Rhode v. Bartholomew

• Decision Date: 25 October 1949
• Citation: 94 Cal.App.2d 272,210 P.2d 768
• Court: California Court of Appeals Court of Appeals
• Parties: , Blue Sky L. Rep. P 70,112 RHODE v. BARTHOLOMEW et al. Civ. 16926.

Page 768

210 P.2d 768

94 Cal.App.2d 272, Blue Sky L. Rep. P 70,112

RHODE v. BARTHOLOMEW et al.

Civ. 16926.

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

Oct. 25, 1949.

Rehearing Denied Nov. 15, 1949.

Hearing Denied Dec. 22, 1949.

Harry W. Elliott and Robert E. Moore, Jr., Los Angeles, for appellants.

J. Q. Gilchrist, Los Angeles, for respondent.

VALLEE, Justice.

Appeal by defendants from a judgment for plaintiff entered on a verdict of a jury in an action to recover compensation for services rendered in securing a purchaser of all of the capital stock of a corporation.

The complaint alleged these facts. About May 1, 1943, defendants entered into an oral agreement with plaintiff whereby they agreed to sell and transfer all of the capital stock of Neu-Bart Stamping and Manufacturing Company, a corporation, to any purchaser procured by plaintiff for a ocnsideration of $225,000, and agreed to pay plaintiff for his services 'in securing such purchaser and assisting in any such sale' all sums in excess of $225,000 that might be obtained from such sale. During July or August, 1943, plaintiff procured P. Seymour Heath and George W. Talbott as prospective purchasers of said stock; 'that thereafter for a period of six or seven months plaintiff negotiated with defendants and said P. Seymour Heath and George W. Talbott and with agents and employees of said Heath and Talbott, in respect to the sale and purchase of said stock.' About April 8, 1944, as a result of the work, efforts and services of the plaintiff, as aforesaid, defendants sold said capital stock to P. Seymour Heath and George W. Talbott, or one of them, and received therefor $250,000.

The answer denied the allegations of the complaint; and, as a special defense, pleaded that the services alleged to have been performed were performed by plaintiff as a broker in corporate securities, if performed at all, and that he was not licensed to act as such broker.

The cause was tried by a jury in 1947, resulting in a verdict for plaintiff. A motion by defendants for a new trial was granted. The cause was reset for trial. Thereafter plaintiff moved for leave to file an amended complaint. The motion was denied without prejudice. At the hearing of the motion the words 'that thereafter for a period of six or seven months plaintiff negotiated with defendants and said P. Seymour Heath and George W. Talbott and with agents and employees of said Heath and Talbott, in respect to the sale and purchase of said stock' were stricken. At the commencement of the second trial plaintiff moved to amend the complaint by striking therefrom the words 'and assisting in any such sale.' The motion was denied without prejudice. At the conclusion of the trial and before argument to the jury, plaintiff again moved to amend the complaint by striking the quoted words. The motion was granted. The jury rendered a verdict for plaintiff for $25,000. Defendants appeal from the judgment which followed.

Appellants contend that the services performed by respondent were those of a broker as the term is defined by the Corporate Securities Act; that he did not have a broker's license; that therefore he may not recover. The fact that respondent did not have a broker's license at any time during the transaction in question is not disputed.

In 1943, Neu-Bart Stamping and Manufacturing Company, a corporation, was engaged in the business of manufacturing stamps. Appellants Neubauer and Bartholomew owned all of its capital stock; each owned one-half. In May, 1943, respondent called Bartholomew on the telephone and asked him 'if they would be interested in selling.' Bartholomew told him to 'come out and see me.' The next day respondent called on Bartholomew and told him he had a man who was interested in buying the stock. Bartholomew told him that he wanted him to talk to Neubauer. Thereafter, several conversations took place between respondent and Neubauer. In one Neubauer said the price would run from $210,000 to $225,000. Respondent said, 'Well, give me something definite, please.' In a few days Neubauer told him that the price was $225,000 'net', and that he would get his money 'by adding to that price.' At that time respondent asked Neubauer for a financial statement and suggested that he prepare one and not put the name of the company on it. Respondent had a prospective buyer for the stock at the time he first called Bartholomew, a Mr. Talbott. He had known for about a month before he spoke to Bartholomew that Talbott was interested in buying the stock. After he had obtained the price from Neubauer, respondent showed Talbott the financial statement, told him about the plant and that the price of the stock was $250,000. Neubauer, Talbott and respondent then met at respondent's office and respondent introduced Neubauer to Talbott. Talbott told respondent that he did not have enough money to purchase the stock, and said that a Mr. Borden might be interested in purchasing it. A short time later a meeting took place in Borden's office, at which respondent, Neubauer, Bartholomew, Talbott and Borden were present. At the meeting there was some discussion about the plant, and near the end Borden said, 'What is the price?' Respondent replied, 'Well, the price is $250,000.00, Mr. Borden, that is the only reason I am here, I guess, to put the price on the property.' Respondent did not take any part in the conversation other than to make this statement.

About a month later Talbott introduced respondent to a Mr. Health as a prospective purchaser. Between the time that respondent first called Talbott's attention to 'the purchase of the stock' until respondent met Heath, he (respondent) was at Talbott's office twice and at his home once. On each occasion it was in regard to purchase of the stock. Respondent told Heath the price was $250,000. Respondent told Heath and Talbott that so far as he knew the plant was still for sale; that the business of the company was stamp manufacturing, and that it had war contracts. Heath met respondent at the latter's office on one occasion; Talbott was there with respondent on another occasion. On each occasion the purchase of the stock was discussed. Respondent went to Heath's office three to five times and talked to Talbott or Heath, or both, about various features of the 'stock purchase deal.' Heath met appellants and they had some negotiations relative to the sale of the stock at which respondent was not present. Neubauer became provoked at Heath and ceased dealing with him. Talbott mentioned a Mr. Cunningham to respondent as a prospective purchaser. Later Talbott arranged to have respondent and Bartholomew meet Cunningham. Respondent knew that Cunningham was connected with Heath, but did not disclose the fact to appellants. He had told Bartholomew that Cunningham was a prospective purchaser. Respondent met Cunningham and introduced Bartholomew to him. The three had lunch together and Bartholomew and Cunningham talked about the purchase of the plant. Respondent testified that that was the purpose of the lunch and that he could not recall whether he participated in the discussion except that he stated the price was $250,000. After the lunch, appellants negotiated with Cunningham respecting the purchase. Respondent did not participate in these negotiations. Talbott and Cunningham were acting for Heath. Cunningham was given an option to purchase at $250,000, which was not exercised because of a dispute as to how the details should be handled. Heath then employed a Mr. Franklin to see if he could purchase the stock. The stock was sold to Franklin for $250,000 on April 7, 1944. Franklin did not disclose to appellants that he was acting for Heath until the purchase was completed. Respondent did not participate in the negotiations with Franklin. The actual purchaser of the stock was either Heath or Trans-Pacific Corporation, of which Heath was chairman of the board of directors. Heath paid Franklin $5000 for this and other services.

Prior to the commencement of the present action, respondent sued Heath, Talbott, Cunningham and Trans-Pacific Corporation for his services in effecting the purchase of the stock and recovered judgment against Heath, Talbott, and Trans-Pacific Corporation for $4,707.75, which was paid.

As we have said, respondent, in the verified complaint in the present action, stated that 'during July or August of 1943, plaintiff procured one P. Seymour Heath and one George W. Talbott as prospective purchasers of said stock; that thereafter for a period of six or seven months plaintiff negotiated with defendants and said P. Seymour Heath and George W. Talbott and with agents and employees of said Heath and Talbott, in respect to the sale and purchase of said stock.' On the trial he testified that the foregoing statement was true. He was interrogated and testified as follows: 'Q. I will ask you if it is or is not a fact that for a period of six or seven months you negotiated with the defendants and with P. Seymour Heath and George W. Talbott and with agents and employees of said Heath and Talbott in respect to the sale and purchase of said stock? A. Yes.'

Neubauer testified that respondent was to find a purchaser 'for us to negotiate with'; that they (appellants) did not tell respondent, 'You can go out and sell our stock to someone'; that respondent had no authority to sell and accept payment or to enter into any contract to sell the stock; that he had no authority to do anything except find a prospective purchaser with whom appellants could negotiate for the sale of the stock; that respondent was to introduce them 'to a prospective purchaser, tell him about the plant, facilities we had and so forth.' Bartholomew testified that the only thing respondent was to do was to introduce appellants to a prospective purchaser; and that, as far as he knew, all respondent did was to bring these various prospective purchasers to appellants.

At the...