Lyons v. Stevenson

• Decision Date: 04 January 1977
• Court: California Court of Appeals Court of Appeals
• Parties: , Blue Sky L. Rep. P 71,340 Frederick Ogden LYONS, Plaintiff and Respondent, v. Cyril STEVENSON, Defendant and Appellant. Civ. 37076.

Page 457

135 Cal.Rptr. 457

65 Cal.App.3d 595, Blue Sky L. Rep. P 71,340

Frederick Ogden LYONS, Plaintiff and Respondent, v. Cyril STEVENSON, Defendant and Appellant.

Civ. 37076.

Court of Appeal, First District, Division 2, California.

Jan. 4, 1977.

[65 Cal.App.3d 597] William H. Hoogs, Berkeley, for defendant and appellant.

Robert S. Rutledge, Oakland, for plaintiff and respondent.

BRAY, Associate Justice. ^*

Defendant and appellant Cyril Stevenson appeals from a judgment of the Alameda County Superior Court in favor of plaintiff and respondent Frederick Ogden Lyons.

ISSUES PRESENTED

1) Plaintiff is entitled to a commission even though he is not licensed as a corporate securities broker.

2) The evidence supports the conclusion that plaintiff acted in the capacity of a 'finder' rather than a 'broker.'

3) The trial court properly pierced the corporate veil.

RECORD

A complaint for a commission filed by plaintiff Lyons against defendants Sather Gate Mortgage Company and Cyril Stevenson contains the following allegations: ¹ Plaintiff is a duly licensed real estate broker who was employed pursuant to a written agreement by defendants to procure a purchaser for Sather Gate Mortgage Company. Defendants agreed to pay plaintiff a commission of 5 percent of the selling price of the mortgage company. On or about May 31, 1972, plaintiff procured Charles Heneveld and Empire Pacific Properties, Inc. to purchase the business and defendants sold the business to Charles Heneveld and Empire Pacific Properties, Inc. for $165,000. Defendants are indebted to plaintiff in the sum of $8,250.

Defendants answered and admit that the written agreement was executed and delivered to plaintiff and that the stock of Sather Gate Mortgage Company was sold to Charles Heneveld and essentially deny the other allegations contained in the complaint. For an affirmative defense defendants alleged that plaintiff is not licensed to act as an agent or broker in connection with the sale of securities (Corp.Code, § 25200 et seq.) and the written agreement is in violation of section 10176 of the Business and Professions Code.

Plaintiff later filed an amendment to the complaint alleging a second cause of action against defendant containing the following allegations: At all times mentioned herein defendant was the owner of or had control of all of the issued stock of Sather Gate Mortgage Company. On May 25, 1972, plaintiff was employed by defendant to find a purchaser of said business, Sather Gate Mortgage Company. Defendant, as owner of the business, agreed to pay plaintiff a commission of 5 percent of the selling price of the business as compensation for finding someone interested in the purchase of the property. Thereafter, plaintiff did procure a purchaser whom he introduced to defendant. It was defendant who negotiated the sale of all of the stock of the business for $165,000. Defendant refuses to pay the amount owing plaintiff ($8,250).

The action was tried before the Honorable Robert L. Bostick, sitting without a jury. Thereafter, findings of fact and conclusions of law were filed and judgment was entered in favor of plaintiff and against defendant in the amount of $8,250, plus interest and costs.

STATEMENT OF FACTS

On May 25, 1972, an agreement was drafted by defendant on the stationery of Sather Gate Mortgage Company and provided: 'We hereby agree to sell at 15% Above the Book Value, payable 5% To Fred Lyons (plaintiff)' and was singed 'Cyril Stevenson, Pres.'

Plaintiff, a licensed real estate broker testified as follows: When defendant indicated he wanted to sell Sather Gate Mortgage Company, he did not mention the sale of stock. After the May 25, 1972 agreement was executed, plaintiff went to see Charles Heneveld who had indicated at an earlier date that he was interested 'in getting into the loan business.' Plaintiff told Heneveld that Sather Gate Mortgage Company was available at the value of the assets of the company plus 15 percent. Defendant estimated the value of the assets to be $125,000. On May 31, 1972, plaintiff again saw Heneveld, who, at this time gave him a written offer to purchase 'Sather Gate Mortgage Company for the amount of $125,000, the total assets of the company,' plus 15 percent. Plaintiff took the offer to defendant who signed 'accepted' on the offer. Thereafter, plaintiff returned a copy of the offer to Heneveld. Plaintiff stated that he did not at any time indicate to Heneveld that he was authorized to sell stock nor did Heneveld mention the sale of stock to plaintiff.

Plaintiff further testified as follows: In March or April of 1973, he learned that defendant and Heneveled had entered into an agreement for the transfer of Sather Gate Mortgage Company in February of 1973. Plaintiff did not take part in any conversations or negotiations regarding the February 1973 agreement. The only conversations plaintiff had with defendant or Heneveld after the May 31 offer was accepted was to inquire when he would receive his commission. Plaintiff stated that he did not know in what manner or form defendant and Heneveld would effectuate the transfer of Sather Gate Mortgage Company.

Defendant, the only other witness at trial, testified as follows: He is a licensed real estate broker and at one time was licensed to sell securities, but the latter license has expired. He never really gave 'a thought' to whether plaintiff had a license to sell securities because at the time he was contemplating liquidating all his assets. He owns 87 percent of the stock of Sather Gate Mortgage Company, the remaining stock being held by his wife and the wife of a former employee. The two other stockholders agreed to the transaction before he entered into any negotiation for the sale of the company. Plaintiff was not present during any of the time he was negotiating with Heneveld. The final agreement he entered into with Heneveld was that Heneveld would pay $165,000 for the company. Out of this amount defendant was to receive $10,000 and plaintiff $5,000. Escrow was opened but the required payments were not made and escrow never closed.

1) Plaintiff is entitled to a commission even though he is not licensed as a corporate securities broker.

In Stoll v. Mallory (1959) 173 Cal.App.2d 694, 343 P.2d 970, the court considered the issue whether nonpayment of a commission could be excused because the plaintiff was not licensed under the Corporate Securities Law. In Stoll, the plaintiff, also a real estate broker, was retained to secure a purchaser for a radio station, not to find a buyer of stock. (Id. at p. 699, 343 P.2d 970.) From the outset of the transaction, there was no indication to the broker that any sale or disposition of corporate securities would be involved. The broker did not learn that the sale of corporate securities was involved until after he had brought the buyer and seller together.

The court in Stoll agreed with the trial court's finding that the contract between seller and buyer for the transfer of securities was neither contemplated nor included in the original brokerage agreement, but on the contrary was incident to a sale of the radio station business. (Id. at p. 699, 343 P.2d 970.) The court noted that the broker did not participate in the negotiations other than to bring the parties together and at no time did he represent himself as dealing in stocks or offer for sale or negotiate the sale of stock. (Id. at p. 699, 343 P.2d 970.)

The court in Stoll pointed out that under the Corporate Securities Law that no one may sell, offer to sell, negotiate for the sale of, or otherwise deal in any security issued by others, or act in the capacity of a broker or agent required to be licensed thereunder without such license. (Id. at p. 698, 343 P.2d 970.) The court then concluded that plaintiff did not violate the Corporate Securities Law because he did not purport to or engage in the business of dealing in stock, nor offer for sale or negotiate for the sale of, or sell, any stock. (Id. at p. 699, 343 P.2d 970.)

In Weber v. Jorgensen (1971) 16 Cal.App.3d 74, 93 Cal.Rptr. 668, the court considered whether the rule stated in Stoll could be applied to a situation where the real estate broker, who was not licensed under the Corporate Securities Law, knew that a real estate transaction, if successfully consummated, would result in the transfer of securities and could therefore bring an action to collect a commission on the real estate transaction. The plaintiff in Weber was a licensed real estate broker whose services were retained in writing by defendant for the purpose of locating a buyer for certain enumerated resort properties operated as Echo Chalet, Inc. (Id. at p. 76, 93 Cal.Rptr. 668.) Plaintiff in Weber in bringing the action to collect a commission alleged that defendant "was and is the sole and majority and controlling shareholder of" Echo Chalet. (Id. at p. 77, 93 Cal.Rptr. at p. 670.) The listing agreement was silent on the subject of the sale of any corporate property in which defendant held an interest or the shares thereof. 'At the time the listing was given to plaintiff, however, defendant told plaintiff that defendant would transfer title to the property by transferring all the stock of the corporation to a buyer of the property, as an incident to the sale of the property, and that the stock transfer agreement would be prepared and handled by an attorney and not by plaintiff.' (Id. at p. 77, 93 Cal.Rptr. at p. 670.)

The court in Weber stated, although plaintiff knew that the real estate transaction would result in the transfer of securities, 'Stoll points the way to the proper disposition of this appeal.' (Id. at p. 84, 93 Cal.Rptr. at p. 675.) The court accepted the rule that a contract to sell corporate shares made by a person without the required certificate from the Corporations Commissioner is illegal. (Id. at p. 84, 93 Cal.Rptr. 668.) And where the conduct of a broker brings him within the proscription...