Gray v. Ellis

California Supreme Court Jan 11, 1913 No. L.A. No. 2969.Published

Before: THE COURT.

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Holding. A corporation is liable for the return of funds received by its agents through an unauthorized diversion of a subscriber's payment, as the corporation cannot profit from its agents' unauthorized acts and holds such funds under an implied promise to repay.

Issues

Whether a corporation is liable for the return of money diverted by its agents to the corporation in violation of the subscriber's specific instructions.
Whether a party may challenge jury instructions on appeal that were given at their own request during the trial.

Disposition. affirmed

Quotations verified verbatim against the opinion

“It cannot profit by reason of the unauthorized act of its own agents in the matter of obtaining subscriptions for its stock, and must be held to hold plaintiff’s money without right and under an implied promise to repay the same.”

“Plaintiff had a perfect right to insist that his subscription, if he made one, should be for the stock of one corporation rather than the other”

“Defendants are not at liberty to complain here of action by the trial court which was entirely in accord with their own requests.”

Synopsis

Corporations—Subscription to Stock in Particular Corporation—• Application to Stock in Different Company—Liability to Refund.—Where an agent authorized to obtain subscriptions to the capital stock of two different corporations, diverts money specifically paid him for a subscription to the original stock of one of such corporations, and attempts to apply it for a subscription to the stock of the other, and the money is so received and applied by the other, both the agent and the corporation obtaining the money, although it may have had no knowledge of the terms on which the agent received it, are liable to refund it to the payer, as for money had and received to his use, if it was impossible to apply the money on. account of a subscription for .the stock of the intended corporation, due to the fact that all of the stock of that company had Been subscribed for prior to the date of the payer’s subscription.

Id.—Corporations of Same Character and Having Property of Same Value.—It is immaterial to the right to recover such money that there was no difference in the value of the stock of the two companies, and that the property of one corporation was the same in character and value as that of the other.

Id.—Instructions Requested by Appellant.—The appellants cannot complain of instructions to the jury, which left them to determine whether under the subscription agreement the payers of the money had the right to elect which stock his money was to be applied on, if they joined in requesting instructions to that effect.

Ib.—Original Subscription to Stock—Acceptance of Stock Already Issued.—One who has contracted to take stock in a company as an original subscriber thereto, cannot be compelled to accept from others, in satisfaction of his rights under such contract, any stock that had been subscribed for by, and issued to, other persons, and that was then owned by other persons.

THE COURT.

This is an appeal from a judgment in favor of plaintiff, and from an order denying defendant’s motion for a new trial. The case was tried with a jury, which rendered a verdict in favor of plaintiff for the full amount claimed.

[483]

The action is one to recover $2,250 paid by plaintiff to Ellis & Church on account of a subscription for the purchase of certain corporate stock, which money, it is substantially alleged, was diverted by Ellis & Church to payment on account of a subscription for stock in another and a different corporation from the one for whose stock he had subscribed, viz., the defendant Northern Investment Company, which diversion he promptly repudiated. The memorandum of agreement for such purchase executed by plaintiff is set forth in the complaint, the same being as follows:

“We, the undersigned, hereby severally agree to pay to Ellis & Church, agents, the sums set after our names respectively, on the following terms and conditions:

“Fifteen per cent (15%) in cash, and the balance as called for, being payments on account of purchase of stock of the Northern or Western Trust Companies, said Northern or Western Trust Companies’ stock representing bonds and stock of the Home Telephone Company of San Francisco:

Names. Amounts to be paid. S. W. Clark......... .............$ 3,000 C. C. Ames......... ............. 15,000 F. C. Hornby....... ............. 35,000 H. H. Barstin...... .............10,000 Harry Gray........ ............. 15,000 By H. D. L. John T. Bill ...... ............ 5,000”

Treating this contract as giving the plaintiff the right to elect or direct to which of the two' corporations referred to his subscription should be made (the “Northern” or “Northern Trust Company” referred to therein being the defendant Northern Investment Company), it was alleged in the complaint that at the time of the payment of the money, plaintiff elected and directed that the same should be applied upon the purchase of stock in the Western Trust Company, and that said election and choice was agreed to and acquiesced in by said Ellis & Church, they so acknowledging in their receipt given for such money. It is further substantially alleged that Ellis & Church paid said money to the Northern Investment Company, on account of a subscription by plaintiff for stock of the last-named company, said company receiving the same and sending plaintiff a certificate for one hundred and fifty

Gray v. Ellis

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Synopsis

THE COURT.

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