Freeman v. Jergins

• Decision Date: 27 May 1954
• Court: California Court of Appeals Court of Appeals
• Parties: , Blue Sky L. Rep. P 70,240 FREEMAN v. JERGINS et al. Civ. 19740.

Page 210

271 P.2d 210

125 Cal.App.2d 536, Blue Sky L. Rep. P 70,240

FREEMAN v. JERGINS et al.

Civ. 19740.

District Court of Appeal, Second District, Division 3, California.

May 27, 1954.

Rehearing Denied June 14, 1954.

Hearing Denied July 21, 1954.

Hartke & Brant, Los Angeles, for appellant A. T. Jergins.

Clock, Waestman & Clock, Long Beach, for appellants Lowell Stanley.

Charles P. Cotton as Executor of the Estate of Charles M. Cotton, Deceased.

Mitchell, Silberberg & Knupp, and Arthur Groman, Los Angeles, for respondent Y. Frank Freeman, Jr.

SHINN, Presiding Justice.

Plaintiff recovered judgment of $149,560.84 against A. T. Jergins, Lowell Stanley and Charles P. Cotton, as executor of the Last Will and Testament of Charles M. Cotton, deceased. The amount was determined to be the reasonable value of plaintiff's services in introducing one John W. Lee, a representative of Smith, Barney & Co., a New York investment partnership (hereinafter called Smith-Barney), to defendants, Jergins, Stanley and the late Charles M. Cotton, under an express oral agreement by which the three last named agreed '* * * that if a sale of the stock of the Jergins Oil Company was effected through the efforts of said Lee or the said firm of Smith, Barney & Co., said defendants would pay to plaintiff for his services in finding and arranging an introduction of said Lee to said defendants, Jergins and Stanley, and to said C. M. Cotton, a reasonable compensation, not only for the stock which stood in their own names but for that which they controlled and which they represented to be approximately 65% of the outstanding stock of the Jergins Oil Company.' Plaintiff was obligated to pay Robert Troutman, Jr., an attorney of Atlanta, one-half of the compensation which he might receive, Troutman having arranged for plaintiff to meet Lee. The stock of the Jergins Oil Company was sold to Lehman Brothers of New York for more than $30,000,000. Plaintiff demanded compensation, which defendants refused to pay. The present action was brought upon the express contract, and an additional common count, both seeking compensation in the amount of the reasonable value of the services rendered. Defendants Jergins, Stanley and Charles P. Cotton, as executor, appeal.

Preliminarily it may be mentioned that the young Mr. Freeman was in the ice cream business. Neither he nor Lee nor Smith-Barney was licensed as a broker in California; Smith-Barney first appeared in the capacity of a possible purchaser of the stock; later the firm was authorized by defendants to find a purchaser for the stock of the defendants and certain of their associates, with the understanding that all the stockholders would have the same opportunity to sell; numerous efforts in this direction were unsuccessful; thereafter Lehman Brothers purchased all the stock of the company. The court found that plaintiff had performed his agreement; that the Lehman Brothers purchase resulted from the efforts of Lee and Smith-Barney; that the shares of stock owned and controlled by the three defendants amounted to 35,483 shares, and that the same sold for $14,956,084, one per cent of which sum was awarded as a judgment against the three defendants.

The questions upon the trial were the following: (1) What contract, if any, was entered into between plaintiff and defendants? (Charles M. Cotton will be referred to as a defendant.) (2) Was the contract one which had an illegal purpose, namely, the rendition of services by unlicensed persons for which a broker's license was required under California law? (3) Did the activities of plaintiff in performance of his agreement amount to the rendition of services for which a permit was required? (4) Was the purchase by Lehman Brothers effected through the efforts of Lee or Smith-Barney? (5) Was Troutman an indispensable or a necessary party to the action? (6) Was the contract with plaintiff joint or several as to the defendants? (7) Was the action barred by the statute of frauds?

The court found that the contract was in terms as stated above and that it created a joint obligation of the defendants. Findings on all other issues were in favor of plaintiff.

There was not a great deal of conflict in the evidence as to the material facts. There were two principal factual questions, namely, (1) as to the terms of the contract between plaintiff and defendants, and (2) whether the sale to Lehman Brothers resulted from the efforts of Lee or Smith-Barney. It is contended that the findings on these issues are without support in the evidence, and that all the other conclusions of the court on the material issues, factual or legal, were erroneous. There is an additional question, namely, did the court err in refusing to allow defense counsel to cross-examine Troutman under § 2055, Code of Civil Procedure, or to inspect certain letters passing between plaintiff and Troutman, and in refusing to permit the letters to be marked for identification?

In order to avoid repetition we shall state the facts which relate to the several contentions on the appeal as each contention is discussed.

There was evidence, consisting of the testimony of plaintiff, and certain of the defendants, as well, that plaintiff was promised compensation in an unsettled amount if he would arrange to introduce Lee to the defendants, and if, as a result of the efforts of Lee or Smith-Barney a sale of the stock was made. On behalf of Cotton it is said there was no evidence that he entered into such an agreement. Upon motion the testimony of plaintiff, Jergins, Stanley and Troutman as to occurrences prior to the death of Cotton was stricken under § 1880(3), Code of Civil Procedure. There was other evidence, however, that Cotton was fully aware of the introduction of Lee by plaintiff and the purpose of it. He was present at the first meeting when Lee told defendants that Smith-Barney would not pay anything as compensation to plaintiff and Troutman and would prefer that the matter be not discussed in their presence. The court properly inferred that Cotton understood plaintiff was not acting as a mere volunteer but expected to receive some compensation from the three defendants to whom he introduced Lee. If no amount was agreed upon, nevertheless Cotton, as well as the other defendants, accepted and had the benefit of plaintiff's services, with knowledge of the purpose of the same. In the absence of an agreement as to price the obligation of the recipient of services is to pay the reasonable value thereof. 27 Cal.Jur. 207, 208; Muncy v. Thompson, 26 Cal.App. 634, 147 P. 1178. There was undisputed evidence that plaintiff performed the agreement on his part, and evidence from which the court could properly conclude that the amount of plaintiff's compensation was not agreed upon. We therefore conclude there was substantial evidence that the parties entered into an agreement in terms as found by the court.

Defendant Jergins has filed briefs separate from those of his co-defendants. They all assert invalidity of the contract with plaintiff, in that it called for services of plaintiff, Lee and Smith-Barney, for which they were required to be licensed under the Corporations Code, §§ 25700-25713, and that the services rendered pursuant to the employment were such as are forbidden to unlicensed persons. Plaintiff replies that his agreement did not call for the services of a broker; that he was a mere 'finder,' and as such was not required to have a broker's license; that he rendered no services as a broker; that his agreement with defendants did not require in its performance any services as brokers of himself or Lee or Smith-Barney; that if Smith-Barney undertook to or did act in the capacity of a broker it did not act as his agent, or in furtherance of his agreement with defendants.

In discussing this point additional facts must be stated. These may be taken from the findings which are, for the most part, merely a recital of evidentiary facts. In October, 1949, plaintiff learned from Troutman that he was in touch with people who were interested in buying valuable oil properties. He requested plaintiff to find properties for sale and promised plaintiff half of any commission he might receive. Plaintiff made inquiries of Bolsa Chica Oil Company and Russell Havenstrite, an independent operator, but was told that neither had anything to sell. Not having found any property for sale plaintiff made inquiry of Jergins in October or November, 1949 and he gave Jergins a letter which he had received from Troutman in order to show what his relations were with Troutman. In the following month he gave Jergins an additional memorandum he had received from Troutman and he offered to bring about an introduction to Troutman's people. Informed by Jergins that a sale of the Jergins Company stock would be considered, plaintiff went to Atlanta in December, 1949 and was informed that John W. Lee was representing Smith-Barney. In March, 1950 plaintiff telephoned Lee in Georgia, with the result that both Troutman and Lee came to Los Angeles, where plaintiff was introduced to Lee. In the meantime plaintiff had discussed the matter of a possible sale with Jergins several times. Plaintiff, Troutman and Lee, met with Jergins at a country club for lunch, following which they went to the home of Stanley, where Lee was introduced to Stanley and Cotton and disclosed his representation of Smith-Barney which firm, he said, would not look to the sellers for compensation in any deal that was made, and would not pay anything to Troutman or Freeman, to which Jergins stated 'we will take care of Frank (plaintiff) and Troutman.' Jergins had knowledge of the arrangement between plaintiff and Troutman for a division of compensation. In May, 1950 plaintiff met with defendants and the latter suggested $45,000 as compensation in the event a sale were made. Plaintiff refused to agree to this figure. (This evidence was stricken as to the estate...