(188 P.)

a dividend was justified before authorizing its payment." Wesp v. Muckle, 136 App. Div. 241, 244, 245, 120 N. Y. Supp. 976, 979, 980, affirmed in Wesp v. Strasenburgh, 201 N. Y. 527,

CAVASSO v. DOWNEY. (Civ. 3228.) (District Court of Appeal, First District, Division 1, California. Feb. 5, 1920.)

1. PARTNERSHIP

defendant all his right, title, and interest in the business, and the good will thereof, to defendant, and that defendant purchased the same from the plaintiff, relying upon the representation and distinct promise of plaintiff, 269-TERMINATED BY IN- and upon the consideration that plaintiff

CORPORATION OF PARTNERSHIP BUSINESS.

Where partners incorporated a partnership business, transferred the partnership assets to the corporation, issued additional stock to secure capital and paid the partners' salaries as officers of the corporation, and where there was no evidence of an agreement whereby their relations as copartners should continue in conjunction with their relation as stockholders, the partnership was in fact terminated and merged into the corporation. 2. MONOPOLIES

12(4)-AGREEMENT NOT TO ENGAGE IN SAME BUSINESS AS CORPORATION,

AS A CONDITION OF SALE OF STOCK, VOID.

Where partners incorporated their partnership business, transferred the partnership assets to the new corporation, issued additional stock to secure capital, and voted themselves salaries as officers of the corporation, an agreement by one not to engage in the same business within the city, as a condition of the sale of his interest in the corporation to the other, was void, under Civ. Code, §§ 1673, 1674.

Appeal from Superior Court, Alameda County; Milton T. Farmer, Judge.

Action by I. L. Cavasso against J. C. Downey. Judgment for defendant, and plaintiff appeals. Reversed.

See, also, 180 Pac. 950.

M. J. Rutherford of Oakland (Jesse Robinson, of Oakland of counsel), for appellant. Edward R. Eliassen, of Oakland (Henry G. Tardy, of Oakland, of counsel), for respond

ent.

WASTE, P. J. Plaintiff brought this action seeking to recover upon three promissory notes for $1,000 each. Judgment was entered for the defendant, and the plaintiff appeals.

The defendant, by failure to deny, admitted the execution of the notes, denied that they have not been paid, and averred a failure of consideration therefor. He further alleged that the notes were procured by plaintiff through fraud and deceit. In this connection defendant averred, and the lower court found, that for some time prior to the making of the notes plaintiff and defendant were engaged in the manufacture, buying, and selling paints, glass, oils, and other merchandise, as copartners, under the firm name and designation, Downey-Cavasso Glass & Paint Company, with a place of business in the city of Oakland, and that they continued to engage in and conduct said business under that name, and as such copartners, until October 31, 1914, the date of the notes sued upon; that on that date the plaintiff sold to

would not engage in any business in competition with the defendant in the city of Oakland for five years, and that as part consideration for the purchase of the rights of plaintiff in and to the business, as aforesaid, defendant executed a promissory note for $3,000

which was afterward divided into three notes of $1,000 each, the notes sued upon in this action; that after obtaining the said promissory notes from defendant, and in violation of defendant's rights, and of the express agreement on his part, plaintiff did open a store and place of business in the city of Oakland, where plaintiff is now engaged in competition with defendant, under the name of Cavasso Paint Company, in the same line of business as that carried on by defendant

In addition to the foregoing facts, which were alleged and found, the trial court also found: That the copartnership between plaintiff and defendant "continued in name as such until January, 1913, when they (plaintiff and defendant) formed a corporation under the same trade-name as before. That that were issued were issued to themselves all of the shares of stock in the corporation equally, excepting 1 share which was issued

*

and delivered to the bookkeeper in order to qualify him as a director. That thereafter said plaintiff and defendant continued to conduct the said business as before, in all essential and substantial ways. That on or about the 31st day of October, 1914, the plaintiff sold 'all his interest in and to the said business' to the defendant on the following terms: One (1) Mack automobile truck valued at about $2,000, $4,000 in two promissory notes of $1,000 and $3,000 each. Later the $3,000 note was divided into three notes of $1,000 each, which are the notes involved in the above entitled action and on which the present action is brought. That at or about said time, the said plaintiff transferred 380 shares of stock in the said corporation to the defendant, together with all of his interest in and to said business, and covenanted as follows: 'It is further agreed that the said party of the second part (Cavasso) will not engage in any business in competition with the Downey-Cavasso Glass & Paint Company for a period of five (5) years from the date hereof.' That despite the incorporation of the aforesaid business of the Downey-Cavasso Glass & Paint Company, the said plaintiff and defendant were copartners, as between themselves, owning the entire issued capital stock *

* when the plaintiff sold out to the defendant, and that the said sale by Cavasso to Downey of his one-half (or 380)

(188 P.)

shares of the capital stock of the corporation | tion with the corporation, but not in competiwas made by said Cavasso as a copartner of tion with the defendant, who, after the orsaid Downey upon, or in anticipation of, the dissolution of the said copartnership." The lower court also found that the defendant continued the business of the Downey-Cavasso Glass & Paint Company after the purchase of plaintiff's alleged interest therein.

ganization of the corporation, had not engaged in such business on his own account. We were satisfied, from a reading of the record, that the evidence fully justified the findings of the court in that regard, and affirmed the judgment. Cavasso v. Downey, 180 From the foregoing facts the court legally Pac. 950. In doing so, we followed the deciconcluded that there was an entire want of sions holding that where one sells his stock consideration for the promissory notes, and in a corporation, and enters into an agreethat plaintiff was not entitled to recover.ment with the purchaser not to again engage Judgment for the defendant was entered ac- in business, such contract is void under the cordingly; hence this appeal.

provisions of sections 1673 and 1674 of the Civil Code, and cannot be enforced. Dodge Stationery Co. v. Dodge, 145 Cal. 380, 386, 78 Pac. 879; Merchants' Ad-Sign Co. v. Sterling, 124 Cal. 429, 432, 57 Pac. 468, 46 L. R. A. 142, 71 Am. St. Rep. 94; Chamberlain v. Augustine, 172 Cal. 285, 156 Pac. 479.

It is apparent that the appellant has now attempted, by pleading and proofs, to make his actions conform to the decision on the first appeal, and has sought, in like manner, to escape from the results which must follow, if the facts subject his case to the application of the law followed by us in the second instance.

This is the third time the parties to the foregoing transaction have been before this court. In the first instance the defendant here, as plaintiff, sought damages, and prayed for injunctive relief against this plaintiff, for alleged violation of the agreement not to again engage in business. In affirming the judgment of the lower court, entered after an order sustaining a demurrer to the amended complaint, the court said: "If it had unequivocally appeared from the allegations of the complaint that the plaintiff and defendant had, by agreement, express or implied, continued their relations as copartners in conjunction with their relation as stockholders We will first consider appellant's contenof the corporation, the law would take cog- tion that the evidence is not sufficient to supnizance of such dual relationship and deal with port the finding that the partnership be'the parties in the light of their agreement, inde- tween Cavasso and Downey continued to pendently of their incorporation' (Shorb v. Beau-exist, after the formation of the corporation, dry, 56 Cal. 446), and if, in fact, such had been the relationship of the parties, to plead it with perspicuity would, it seems to us, have been a very simple matter." Downey v. Cavasso, 36 Cal. App. 316-318, 171 Pac. 1077.

and that the sale of Cavasso's interest in the business to Downey was, in reality, a sale of a partnership interest, made in contemplation of a dissolution of the copartnership. The conclusion reached on this point practically amounts to the decision of the whole case.

Respondent relies upon the showing that the copartnership and the corporation bore the same name; that plaintiff and defendant owned all the issued shares of stock, except one; that, after incorporation, according to defendant's testimony, business was conducted in the same manner as before; the plaintiff and the defendant still considering themselves partners in the business. On the part of plaintiff, it appears that immediately after the incorporation of the Downey-Cavasso Glass & Paint Company, a stockholders' meeting was held, directors elected, a code of bylaws adopted and ordered engrossed. directors thereupon duly organized by the election of Downey as president, Cavasso as vice president, and Schuler (the bookkeeper) as secretary. The by-laws were approved and subscribed. The place of business of the

The next controversy arising out of this transaction to engage the attention of this court was an appeal, by the defendant here, from a judgment in favor of this same plaintiff, for the sum of $1,000 with interest, and costs of suit, in an action to recover on the promissory note for that amount, given by the defendant here as part of the purchase price for the interest of the plaintiff in the Downey-Cavasso Glass & Paint Company, which note is referred to in the findings in this action, before quoted. In that case the trial court decided, upon the whole evidence presented, that the copartnership which had previously existed between the parties had been merged in the corporation formed in the month of January, 1913, and that the relation of copartners in respect to the business then taken over by such corporation did not continue thereafter, and that the transaction between the partners in October, 1914, was one in which the defendant purchased corporation was fixed. A corporate seal was the stock of the plaintiff in said corporation, procured. Certificates of stock were pregiving, among other things, the note there pared. The president, or vice president, and sued upon as a part of the consideration secretary were, by proper resolution, authortherefor. The lower court further found, in ized to sign and indorse checks and drafts that case, that the plaintiff did embark in on behalf of the corporation. The firm of J. business in the city of Oakland in competi-C. Downey and I. L. Cavasso, copartners, do

The

any ever should be. A similar state of facts existed in Watkins v. Delahanty, 133 App. Div. (N. Y.) 422, 117 N. Y. Supp. 885, where it was held that the previously existing partnership was not terminated by the organization of the corporation, and the transfer to it of the partnership assets, in view of the fact that the stocks and bonds of the corporation were not distributed to the respective parties, as their interests appeared; the corporation being formed merely for the purpose of financing certain partnership affairs.

ing business under the firm name and style bearing in the instant case. The other auof Downey-Cavasso Glass & Paint Company, thorities can be differentiated. In Shorb v. executed a bill of sale transferring to the Beaudry, 56 Cal. 446, 450, the corporation incorporation everything appertaining to the curred no liability, did not participate in the business, theretofore carried on by it, in con-profits of the business, no certificates of stock sideration for which transfer the corporation were issued, nor was it contemplated that issued to Downey and to Cavasso each 380 shares of its capital stock, certificates for which were delivered. At the same time the corporation, by action of the directors, directed the sale of 200 shares of its stock, at the par value of $100, in order to secure "capital to enlarge its capacity and liquidate some of its outstanding indebtedness." This stock Downey attempted to sell. The minutes of a number of directors' meetings appear in the record, from which it appears that the borrowing of money, approval of contracts, election of directors, and secretaries, and other matters were acted upon in corporate capacity. The corporation gave its notes for the payment of money obtained from banks. Downey and Cavasso each received a salary from the corporation after its organization, which was fixed, according to plaintiff's testimony, by Downey and himself, acting "as a majority of the board of directors."

[1] From a careful scrutiny of the entire record, from which the foregoing recital of the evidence is drawn, we are unable to discover the "conflict in the testimony" relied upon by respondent, to support the finding of the court that the partnership between appellant and respondent continued after the formation of the corporation. Respondent's conclusion in the matter as testified to by him, is not sufficient to offset the positive showing to the contrary, and is incompetent to raise an issue, or present a conflict in the testimony. There was no other evidence which has that effect. Neither does the evidence lend weight to the contention of respondent that "as between themselves" appellant and he were partners, nor does it bring the facts within the rule referred to in Downey v. Cavasso, supra, to the effect that if the appellant and respondent had, by agreement, continued their relations as copartners, in conjunction with their relation as stockholders of the corporation, the law would take cognizance of such dual relation, and deal with the parties independently of their incorporation. If such an agreement ever existed it was not alleged or proved.

In the absence of such an agreement, we find nothing in the actions or relations of the parties bringing the case within the rule of the authorities cited by respondent, to the effect that the copartnership should be regarded as continuing. A number of the cases cited deal with the rights of third parties under such circumstances, and have no

What we have already said, in our judgment, determines the effect of the contract between the parties. In confirmation of our conclusion in that regard we are of the opinion that the parties themselves, by the language used in the written agreement, made nearly two years after the formation of the corporation, concluded argument concerning the exact nature of that transaction. The consideration passing from the defendant to plaintiff is recited to be "in full payment of all the interest of the said party of the second part (Cavasso) in the said corporation and business known as Downey-Cavasso Glass & Paint Company, a corporation, the said interest being represented by 380 shares of the capital stock of the said corporation, and being represented by one certificate, No. 5." In fact, the conduct of the parties throughout is inconsistent with the continuance of the copartnership, and reconcilable with appellant's claim that it was, in fact, terminated and merged into the corporation. The trial court's finding to the contrary is unsupported by the evidence.

[2] The sale not being one in anticipation of the dissolution of the copartnership, but being merely the sale by one stockholder to another of his interest in the corporation, accomplished by the transfer of his shares of stock, the agreement not again to engage in business was void for the reasons given in the authorities already cited. Cavasso v. Downey, supra; Chamberlain v. Augustine, supra; Dodge Stationery Co. v. Dodge, supra; Merchants Ad-Sign Co. v. Sterling, supra.

In view of these conclusions the other points suggested by the appeal do not require

consideration.

The judgment is reversed.

We concur: KNIGHT, Judge pro tem.: RICHARDS, J.

(188 P.)

HOFFMAN v. PACIFIC ELECTRIC CO. (Civ. 3187.)

(District Court of Appeal, First District, Division 1, California. Feb. 3, 1920. Hearing Denied by Supreme Court April 1, 1920.)

1. APPEAL AND ERROR

Frank Karr, R. C. Gortner, and E. E. Morris, all of Los Angeles, for appellant.

Crail & Crail, of Los Angeles, for respondent.

RICHARDS, J. This is an appeal from a judgment in plaintiff's favor in an action 1064(2)-INSTRUC- for damages for personal injuries, alleged to have been suffered by the plaintiff while a passenger on one of the defendant's cars in

TION ON FACTS NOT REVERSIBLE UNLESS
PREJUDICIAL.

The giving of instruction as to question of fact, forbidden by Const. art. 6, § 19, does not require a reversal, unless from an examination of entire record it appears that appellant has been prejudicially affected thereby, and that the error has resulted in a miscarriage of justice.

2. APPEAL AND ERROR 1064(2)-INSTRUCTION AS FACT THAT PLAINTIFF WAS PASSEN

GER HELD BENEFICIAL TO APPELLANT.

Where the only contradiction of plaintiff's evidence that he was a passenger on a certain car was the testimony of defendant's employés, who also testified that the car did not stop where plaintiff alighted, an instruction that there was no question that plaintiff was a passenger on that car was beneficial to the car

rier, since if he were not on that car there was no evidence to contradict his testimony that the car he was on stopped, and then started while he was alighting.

THE

3. TRIAL 243-INSTRUCTION AS TO STOPPING OF STREET CAR HELD NOT CONTRADICTORY.

An instruction that, if defendant car stopped to enable plaintiff to get off or for any other reason, and started while he was alighting, he could recover is not contradicted by a later statement in the same instruction, authorizing recovery if the car stopped to enable him to get off and started while he was alighting. 4. CARRIERS 303(5)—STREET CAR MUST NOT START WHILE PASSENGER IS ALIGHTING, THOUGH NOT STOPPED FOR THAT PURPOSE.

The high degree of care owed by a carrier to its passengers requires that the conductor in charge of a street car which has stopped for a purpose other than to permit a passenger to alight shall not start the car without first ascertaining whether any passenger is attempting to alight.

the city of Long Beach, on the evening of January 16, 1917, the plaintiff averring that the said car had stopped to enable him to alight, but had suddenly started while he was in the act of alighting, whereby he was thrown to the pavement and injured.

The defendant's answer denied that the plaintiff was a passenger on any of its cars, and denied that the car came to a stop for the purpose of allowing plaintiff to alight, and denied that he attempted to alight at the time and place mentioned in the complaint, or that the car started while he was in the act of so alighting, and denied any negligence on the part of the defendant whereby plaintiff was injured; and, as a further and separate defense, pleaded contributory negligence on the part of the plaintiff,

Upon the trial of the cause a verdict was returned for plaintiff in the sum of $2,125, and, after a motion for a new trial had been made and denied, this appeal was taken.

this appeal relate entirely to errors of the The points raised by the appellant upon trial court in the giving or refusing to give certain instructions. In order to deal with the appellant's several points clearly and at the same time concisely, we deem it best to give in full that portion of the instructions of the trial court at which the appellant aims its several objections. After certain preliminary instructions, relative to the credibility or interest of witnesses and the like, the court proceeded as follows:

small compass. "Now then, gentlemen, this case is in a very As I have already stated to you, there is no question but that plaintiff was a passenger on the car that Mr. Wilson and Mr. Shepherd were on. There is no question 5. TRIAL 260(8)—REQUESTED INSTRUCTION about that. He was a passenger on that car. ON CONTRIBUTORY NEGLIGENCE IN ALIGHT-He wanted to get off at Atlantic avenue. The

ING FROM STREET CAR HELD COVERED.

In an action to recover damages for injuries received by a street car passenger while alighting, it was not error to refuse requested instructions, correctly stating the doctrine of contributory negligence, where the court had stated that plaintiff could not recover if he tried to get off while the car was in motion.

Appeal from Superior Court, Los Angeles County; Charles Monroe, Judge.

Action by Ben F. Hoffman against the Pacific Electric Company. Judgment for plaintiff, and defendant appeals. Affirmed.

burden is upon the plaintiff to prove his acts by a preponderance of the testimony, that is, the burden is upon him to prove that the deto recover, and he must prove that by a prefendant was negligent, in order to entitle him ponderance of the evidence, that is, such evihas more convincing force and from which it dence as, when weighed with that opposed to it, results that the greater probability is in favor of the party upon whom the burden rests.

"Now, then, all there is to the case is this: If the car stopped, whether it stopped to enable for any other reason, if it stopped and the the plaintiff to get off, or whether it stopped plaintiff started to get off, and while he was getting off it started up again and threw him,

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes