Russell v. Ruffcorn

This is an appeal by the plaintiff from a judgment in favor of the defendants. The complaint is in four counts, and in so far as it is material to a decision of this appeal, is as follows:

The first count alleges that the plaintiff agreed to purchase from the defendants 3,350 shares of the capital stock of the National Land Value Guaranty Company, a Nevada corporation, at a total price of $167,000, and that he paid thereon the sum of $19,750; that the contract of purchase was made through the defendant Oren Ruffcorn, who was acting for himself, and also as the agent of his co-defendants ; that at the time of the execution of the above-mentioned agreement, all of said stock was deposited with the Bank of America in Los Angeles, in an escrow proceeding and under the control of the Commissioner of Corporations, of California, and the defendants were not permitted to sell said stock or to offer the same for sale without the written consent of said commissioner, and they did not have possession of said stock and could not, and did not, deliver the same to the plaintiff, and were prohibited by the laws of California from making such delivery, and plaintiff has never received anything of value for the money paid by him to the defendants for said stock; that at the time of the sale and the payment of the money by plaintiff to the defendants, the latter, through their agent, Oren Ruffcorn, represented to plaintiff that they had a right to sell the same, and plaintiff relied thereon and paid the money therefor, and did not learn, until after such

The second cause of action alleges that the defendants, through their agent, Oren Ruffcorn, represented to plaintiff that they owned 3,350 shares of said stock, and also that the corporation owned a large amount of property of great value, and was doing a profitable business, and was earning large sums of money from its business; that the said corporation then had business already on hand which would profit it a million dollars in the near future; that the said corporation was solvent and in good condition and a going concern, and its stock was worth more than its face value; that the plaintiff, not knowing otherwise, believed and relied upon said representations and entered into said contract and paid $18,750 on the purchase price of said stock; that, after he had made said contract of purchase, and after the payment of said moneys, he learned that all of said representations were false and fraudulent; that said corporation had no assets; that its stock was worthless; that it was in debt $190,000 and was insolvent; that the stock which they proposed to sell to plaintiff was impounded in an escrow proceeding in the Bank of America in Los Angeles under the terms of a permit by the Commissioner of Corporations of California, authorizing the sale of treasury stock of the corporation, and which permit prohibited the sale of said impounded stock without the written consent of the said commissioner, and that such written consent was never obtained; that had he known of the condition of said corporation and the falsity of the representations and the condition of said stock in escrow, he would not have entered into said contract of purchase or paid said money or any part thereof; that shortly before the bringing of this suit, the said corporation was adjudged bankrupt, and that said money paid for said stock became lost to plaintiff, and that he never received anything of value therefor.

The third count is for money had and received by the defendants for the use and benefit of plaintiff in the sum of $19,750.

The fourth count sets out the written contract between the plaintiff and defendants and the proportionate share which each defendant received from the $19,750. It also

A joint answer to the foregoing complaint was filed by Max B. Ruffcorn, Ola Ruffcorn and Georgia Ruffcorn, in which they deny that Oren Ruffcorn was acting as their agent, or that they owned said stock, or any interest therein, or that they received from the plaintiff, John L. Russell, any money whatsoever; and further deny any false or fraudulent representations to the plaintiff.

The defendant E. B. Evans also filed a separate answer in which he denies the alleged agency of Oren Ruffcorn or any false or fraudulent representations, or that he is indebted to the plaintiff.

The separate answer of Oren Ruffcorn also denies that in making the agreement he was the agent of the several defendants; or that he was guilty of any fraud, and alleges that the stock sold to plaintiff was his own property and that plaintiff purchased it with full knowledge of all the circumstances surrounding the transaction.

The court found that on February 5, 1926, the plaintiff and the defendant Oren Ruffcorn (but not the other defendants) entered into an agreement whereby the said defendant Oren Ruffcorn agreed to sell and the plaintiff agreed to buy 3,350 shares of the capital stock of the National Land Value Guaranty Company, the corporation above referred to of a par value of $100 per share, for $50 per share; that defendant Oren Ruffcorn was not acting in the making of said contract as the agent of any of the defendants, and that the defendants Max B. Ruffcorn, Ola Ruffcorn and Georgia Ruffcorn were not the owners of any of said shares of stock; that 3,000 of said shares of stock were the personal property of said Oren Ruffcorn, and that the other 350 shares belonged to the defendant E.

It is further found that none of the defendants had possession of the certificates evidencing said stock which was the subject of the agreement of February 16, 1926, at the time of the making thereof or thereafter. And, further, that it is true that the same had been, prior to the making of said agreements, deposited, and was, at the time of the making of the said agreements, in escrow in the Bank of America at Los Angeles, which deposit in escrow was made pursuant to the terms of a permit issued by the Commissioner of Corporations of California to the said National Land Value Guaranty Company, by the terms of which permit it was provided that certain shares of the common capital stock of said corporation theretofore issued and then owned by. the defendant Oren Ruffcorn and others in the total number of 6,500 shares, should be deposited in escrow and retained therein until the further order of the commissioner, and that pending the further order of the commissioner, the same should not be sold or offered for sale or agreed to be sold, without the consent of the commissioner; that the permit issued to said corporation for the sale of its stock was prior to the making of the contract

The court also found that it was true that none of the defendants, prior to the commencement of this action, delivered any of the certificates of the stock which was the subject of said agreement between plaintiff and defendants of date February 5, 1926, but it was not true that the defendants refused to deliver the same, or that they were prohibited by law from so doing, but it was the agreement between plaintiff and defendant Oren Ruffcorn and E. B. Evans that plaintiff accepted said shares of stock, although the same were in escrow, and plaintiff accepted from Oren Ruffcorn the transfer of the shares of stock for which he paid, in escrow and expressly agreed with said defendant Oren Ruffcorn and the said E. B. Evans that he, plaintiff, would obtain consent of the Commissioner of Corporations to the transfer of the stock to himself and that defendants Oren Ruffcorn and E. B. Evans need not secure such consent.

It was also found that it was not true at the time of the sale and the payment of the moneys by the plaintiff to the defendant Oren Ruffcorn that the latter represented to plaintiff that he, or the defendants or any of them, had full right and authority to sell said stock or deliver the same or that plaintiff believed or relied upon any such representations or that plaintiff paid said money on account of such representations. It was also found that the plaintiff knew at the time the contract was entered into that the stock was deposited in said bank pursuant to the said permit of the Commissioner of Corporations, and knew that the defendants did not have, and none of them had, the certificates representing said stock in their possession, and he knew such certificates were actually in said escrow in said bank; that plaintiff had full knowledge of the terms and conditions of said permit and escrow, and made said agreement with such knowledge, and expressly made the same subject thereto.

It was also found that it was not true that the defendants, or any of them, on or about the fifth day of February, 1926, when the contract in controversy was made, or at any other time, by Oren Ruffcorn, or otherwise, represented to plaintiff that they owned 3,350 shares of stock of said

The court further found that the plaintiff was familiar with the conditions of said company, and had for a long time prior to the making of the contract had access to its books and records and knew at the time the contract was entered into as well as the defendants, its prospects for business, and it is not true that plaintiff did not learn until after the payment of the moneys by him that each and all of the representations alleged in his complaint to have been made to him were falsely and fraudulently made; that it was not true that plaintiff learned after the payment of said moneys that the corporation did not own any property of any considerable value or that it was in debt approximately $190,000, or that it was insolvent or that it always had been insolvent since its organization, or that its capital stock had no value at all or that the defendants did not have said stock or that the same was impounded in escrow in the Bank of America under a permit of the Commissioner of Corporations prohibiting its sale or offer for sale; that it is not true that the plaintiff did not know the condition of the said.corporation when he entered into said contract.

The court also found that it was not true that on August 1, 1926, or at any other time the' defendants or either of them were indebted to the plaintiff in any sum whatever.

Appellant contends that there was a conspiracy by the defendants and that he was entitled to a judgment for the full amount claimed against all of the defendants. This contention is based upon the following admissions and evidence. It was admitted that the stock standing in the name of Oren Buffcorn was impounded in the Bank of America under the direction of the Commissioner of Corporations in pursuance of the terms of the permit issued for the sale of the treasury stock of the corporation, which permit forbade such escrowed stock being sold or offered for sale without the written consent of the commissioner. That said written consent of the commissioner was never obtained for the sale of the stock or for the transfer thereof provided for in the contract of February 5, 1926. It was stipulated that the. plaintiff paid in actual cash to Oren Buffcorn $18,750; that the evidence shows that the 3,350

From the foregoing evidence does it appear as stated by appellant that the defendants joined together in a comm on enterprise to violate the Corporate Securities Act? The court has found and the evidence sustains the findings, that Oren Ruffcorn was the owner of 3,000 shares of the stock described in the contract between him and the appellant; that it was his individual stock and that the other Ruff corns did not own it or any part of it, but that the contract of February 16, 1926, was merely an agreement among all of the Ruffcorns that the antecedent debts of Oren Ruffcorn should be paid to them in certain proportions from the sale of said stock. Such being the ease,

“That case is quite parallel to the case at bar, the principal difference being that in that case the commission orders that the escrowed stock shall be held, and yet the judgment requires that it be returned, while in the case at bar it is obvious that the California commission had no thought of retaining the stock in escrow after the revocation of the permit.

“If the stock was ever legally impounded, the revocation automatically released it and a suit by Ruffcorn to recover it (as in the Louisiana case) could not add to the potency of the release by the revocation.”

In principle, we consider the case of People v. Pace, supra, as sustaining the point that the revocation of the permit by the Corporation Commissioner to sell the corporation stock released from the escrow the individual stock of Oren Ruffcorn and E. B. Evans.

We therefore hold that irrespective of whether or not the Commissioner of Corporations had a right to impound the individual stock of Oren Ruffcorn as a condition precedent to the 'sale of the treasury stock by the corporation, the revocation of the permit operated to remove the restriction placed upon Ruffcorn and Evans to sell their individual stock.

In answer to the objection that the plaintiff was not a promoter and organizer, but was a member of the general public, such fact does not relieve him from a bad bargain. He knew he was buying the private stock of Ruffcorn; he admitted over his own signature that he was familiar with the affairs of the corporation and the court found upon substantial evidence that there was no fraud

Under the assignment of error that the stock was owned by the defendants and that Oren Ruffcorn was their agent, it is sufficient to say that the court found that Oren Ruffcorn was the owner of the stock and not the agent of his co-defendants. Appellant argues that certain expressions and statements contained in the contract of February 16, 1926, which is signed by all of the defendants, conclusively establishes the joint ownership of all the defendants in and to said stock. But there is other evidence which is direct and positive that said defendants did not own any interest therein but that Oren Ruffcorn was the sole owner and that the trust agreement of February 16, 1926, for the distribution of the proceeds of the sale of the stock was to pay antecedent debts which Oren Ruffcorn owed to the other defendants; that in so far as defendant Evans was concerned, he was the actual owner of 350 shares of the stock. At best, such a state of the evidence merely raised a conflict as to the ownership of the stock, and upon well-settled principles of law, we cannot disturb the findings of the court. (Wilson v. Fitch, 41 Cal. 363 ; Mah See v. North American Acc. Ins. Co., 190 Cal. 421 [ 213 Pac. 42 , 26 A. L. R. 123 ].)

Further, concerning the claim that the stock was not delivered to appellant, it is clear from what has already been said that the latter had full knowledge of the condition of the corporation, and as shown by the contract itself, accepted the stock subject to the escrow. It also appears that in a conversation between defendant, E. B. Evans, the appellant Russell, and others, concerning the prospective sale of this stock to Russell, that Evans said the stock was in escrow under the direction of the Commissioner of Corporations, and that he had no right to sell it without the commissioner’s consent, and Evans was told that had been taken care of; that he then turned to appellant and asked him if that would be looked after, and he replied that it would. There is other evidence, but we believe the foregoing shows that appellant waived actual physical delivery. Furthermore, under the following authorities, we think there was in fact a sufficient delivery. Section 1754 of the Civil Code as it stood at the time of the transaction in

Plaintiff made a motion for the entry of a different judgment under the provision of section 663 of the Code of Civil Procedure, but, from what we have already said, such a motion was properly denied.

Appellant also calls our attention to a decision of the Supreme Court of the State of Nevada, entitled John L. Russell and another against Oren Ruffcorn and another, reported in 10 Pac. (2d) 632 , which he claims is res judicata of the questions involved on this appeal. But an examination of the record before us shows that such claim is unsupported by pleading or proof. This was necessary in this character of action. (Sec. 456, Code Civ. Proc.; Meredith v. Santa Clara Min. Assn., 56 Cal. 178 ; Ex parte Von Vetsera, 7 Cal. App. 136 [ 93 Pac. 1036 ]; Simmons v. Threshour, 118 Cal. 100 [ 50 Pac. 312 ].) All that we have before us on this subject is a supplemental brief by appellant referring to the cited case, and also a third amended complaint in that action, and a certified copy of the judgment offered ex parte, and also offering to furnish us such additional records of the Nevada case as we may desire to consider the subject. We are of the opinion that in the absence of a proper record presented to the trial court, such decision is only entitled to consideration as an authority on questions of law. A careful reading of the cited case discloses that the action was brought for the purpose of canceling the deed to the real estate which was conveyed by appellant Russell to the respondent Oren Ruffcorn, as a part consideration for the stock sold by said Ruffcorn to Russell under the terms of the contract of February 5, 1926. The relief was granted upon the ground that in making the sale the agreement was void because it violated the terms of the permit issued by the Corporation Commissioner of California to the corporation to sell its treasury stock in California. However, in reaching such conclusion no mention is made in the decision of the revocation of the

In the case at bar the trial court also found upon the evidence that appellant not only waived delivery of the certificates of stock, but we have held that under the evidence adduced in this case there was a sufficient delivery, while in the cited case the court held that it was the duty of Oren Ruff corn to have made delivery, which he failed to do, and therefore there was no consideration passed to appellant. Under such circumstances we do not consider the case as authority here. We have examined the entire record with care and have been unable to discover any error which under the law would warrant us in disturbing the judgment.

The judgment is affirmed.

Plummer, Acting P. J., and Thompson, J., concurred.

A petition by appellant to have the cause heard in the Supreme Court, after judgment in the District Court of Appeal, was denied by the Supreme Court on July 21, 1933, and the following opinion then rendered thereon:

In denying the petition for a transfer of this cause to this court after decision by the District Court of Appeal we withhold approval of that portion of the opinion which declares that the revocation of the permit automatically released the impounded stock. However, under the facts and findings recited by the District Court of Appeal, there can be no doubt but that the plaintiff was equally intent with defendants in his determination to obtain the stock without regard to and in defiance of the order impounding the stock. Hence the doctrine of Domenigoni v. Imperial Live Stock & Mortgage Co., 189 Cal. 467 [ 209 Pac. 36 ], concludes the argument of petitioner here. Petition for hearing denied.