Wood v. Powers

STEPHENS (Jess E.), J. pro tem. This is an action to recover money paid as the purchase price for corporate stock. Defendant Averill alone answered and he will be hereinafter referred to as defendant.

The complaint was, in form, for money had and received, and upon the trial before the court without a jury it appeared that plaintiff’s assignor in December, 1934, purchased certain stock of the Monarch Gold Mining Company, a corporation organized under the laws of the State of Nevada. Plaintiff’s assignor, Miss Beale, was a secretary in the office of one of her present counsel, who at that time represented defendant (but not the corporation) herein. Defendant was a stockholder in the above named corporation and frequently discussed with Miss Beale and the attorney the prospects of the mine belonging to the corporation and located in California. Both became interested in it and visited the mine, and eventually purchased stock in the corporation. Defendant, although active in taking numerous persons to see the mine and extolling its possibilities, was not an officer or agent of [583]the corporation, or, so far as appears, connected with it in any manner other than as a stockholder.

Called as a witness by plaintiff under section 2055 of the Code of Civil Procedure, defendant testified that perhaps 40 people purchased stock as a result of his taking them to see. the mine; that none of this stock was his own; that he was interested only as a stockholder in the success of the mine. In answer to the question, “Did you sell him [meaning a specific purchaser] any shares of the Nevada Monarch stock?” defendant replied: “I sold him some shares that belonged to Mr. P. W. Powers.” Similar reply was given to at least one other such question. Upon cross-examination defendant was asked by his own counsel: “This stock that you testified on examination by Mr. Lincoln was sold to them, was that stock that was owned by Mr. Powers?” and he answered, “Yes.” Objection to the question was afterward made by plaintiff’s counsel, but no motion to strike the answer was made and no direct ruling made upon the objection; although when later defendant’s counsel asked him, “Was that stock that had previously been issued to Mr. Powers?” objection was made by plaintiff’s counsel and sustained.

There was no other evidence presented as to the ownership of any of the stock that was sold through the activities of defendant, whether it was or was not privately owned by Mr. Powers. No evidence whatever was offered as to the ownership of the specific stock purchased by Miss Beale, plaintiff’s assignor, or whether if it was the privately owned stock of Mr. Powers he was a bona fide owner disposing of his own property for his own account or whether such sales were made directly or indirectly for the benefit of the issuer or an underwriter of such securities. No evidence was presented throwing any light upon the reason for the organization of the corporation in Nevada, and no evidence was offered indicating that this or any sale was made for the direct or indirect promotion of any scheme or enterprise with the intent of violating or evading any provision of the Corporate Securities Act.