Adlman v. McDonald

ROTH, J., pro tem. Plaintiff was president of the Coast Braid Manufacturing Co., Ltd., a corporation (hereinafter [276]called “corporation”), which corporation had on January 19, 1931, made its promissory note in the sum of $5,000 to defendant as payee, in return for that amount of money loaned to the corporation by defendant through the persuasion of one G. P. McGregor. Before delivery of said note to defendant, it was indorsed by plaintiff and his wife and G. P. Mc-Gregor. The note was due May 19, 1931. On April 7, 1931, prior to the maturity of the note, defendant indorsed it in blank over the signatures of the prior indorsers, and caused it to be delivered to plaintiff in return for that amount of the par value of the stock of the corporation owned by plaintiff. The indorsement and the delivery of the note from defendant to plaintiff was an incident and consequence of the following transaction:

On April 7, 1931, defendant acting through one Briggs, a realtor, had pending and was about to escrow a real estate transaction with a Mrs. Halloran. McGregor, a friend and adviser of defendant, was associated with Briggs, and, as already suggested, had previously persuaded defendant to become interested in the affairs of the corporation, of which he was secretary, stock salesman and financial agent. On the date in question, defendant was in Los Angeles, but was planning to return forthwith to Tacoma, where she had her permanent residence. In the real estate transaction mentioned, it developed through the manipulations of McGregor that defendant could use $5,000 of the corporation’s stock for that amount of value. She had no stock and the corporation had no permit to sell any stock in addition to that already issued. McGregor suggested to plaintiff, as a part of a plan to stabilize the corporation’s finances, of which more will be said later, that plaintiff sell to defendant $5,000 worth of his stock in the corporation in exchange for the promissory note made by the corporation to defendant. This plaintiff agreed to do. Plaintiff contends that this agreement was predicated upon the condition that the defendant indorse the note in blank and that as a part of the same agreement the prior indorsements of plaintiff, his wife and McGregor were to be eliminated. The note was indorsed in blank by defendant, and when introduced in evidence, the prior indorsements were shown to have been crossed out. Defendant and Mc-Gregor testified that these indorsements were on the note at the time defendant signed. There was some dispute as to [277]