the defendant Henry Eummelen, and to prohibit the corporation defendant from issuing to the defendant Mack other certificates in lieu thereof evidencing in the aggregate 280 shares of the corporate stock, and also to restrain the defendant Mack from receiving under claim of ownership or otherwise all or any portion of the said stock. The appeal, presented on the judgment-roll alone, is only from that particular portion of the judgment which in effect decreed that the plaintiff held the certificates of stock in controversy as a pledge to secure the payment of only twelve thousand dollars, instead of twenty-four thousand dollars, and provided that before a sale of 280 shares of said stock could be resorted to in satisfaction of the loan, which the trial court found were owned by the defendant Mack, the plaintiff must first foreclose the real property mortgage executed to plaintiff by defendant Eummelen simultaneously with the pledge of the stock as additional security for the loan of twenty-four thousand dollars, which was ultimately made by the plaintiff to the defendant Eummelen. In this behalf the portion of the judgment appealed from directed that the proceeds of the sale of the mortgaged property be applied first to the satisfaction óf a second loan of twelve thousand dollars, and that then the plaintiff might have recourse to a sale of said stock in satisfaction of the unpaid balance, if any, of the twelve thousand dollars originally loaned to the defendant Eummelen, and secured by a pledge of the stock and a first mortgage on real property as well.

The facts of the case, as evidenced by the pleadings, proof and findings, are these: In November, 1911, W. H. Bentley was the owner and holder of 840 shares of the issued capital stock of the Bentley Ostrich Farm. In that month, the defendant Henry Eummelen represented to A. F. Mack, defendant and respondent herein, that a controlling interest in

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said Ostrich Farm could be had for fifty thousand dollars. Thereupon an agreement was entered into by and between Mack and Eummelen whereby they were to jointly purchase the said 840 shares, each to advance one-half of the purchase price, and each in return to receive 420 shares of said stock Eummelen alone conducted the negotiations with Bentley, acting all the while for himself, and as agent of Mack. During the course of the negotiations, Eummelen informed Mack that he was unable to contribute twenty-five thousand dollars in cash as payment for his portion of the purchase price, and represented to Mack that Bentley was willing to take from Eummelen, in lieu of cash, his promissory note extending over a period of two years if Mack would pay fifteen thousand dollars in cash and give his promissory note for ten thousand dollars, and that if Mack would do this Bentley would convey to Mack in addition to the said 420 shares of stock certain real property situate in the city of San Diego, which was mortgaged for one thousand five hundred dollars and valued at three thousand dollars. Mack was willing and accordingly paid Bentley the sum of fifteen thousand dollars in cash and delivered his promissory note to Bentley in the sum of ten thousand dollars. Bentley in turn executed to Mack a deed to said real property. The representations made in the first instance by Eummelen to Mack that the purchase price of the stock was fifty thousand dollars were false, and willfully and knowingly made by Eummelen, who at all times knew that the price of the stock was but thirty thousand dollars, and in fact had, during the negotiations for the sale of the stock, agreed with Bentley, without Mack’s knowledge, that the purchase price thereof was to be but thirty thousand dollars. A sale of the stock was consummated by Eummelen and Bentley at that price, ibut as a payment in full for his 420 shares he gave Bentley only a promissory note for five thousand dollars. In March, 1912, Mack discovered the fraud that had been thus perpetrated upon him, and on August 12, 1912, instituted an action, which sought' and secured a judgment, entered on August 4, 1913, decreeing that he was the owner of such portion of the 840 shares of stock purchased as the sum that he had personally paid toward the purchase price of the stock bore to the amount actually paid therefor, namely, seven hundred shares, and that the defendant Eummelen held 28C