Opinion
On rehearing, July 30, 1920.
Appeal from Superior Court, Los Angeles County; Leslie R. Hewitt, Judge.
Action by George H. Beeman against J. C. Richardson and others. From judgment for plaintiff, defendants appeal. Reversed. COUNSEL
Oliver O. Clark and George M. Pierson, both of Los Angeles, for appellants.
Parker & Moote and Moote & Patterson, all of Los Angeles, for respondent.
OPINION
THOMAS, J.
This is an action brought to recover $5,500, and interest thereon, claimed to have been paid by plaintiff for 50 shares of stock in a corporation known as Richardson, Holmes & Lamb Company, and for general relief.
It is alleged that defendants were, and at all times herein mentioned have been, directors of the said corporation; that they "entered into a conspiracy to cheat and defraud plaintiff" out of said sum of money by knowingly making certain fraudulent representations which were relied upon by plaintiff, to wit, that said corporation "was a large, prosperous and rapidly growing concern, having assets in excess of $40,000 over and above all liabilities; that the business of said corporation was growing so rapidly that additional capital was necessary, and that if plaintiff would invest $5,000 or thereabouts, in the business of said corporation, the amount so invested would be used for the purpose of strengthening the business of said corporation and establishing branch offices and agencies thereof"; and, further, that if he, plaintiff, made such investment, the corporation would employ him as salesman at a salary of $100 per month. The complaint then sets forth that all said representations, so alleged to have been made, were false and untrue, etc.; that said corporation "was not a prosperous and rapidly growing concern, but that its affairs were in a shaky and precarious condition," and that it did not possess net assets of said value, but was, in fact, at the time such representations were made, and ever since has been, insolvent; that said shares of stock were of no value whatever, although represented to have been of the value of $110 per share; and that all such statements were known by said defendants to be false and untrue at the time they were so made. It is further alleged that the money paid by plaintiff, as aforesaid, was not used for the strengthening of the corporation, but that the greater portion thereof was withdrawn from the corporation by defendants and used for the purpose of paying their own personal debts; that no branch offices or agencies were established by said corporation after plaintiff made the investment in question; and that the position of salesman was not a permanent position, "but was offered merely as an inducement to plaintiff to purchase said stock." Following these allegations is an elaborate statement as to how the money so paid was disposed of by defendants, and their subsequent acts in carrying out the alleged nefarious deal. The answer denies all the material allegations of the complaint. Upon the issues thus presented the case was tried without a jury, at the conclusion of which the court found against the defendant Boqua in the sum of $700, and against each of the other three defendants in the sum of $5,500, with interest. Judgment was entered accordingly, from which this appeal is taken.
The record is voluminous. No brief, except appellants’ opening brief, has been filed. The ground upon which the appeal is taken is insufficiency of the evidence to support the findings.
It must be observed that plaintiff is not seeking in this action a rescission of the contract, but, rather, to recover the damage which he claims to have sustained by reason of the alleged false representations, having, by so doing, elected to affirm the contract. We have read the entire record, and it contains no evidence that any one, other than defendant Richardson, ever made any of the alleged representations to plaintiff. There is no evidence that any of the other defendants ever knew of the representations alleged to have been made by Richardson; nor is there anything, in our judgment, from which knowledge of the alleged representations by defendants, other than Richardson, may be inferred. Indeed, we might disregard all the testimony offered in behalf of defendants on this point and accept the testimony offered by plaintiff as wholly correct, and still our conclusion would have to be the same. The same statement is true as to the alleged conspiracy. Webster defines a conspiracy as follows:
"A combination of men for an evil purpose; * * * an agreement for the purpose of wrongfully prejudicing another; * * * a concurrence or general tendency, as of causes or circumstances, to one event."
Certainly no argument need be advanced to prove that the actions of one man, however reprehensible they may be, can bring him within the scope of this definition. "An actionable conspiracy exists only where there is an unwarrantable combination of two or more persons to do an unlawful thing." Menner v. Slater, 148 Cal. 284, 83 P. 35; Schwenn v. Schwenn, 166 Wis. 420, 166 N.W. 171, 2 A. L. R. 287, and cases there cited.
In the case at bar the evidence shows that defendant Richardson did represent to plaintiff that said corporation "was a large, prosperous, and rapidly growing concern, having assets in excess of $40,000 over and above all liabilities; that additional capital was necessary"; that if plaintiff would so invest that such investment would be used to strengthen the business of the corporation and to establish branch offices and agencies; and that the corporation would also employ plaintiff as salesman at a salary of $100 per month, which position was to be permanent. In support of the foregoing representations the evidence further shows: (1) That the corporation was a large concern, transacting a total business during 1913 amounting to $915,074.69; (2) that it was rapidly growing during all the years from its organization, in 1905, to and including 1913, its total business transactions during the first-mentioned year having been in the sum of $184,417.44; (3) and that, by the statements received in evidence, as well as the testimony of the defendant Richardson, it was prosperous. All the foregoing representations were, in legal contemplation, but expressions of opinions. There is no evidence in this case, however, showing that such opinions were not honestly held by Richardson, or that he was not justified by the information which he had in making them. Nor is there evidence to show that they were deliberately made for the purpose of deceiving plaintiff. These are essential, if Richardson is to be held liable. Civ. Code, § 1572; Estate of Johnson, 134 Cal. 662, 66 P. 847; Winkler v. Jerrue, 20 Cal.App. 555, 129 P. 804.
As to the representations that the corporation had assets in excess of $40,000 over and above all liabilities, the record shows, by the statements offered and received in evidence--in view of the fact that there is no impeachment or contradiction of such showing--the same to be true. This may also be said as to the representation "that additional capital was necessary." As to the representation that "if plaintiff would invest $5,000, or thereabouts," the money would be used for the purpose of strengthening the business of the corporation and for the establishment of branch offices and agencies thereof, we are confronted at the outset with two propositions: (1) That at most it was a promise made to do something in the future; and (2) the record fails to disclose that plaintiff was damaged in any sum, or at all, by defendants’ failure to comply therewith. "As a general rule, false representations upon which fraud may be predicated must be of existing facts, or facts which previously existed, and cannot consist of mere promises or conjectures as to future acts or events, although such promises may be subsequently broken." 20 Cyc. 20; Ayers v. Sou. P. Ry. Co., 173 Cal. 74, 159 P. 144, L. R. A. 1917F, 949. It is not alleged, nor is there any evidence in this record indicating, that such promise was made without any intention of performing it. In such case "the making of a promise does not constitute fraud. * * *" Civ. Code, § 1572, subd. 4; Ayers v. Sou. P. Ry. Co., supra. "The mere failure to perform the covenant does not relate back to and render the same fraudulent." Lawrence v. Gayetty, 78 Cal. 126, 20 P. 382, 12 Am. St. Rep. 29.
As to the second proposition presented above, we think it must now be apparent that no such action can find support here. "Fraud without damage calls for no redress from any court. However in morals such conduct may be censurable, it is not regarded by the law as of sufficient consequence to put in operation the machinery of courts." Reay v. Butler, 69 Cal. 572, 11 P. 463; London, etc., Co. v. Liebes, 105 Cal. 203, 38 P. 691; Stouffer v. Eymann, 183 P. 210.
As to the representation that the corporation would employ plaintiff permanently, little time or space, we think, need be devoted to the consideration thereof. The fact is that the evidence shows, without conflict, that plaintiff was employed, and that he continued in the employment of the corporation, until the latter died. Such was a permanent employment, so far as it was legally and physically possible. It certainly cannot successfully be maintained that an agreement to employ one "permanently" is intended to extend the time beyond the grave.
In this case a series of unfortunate circumstances, apparently such as could not, with ordinary prudence and foresight, be guarded against--unusual market conditions, etc.--affected in a very material way the business of the corporation involved, resulting very disastrously for all the defendants, each of whom lost everything invested therein. The defendants, Richardson and Lamb, it appears, had each invested $25,000, the defendant Holmes had in the venture $26,400, while the investment of the defendant Boqua therein amounted to $30,000. Under these circumstances, and in view of the state of the record before us, we think that the rule and guide repeatedly prescribed for trial courts in this state in actions such as this must govern here:
"If there be two inferences equally reasonable and equally susceptible of being drawn from the proved facts, the one favoring fair dealing and the other favoring corrupt practice, it is the express duty of court or jury to draw the inference favorable to fair dealing." Ryder v. Bamberger, 172 Cal. 791, 158 P. 753.
We are not unmindful of the fact that there was conflict in some of the evidence, and that the finding of the trial court in such case cannot be legally interfered with by this court. Still, in the instant case, on all the material issues, as we have seen--if we disregard all the evidence offered by and on behalf of defendants and rely wholly on the evidence offered by and on behalf of plaintiff, as interpreted and applied under the laws of this state-- we think the trial court should have found in favor of defendants, for the reason that the record contains no legal evidence which supports a judgment against them, or any of them. This disposes of all the points raised by appellants.
As we have seen, the judgment entered against the defendant Boqua is for $700, the amount which he is supposed to have received from the proceeds of the $5,500 paid in by plaintiff; while a judgment for the full amount of $5,500 is entered against each of the other three defendants, notwithstanding the fact that each of them received only what the shares of stock sold by him at $110 each would amount to, and notwithstanding the further fact that a portion of plaintiff’s alleged "investment" was actually turned into the corporation for "corporation" stock. We fail to understand the reason for what appears to us a discrimination by the plaintiff between the defendant Boqua and the remaining defendants.
If it be contended that the evidence shows that these defendants represented to plaintiff that they were selling him treasury stock, or that the money paid by him for the stock would go into the treasury of the corporation, or into its business, the answer to this is that the complaint contains no allegation which would permit the legal reception of any such testimony. We, of course, do not so hold, but it has occurred to us, after a careful reading of the whole record here, that in any event the sales of stock made by these defendants were individual sales, and, there being no conspiracy to defraud, the liability, if any there be, would be only individually to the amount received for the individual shares. However, these points are not raised by appellants, and we cite them simply as further reasons for the conclusion we have reached.
We do not think the evidence supports the findings.
Judgment reversed.
We concur: FINLAYSON, P. J.; SLOANE, J.
On Rehearing.
PER CURIAM.
This case was before us on our term calendar for January last, at which time, by stipulation entered into between the parties hereto--there being no briefs on file, with the exception of appellants’ opening brief--respondent was given 20 days to file his answering brief, and appellant 10 days thereafter, if so advised, within which to reply to respondent, the cause then to stand submitted. The time so given expired, without any briefs being filed, and in due time, by proper order, the cause was submitted, the case considered, and opinion filed as the court’s judgment therein. Such decision was rendered on March 18th last, and may be found above (189 P. 790). On March 24th, by stipulation of the parties, the decision so entered was, by order of this court, set aside, and respondent again given 30 days to prepare, serve, and file his brief, and again on April 21st that stipulation was renewed for 30 days "after April 23d." Respondent finally, and on May 19th last, filed his brief herein, the cause was set for hearing at the July term of this court, and upon the calling thereof was submitted without argument.
We have considered respondent’s said brief fully, and find nothing therein which causes us to view the case from any different angle than that taken by us when the opinion above referred to was handed down. We therefore readopt the opinion previously filed herein, and for the reasons there stated the judgment is reversed.