SAVAGE v. MAYER

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

SAVAGE v. MAYER.*

Civ. 15781.

Decided: May 21, 1948

Oliver O. Clark, Robert A. Smith, and Pat Ford, all of Los Angeles, for appellant. A. S. Goldman and Chas. I. Rosin, both of Los Angeles, for respondent.

In this action, based upon alleged fraud of the defendant in a transaction involving the purchase of shares of stock, plaintiff obtained judgment for $26,400, and defendant appeals.

The findings were made by referring to paragraphs of the complaint and stating whether or not the allegations therein were true. Since the trial court found that the allegations of the complaint were true, except as to a few comparatively minor matters, the substance of the complaint should be stated here.

In the complaint herein, as a first cause of action, it is alleged as follows: That on November 15, 1944, plaintiff and defendant, for their mutual benefit and for the purpose of acquiring sufficient capital stock of the Pig'n Whistle Corporation to enable them in connection with other stockholders as a group to elect members of their selection as directors of said corporation, entered into an oral agreement with each other to the effect that each of the parties hereto would purchase an agreed number of shares of said stock; that the defendant at said time informed the plaintiff that, in the course of purchasing shares of said stock for himself he would also, without any expense or cost to the plaintiff or profit to himself, purchase for plaintiff the stock desired by plaintiff, and that he would purchase the said stock for the plaintiff at the lowest price at which it could be acquired; that the defendant was not at said time or any other time mentioned in the complaint a licensed broker so as to entitle him to act as a broker or agent in purchasing shares of stock for other persons and was not entitled to charge or receive any compensation in acting for other persons in the purchase of shares of stock; that during December, 1944, the defendant informed the plaintiff that he had purchased 9,000 shares of said stock from various persons at $20 per share and for the total sum of $180,000, and that he had agreed to pay said persons for and on behalf of plaintiff the said $180,000 for said 9,000 shares, and that said price of $20 per share was the lowest price at which said stock could be purchased; that pursuant to said representations of defendant the plaintiff paid to defendant, during November (December), 1944, the sum of $180,000 as the purchase price of said stock; that in truth and in fact the defendant did not purchase the said stock from various persons and did not arrange for the purchase thereof at $20 per share or for $180,000, but on the contrary the agreed purchase price of said shares of stock was not $180,000 but was $153,000, and was not at $20 per share but was at $17 per share, and the amount paid by the defendant for said stock was $17 per share and the total sum of $153,000 and no more and the defendant, without the knowledge of the plaintiff, fraudulently retained for himself the sum of $27,000 of the money paid by the plaintiff for the purchase of said stock, and the plaintiff was defrauded in the sum of $27,000; that the said false representations made by the defendant were made for the purpose of defrauding and deceiving the plaintiff, and they were false and known by the defendant to be false, and were made for the purpose of causing the plaintiff to act thereon and to defraud him; that the plaintiff believed said representations to be true and relied and acted thereon and was deceived and defrauded by reason thereof, and as a result thereof plaintiff paid to defendant $180,000 instead of $153,000, the actual purchase price of said stock, and that by reason thereof plaintiff was damaged in the sum of $27,000; that by reason of the business association between plaintiff and defendant the plaintiff reposed his trust and confidence in the defendant and the defendant undertook to act for the plaintiff in trust and in confidence and for the benefit of the plaintiff and without profit to himself, and plaintiff at all times relied upon the belief that the defendant was so acting in trust and confidence.

Also in said complaint, as a second cause of action, it was alleged as follows: That plaintiff adopts all the allegations of the first cause of action as a part of said second cause of action, ‘as fully as though set out in full’; that about December, 1944, the plaintiff paid to defendant for the use and benefit of plaintiff the sum of $180,000 ‘for the purpose of defendant purchasing and acquiring for plaintiff 9,000 shares of capital stock of Pig'n Whistle Corporation’; that the defendant ‘expended of the said sum for the purchase of said stock’ only the sum of $153,000 and retains $27,000 which now is and at all times has been the property of plaintiff and that $27,000 is now due from the defendant to the plaintiff; that the plaintiff has made demand upon defendant for said $27,000 and defendant has failed to pay any part thereof.

The exceptions, above referred to, wherein the court did not find the allegations of the complaint to be true, were as follows: That the money paid by plaintiff to defendant was paid in December, 1944, and not in November, 1944; that defendant had expended $600 for the benefit of plaintiff as taxes and other expenses in said transaction, and that the amount in which plaintiff had been defrauded was $26,400 and not $27,000. Further, it appears that the court, in making its findings by such reference method, failed to refer to paragraph II of the second cause of action. That such failure was an inadvertence is indicated by the fact that the court referred to paragraph I of the second cause of action and found that the allegations thereof were true, and then referred to paragraph III thereof twice and found twice that the allegations of paragraph III were true. Irrespective of the reason for such failure, the result is that the court failed to find, by specific reference to said paragraph II, that the allegations of paragraph II of the second cause of action were true. That paragraph was to the effect that plaintiff paid to defendant for the use and benefit of the plaintiff the sum of $180,000 to be used in said stock transaction, and that defendant expended only $153,000 of said sum and retained $27,000 which is the property of, and which is due to, the plaintiff. In its other findings, however, the court found in effect that the matters alleged in paragraph II were true. As above shown, the court found that plaintiff believed, relied and acted upon, and was deceived and defrauded by, the representations of defendant and as a result thereof plaintiff paid to defendant $180,000 instead of $153,000, the actual purchase price of said stock, and that by reason thereof plaintiff was damaged in the sum of $27,000; and that by reason of the business associations between plaintiff and defendant plaintiff reposed trust and confidence in defendant and defendant undertook to act for plaintiff in trust and confidence and for the benefit of plaintiff.

Appellant's first contention is in effect that the finding of fraud is not supported by the evidence. This contention is not sustained. The evidence shows that defendant, at a time when he was in need of money, initiated the negotiations with plaintiff relative to defendant purchasing for plaintiff stock of the Pig'n Whistle Corporation, in order that the amount of stock to be so acquired by plaintiff and the amount of stock then owned or to be acquired by other designated persons might be sufficient to give plaintiff and said other persons, as a group, control of the company; that at that time Schwabacher & Company of San Francisco owned approximately 25,000 shares of the stock and had the controlling interest in the company; that at that time Mr. Frank Gentles, who resided in San Francisco, owned 12,000 shares. The plaintiff testified in part that in the early part of November, 1944, defendant told him he thought the Pig'n Whistle Corporation could be acquired on a reasonable basis, and that he then asked plaintiff if he would be interested in going into a combination, consisting of plaintiff, defendant, Mr. Gentles, and Mr. Louis B. Mayer, brother of defendant, that would take over the Pig'n Whistle Corporation; that plaintiff replied that it looked like a good deal; that a few days later, at the request of defendant, plaintiff went to defendant's apartment and met Mr. Gentles; that on that occasion, prior to the arrival of Mr. Gentles, defendant told plaintiff that Mr. Gentles owned 12,000 shares of the stock and that Mr. Gentles was dissatisfied with the Schwabacher management and that he would be glad to go in with plaintiff and defendant if they could form a group that could buy out the corporation, and that Mr. Gentles would stay in and would work with them in making a deal; that at that meeting Mr. Gentles said he was very anxious to go into a deal whereby the Schwabacher interests could be purchased and that he would be glad to stay in the company and work with any group that would be interested in coming in and taking out the Schwabachers; that it was then discussed at that meeting that defendant should go to San Francisco, and, with the assistance of Mr. Gentles, should see what dead could be made with the Schwabachers; that a few days thereafter the defendant went to San Francisco; that defendant returned about five days thereafter and told plaintiff that he had a contract with the Schwabachers whereby they gave him five days to decide whether or not he would accept a deal that they had offered him; that plaintiff and defendant then discussed the contract and decided that the deal was not satisfactory, and they let the contract expire; that about December 3rd defendant said that they should buy some stock off the San Francisco Stock Exchange, and that Mr. Gentles had 12,000 shares and if plaintiff and defendant bought a certain amount of stock they would have Schwabacher wondering who would control the company; that plaintiff replied that if defendant would buy 3,000 shares he (plaintiff) would buy 3,000 shares provided that Mr. Gentles could get it off the stock market at a reasonable price; that defendant said he thought it was a good idea and that he had just returned from China on a refugee ship, and that he did not have money to buy stock with, but a friend of his, a Mr. Fingerman, would buy 3,000 shares and keep it; that the next day defendant went to San Francisco; that when he returned he said that Mr. Gentles was very much interested in plaintiff and defendant buying some stock and that Mr. Gentles would get 3,000 shares for plaintiff and 3,000 shares for Fingerman off the stock exchange and send the stock to them; that within a few days defendant told him that 6,000 shares had arrived at the Bank of America in Los Angeles, that 3,000 shares were for plaintiff and 3,000 shares were for Fingerman, that the price was $60,000 or 3,000 shares at $20 a share, that Mr. Gentles had gotten the stock off the exchange and that they would have to pay a little more than the regular price on the exchange in order to get that amount; that plaintiff replied that if that was the best they could do on the exchange it was all right with plaintiff; that plaintiff and defendant went to the bank about December 8th and plaintiff paid $60,000 to the bank, which was the face amount of a draft presented by the bank, and received 3,000 shares of stock; that defendant told plaintiff that Fingerman ‘had already taken up’ his 3,000 shares; that thereafter defendant said that Mr. Gentles had 12,000 shares and they had 6,000 shares which amounted to 18,000, that if they had another 6,000 they would have 24,000 which would be practically as much as Schwabacher; that when they had 24,000 shares he would be able to get a fair deal from Schwabacher; that defendant then told plaintiff that Mr. Gentles would continue to get the stock off the exchange and send it to them; that about December 14th a second lot of stock arrived at the bank and plaintiff and defendant went to the bank and plaintiff paid $60,000 or $20 a share to the bank, upon a draft, and received another 3,000 shares of stock; that defendant told plaintiff that Fingerman had taken another 3,000 shares; that defendant then said that with their 12,000 shares and the 12,000 that Mr. Gentles had he was in a good position to deal with Schwabacher and that he was going to San Francisco for that purpose; that about December 20th, when defendant returned from San Francisco, he said he was unable to do any business with Schwabacher while Gentles was ‘in the picture’ owning some of the stock, so that he (defendant) and Schwabacher bought Gentles' stock—that Schwabacher took 6,000 shares and he took 5,700 at $20 a share; that plaintiff replied that he could not see any sense in that—that they were in a position to talk business with 24,000 shares and that they had then disposed of a considerable portion of the 24,000 shares and that would leave them in a bad position because Mr. Gentles was one of their partners in the deal and he was willing to go along with them; that defendant said he was going to make a good deal since Gentles was out, but ‘with Gentles in the picture there was just no change to make a deal’; that defendant said that the 5,700 shares he had bought were then in a brokerage house that was carrying it for him until he could get the money to pay for it, and he asked plaintiff to put up some more money to carry that stock; that about three days later (about December 23rd) plaintiff consented to put in some more money, and defendant said that when that was straightened out he would get a contract from Schwabacher and they would never have to put in any more money because his brother, Louis B. Mayer, would take care of the deal; that plaintiff then paid $28,000 to defendant to apply on the brokerage house account and in order to get title in himself to a pro rata part of the 5,700 shares at $20 a share, and for the purpose of carrying the whole 5,700 shares for a while, which matter of paying for all the stock, defendant said, had to be straightened out before he could deal with Schwabacher; that on December 28th defendant said that he had to have more money to carry the stock at the brokerage house, and on that date plaintiff paid him $32,000 more, making a total of $60,000 additional for 3,000 shares of the 5,700 shares which defendant was trying to buy through the brokerage house; that defendant at that time said that all of Gentles' stock had been sold in one transaction to him and Schwabacher; that after plaintiff paid the last $60,000 the additional 3,000 shares were delivered to him; that plaintiff did not know until several months later that stock he had previously purchased was Gentles' stock and that he had paid $20 a share for the stock that defendant had agreed to buy from Gentles at $17 a share.

Plaintiff testified further that thereafter in the early part of 1945 a group of persons, including Mr. Gentles who had repurchased stock in the company, and including himself, a Mr. Hirschberg, and the defendant, obtained a loan of $465,000 from a bank and bought all the Schwabacher stock and acquired control of the company; that Mr. Gentles becamse the chairman of the board of directors and plaintiff became a director; that Louis B. Mayer never put any money into the deal; that defendant did not put much money into the deal and that which he put in was a part of the money he obtained in charging plaintiff $20 a share instead of $17 a share for the 9,000 shares of stock; that in April, 1945, after the whole deal had been closed and after the meeting when the new directors had been elected, plaintiff told defendant that Mr. Hirschberg (treasurer of the company) had told him that all the stock that plaintiff bought originally had come from Gentles at $17 a share; that defendant replied, ‘That's right,’ and that he had to have money to work on the deal and that he had a right to make a profit on plaintiff's purchase of stock; that at that time plaintiff told defendant that defendant, Gentles and plaintiff were supposed to be partners in the deal and were the ones who were going to put the deal over; that defendant replied that that did not make any difference to him; that also at that time plaintiff told defendant that he had been informed that defendant had obtained an option from Gentles to sell his stock at $17 a share, and that, at the time he obtained it and during the time defendant was arranging for plaintiff to go into the group deal with Gentles, defendant had told Gentles that ‘the deal was off,’ and that he had a buyer down south who might buy his stock; that defendant replied that it did not make any difference to him; that plaintiff would not have bought a share of the stock from anyone if he had known that Mr. Gentles was going to be out of the deal, because he was the keynote in the whole transaction.

Mr. Gentles testified in part that he is chairman of the board of directors of the Pig'n Whistle Corporation, a director of Pacific Mutual Life Insurance Company, and a director of other companies; that he first met defendant in July, 1944, and first talked with him in September, 1944, about the stock; that he told defendant that he had 12,000 shares of Pig'n Whistle stock and that he was willing to sell it or to go in with a group if they could get a group to buy the controlling interest; that defendant said he would try to get a group to buy the control; that at another time he told defendant that if he got a group, willing to buy control, he would hold his stock and, if necessary, would buy more; that in a conversation with plaintiff and defendant in September, 1944, he told them that he wanted either to be in one group to control the company or to sell his stock and get out as a minority stockholder; that after plaintiff left them, at the place of that conversation, defendant said he believed he could get plaintiff interested in going in on a controlling deal; that later defendant told him that he thought plaintiff would go in on a group deal; that defendant also said that his brother, Louis B. Mayer, would put up all the money necessary; that during November defendant told him many times that he was still trying to get a group together; that in the first part of December defendant said that he had been unsuccessful in getting a group together because his brother had been sick, and that he could not get others to come in on the deal; that defendant then told him that he thought he could sell his stock if he (witness) wanted to sell it; that he (witness) replied that he wanted to sell it because he did not like to be a minority stockholder when he had no confidence in the management; that he (witness) then gave defendant a 30-day option to sell his stock at $17 a share, and defendant said that he thought he could sell it within that time because he had many friends in the movie colony who would buy it; that at the time he gave the option there was no mention of plaintiff's name, and that he (witnesse did not know that there was any transaction with plaintiff or that plaintiff was going to buy the stock; that if he had known that plaintiff was ready to buy stock and join a group with the witness he (witness) would have preferred to stay in the corporation; that in February, 1945, about two months after he had sold his stock, he (witness) repurchased stock at $19 a share and joined with plaintiff and others as a group in purchasing the Schwabacher stock; that when the group was arranging the bank loan and arranging to buy the Schwabacher stock, he learned for the first time that plaintiff had bought his stock; that at that time defendant asked him not to mention to plaintiff at what price he (witness) had sold his stock because defendant had sold some of it to him at $20 a share; that at a later time he (witness) told defendant that he should tell plaintiff about the deal because they were all going to be partners in the deal and they should go in on a clean basis; that defendant replied that he intended to tell him and that he would rebate the difference between the $17 and $20 a share, less his expenses.

Mr. Oseran, called as a witness by plaintiff, testified that for a period of approximately 18 months in Los Angeles he was with defendant daily from 9 a. m. to midnight; that defendant said that he and the witness were partners; that he had known plaintiff about 30 years; that he arranged a meeting between plaintiff and defendant; that at that time defendant did not have any money; that at defendant's request he took plaintiff, in September, 1944, to defendant's apartment where plaintiff met defendant; that defendant asked the witness how soon plaintiff could put money in any transaction that came up; that defendant asked the witness what he thought of the Pig'n Whistle deal; that when plaintiff met Gentles at defendant's apartment, defendant told plaintiff that Gentles was a large stockholder in Pig'n Whistle; that he (witness) and defendant went to San Francisco to try to get the stock, to see if they could get the deal together; that when they were with Gentles at San Francisco, defendant said that he thought he had someone to pick up the stock but he didn't mention plaintiff's name at all; that when they returned from San Francisco, defendant told plaintiff that plaintiff ‘would come in on the deal and would make millions.’

A representative of the bank, where the two blocks of stock for 3,000 shares each were delivered to plaintiff, testified in part that on December 6th the bank received a draft drawn on defendant for $51,000 that covered 3,000 shares of the stock which accompanied the draft; that the draft was paid by redrafting on plaintiff for $60,000—that defendant redrafted on plaintiff for $60,000, and that on December 8th plaintiff paid $60,000 to the bank on defendant's draft and received the stock; that $51,000 of the $60,000 was applied against the draft of $51,000 which had been drawn on defendant, and the $51,000 was sent to San Francisco; that the balance of $9,000, less $22.50 charges, was paid by the bank to defendant on December 8th; that on December 12th the bank received three drafts on defendant totaling $51,000, which drafts covered another 3,000 shares of stock which accompanied the drafts; that the drafts were paid in the same manner as the previous one, by redrafting on plaintiff by defendant for $60,000, and plaintiff paid the $60,000 to the bank; that $51,000 of that amount was applied in payment of the $51,000 draft which had been drawn on defendant; and that the balance of $9,000, less $2.50 charges, was credited to the account of defendant.

The president and general manager of Pig'n Whistle testified in part that in October, 1944, defendant and Mr. Gentles came into his office, and defendant said that his brother, Louis B. Mayer, had given him authority to buy control of the company and had placed one million dollars at his disposal to do so.

Defendant testified and denied all the statements by plaintiff relative to buying stock off the stock exchange. He also denied that he said he had a friend, Fingerman, who would also buy 3,000 shares of stock, and testified that nothing was said about Fingerman at any time. He also denied the statements of plaintiff, Gentles and the president of the Pig'n Whistle Corporation that he had mentioned the name of Louis B. Mayer, and he testified that the only time his brother's name was mentioned was when plaintiff wanted defendant to sign his brother's name on a note. (Plaintiff denied that he made such a statement about signing a note.) Defendant testified in his deposition that he told the representative of the bank that he did not want plaintiff to see the original drafts which were drawn on defendant, because there was a higher price on the drafts drawn on plaintiff by defendant.

In the view of the evidence most favorable to plaintiff (respondent) it is clear that plaintiff and defendant agreed to enter into a joint venture, for their mutual benefit, with the expressed agreement and understanding that plaintiff's primary purpose in agreeing to purchase stock of the company was to join Mr. Gentles and other stockholders in forming a group of stockholders who, by reason of the aggregate number of shares owned by the group, would have control of the company. It is also clear that defendant knew that plaintiff had no desire to purchase any of the stock merely as an investor, and it is clear that he knew that plaintiff's agreement to purchase stock was solely upon condition that Mr. Gentles keep his stock and join the group. It is also clear that defendant knew that Mr. Gentles did not want to sell his stock if the deal he had discussed with plaintiff was still pending and if there was a reasonable prospect of forming such a controlling group. Defendant's statement to Mr. Gentles that the deal was off was false. He knew at the time he made that statement that plaintiff had agreed to expend a large sum of money in purchasing stock in order to join such a proposed controlling group of stockholders that would include Mr. Gentles and his 12,000 shares. Defendant's scheme, based on that false statement and on a betrayal of the trust and confidence reposed in him by his co-adventurer, was to cause Mr. Gentles to believe that the group deal with plaintiff was off, and thereby obtain an option from him to buy his stock at a low price, and at the same time to cause plaintiff to believe that the group deal was still on, and thereby sell the stock to plaintiff at a high price. He knew that his relationship to plaintiff in the transaction was not that of an independent seller or any seller of stock, and he knew on the contrary that he occupied a position of trust and confidence in dealing with the money advanced by plaintiff for the purposes of their joint venture. Strong evidence of his intent to defraud is the method of ‘redrafting’ he adopted in handling the sight draft at the bank. That method was calculated to, and it did, prevent his co-adventurer, the plaintiff, from ascertaining the real selling price of the stock before he parted with his money. That defendant intended to deceive by that method is established by his admission that he told the bank representative that he did not want plaintiff to see the original drafts because the redrafts drawn on plaintiff by defendant were for a higher price. That he had guilty knowledge of having defrauded plaintiff is established by his request of Mr. Gentles that he not tell plaintiff the price that defendant had paid him for the stock because defendant sold the stock to plaintiff for $20 a share. There was evidence herein that the records showed that Fingerman did not own any stock. Further strong evidence of defendant's intent to defraud, by causing plaintiff to believe that the group deal was still pending and progressing, is as follows: (1) Defendant's statement to plaintiff, just prior to the times plaintiff paid for each of the first two blocks of stock, that Fingerman had just purchased and taken delivery of 3,000 shares of stock; and (2) defendant's computations, after each of the first two purchases by plaintiff, as to the total number of shares then owned by the group, which computations each time included the 12,000 shares of Mr. Gentles and the 6,000 shares he asserted that Fingerman had purchased. Fingerman had changed his name to Field. Further evidence of deceitfulness on the part of defendant is that at a social gathering, sponsored by defendant, where plaintiff and Fingerman were present, the defendant introduced Fingerman to plaintiff as Field and did not identify him as Fingerman or anyone who was, according to defendant, a member of the stock group. The findings that defendant defrauded the plaintiff are amply supported by the evidence.

Appellant's next contention is that even if a buyer of stock is deceived as to the price his seller paid for the stock, such fraud is not a basis for monetary relief. The question involved in the present case is broader in scope than the question presented by this contention. The court herein found in effect, upon sufficient and substantial evidence, that defendant and plaintiff were joint adventurers and that defendant, in obtaining the stock for plaintiff, had undertaken to act for plaintiff in trust and in confidence and for the benefit of plaintiff. Since this contention presents an abstract question, not founded upon the full factual basis of this case, it is not necessary to discuss it further.

Another contention of appellant is to the effect that, even if a buyer of stock is entitled to recover damages for a seller's fraud, no recoverable amount can be determined in the absence of evidence of the actual value of the stock received. His argument is that if a buyer of stock elects to stand upon his contract, rather than to rescind and seek the return of his money, his recovery is limited to the measure of damages prescribed by section 3343 of the Civil Code. That section provides in part: ‘One defrauded in the purchase, sale or exchange of property is entitled to recover the difference between the actual value of that with which the defrauded person parted and the actual value of that which he received, together with any additional damage arising from the particular transaction.’ This action is not to recover damages suffered by reason of fraudulent representations in a sale of stock by defendant to plaintiff. It is an action to recover money fraudulently obtained as secret profits by a joint adventurer from his co-adventurer, while acting in trust and in confidence for the benefit of his co-adventurer in purchasing stock for him, and under circumstances where he betrayed the trust and confidence reposed in him. The value of the stock herein is immaterial. Section 3343 is not applicable herein. In the case of Adams v. Harrison, 34 Cal.App.2d 288, 93 P.2d 237, the defendant, in April, 1922, sent a telegram to plaintiff stating that he had obtained an option to purchase a certain ranch and he asked plaintiff to buy it. Within a few months thereafter defendant therein acquired title to and possession of the ranch. In April, 1923, the plaintiff therein purchased from defendant a half interest in the land, and thereafter the property was operated by the parties as partners until 1926. Defendant represented to plaintiff, at the time he sold the half interest, that it cost about $60,000 more than it did in fact cost, and he charged plaintiff about $30,000 more for the half interest in the ranch than the half interest had cost defendant. In that action to recover secret profits, a judgment for plaintiff was affirmed. Defendant therein contended that since he had owned the ranch about a year before he sold part of it to plaintiff, and since no partnership existed until after the sale, he had a right to sell a half interest to plaintiff at a profit. Plaintiff therein contended that it was a case where a secret profit was obtained by one partner or joint adventurer by taking advantage of the other. The court therein said, 34 Cal.App.2d at page 297, 93 P.2d at page 242: ‘It clearly appears that the primary purpose of both parties was to obtain the land for speculative purposes. * * * It matters little, however, whether the arrangement was technically a partnership or a joint adventure. The material and controlling element is whether the respondent entered into the transaction * * * with the understanding that each was to pay the same amount and that they were to share the cost of the ranch whether past or future. If, in fact, there was an agreement that this cost was to be shared equally there was a sufficient confidential relationship between the parties to require the appellant to disclose the true facts * * *.’ In that case the defendant also contended that the court erred in excluding testimony as to the value of the land, and in refusing to instruct the jury that the measure of damages, if any, would be the difference between the money paid for the property and the value of the property. In that case the court said, 34 Cal.App.2d at page 299, 93 P.2d at page 244: ‘It is argued that since the action was in fact based upon fraudulent representations the measure of damages is fixed by section 3343 of the Civil Code. That section has no application in this case where * * * the respondent waived the tort and sued for the return of his money. In such an action the actual value of the land is not material and has nothing to do with the amount which the plaintiff has paid and which he aeeks to have returned.’ In the present case, as above indicated, the primary purpose of plaintiff and defendant was to form a group of stockholders who, by reason of the total number of their shares, would have control of the company. They entered into the transaction with the understanding that, in pursuance of their common purpose, plaintiff and a friend of defendant (acting for defendant's benefit) would buy an equal number of shares and that defendant would purchase the shares for them at a reasonable price. It is clear, as above stated, that the arrangement between them was a joint venture for their mutual benefit and that there was a sufficient confidential relationship between them to require the defendant to disclose the true facts. In the case of Munson v. Fishburn, 183 Cal. 206, at page 211, 190 P. 808, at page 810, the court said: ‘It is well settled that associates in a common enterprise, under whatever guise, have a duty to each other to make full disclosure of any preference or profit not common to all of the associates.’

Another contention of appellant is that since stock of the Pig'n Whistle Corporation was being sold on the stock exchage at an average price of $19.75 per share, during the time defendant was buying stock from Gentles, plaintiff could not, in any event, recover more than the difference between the price of $20 which he paid in the private transaction and the price of $19.75 which he would have had to pay on the exchange. This contention is not sustained. It is in effect a continuation of the previous contention regarding the measure of damages, and the answer to that contention is applicable here. Defendant was acting in a fiduciary capacity in furtherance of the common purpose of the parties and, irrespective of where he obtained the stock or the bargain of any he made in purchasing it, he was not entitled to secretly appropriate to himself any of the money which he had received from plaintiff to pay for the stock. It is indicated in appellant's brief that the stock which defendant obtained for plaintiff has doubled in value, and it is argued in effect that, in view of that increase in value, plaintiff has not been damaged. If it be a fact that plaintiff profited by his investment, even though defendant fraudulently overcharged him $26,400 in making the investment, that does not relieve defendant of his obligation to return to plaintiff money misappropriated by defendant.

Appellant asserts also, in his reply brief, that the complaint fails to state a cause of action for the reason that the value of the stock is not alleged therein. The complaint states two causes of action. As above stated, the value of the stock is immaterial in view of the allegations regarding joint venture, fiduciary relationship, and misappropriation of plaintiff's money.

The judgment is affirmed.

WOOD, Justice.

SHINN, Acting P. J., and VALLEE, Justice pro tem., concur.