163 Iowa 726 | Iowa | 1914
Plaintiff brings this action upon a certain promissory note, dated April 25, 1910, executed and delivered by these defendants to one R. P. Dodge for $2,500, and claims that before the maturity of the note, Dodge indorsed and
At the conclusion of all the testimony the plaintiffs filed a motion for a directed verdict, which was by the court overruled. Thereupon defendants filed an amendment to their answer pleading a partial defense, alleging that if the stock had any value at all, it did not exceed one cent on the dollar, and thereupon asked that they be allowed the difference between the value of the stock, as warranted by Dodge, and its actual value, as found from the evidence, as an offset against the note. The undisputed evidence upon the trial showed that the Stotts Signal Company was an-Arizona corporation; that the plaintiff, Stotts, was a director in said company and general manager; that the company issued 5.000.000 shares of stock at $1 a share; that Stotts received 3.000.000 of the stock issued as a consideration for his patents. The evidence tended to show that Stotts was not the patentee of these devices; that none of these devices had ever been sold, and no contract had ever been entered into with any company for the use of these devices; that the company was organized for the purpose of manufacturing and install
One Lampman, called as a witness, testified as follows:
I have been a member of the board of directors of the Stotts Signal Company and a stockholder for three and one-half years. • E. S. Stotts has been the manager up until a few months ago, the most of the funds that came into the hands of the company was from the sale of stock, no signals were sold. I am secretary now. May be stock was sold from ten cents up; I don’t know what amount was sold for ten cents, or what amount was sold for twenty-five cents, or what was sold for $1; I knew some was sold for ten cents and some for twenty-five cents; none was sold for less than ten cents by the company. Q. Was there any sold for less than ten cents by anybody connected with the company to your knowledge? A. Yes, sir. Before the year 1910. Q. And since that time? A. Yes, sir. Perhaps a year and a half ago. We thought sometimes it looked pretty good, then in a few months it wasn’t so good again. In April 1, 1910, the company had some property at Marion. I don’t know that it had the deed at that time; it had some patents. I don’t know that the patents belonged to the company, or to Mr. Stotts at that time. Q. What was the value of this stock per share in April, 1910 ? A. I think ten cents. Q. Up to April 25, 1910, what was the condition of the .company financially with regard to ready money? A. A good share of the time we were out of money. Í understood at one time that some railroads would use the two position signal, but no contracts therefor. were ever made. We are now working on a new design; a new company has been formed called the ‘Overland Signal Company.’
The defendant, Fairfield, testified that Dodge said that the stock was worth fifty cents per share; that he would guarantee it to be worth that. Said that he relied upon the statement made by Dodge; would not have bought the stock but for it; that he did not then know the value of the stock.
Dodge testified:
W. A. Weaver testified as follows:
I met Mr. Stotts in Buffalo in October or November, 1911. I am a mechanical engineer. He wanted such an engineer. He sajd it was necessary for some mechanical engnieer to be obtained so that the machines might be made marketable and acceptable to railroads. I found that he was not the patentee of these devices. He explained this by saying that he got these parties to allow him to use their names in procuring these patents. He urged me to coiné and make these machines marketable. He said the engineers in Marion were incompetent. When I arrived at Marion, I found these signals disassembled. I found the two position signal working perfectly. The three position failed, in my judgment, to possess any merit. Ten of the two-position signals were completed, and worked perfectly. They had eighty or ninety nearly completed.
Dodge testified that at the time Stotts took over the note in suit that he (Dodge) agreed to do the collecting; that he would collect the note.
I told him that Fairfield got 5,000 shares of stock, and had given this note for it; that he intended to help Fairfield with the note as soon as we could get to it, and as soon as we got the company on its feet, and not to interfere with Fair-field; that the note was given to Stotts for *the one two-story
The plaintiff further testified that Dodge said to him that before the note became due, the stock would be worth $1 per share; that the devices were all patented; that the plant was in operation; that one railroad company had offered to contract with them. At the time he sold me the stock he said it was worth fifty cents, and that he would guarantee it to be worth fifty cents.
After the evidence had all been concluded and after the motion for a directed verdict had been overruled, and the amendment to the answer filed, defendant produced the stock in open court, offered it in evidence (after the same had been identified), and said: “I bring these certificates into court for the use of the one entitled to them.”
The first contention on the part of appellant is that the evidence of fraud, in procuring the note, was insufficient; that it consists of mere expressions of opinion as to the value and the future value of the stock, and are therefore not available as false representations upon which to predicate an action for damages, or to avoid the note; that representations, as to the value of stock, where they relate to no existing fact, are insufficient to be available as defense against a contract procured by reason thereof.
In Howard v. McMillen, 101 Iowa, 457, it is said: “It is the general rule that mere silence of a person in regard to facts which it is not his duty to disclose is not fraudulent. But, where silence would be misleading, a duty to speak may arise. A person may, under some circumstances, by passive conduct or silence, knowingly and intentionally deceive and mislead another, an'd thus perpetuate a fraud.” As sustaining this doctrine, see also, Harrison County v. Ogden, 133 Iowa, 677.
In Hubbard v. Weare, 79 Iowa, 688, in dealing with the question of false representations, this court said: “It must appear that the representations were made with intent to wrong or injure the parties to whom -made. Such intention may be shown by direct evidence, or be inferred from the making of the false representations knowingly. Such intention may exist, though the party making the representations confidently believed at the time that no injury would result therefrom. For instance, an officer of a corporation, to induce others to take stock therein, -makes material representations as to its financial condition which he knows to be false, yet in the confident belief that the corporation will soon be as represented, and that no loss will follow; he surely commits an intentional wrong, notwithstanding his belief. The wrong is in inducing others to take stock in a corporation that is not as he has represented it to be. The parties taking stock under these circumstances are entitled to shares in a corporation such as he represented, but get shares in a company such as it was.” This case is not directly in point
¥e are of the opinion that the statement made by-Dodge, touching the value of the stock and its future value, ought to be held as a statement of fact, and not an opinion, in view of the fact that he was a director in the corporation; had full knowledge of its assets; of the nature and character of the business; what it had done and what it had not done, and the uncertain nature of the patent, which was its largest asset; in view also of the fact that he knew', at the time, that Stotts was the owner of three-fifths of all the stock issued by the corporation, and that the total face value of the outstanding stock was $5,000,000. Under no theory of this record can it be said that Dodge honestly entertained the opinion that the stock of this company was worth $2,500,000, or that it even approximated that amount, and we think it affirmatively appears that Dodge made the statement to the defendants as to the value of the stock purposely, and with the intent to deceive them, and purposely concealed from them the knowledge of facts essential to a correct estimate of its value, and that his pretended guaranty was made for the purpose of confirming the defendants in the belief that his statement was true, and that the stock was of the value stated by him.
The court submitted to the jury, the following special interrogatory: “Do you find that the note in question was procured by Dodge of the defendants, by, and as a result of, fraudulent representations made by him to them?” to which the jury answered, “Yes;” and we are satisfied that this finding has support in the record.
The appellant relies on Bank v. Fulton, 156 Iowa, 734, but we think that case is clearly distinguishable in its facts from the case at bar.
It does not appear from this record that the defendants discovered the fraud pleaded against this note at any time prior to the filing of the answer. They tendered the stock upon the trial, introduced it in evidence, with a statement that they presented it for delivery to him to whom it belonged. It is true that it is the duty of one who seeks to avoid a contract on the ground of fraud to tender back the thing received within a reasonable time after discovering the fraud. This presupposes that the thing received had some value. If the thing received has no value, there is no obligation to return it. The jury practically found that the stock was of no value, and in answer to the third special interrogatory, to wit, “Do you find that the note in suit was procured without consideration therefor?” answered, “Yes.” This is another way of saying that the thing for which the note was given was of no value, and therefore no duty rested on the defendants to tender it back before bringing suit. But, even conceding that it had some value, and that it was the duty of the defendants to tender it back within a reasonable time after discovering the fraud relied upon, we think that it was a question for the jury as to whether they did so do, and this question was submitted to the jury for their determination in the sixteenth instruction given by the court. We are of the opinion, however, that when the defendants produced the stock in question in open court, and waived all claim thereto, and made the waiver a matter of record, and left the stock for the disposition of the courtj a sufficient showing was made of tender to justify the jury, under all the facts of the case, in a finding that the same was tendered back within a reasonable time, and this we held .in view of the character of
As bearing upon this question, see Schneider v. Schneider, 125 Iowa, 1; Bank v. Cook, 125 Iowa, 115; Cox v. Cline, 139 Iowa, 133; Cox v. Cline, 147 Iowa, 355; Aken v. Clark, 146 Iowa, 440; Moore v. Moore, 39 Iowa, 461.
Some complaint is made of the instructions given by the court. They must be considered as a whole. Examining them in the light of the record in this case, we are satisfied that they fully, fairly, and clearly present all the legal questions involved in this suit, and that no error exists therein prejudicial to the plaintiff’s rights.
Upon the whole record, we find no reversible error, and the cause is Affirmed.