Opinion
Rehearing Denied Dec. 26, 1928.
Hearing Granted by Supreme Court Jan. 24, 1929.
Appeal from Superior Court, Kern County; Erwin W. Owen, Judge.
Action by Imperial Life Stock & Mortgage Company against William Tracy. Judgment for defendant, and plaintiff appeals. Reversed in part, and affirmed in part.
COUNSEL
Fredericks & Hanna, of Los Angeles, and C. V. Anderson, of Bakersfield, for appellant.
Dorsey & Campbell and Emmons & Aldrich, all of Bakersfield, for respondent.
OPINION
PLUMMER, J.
This action was brought to enforce payment of five promissory notes, set out in plaintiff’s complaint in five separate causes of action. The defendant had judgment, and the plaintiff appeals.
The first cause of action is based upon a promissory note in the sum of $7,500, executed by the defendant on May 20, 1922. The second cause of action is on a promissory note in the sum of $1,875, executed by the defendant on May 20, 1922. The third cause of action is based upon a note executed by the defendant in a like sum of $1,875, dated May 20, 1922. The fourth cause of action is based upon a promissory note executed by the defendant in the sum of $7,500, dated May 20, 1921. And the fifth cause of action is based upon a promissory note executed by the defendant in the sum of $3,750, on May 20, 1921. These notes were all executed for and on account of original subscription agreements of the defendant to purchase shares in the capital stock of the plaintiff corporation. These subscriptions are dated as follows: One for 250 shares of the capital stock of said company dated February 5, 1920; one for 250 shares of the capital stock of said company, dated November 16, 1920; one for 500 shares of the capital stock of said company, dated January 27, 1921; one for 1,000 shares of the capital stock of said company dated March 16, 1921; and one for 1,000 shares of the capital stock of said company, dated April 7, 1921. The note based upon the subscription agreement for 1,000 shares of the capital stock of the plaintiff corporation, dated April 7, 1921, appears in the complaint in the form of a renewal note, for the same sum set forth in the first cause of action.
By way of defense to the plaintiff’s action, the defendant set forth in his answer that the notes were obtained by fraudulent representations, and also that the subscription agreements upon which the original notes were given were void under the Corporate Securities Act, and that the notes sued upon are simply renewals of the original void obligations. The subscription agreements were all in similar form, and, among other items, contained the following:
"I hereby subscribe for, and agree to purchase _____ shares of the capital stock of the Imperial Live Stock & Mortgage Company, a corporation organized and existing under and by virtue of the laws of the state of California, and agree to pay therefor $10.00 per share, payable as follows: Not less than one-fourth cash accompanying this obligation, and the balance thereof as evidenced by a promissory note of even date herewith bearing interest at the rate of 6 per cent. per annum."
The permit issued by the commissioner of corporations permitting the plaintiff corporation to take subscriptions for shares of its capital stock, specified that not less than 25 per cent. of the par value of the stock should be paid for in cash, and that the remainder, or 75 per cent. of the amount agreed to be paid, might be evidenced by a promissory note or promissory notes bearing 6 per cent. interest.
In so far as the agreements to purchase shares of the capital stock of the appellant corporation are concerned, upon which the renewal note set forth as the second, third, fourth, and fifth causes of action in the plaintiff’s complaint are based, the record shows beyond controversy that no part of the 25 per cent. of the par value of the shares of the capital stock subscribed for by the defendant was paid in cash. In each instance, so far as the agreements to purchase shares of the capital stock which lead to the giving of the renewal notes set forth in said causes of action are concerned, what are called in the transcript "myself notes" only were given; that is, the defendant, when subscribing for shares of the capital stock, instead of paying 25 per cent. in cash, drew a note payable to himself for 25 per cent. of the par value of the shares of stock subscribed for, and delivered the same to the plaintiff, and then, at the same time, and as a part of the same transaction, executed a promissory note payable at a definite time, some months after the date of the execution of the note, for 75 per cent. of the par value of the stock subscribed for. The record shows that prior to the 20th day of May, 1921, these "myself notes" had all been taken up by the defendant by the payment in cash of the 25 per cent. of the value of the shares of stock theretofore subscribed for by the defendant; that on said 20th day of May, 1921, renewal notes were given in lieu of the former notes, representing 75 per cent. of the purchase price of the shares of stock mentioned in the subscription agreements; that at said time the shares of capital stock subscribed for were issued and assigned to certain persons as trustees for the benefit of the plaintiff, to be held as security or until the 75 per cent. notes were fully paid, trust certificates representing the shares of stock called for in each subscription being delivered to the defendant, evidencing the number of shares assigned by him, and to be held in trust for the benefit of the corporation.
The court instructed the jury to find in favor of the defendant as to the second, third, fourth, and fifth causes of action alleged in plaintiff’s complaint. With this summary we may proceed to consider the appellant’s contentions, which are as follows:
(1) That the court erred in directing the jury to return a verdict in favor of the defendant on the second, third, fourth, and fifth causes of action.
(2) That the issue of fraud should not have been submitted as a defense to the first cause of action set forth in the plaintiff’s complaint.
(3) That the defense of illegality, based on the use of "myself notes," should not have been submitted as a defense to the first cause of action.
As heretofore stated, all the notes sued on by the plaintiff in the second, third, fourth, and fifth causes of action set forth are renewal notes, based upon subscription agreements for the purchase of shares of stock, under a permit from the commissioner of corporations, providing that at least 25 per cent. of the purchase price should be paid in cash, whereas in truth and in fact no cash was paid, and only "myself notes" were given for the 25 per cent. of the purchase price, which notes were subsequently taken up by the defendant.
Section 12 of the Corporate Securities Act, usually referred to as the "Blue Sky Law," reads as follows:
"Every security issued by any company, without a permit of the commissioner authorizing the same then in effect, shall be void, and every security issued by any company, with the authorization of the commissioner but not conforming in its provisions to the provisions, if any, which it is required by the permit of the commissioner to contain, shall be void." Deering’s General Laws 1923, part 1, p. 1414.
The receipts issued by the appellant corporation at the time of taking subscriptions to purchase shares in its capital stock were in the following form, one of which will suffice:
"November 16, 1920. Received of William Tracy, of Buttonwillow, California, the sum of $2,500.00, cash, $625.00, note $1,875.00, payable to Imperial Live Stock & Mortgage Company as payment for 250 shares of the capital stock of the Imperial Live Stock & Mortgage Company, as set forth in this subscription contract, numbered the same as the receipt and bearing even date herewith.
"Imperial Live Stock & Mortgage Company,
"L. V. Moron, Special Agent." No mention being made in the receipts that the 25 per cent. of the subscribed cost of the shares of stock was in fact evidenced by "myself notes," and not really paid in cash at the date of the subscription. Upon this state of facts the appellant contends, upon the authority of Moore v. Moffatt, 188 Cal. 1, 204 P. 220, that the renewal notes, though based upon void contracts, became valid obligations upon the date of renewal, the issuance of the certificates, and the assigning of them by the defendant to trustees for the benefit of the corporation, under the theory that the agreement was a continuing offer on the part of the corporation for the sale of its stock, and was accepted in a valid manner at the date of the issuance thereof, ratified by the defendant as evidenced by his having taken up and paid the "myself notes," and the then giving by him of notes evidencing the remaining 75 per cent. of the value of the respective purchases.
In the case of Moore v. Moffatt, supra, the action was brought by a trustee in bankruptcy to recover the difference between the sums paid on a subscription agreement for stock in a corporation, and the par value of the stock. In that case it appears that the amount agreed to be paid had all been paid. The defense to the action was based upon the fact that at the time the money was paid, the corporation had no valid permit to sell shares of its capital stock. The court, in discussing the issues involved in that case, used the following language:
"Conceding, for the purposes of discussion and decision, as is contended in support of the judgment, that the subscription agreement was in its inception void and incapable of acceptance by the corporation because executed, in contravention of the provisions of the Investment Company’s Act (Stats. 1913, p. 715), prior to the procurement of a permit from the corporation commissioner authorizing a sale of the corporation’s stock, and therefore could not have been legally made the basis of an action against the defendants upon the theory that they were stockholders in the corporation, still we have the admitted fact in the plaintiff’s case that no stock of the corporation was in fact issued in response to any agreement of the parties until after an admittedly regular and valid permit had been granted by the corporation commissioner. This being so, the subscription agreement, even though it may have been void and incapable of acceptance in the first instance, should, in the light of the subsequent conduct of the parties to the transaction, be considered and construed as a continuing offer to subscribe for the stock in question, pending the procurement of a permit from the corporation commissioner, which ultimately became the embodiment and expression of a new agreement to purchase the stock entered into at a time when the only legal obstacle in the way of a valid agreement had been overcome. The agreement, so considered, and having been in fact ultimately accepted by the corporation after the required permit had been procured, *** the validity of its making and acceptance must be measured and tested by its character as revealed by the circumstances and conduct of the parties with relation thereto at the time of its ultimate acceptance rather than by the circumstances attending its mere physical making in the first instance."
The court in that case then goes on to hold that the acts of the parties were tantamount to an adoption by them of the terms and conditions of the subscription agreement as of the date of its ultimate acceptance, and that the defendants were liable for the unpaid portion of the capital stock, and reversed the judgment of nonsuit entered by the trial court. If the circumstances of the instant case were identical with the case of Moore v. Moffatt, supra, the contentions of the appellant would have to be accepted as decisive, and the ruling of the trial court reversed. As we regard the transaction, however, a different principle is involved. In the Moffatt Case the trustee was not suing upon a tainted contract affecting its validity. In the case at bar there can be no doubt that the original 75 per cent. notes, of which the notes represented in causes of action set forth in plaintiff’s complaint numbered 2, 3, 4, and 5 are renewals, were invalid.
In the case of Domenigoni v. Imperial Live Stock & Mortgage Co., 189 Cal. 467, 209 P. 36, in an action to cancel certain promissory notes given to represent 75 per cent. of the purchase price of shares of the capital stock of the corporation which is the appellant in the present action, where "myself notes" were given for 25 per cent. instead of cash, just as in the case at bar, the court held as follows:
"The entire transaction was an attempt to circumvent the law. The notes and agreements were each of them made in violation thereof and are therefore against the policy of the law, *** and void."
No relief, however, was given for the following reason, as was there said speaking of the plaintiff:
"He was a party to them and is equally guilty with the defendant. In such a case the court will give no relief even if the point is not raised by either party."
The contract being void, the promissory notes were held void and each party was left in the condition in which the court found him. The receipt given by the defendant, the appellant here, in the Domenigoni Case was identical in language with the receipts given to the defendant in the instant case.
In the case of Union Collection Co. v. Buckman, 150 Cal. 159, 88 P. 708, 9 L. R. A. (N. S.) 568, 119 Am. St. Rep. 164, 11 Ann. Cases, 609, a case having to do with a renewal note given in place of a prior note based upon an illegal contract, it was held as follows (we quote from the syllabus):
"Any renewal notes given in place of the original notes based upon an illegal consideration are affected with the same illegality. Merely repeating a promise based on an illegal consideration cannot give it validity."
It is further said in the opinion in that case, quoting from a former opinion of Kreamer v. Earl, 91 Cal. 112, 27 P. 735:
"‘It is not for the sake of the party who is benefited by the intervention, but for the sake of the law itself,’ that a court refuses to allow the law and the machinery of the courts to be made use of for the enforcement of illegal contracts, and leaves the parties precisely where it finds them."
Quoting, also, from the case of Hill v. Kidd, 43 Cal. 615:
"It is equally well settled that no action in affirmance of an illegal contract can be maintained."
A long list of citations supporting the rules of law just set forth may be found in 11 Ann. Cas. on page 612, following the opinion in the Buckman Case. The authorities there set forth are so numerous as to prevent repetition here, but all hold that a renewal note, given in lieu of a previous note based upon an illegal contract, partakes of the same tainted character, and is unenforceable when in the hands of the parties participating in the fraud, or in the acts which render the original note invalid. In 19 California Jurisprudence, 1006, we find the following statement supported by authorities:
"A renewal note given in place of the original one based upon an illegal consideration, is affected with the same illegality; merely repeating a promise based on an illegal consideration cannot give it validity."
It is but trite to say that:
"Commercial paper cannot be based on any consideration which is in violation of an express statutory provision." 8 Cal.Jur. 243.
Again:
"If the instrument or contract is declared void by statute, it cannot be enforced; in some states, even by a bona fide holder." 8 Cal.Jur. 768.
The latter statement is not involved here, the original parties only being before the court.
In the case of Reno v. American Ice Machine Co., 72 Cal.App. 409, 237 P. 784, in an action based upon a void contract for the purchase of stock, an attempt is made to distinguish between actions where the original parties are involved, and actions where a representative of one of the parties appears, as was the case in Moore v. Moffatt, supra, where a trustee in bankruptcy was one of the parties, and in so doing, referred to the case of Moore v. Moffatt in the following language:
"That was not an action between the parties to avoid contract, but an action by a trustee in bankruptcy of a corporation to recover the unpaid subscription price of stock for the benefit of creditors. That situation presents an exception to the rule above announced, which rule is suspended in the interests of innocent third persons who have relied upon the contract."
Although this statement is relied upon by respondent and vigorously assailed by the appellant, we do not feel called upon to either approve or disapprove the language there used, save and except to state that in the Moffatt Case the circumstances are readily distinguishable from the circumstances characterizing the transaction in the cause now before us. The contract, which really was a contract created by law to pay the unpaid portion of capital stock issued to, and accepted by the defendants in the case of Moore v. Moffatt, only, was involved, whereas in the instant case the attempt is made to give vitality and validity to tainted and void contracts by renewals thereof.
The issues presented in this cause relate to matters of public policy. If no other persons were involved, and the principle reached no farther than the respective parties to this cause, we might consider seriously the contention of the appellant that the renewal notes, instead of being considered on the same basis, should be treated as a new subscription for the shares of stock in the plaintiff corporation, and valid and enforceable obligations. To do so, however, would be to open the door to all the illegal practices condemned by the Corporate Securities Act. If a scheme or a plan to avoid the provisions of that act, and of the requirements inserted in the permit issued to the corporation by the corporation commissioner, relating to its sale of stock, can be accomplished by the subterfuge of the issuance and taking of "myself notes" for 25 per cent. of the value of the stock and ordinary notes for 75 per cent., then and in that case the requirement for the payment of a certain portion of the subscription in cash, in order that the corporation may have assets to meet its obligations, would simply be to render nugatory, not only the requirements of the corporation commissioner, but also the act itself. Public policy, which led to the enactment of the Corporate Securities Act, forbids the approval of any such transactions, and we think the trial court properly excluded from the jury consideration of the second, third, fourth, and fifth causes of action tendered by the plaintiff’s complaint, by instructing the jury to find for the defendant.
The record shows that the court submitted to the jury the issues tendered by plaintiff’s first cause of action and the defendant’s answer thereto which set up two defenses as follows: The illegality of the subscription for the shares of stock for which, in part payment, the note sued on in the first cause of action appears as a renewal note, dated April 7, 1921; and also the further defense that the defendant was induced to subscribe for the shares of stock for payment of which, in part, said note was given, by the fraudulent representation of the plaintiff’s agents. Appellant contends that neither one of these issues should have been submitted.
If the first contention of the appellant be well taken, it will be unnecessary to enter into a discussion of whether the evidence sustains the defense of fraud, or whether it shows a waiver thereof in the event that the testimony establishes the fraudulent representations as contended for by the respondent. The verdict of the jury on the first cause of action is in the words following:
"We, the jury, find for the defendant on the first cause of action set out in plaintiff’s complaint."
By finding only a general verdict, of course, it was impossible for the trial court, and is impossible for an appellate court, to determine whether the jury concluded that the defense of illegality had been made out, or whether the jury returned a verdict by reason of the alleged fraudulent representations of the plaintiff’s agents at the time the defendant subscribed for the stock partly covered by the note set forth in the first cause of action.
In relation to the first cause of action the court, among other things, instructed the jury as follows:
"You are instructed that if you find from a preponderance of the testimony that the note sued upon in plaintiff’s first cause of action for $7,500.00, is a renewal of a note executed by William Tracy on April 7, 1921, and at that time he made and executed an agreement to purchase 1,000 shares of stock of the Imperial Live Stock & Mortgage Company, a corporation, and at the time of entering into such agreement executed in addition to said note for $7,500.00 a note payable to himself for $2,500.00 and that the said note for $7,500.00 together with said note for $2,500.00 was for the purchase of shares of stock mentioned in said subscription agreement and that said notes constituted the entire purchase price of said stock mentioned in said agreement, the notes issued in connection therewith are void, and you must find for the defendant on said cause of action number one of plaintiff’s complaint."
"You are instructed that if you believe from a preponderance of the testimony that the defendant gave to the plaintiff notes for the entire transaction in entering into the contract set out in plaintiff’s first cause of action, then you must find for the defendant."
"If you find from a preponderance of the evidence that the defendant, at the time of the executing of the original note, renewal of which is set out in the first cause of action of plaintiff’s complaint, entered into the subscription agreement set out in the first cause of action of plaintiff’s complaint, the said defendant William Tracy executed and delivered to the plaintiff, Imperial Live Stock & Mortgage Company, a corporation, notes for the entire amount of the subscription mentioned therein, you must find for the defendant on such cause of action."
The giving of this instruction is assigned by appellant as prejudicial error, and in support thereof it insists that the testimony, instead of showing a "myself note" having been given by the defendant for 25 per cent. of the value of the stock subscribed for by him on the 7th day of April, 1921, establishes without any substantial conflict that the defendant paid for the same in cash. If this is true, appellant’s contention is well taken. In order to understand the testimony which we are about to set forth, it is necessary to state that on the 16th day of March, 1921, the defendant signed an agreement for the purchase of 1,000 shares of the capital stock of the plaintiff corporation; that at the time of signing such agreement he executed two notes, one a "myself note" for $2,500 and one for $7,500. This $7,500 note appears in the plaintiff’s complaint as the basis of the fourth cause of action, and which was excluded from consideration of the jury by instructing the jury to find for the defendant. The "myself note" given on the 16th day of March, 1921, was paid by the defendant on the 31st day of March, 1921. Thereafter there was only one transaction between the plaintiff and the defendant now represented in the first cause of action. This statement is necessary because the testimony of the defendant does not clearly distinguish between the two transactions. We now quote the testimony of the plaintiff as to the transaction of April 7, 1921:
"Cross-examination: Q. Now, Mr. Tracy, in reference to the subscription of April 7, 1921, what makes you think you gave a ‘myself note’ for $2,500.00 instead of $2,500.00 cash at that time? A. It is my remembrance that I gave a note each time.
"Q. Don’t you remember, Mr. Tracy, that the gentlemen came to your place and you went to the Security Trust Company Bank in Bakersfield and drew out of that bank $2,450.00 April 7, 1921? A. I don’t.
"Q. Have you the ‘myself note’ that you gave April 7, 1921? A. Oh, I paid it. I know I paid all those notes.
"Q. When you paid it, did you receive the note back from the bank? A. I can’t remember.
"Q. Have you that note? A. No.
"Q. How did you pay it? A. (No answer.)
"Q. Did you pay it with a check or with cash? A. I think I paid that with a check; I didn’t have that much cash.
"Q. On what bank did you draw the check? A. I think I drew it on the Security Trust Bank.
"Q. In Bakersfield? A. Yes.
"Q. If your account at the Security Trust Company Bank in Bakersfield showed a withdrawal of $2,450.00 April 7, 1921, wouldn’t that refresh your memory, so you might change your opinion as to the facts of that transaction? A. I don’t know it.
"Q. You had on deposit April 7, 1921, a considerable amount of money, did you not? A. I don’t know just what I had; I had an account. I don’t know what amount I had at that time.
"Q. Now on March 16th, when you purchased the 1,000 shares of stock, you gave the ‘myself note’ for $2,500.00 that is in evidence as ‘Defendant’s Exhibit 3.’ You remember that note, Mr. Tracy? A. Yes.
"Q. And you notice that note is paid March 31, 1921; stamped on the face of it, ‘Paid Security Trust Company March 31, 1921’? A. Yes.
"Q. Did you pay it on that date? A. Well, I couldn’t say offhand; it would indicate that I did.
"Q. What is your best recollection as to whether you paid the note on that date? A. I don’t remember.
"Q. You remember you did pay that note at the bank? A. No; I don’t remember. I know I paid all the notes at the bank, but I can’t remember that particular note."
The defendant further testified that he did not have the canceled checks with which he paid the 25 per cent. of the subscription taken on March 16, 1921, nor did he have the canceled check for payment made on the subscription dated April 7, 1921. Upon cross-examination the defendant further testified as follows:
"Q. Well, now, I will ask you if it is not a fact that April 7, 1921, you drew a check in favor of Imperial Live Stock & Mortgage Company for $2,450.00? A. I don’t remember.
"Mr. Hanna: I will ask you if, on one of the statements you received, Mr. Tracy, you saw entries such as are listed here, from March 24, 1921, to April 12, 1921, for instance, you will notice here listed March 25, a $16,000.00 deposit; do you remember making that deposit in the bank? A. I couldn’t say what date; I remember the deposit.
"Q. March 25 there was a check for $8,142.32. Do you remember that check? A. No; I don’t know.
"Q. Do you remember you paid out about half of the $16,000.00 immediately after depositing it, on the same day? A. No; I don’t remember.
"Q. You don’t remember that? A. No.
"Q. Do you remember a check March 31, 1921, for $2,450.00? A. No.
"Q. Do you remember a check, April 7, 1921, $2,450.00? A. No, sir.
"Q. You don’t remember those checks, whom they were made payable to? A. No; that is too long ago. I don’t remember what they were, now.
"Q. Do you remember receiving, June 15, 1920, $10,000.00 and depositing it in your account? A. No.
"Q. Do you remember paying out, June 15, 1920, $8,445.06? A. No.
"Q. Do you remember paying out, October 4, 1920, $3,000.00? A. No.
"Q. Or. $1,208.00 the same day? A. No.
"Q. Do you remember receiving, October 4, 1920, $5,140.07, and depositing it in your account? A. No.
"Q. Do you remember paying out, December 6, 1920, $1,120.50? A. No, sir.
"Q. Do you remember receiving and depositing in your bank account, December 9, 1920, $7,200.00? A. No."
The record further shows that previous to the trial the defendant’s deposition was taken, wherein he testified as to a "myself note" executed on April 7, 1921, as follows:
"Q. Did you execute a ‘myself note’ at that time, also? A. I think I did.
"Q. Are you sure you did? A. Well, I don’t know that I can say I am sure of it; that certainly is my impression. I gave a ‘myself note’ in all those sales."
The record shows that no "myself note" was produced for the transaction of April 7, 1921. As against this statement of the defendant that he "did not know," "did not remember," and "thought he did," the record shows as follows: That on April 7, 1921, the date on which the subscription was signed by the defendant for the shares of stock involved in the first cause of action, there was charged against the account of the defendant on the books of the Security Trust Company Bank at Bakersfield, the sum of $2,450; that on the same date a draft or cashier’s check was issued by the bank payable to the plaintiff, in the sum of $2,450. The record further shows that the plaintiff had no other business transaction at said bank in Bakersfield at that date; that the plaintiff received this draft or cashier’s check, together with $50 in cash, as the initial payment of Tracy’s subscription of April 7, 1921, and that on April 11, 1921, the plaintiff deposited this check or draft drawn by the Security Trust Company of Bakersfield for $2,450, and $50 in cash, and credited the same to the defendant’s account. The testimony of the cashier of the plaintiff shows that the plaintiff received from the defendant the check or cashier’s draft for $2,450, dated April 7, 1921, together with $50 in cash, and that the same was entered as a credit on the defendant’s account, as herein stated, and that on the 11th day of April, 1921, the check or draft for $2,450 and $50 in cash was deposited with the National Bank of Los Angeles. The exhibit in the transcript shows the draft was drawn by the Security Trust Company of Bakersfield in favor of the Imperial Live Stock & Mortgage Company, the plaintiff in this action, on the Farmers’ & Merchants’ National Bank of Los Angeles, for $2,450, and bears date of April 7, 1921.
The record further shows that the books of the plaintiff exhibit the fact that there was no other transaction involving the sum of money here referred to, had by the plaintiff with any other of its customers, and that the only one with whom it had any such transaction was the defendant Tracy. The record further shows a transcript of the defendant’s account with the Security Trust Company of Bakersfield, which account of the defendant with the bank shows that on March 31, 1921, the defendant withdrew from the Security Trust Company the sum of $2,450, which corresponds with the defendant’s testimony that he paid the "myself note" given at the time he subscribed for 1,000 shares of the capital stock of the plaintiff on the 16th day of March, 1921. The "myself note" given on the 16th day of March, 1921, was introduced in evidence as defendant’s exhibit No. 3, and shows upon its face that it was paid March 31, 1921. And then, following this, the account of the defendant with the Security Trust Company shows that on April 7, 1921, he drew a check for $2,450; that in accordance with this check the testimony shows that the cashier made out a check in favor of the plaintiff for the sum of $2,450, dated April 7, 1921. This check, together with $50, the testimony shows was transmitted to the plaintiff, and was by it deposited as hereinbefore stated, and the defendant credited with the payment of $2,500. This testimony stands in the record absolutely uncontradicted. All there is opposed to it is the statements of the defendant, to use his own language, "I don’t remember." The probative value of the testimony of the defendant, that he does not remember, does not rise to the dignity or degree of weight ordinarily characterized as "scintilla" evidence.
We think it is clear from the foregoing that the court erred in giving to the jury instructions bearing upon the legality of the first cause of action in so far as the Corporate Securities Act is concerned. As the verdict is general, it is impossible to determine, as heretofore stated, upon which of the two issues the jury rendered its verdict in favor of the defendant, and as one of the defenses submitted to the jury is not supported by the evidence, and is directly contrary to the evidence, as we have shown, the judgment cannot stand, based upon such a verdict. "Where it is impossible to tell whether the verdict was based on an erroneous instruction, the judgment will be reversed." Likewise, "where a cause is submitted to a jury by a principal instruction authorizing a recovery on an erroneous theory of the law, plaintiff on securing a verdict could not have it sustained on appeal and have the error declared harmless, because there was a theory which, if submitted, would have sustained a similar verdict." 4 Corp. Jur. p. 1043, and cases there cited. To the same effect are the cases of O’Meara v. Swortfiguer, 191 Cal. 12, 214 P. 975; Thompson v. L. A. Ry. Co., 165 Cal. 748, 134 P. 709; see, also, Wiseman v. McNulty, 25 Cal. 230; Lewis v. Hayes, 165 Cal. 527, 132 P. 1024, Ann. Cas. 1914D, 148. These cases are all to the effect that, where two defenses are interposed and a general verdict is rendered, if the instructions are erroneous as to one defense, the cause must be reversed.
In view of the fact that the judgment must be reversed for the reasons herein stated, it becomes unnecessary to pass upon the contention of the respondent that the defense of fraud was made out, and likewise unnecessary to pass upon the correctness of the position taken by the plaintiff that if fraud existed it was waived by the defendant, as the testimony in relation to these matters may not be the same upon another trial.
In so far as the judgment appealed from relates to the first cause of action, it is hereby reversed. Otherwise, as to all other matters, the judgment is affirmed, neither party to recover costs.
We concur: FINCH, P. J.; HART, J.