Morris v. Whittier Amusement Co.

WOOD, J. Plaintiffs and the individual defendants, other than defendants Berry, Siler and Gwin, who will hereinafter be referred to as the “associates”, became associated together for the purpose of purchasing a theater building in the city of Whittier owned by defendants Berry. Defendants Siler and Gwin were the owners of the equipment of the theater. The associates designated one of their number, defendant Harris, to negotiate with Mr. and Mrs. Berry, the owners of the building, for the purchase of the property, it being understood that Harris was not to receive any profit for his services in the matter. Harris informed the other associates that the property could be bought for the sum of $75,000 subject to a mortgage of $60,000 and it was agreed that the property should be purchased by the associates from Mr. and 'Mrs. Berry at this price. An agreement was made between the associates and Siler and Gwin whereby it was agreed that [377]a corporation would be formed in which defendants Siler and Gwin would have an interest in the sum of $45,000, the price agreed upon as the value of the equipment owned by them. Thereafter a corporation was formed, Whittier Amusement Company, and the stock was issued to the associates in proportion to the amount each had subscribed for the purchase of the building. Stock was also issued to Siler and Gwin in proportion to the value of the equipment of the theater.

In order to carry out the transaction Mr. and Mrs. Berry transferred title to the real estate to Siler and Gwin as trustees and they in turn transferred the title to the building and equipment to the corporation. After the respective shares in the corporation had been issued to the various parties concerned it was discovered that defendant Harris had received a secret profit in his negotiations with Mr. and Mrs. Berry for the purchase of the building; that a dummy promissory note in the sum of $10,000 had been delivered to Harris by Mr. and Mrs. Berry and that this note had been turned in as cash at its face value; that in truth the total purchase price of the building was only $125,000, represented by $65,000 cash and the mortgage of $60,000. Thereupon the corporation demanded of Harris that his stock be surrendered, Harris delivered the stock to the corporation, and it is now held by the corporation.

Plaintiffs contend that the corporation is not the owner of the Harris stock and that it belongs to the associates in proportion to the amount of cash paid by each of them for the building. This contention was upheld by the trial court and judgment was entered accordingly. From the judgment an appeal is taken by the defendant corporation, defendants Siler and Gwin, and by the various associates of the plaintiff, who were made party defendants.