Opinion
Rehearing Denied Feb. 4, 1932.
Hearing Granted by Supreme Court March 7, 1932.
Appeal from Superior Court, Los Angeles County; Dailey S. Stafford, Judge.
Action by E. E. Barton against the El Encanto Apartments, Incorporated, and others. From a judgment for plaintiff, defendants Catherine Bayne Stephens and others appeal.
Modified and, as modified, affirmed.
COUNSEL
C. M. Booth and Welburn Mayock, both of Los Angeles, for appellants.
Kimball Fletcher, of Los Angeles, for respondent.
OPINION
HOUSER, J.
From the record herein it appears that it was mutually agreed between plaintiff and the corporation defendant that the plaintiff would render certain services as an architect for the corporation in and about the proposed construction of an apartment building estimated to cost $4,600,000; that for the services thus to be performed plaintiff was to receive a 3 per cent. commission, to be calculated on the final cost of said apartment building; that "the said defendant corporation gave directions to, and did, increase the proposed cost of the said apartment building from the prior amount of $4,600,000 to the amount of $6,000,000"; that the said commission of plaintiff was to be paid 1 per cent. in cash and the remaining 2 per cent. thereof in shares of stock in the corporation, "to be applied upon the subscription by the plaintiff to $162,700 par value of shares of capital stock of the said defendant corporation"; that of the 1 per cent. of the said commission to be paid by the corporation to plaintiff in cash, it was agreed that the sum of $2,000 would be paid shortly after the execution of the contract, which sum was to be used by plaintiff in the payment of expenses incident to the general services to be performed by plaintiff; that said apartment building was never constructed; and that said defendant corporation "performed none of the promises made by it or obligations imposed upon it in or by said contract," except that the defendant corporation did pay to plaintiff the sum of $1,450, of which amount plaintiff expended the sum of $713.60 in and about the performance of said contract. Furthermore, that had the apartment building been constructed, the cost to plaintiff in performance of his part of the contract between him and the defendant corporation would have been the sum of $29,800. It further appears that "the par value of said capital stock of said corporation is $100 per share; that if the defendant corporation had performed its obligation under said contract, the capital stock of said corporation would now be worth at least $100 per share." The complaint also contained allegations concerning the several liabilities of each of the respective defendants, together with a demand for judgment against the corporation in the sum of $150,200, as well as a judgment "against each of the defendants herein, excepting only said defendant corporation, for the portion of the said $150,200 which the number of shares of said corporation set opposite the names of said defendants, respectively, in said schedule, bears to the total number of shares of capital stock of said corporation subscribed, issued or outstanding." A demurrer to the complaint was interposed by the defendants who are appellants herein, which demurrer was overruled by the trial court. Thereafter, on the failure of said defendants to answer the complaint, judgment was entered in accordance with the prayer of said complaint. It is from such judgment that the appellants herein have prosecuted the instant appeal.
The first point urged by appellants is that the damages which were awarded to plaintiff were not only speculative in character, but as well that such damages were not proximately caused by the breach of the contract. In that connection, appellants cite certain authorities which indicate that in an action of the nature of that here under consideration, where no evidence is presented to the trial court by which the value of the shares of stock may be determined, the plaintiff has failed to prove any damage--particularly where it appears that according to the provisions of the contract between the parties the plaintiff was entitled to receive a certain number of shares in a corporation not in existence and which corporation never was organized. Peek v. Steinberg, 163 Cal. 127, 124 P. 834; Eisenmayer v. Leonardt, 148 Cal. 596, 84 P. 43. However, as to the facts in each of said cases it is apparent that the essential difference between them and the pertinent facts herein is that in each of the cited cases it affirmatively appeared that on the respective trials thereof no evidence was introduced by which value of such shares of stock was or could have been established; whereas in the instant case, besides the presumption which favors the validity of the judgment in all respects, it is recited in the judgment that on the hearing, "evidence having been introduced, * * * it is ordered, adjudged and decreed," etc. But, in addition thereto, the facts of the instant case are distinguishable from those of either of the cited cases in that herein by the provisions of the contract between the parties the compensation for the services of plaintiff was definitely fixed, with the proviso that 2 per cent. of the final cost of the apartment building was to be "applied upon the subscription by the plaintiff to $162,700 par value of shares of capital stock of the said defendant corporation." In other words, although the amount of the commission in gross was agreed upon by the parties, the manner of payment of a portion thereof was changed from a cash consideration to an equal consideration as represented by shares of the capital stock in the corporation. The failure of the corporation to execute its certificate of shares of its capital stock in favor of plaintiff and to deliver the same to him could have no adverse effect upon the contractual right of the plaintiff by which he was entitled in gross to a compensation of three per cent calculated upon the final cost of the apartment building.
Appellants also object to the judgment on the ground that other than "directions" given by the corporation to "increase the proposed cost of the apartment building from the prior amount of $4,600,000 to the amount of $6,000,000," the record herein contains nothing on which the assumption may be based that the original agreement of the parties to "erect a certain apartment building * * * at a cost of $4,600,000" in reality was changed to the extent that the commission of 3 per cent. to be paid to plaintiff on the "actual final total cost of said apartment building" may be said as a matter of law to have been earned by plaintiff on said sum of $6,000,000.
On examination of the complaint in the action it appears that the agreement between the parties was that the apartment building would be erected "at a cost of $4,600,000," but that plaintiff was to receive his commission on the "actual final cost of said apartment building." Since the apartment building was never constructed, manifestly it is impossible to determine its "final cost." Although it may be true that the corporation gave "directions to and did increase the proposed cost" to a specified sum, it does not follow that either before the construction of the apartment building would have been commenced, or at any practicable time before its completion, the corporation might not have given "directions" either to return to the original "proposed" cost of the apartment building, or even to decrease in amount its "proposed" cost. As far as the allegations of the complaint disclose, no agreement was entered into between plaintiff and the corporation concerning any increase in the cost of the building. It is clear that in that regard the corporation, acting on its own initiative and without any binding obligation or liability to any person, had a right to change its "mind" in any way and as often as to it seemed desirable. According to the provisions of the contract between the parties, the corporation became liable to plaintiff only for "three per cent of the actual final cost of said apartment building." But since theretofore it had been definitely agreed by the respective parties to the contract that the apartment building would be erected "at a cost of $4,600,000," in such circumstances it becomes plain that that amount, rather than any other amount thereafter possibly contemplated by the corporation, should form the basis for the computation of the amount of the commission which would become due to plaintiff.
But there is additional reason for the conclusion hereinafter indicated that as rendered the judgment is an incorrect expression as to the liability of each of the respective appellants. Nor in reaching such conclusion has this court lost sight of the particular circumstance that, although plaintiff was a subscriber for 1,627 shares of the capital stock of the corporation, no certificate of ownership thereof had been issued to him. As far as the corporation was concerned, by the instant action plaintiff sought only to recover his commission of 3 per cent. based upon the final cost of the apartment building; and as far as concerned the individual defendant stockholders, the action was brought for the purpose of establishing the personal statutory liability of each of them for the alleged debt of the corporation and the recovery of a judgment therefor. As between plaintiff and the corporation, the fact that, on the one hand, a possible cause of action existed in favor of plaintiff because of the failure of the corporation to issue to him the certificate of shares of stock to which, on payment of the purchase price thereof, he was entitled; or, on the other hand, that the corporation had a right to maintain an action against plaintiff on his unpaid stock subscription, or to offset such claim against his instant action for commission--was of no consequence or materiality in the ultimate result to the defendant stockholders following the determination of that which because of the failure of the corporation to defend the instant action, became an admitted or an adjudicated liability against it. If not before, at least as soon as such liability of the corporation had been judicially established, under the provisions of the statute (section 322, Civ. Code), each stockholder of the corporation became individually and personally liable for such proportion thereof as the amount of shares of the capital stock of the corporation owned by him bore to the whole of the subscribed capital stock of the corporation. Referring to the record herein, it is discovered that the names of the alleged respective stockholders in the corporation, together with the number of shares therein owned by each of such stockholders respectively, are set forth in the complaint in the action, and that the "total number of shares of the capital stock subscribed to or outstanding was and is 8251 shares." Presumably it was upon such allegation in the complaint in the action that the proportionate liability of each of the stockholders who are appellants herein was computed. But as hereinbefore appears, plaintiff was a subscriber to stock in said corporation for 1,627 shares thereof. His name as the owner of such shares of stock does not appear in the alleged list of stockholders set forth in the complaint; nor on calculation of the respective liabilities of the other stockholders does it appear that the shares of stock owned by plaintiff were taken into consideration. If in identical circumstances any other creditor of the corporation had brought an action similar in character to that here under consideration against the corporation and its stockholders, it is unlikely that any one would seriously question the liability of plaintiff herein as a stockholder of the corporation. Accepting as true the allegations contained in the complaint in the instant action to the effect that prior to the creation of the liability upon which the action is founded plaintiff had subscribed for 1,627 shares of stock in the corporation, it follows that that number of shares of stock added to 8,251 shares of such stock, or a total of 9878 shares, rather than 8,251 shares, as stated in said complaint, should form the basis for the computation of the proportionate liability of each of the appellants herein.
The record herein further discloses the fact that, in attempting to determine the liability of each of the several stockholders in the corporation, no account was taken of the fact that, according to the admission of plaintiff, he had received from the corporation the sum of $1,450, but that of that sum he had expended the sum of $713.60 "in performing said contract." It is therefore apparent that, as against the commission due to plaintiff in the matter, not only the sum of $29,800 which plaintiff alleges would have been expended by him "in performing to completion all details and obligations required of the plaintiff under said contract," but as well the sum of $736.40, should be offset before any computation should be made regarding the liability of each of the several appellants herein.
No other question presented by appellants requires consideration by this court.
In pursuance of the conclusions herein expressed, it is ordered that as to appellants herein the judgment of the lower court be and it is modified so that in the several specified amounts said judgment against the said appellants shall be as follows, to wit: Catherine Bayne Stephens, $78,868.31; Lunette W. Smith, $1,392.82; Maude F. Bollman, $761.70. As thus modified, the judgment is affirmed.
We concur: CONREY, P. J.; YORK, J.