Ettlinger v. Collins

• Decision Date: 31 March 1923
• Docket Number: Civil 2011
• Citation: 213 P. 1002,25 Ariz. 115
• Parties: J. W. ETTLINGER, Appellant, v. J. C. COLLINS and R. A. BRETHERTON, a Copartnership Doing Business Under the Firm Name and Style of COLLINS & BRETHERTON, Appellees
• Court: Arizona Supreme Court

213 P. 1002

25 Ariz. 115

J. W. ETTLINGER, Appellant, v. J. C. COLLINS and R. A. BRETHERTON, a Copartnership Doing Business Under the Firm Name and Style of COLLINS & BRETHERTON, Appellees

Civil No. 2011

Supreme Court of Arizona

March 31, 1923

APPEAL from a judgment of the Superior Court of the County of Cochise. A. C. Lockwood, Judge. Reversed and remanded.

Mr. O Gibson, for Appellant.

Mr Fred Sutter and Mr. Walter Roche, for Appellees.

OPINION

BOLLINGER, Superior Judge.

J. W Ettlinger, appellant, sued J. C. Collins and R. A. Bretherton, a copartnership doing business under the firm name and style of Collins & Bretherton, appellees, in the superior court of Cochise county, Arizona, for $1,500, because of alleged damages as a result of the sale of certain stock in the Jerome-Portland Copper Mining Company, which company is an Arizona corporation doing business in Yavapai county, Arizona. He alleged that this was a wrongful sale of stock, and that said stock was worthless. The suit was on two causes of action, $1,000 being for stock sold to appellant for which he had paid $710, and $500 was an assigned claim from Louis J. Larsen, he having bought 1,000 shares of the Jerome-Portland Copper Mining Company stock from appellees for $230. The appellant alleged in his complaint that the consideration for the money paid for said stock had wholly failed; that he had made demand upon the appellees prior to the commencement of his action for the return of his money, and that they had refused. He alleged further that, prior to the delivery of the stock to him by the appellees, they had notice that said stock had been adjudged to be fraudulent and void. He alleged that the stock as delivered to him had been issued fraudulently, and without consideration, and that the issue was the result of a conspiracy, and that the stock which had been delivered to him was a part of that issue which had been adjudged fraudulent and void by the superior court of Yavapai county, Arizona, on February 16, 1918, in case No. 6802, in which case J. M. Mahoney and others were plaintiffs, and A. B. Frame and others were defendants, said judgment having been affirmed by the Supreme Court of the State of Arizona as reported in 21 Ariz. 282, 187 P. 584. He alleged that, because said certificates which were delivered to plaintiff were bogus and void, they transferred no shares or interest in the Jerome-Portland Copper Mining Company. The appellees defended this action by denying any fraud or wrongdoing upon their part, and setting up that they were merely licensed brokers in the state of Arizona, and were engaged in a general brokerage business, and that, when they furnished the shares of capital stock of the Jerome-Portland Copper Mining Company to appellant and his assignor, they merely acted as brokers and agents, and because of that status, and because they followed the usual customs of the brokerage business, they were in nowise liable for any loss sustained by plaintiff.

The case was tried before a jury, and, after the completion of the testimony of appellant and his witnesses, including the depositions of Joseph H. Morgan and R. B. Westervelt, attorneys of Prescott, upon motion of counsel for appellees, the trial court instructed the jury to return a verdict in favor of the defendants. The jury elected a foreman without retiring from the courtroom, and returned a verdict in favor of the defendants in accordance with the directions of the court.

Counsel for appellant states five assignments of error, and they each and all lead up to the question as to whether or not the appellant herein, plaintiff below, under all the circumstances of this case, made a sufficient showing to entitle him under the law to have his case passed upon by the jury without their being directed by the court to render a verdict in favor of the appellees and against the appellant.

One of the serious questions presented to the court in this case is as to whether or not the trial court should have admitted as evidence in this case the depositions of Joseph H. Morgan and R. B. Westervelt, of Prescott. These depositions were for the purpose of identifying the stock involved in this case as a part of the stock which was declared void and worthless by the decision in the Frame case. We are inclined to the belief that these depositions were properly admitted. Mr. Morgan was one of the attorneys connected with the Frame litigation, and Mr. Westervelt was attorney for the receiver for the Jerome-Portland Copper Mining Company, and later was receiver for this company. They no doubt had personal knowledge of the facts to which they testified, and their testimony was competent to identify the property which had been condemned by the decision of this court in the Frame case. This testimony as presented in their depositions was competent and proper for the consideration of the jury, and the court below did not err in permitting same to be introduced. If the stock involved in this case were a part of the stock condemned by this court in the Frame case, then the stock involved is invalid and worthless, and the identity of the stock is a question of fact which should have been decided by the verdict of the jury.

Section 6, article 14, of the Constitution of the state of Arizona, reads as follows:

"No corporation shall issue stock, except to bonafide subscribers therefor or their assignees; nor shall any corporation issue any bond, or other obligation, for the payment of money, except for money or property received or for labor done. The stock of corporations shall not be increased, except in pursuance of a general law, nor shall any law authorize the increase of stocks of any corporation without the consent of the person or persons holding the larger amount in value of the stock of such corporations, nor without due notice of the proposed increase having been given as may be prescribed by law. All fictitious increase of stock or indebtedness shall be void."

Similar constitutional or statutory provisions may be found in the states of Pennsylvania, Oklahoma, Illinois, California, Nebraska, Kentucky, Alabama, Arkansas, Missouri, Texas, Louisiana, Colorado, South Dakota, Ohio, New York, Wisconsin, Maine, Utah, Indiana, Mississippi, New Jersey, Tennessee, Washington, Oregon, Massachusetts and Iowa. These constitutional and statutory provisions invariably end with the statement, "All fictitious increase of stock shall be void," and in the states which have these provisions it has been uniformly held that stock issued in violation of them is null and void. The provisions seem to be a declaration of public policy, and the decisions are to the effect that any act done in violation of the public policy of the state is null and void. Jefferson v. Hewitt, 103 Cal. 624, 37 P. 638; Kellerman v. Maier, 116 Cal. 416, 48 P. 377; Arkansas River etc. Co. v. Farmers' Loan etc. Co., 13 Colo. 587, 22 P. 954; Lake St. El. R. Co. v. Ziegler et al., 99 F. 114, 39 C.C.A. 431; First Ave. Land Co. v. Parker, 111 Wis. 1, 87 Am. St. Rep. 841, 86 N.W. 604; Altenberg v. Grant et al., 85 F. 345, 29 C.C.A. 185; Webster v. Webster Refining Co. of Okmulgee, 36 Okl. 168, 47 L.R.A. (N.S.) 697, 128 P. 261; Clark v. Lincoln Lumber Co., 59 Wis. 655, 18 N.W. 492; Frame v. Mahoney, 21 Ariz. 282, 187 P. 584; Lee v. Cameron (Okl. Sup.) 169 P. 17; Walton v. Standard Drilling Co., 43 S.D. 576, 181 N.W. 96; Wigmore on Evidence, pars. 650, 654, 658, and cases cited therein. In the case of Handley v. Stutz, as reported in 139 U.S. 417, 35 L.Ed. 227, 11 S.Ct. 530 (see, also, Rose's U.S. Notes), the Supreme Court of the United States used the following language:

"The stock of a corporation is supposed to stand in the place of actual property of substantial...