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Hidalgo v. McCauley

Supreme Court of Arizona

July 12, 1937


APPEAL from a judgment of the Superior Court of the County of Pima. Wm. G. Hall, Judge. Judgment affirmed.

Messrs. Cusick & Lyons and Mr. George O. Hilzinger, for Appellants.

Mr. William R. Chambers and Mr. Richard H. Chambers, for Appellee.


Page 444

[50 Ariz. 179] LOCKWOOD, J.

This is an appeal by Miguel Hidalgo and Maggie H. Hidalgo, his wife, hereinafter called plaintiffs, from a judgment in favor of Thomas N. McCauley, hereinafter called defendant. There are many assignments of error, but we think the case can, and should, be disposed of upon a determination [50 Ariz. 180] of the question whether or not the complaint stated a cause of action as against the defendant. We, therefore, shall consider the case primarily from that angle. The complaint is a voluminous one, and we think it unnecessary to quote it in full. The substance of its allegations may be stated in a narrative form as follows.

On the 9th day of February, 1928, the plaintiffs were the owners of certain real estate in Tucson, situated next to the Santa Rita Hotel, one of the leading hostelries of that city. One of the codefendants of McCauley, Archie C. Shreve, was a leading spirit in the activities of another codefendant, Overland Hotel & Investment Company, a corporation, hereinafter called the company, organized under the laws of the state of Nevada and authorized to do business in Pima county. Shreve, desiring to secure the real estate in question for the company, offered to purchase it on the following terms: $2,000 in cash, a $12,000 mortgage on the property to be assumed by the company, and the delivery to plaintiffs of 800 shares of prior preferred shares and 1500 shares of preferred stock of the company. At the time of the sale, Shreve represented to plaintiffs that the prior preferred stock was worth $8,000 and the preferred stock was worth $15,000, and that they would produce a substantial income, and they made the trade relying upon his representations as to these values. As a matter of fact, it was well known to Shreve that such stock was utterly worthless. On the 23d of February the property was deeded to the company, and it paid the sum of $2,000 in cash and delivered the stock as agreed upon, and thereafter discharged the mortgage which it had assumed to pay.

It was then alleged that shortly after the transaction had been consummated, defendant McCauley, who [50 Ariz. 181] then knew of the various misrepresentations of Shreve in regard to the value of the stock and their

Page 445

falsity, together with Shreve and others

"conspired together for the fraudulent purpose of making said stock of the Overland Hotel and Investment Company utterly worthless and valueless to the end that the said Thomas N. McCauley should eventually acquire the real estate herein first described by and through his agents and dummies, for little or nothing and preventing these plaintiffs from rescinding said contract of sale, and securing said real estate, and to cheat and defraud them of any value which the said stocks might have."

The complaint then continued by setting up the various means through which the value of the company's stock was depressed, and by which McCauley gained possession of the property involved. Damages were alleged in the sum of $23,000, and the prayer for judgment was for a judgment in favor of the individual plaintiffs in such sum of $23,000, with interest and costs, and for no other relief.

It is apparent from the foregoing recital that the complaint sets up two different and independent causes of action. The first is the securing of the title to the property in question from plaintiffs for the company by the representations of Shreve that the stock, which was the major portion of the purchase price, was worth approximately $23,000, when, to his knowledge, it had no value whatever. The facts pleaded in regard to this constitute a cause of action against Shreve for deceit, but we cannot see how McCauley is affected in any manner thereby. There is no allegation whatever that he played any part in the planning or execution of the deal between Shreve and plaintiffs, or had any knowledge of it until after the transaction had been completed. The complaint then alleges that after [50 Ariz. 182] the purchase and sale aforesaid had been completed, all of the defendants conspired together for the purpose of making the stock, which was part of the purchase price of the property, worthless and valueless, so that McCauley could eventually secure the real estate in question for little or nothing, and the manner in which the conspiracy was carried out is set up with considerable detail.

These latter allegations of the complaint doubtless state a cause of action against the alleged conspirators, with the gist of the conspiracy being the making of the stock of the company worthless. That such an action lies, cannot be questioned, but the all important question herein is, who may bring such an action, and for whose benefit must it be brought? The leading case upon this point is that of Green v. Victor Talking Machine Co.,24 F.2d 378, 380, 59 A.L.R. 1091, decided by the circuit court of appeal of the second circuit, and certiorari later denied by the Supreme Court of the United States (278 U.S. 602, 49 S.Ct. 9, 73 L.Ed. 530). In that case, the gist of the complaint was that the defendant, after inducing plaintiff's testator to purchase ...

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