112 Neb. 187 | Neb. | 1924
The plaintiff, for himself and as trustee for 41 others
It is alleged that the stock was issued to each of the office-holding defendants without consideration; that each of them, in order to induce the purchase of stock, made a large number of false and fraudulent representations set forth in the petition; that, relying on these false representations, plaintiff and his assignors purchased the stock at the rate of $100 a share; and that the stock was, and is, worthless. Defendants, though answering separately, set up substantially the same defenses. They are: That the petition does note state sufficient facts to constitute an action; that there is a misjoinder of parties and causes of action; that the contracts contained a clause, “No conditions or agreements either verbal or written, or other than those printed herein, shall be binding upon the corporation. This contract is signed with full knowledge of the plans of organization of the corporation” — and plaintiffs are therefore estopped to claim fraud; that there was not authority in the sellers of stock to make any contract with reference to the same other than that printed. The answers also contained a general denial. Judgment was rendered in favor of plaintiff for only a part of the damages claimed, the court having instructed the jury that there was no proof of false and fraudulent representations as to a number of plaintiff’s assignors.
The errors assigned are in substance as follows: (1) That several actions in tort cannot be joined and suit brought in the name of an assignee, and therefore that there is a misjoinder of parties. The general rule is that,.if a cause of action in tort survives, it may be assigned. A pause of action such as this survives in this state, and is therefore
(2) That the verdict is contrary to the evidence, and that there was no evidence as to the value of the stock. It is impracticable within the proper limits of this opinion to relate all the facts in evidence with reference to the promotion, and as to the affairs of the corporation and the method in which the sale of stock was carried on. But it is clear that most of the tangible assets of the company about which the representations were made possessed no actual value unless and until paid for. There is evidence that the title to property of considerable value, which was represented to be in the corporation, was in fact in the names of other persons, and the corporation had nothing but a mere contract or option to buy the same, which it had never exercised and could not exercise if it would. In fact the estimates and representations made by the salesmen were largely based upon hope and faith and were tinted with the roseate hues of imagination. The evidence establishes actionable fraudulent misrepresentations.
It is said that, where the contract provides that the company will not be bound by statements of an agent, but only by the written provisions of the contract, a corporation or its officers are not bound by representations outside of those contained in the written order, and that the written agreement heretofore set forth was sufficient to release the corporation from liability for any promises or representations outside of those contained in the writing. But the written limitation is not against representations, but merely against “conditions or agreements,” and knowledge of the “plans of organization” does not include knowledge of all its assets. There is no contention in this case that the agents made any “conditions or agreements” inconsistent with the written order. Even if this clause be given the fullest force, it cannot apply to the facts in this case, nor limit the liability of the corporation for false and fraudulent representations made by its agents. As pointed out in Schuster v. North American Hotel Co., 106 Neb. 679, in order to ac
(3) That the court erred in holding that a director of a corporation is liable for such false representations where the director did not know of, approve or ratify the action of the agent. The evidence establishes that the defendants served, other than the corporation itself, were active in the promotion and organization of the corporation and knew of the manner in which its stock was being sold. Defendant Bevard actively participated in the sale of stock. Defendant Armstrong, among other things, prepared for circulation a flamboyant letter with respect to the assets of the corporation used by agents in the sale of stock. It is shown that a number of purchasers relied largely upon the Armstrong letter, knowing that Mr. Armstrong was the president of the Armstrong Clothing Company, a reputable corporation doing business in Lincoln. Defendant Thompson knew the state bureau of securities had refused permission to the company to sell stock in this state on account of the unsatisfactory condition of its property, and although he knew the agent selling stock had no permit, he made no effort to stop the sale, to correct or stop the misrepresentations, or to return any of the funds received for such illegal sales. He knew that if the actual facts had been fully stated to intending purchasers no man of ordinary common sense would buy.
(4) It is asserted that it was essential, in order to find the officers of the corporation liable, that they must have entered into a conspiracy to sell this stock, and that, since the court instructed the jury that there was no proof of conspiracy, the verdict cannot stand. The purpose of the stock-selling campaign was to procure money for the benefit of defendants. Each of these defendants assisted either ac
It is next assigned that the court erred in refusing to give instructions Nos. 1, 2, 3, 4, and 10, requested by defendants, and that the verdict is contrary to instruction No. 9, given by the court. There is no argument made to support this assignment, except with respect to instruction No. 10. The court upon its own motion instructed the jury in substance that the officers of a corporation are not originally personally bound by the contracts of the corporation or by its frauds, but they may be bound if they have knowledge of the fact that fraud is being practiced, and if they assent to the same and approve it; and, further, that they should not find against the officers of the corporation, naming them, “unless you find by a preponderance of the evidence that they actually knew and approved and ratified the actions of the agents of the corporation in selling its stock, and that said action was fraudulent and acted as an inducement for its purchase.” Instruction No. 10, requested by defendants, is in conflict with this and was properly refused. The rights of the defendants were fully protected.
The judgment of the district court is
Affirmed.
Note — See Appeal and Error, 3 C. J. p. 1409, sec. 1586; Assignments, 5 C. J. p. 891, sec. 56; Corporations, 14 A C. J. p. 185, sec. 1962; 14 C. J. p. 253, sec. 285; p. 254, sec. 286; Evidence, 22 C. J. p. 1218, sec. 1623.