Allan v. Southwest Finance Co.

SCOTT, J., pro tem. Plaintiff recovered judgment on a promissory note against defendant, from which the latter appeals.

The father of plaintiff, who was the payee of the note and who made the assignment for collection, was engaged in the insurance business as stockholder in a corporation known as Allan-MacMaster Company. He sold his common and preferred stock in said company to one Stearns, apparently acting at least in part for appellant corporation, for a consideration which was part cash, some shares of stock in appellant corporation and a promissory note for $5,000.. The latter was not paid, and upon suit being brought judgment was rendered in behalf of this plaintiff for that amount. It is appellant’s claim that the trial court’s findings adverse to various defenses and a cross-complaint were not warranted and should not be sustained.

Coincident with the sale of stock above described a contract was entered into between Allan senior (plaintiff’s assignor), Stearns and appellant, by which Allan represented and guaranteed that the liabilities of his insurance [525]company other than current items were all shown by the audit made about two months prior thereto. On such audit there did not appear an item of $150 fee for the auditor and a contingent liability arising out of a note for $7,500 signed by said insurance company and secured by a mortgage on some real property which had been sold by it subject to such mortgage. As to the auditor’s fee, the finding of the trial court that it was merely a current account is obviously correct. The court further found that the note for $7,500 was secured by a mortgage on real property worth at all times not less than $11,000 and “that it is not true that Southwest Finance Company of California, a corporation, T. L. Stearns or Allan-MacMaster Co., a corporation, have suffered any damage through said liabilities”, and that appellant “offered no evidence to prove or indicate that said Southwest Finance Company of California, a corporation, and/or Allan-MacMaster Co., a corporation, had suffered any damage by virtue of either of said obligations”. Appellant, had not directed our attention to any evidence which would effectively controvert such finding or justify any reduction of the judgment on that ground.

It is next urged that an offset for $10,000 should have been allowed. Allan had assumed liability for one-quarter of that amount on a note payable to said insurance company which had later come into the hands of appellant, but appellant in writing had agreed to repay to Allan any amount he might be required to pay out on account of said note. It could scarcely complain when the trial court held that since it was liable to reimburse him at once for any sum he might have to pay out toward meeting that note, it could not interpose such an obligation as an offset to the note which was the basis of plaintiff’s complaint in this case.