Krohn v. Lambeth (1896) · DecisionDepot

Krohn v. Lambeth

Name: California Superior Court Tentative Rulings
Creator: DecisionDepot
License: https://creativecommons.org/licenses/by-nc/4.0/

California Supreme Court Sep 18, 1896 No. S. F. No. 25Published

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Holding. The court held that the defendant was not an undisclosed principal in the purchase of the mine, as the evidence established that the agent acted as a principal in his own right and the defendant merely provided financing for the venture.

Issues

Whether the evidence was sufficient to support the verdict that the defendant was an undisclosed principal in the purchase of the mine.

Disposition. reversed and remanded

Quotations verified verbatim against the opinion

“Bailey is still the principal in the transaction with plaintiff. It devolved upon Bailey to purchase the property, not for Lambeth, but as a part of his agreement to secure the mine, organize the corporation, and convey to it the property.”

Synopsis

Appeal from a judgment of the Superior Court of the City and County of San Francisco and from an order denying a new trial. John Hunt, Judge.

The facts are stated in the opinion of the court.

The Court. This action was brought by the plaintiff to recover. from the defendant the sum of $800, the balance of the purchase price of certain mines, said sum being the amoúnt of a promissory note executed to the plaintiff by one J. Murray Bailey, in his own name, it being alleged by plaintiff that in making said purchase and executing said note, Bailey in fact acted as agent for the defendant, though plaintiff then and for a long time thereafter supposed and believed that he was acting in his own behalf. The jury returned a verdict for the plaintiff, upon which judgment was entered, and this appeal is from the judgment, and from an order denying defendant’s motion for a new trial.

The only point made by appellant for reversal is that the verdict is not sustained by the evidence.

Plaintiff was the owner of certain mines, and had given a bond to Holcombe & Beale to sell and convey said mines to them at a price therein named for the purpose of enabling them to sell the property. Bailey was a broker engaged in buying and selling mines, and Holcombe & Beale called his attention to the property, and exhibited to him specimens of the ore, which he had tested and found valuable. Lambeth, the defendant, was a mining man of considerable means, and Bailey, who was without means and unable to purchase on his own account, called the attention of Lambeth to the property and showed him the samples of the ore. Bailey testified that he proposed to Lambeth that when the property was secured he would form a corporation and would give Lambeth the control, “ if he would put up the money and purchase the mine, provided he approved of it when he examined it”; that Lambeth said he would let him know, and the next day informed him that he was “ ready to go in that mine.” The understanding in relation to the interest each was to have in the stock of the corporation was that Lambeth should have 110,000 shares out of the 200,000 which was to represent the capital of the corporation, and Bailey was to have 90,000, out of which he was to provide [304]for Holcombe & Beale, who held a bond on the mines. On June 11, 1891, Lambeth, Holcombe, "and Bailey visited the mines, and spent two days in, examining them, and Lambeth said (as Bailey testified): “Bailey, I will put up $12,000 for this property; that is all the money I have loose, and I will put up no more. I will give $5,000 for the title, and the remaining $7,000 shall go to repairing the mill, and for the development of the property.”

The price named in-the bond held by Holcombe & Beale was $22,500, and Bailey agreed to give them 40,-000 shares out of his 90,000, they to permit the purchase to be made direct from the owner.

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The verdict was returned and the judgment entered upon the theory that the evidence showed that Lambeth [306]was an undisclosed principal in the purchase of the mine, acting through his agent Bailey. We are of the opinion that no such interpretation can reasonably be put upon the evidence. Lambeth was not the purchaser of the property. Lambeth was not to receive from Bailey a deed to the property, or to any part thereof. Bailey was a “promoter,” desirous of securing the ownership and control of the mine. He was without financial means to do so himself. He interested Lambeth in the proposition, and agreed with Lambeth that if he, Lambeth, would.advance to him, Bailey, money wherewith Bailey might purchase the mine, Bailey in turn would organize a corporation, convey certain shares of stock to others for their interest in the property, would, retain a certain amoxmt for himself, and would make over to Lambeth 110,000 shares. The money which' Lambeth advanced, or in effect lent, to Bailey, was not even to be repaid in the form of stock. He was, under his agreement, still entitled to a return of every dollar of it out of a designated fund, the profits of the mine. If Lambeth had said to Bailey that he would advance him $12,000 for the indicated purposes, without taking any interest in the corporation, and that Bailey was to repay this money out of the profits of the mine, it would not be contended for an instant that Lambeth was any more an undisclosed principal than would have been any other person from whom Bailey might have secured the desired loan. Exit the circumstance that Lambeth is to receive shares of stock in the corporation to be formed does not alter his position under the agreement. Bailey is still the principal in the transaction with plaintiff. It devolved upon Bailey to purchase the property, not for Lambeth, but as a part of his agreement to secure the mine, organize the corporation, and convey to it the property. Lambeth’s promises of money enabled him to do what otherwise he would have been unable to accomplish. For Lambeth’s failure to make good those promises Bailey might have had his cause of action ■against Lambeth, but as between plaintiff and Lambeth [307]there was no privity. Bailey was not alone acting as principal, but in fact was the principal.

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