Anderson v. Lloyd, 7048

• Decision Date: 22 May 1943
• Docket Number: 7048
• Parties: CARL N. ANDERSON, Respondent, v. T. J. LLOYD, Appellant
• Court: Idaho Supreme Court

139 P.2d 244

64 Idaho 768

CARL N. ANDERSON, Respondent,
v.
T. J. LLOYD, Appellant

No. 7048

Supreme Court of Idaho

May 22, 1943

Rehearing Denied July 13, 1943

CORPORATIONS-CONTRACT FOR SALE OF STOCK-SPECIFIC PERFORMANCE-FALSE REPRESENTATION-EVIDENCE-EXPERT TESTIMONY-CONFLICT OF EVIDENCE-REQUESTED FINDINGS-APPEAL AND ERROR.

1. Findings that majority stockholder and manager did not induce minority stockholder to sell his interest in corporation by any false representation of a material fact or future intention or by concealment of any material fact concerning value of stock, and that minority stockholder relied on his own knowledge and judgment and not on any representation of majority stockholder, were sufficient to support judgment that minority stockholder was not entitled to rescind sale.

2. Where trial court's findings upon the affirmative case are necessarily a complete negative of the case as pleaded by answer, such findings though not expressly answering allegations of answer, are sufficient to support judgment for plaintiff.

3. Trial court's findings of fact must be liberally construed.

4. Where findings of fact substantially dispose of the issues raised, and no more specific findings are requested, trial court's failure to make specific findings on certain allegations of pleadings does not present reversible error.

5. Whether after partnership was converted into two corporations in which partners retained the same respective interests, the partnership relation continued so as to impose on majority stockholder and manager the duty of a fiduciary as to disclosures and entitle minority stockholder to rescind sale of his stock to majority stockholder for failure of the latter to disclose the true value of stock was an issue of fact.

[64 Idaho 769]

6. In action for specific performance of minority stockholder's contract to sell stock to majority stockholder and manager, wherein seller sought to rescind on ground that buyer had deceived him concerning value of stock, evidence justified trial court's conclusion that books of corporation were not kept in such a way as to mislead.

7. Minority stockholder was not entitled to rescind contract to sell his stock to majority stockholder and manager on ground that he had been overreached by buyer concerning value of stock, where buyer concealed no information he possessed and should have imparted, made no false representations which induced sale, and where his conduct measured up to that required of a fiduciary.

8. In action for specific performance of minority stockholder's contract to sell his stock to majority stockholder and manager wherein seller sought to rescind on ground that he had been overreached by buyer as to value of stock, evidence sustained finding that seller and not buyer was the aggressive factor in bringing about the sale.

9. That majority stockholder 18 months after purchasing minority stockholder's one-third interest in corporations for $25,000 sold the corporations for $200,000, though a circumstance to be considered, did not of itself establish that majority stockholder falsely misrepresented or concealed from minority stockholder facts concerning value of stock so as to entitle minority stockholder to rescind sale.

10. Statements of majority stockholder and manager of corporations owning a Coca Cola franchise that Coca Cola business had reached its peak and future competition would be more keen were mere "statements of opinion" and not "representations of material facts" on which minority stockholder could rely as ground for rescission of his contract to sell his interest in corporation to majority stockholders.

11. Statement of majority stockholder and manager that he was going out of the beer business was a declaration of future policy and not a "false representation" on which minority stockholder could rely as ground for rescission of contract to sell his interest in corporation to majority stockholder.

12. Supreme Court may not substitute its judgment as to what the facts show for that of the trial court where the evidence is in conflict.

13. The testimony of experts is merely advisory and not binding upon the court.

14. Where all items of value of corporations were before trial court, expert testimony estimating the value far in excess of [64 Idaho 770] three times amount paid by majority stockholder for minority stockholder's one-third interest did not require trial court to find that stock was sold for less than its reasonable market value so as to entitle minority stockholder to rescind sale, though contradictory expert testimony did not take into account all items of value.

15. Evidence sustained judgment that minority stockholder was not entitled to rescind sale of his one-third interest in corporations to majority stockholder and manager for $25,000 on ground that seller was overreached and deceived concerning true value of stock by buyer, thought 18 months later buyer sold entire stock in corporations for $200,000.

Rehearing Denied July 13, 1943.

Appeal from the District Court of the Eleventh Judicial District, in and for Twin Falls County. Honorable James W. Porter, District Judge.

Action for specific performance of contract. Appeal from judgment in favor of plaintiff. Affirmed.

Judgment affirmed. Costs awarded to respondent.

Chapman & Chapman, Parry & Thoman, and J. R. Keenan for appellant.

Findings merely that plaintiff did not knowingly or fraudulently make any false misrepresentations as to any material facts or material future intentions, and did not fail to disclose any facts of which he had personal knowledge are too vague to support a judgment. (Sterrett v. Sweeney, 15 Idaho 416, 98 P. 418.)

Respondent owed to appellant the duty of full disclosure of all matters relating to the business within the knowledge of respondent for the reasons:

(a) He was the managing director of the business, either asked for information or volunteering information. (13 Am. Jur. 964; Lightner v. Hill, 250 Mich. 50, 242 N.W. 218, 84 A. L. R. 601; Schroeder v. Carroll, 192 Wis. 460, 212 N.W. 299; Poole v. Camden, 79 W.Va. 310, 92 S.E. 454, L. R. A. 1917E 988; Hotchkiss v. Fischer, 16 P.2d 531, (Kan.); Buckley v. Buckley, 230 Mich. 504, 202 N.W. 955; Bollstrom v. Duplex Power Car Co., 208 Mich. 15, 175 N.W. 492.)

(b) The special facts of this case demanded that he make such disclosure. (Strong v. Repide, 213 U.S. 419, 53 L.Ed. 853, 29 S.Ct. 521; Nichols v. Sensenbrenner, 263 N.W. 650 (Wis.); Voellmeck v. Harding, 166 Wash. 93, 6 P.2d 373, 84 A. L. R. 601; White v. Texas Co., 202 P. 826, (Utah).

(c) The corporations were but dummies, and the relationship of the parties was actually that of partners. (Komow v. Simplex Cloth-Cutting Machine Co., 179 N.Y.S. 682.)

Harry Benoit and Harry Povey for respondents.

Fraud is never presumed. It must be proved by clear and convincing evidence. (Hill v. Wilkinson, 60 Idaho 243, 90 P.2d 696; Smith v. Johnson, 47 Idaho 468, 276 P. 320; Smith v. Thomas, 42 Idaho 375, 245 P. 399.)

When the partnership was incorporated in 1931, thereafter all relationship of partners ceased for all purposes. (I. A. L. R. 610, annotation; Jackson v. Tooper, (N. J.) 75 A. A. 568.)

Fiduciary relationship does not exist between an officer and a stockholder in a corporation. In the instant case the parties were both officers and directors. There was in no event a fiduciary relationship between the parties to this action. ( Stout v. Cunningham, 33 Idaho 464, 196 P. 208; 84 A. L. R. 616, annotations; 84 A. L. R. 633, subd. IV annotations; Yuster v. Keefe, (Ind.) 90 N.E. 920; Mell v. Schruder, (N. M.) 263 P. 954.)

GIVENS, J. Budge, J., and Buckner, D.J., concur. DUNLAP, J., Holden, C.J., dissenting.

OPINION [139 P.2d 245]

[64 Idaho 771] GIVENS, J.

In 1921, E. E. Bascom, Joe Hull, and respondent each contributed $ 2,000 and formed a tri-party partnership, which purchased the bottling works, including a Coca Cola franchise, from Benoit & Sons, in Twin Falls. Later in the year appellant purchased Hull's interest. Bascom sold his share to appellant and respondent in 1929, repurchasing after a few months, and finally sold his share to respondent in 1936.

In 1931 appellant and respondent, retaining their respective one-third and two-thirds interests therein, converted the partnership into two corporations--to avoid partnership liability and to comply with the restrictions of the parent Coca Cola company prohibiting the sale of both fountain and bottled Coca Cola by one concern. Appellant acquiesced and participated in such transmutation and is in no position to upbraid respondent on account thereof, as he does.

In December, 1938, respondent purchased appellant's stock for $ 25,000, paying part down, the balance to be paid in installments secured by pledge of the stock, with the privilege of substituting other security.

In June, 1940, respondent sold the corporation for $ 200,000 [64 Idaho 772] to Tyrus Cobb of baseball fame and requested the certificates of stock, offering to pay the balance due or substitute therefor other commensurate security. Appellant, learning of the sale to Cobb, rescinded the contract and refused to deliver the stock on the ground he had been overreached and deceived by appellant in that his stock was worth $ 50,000 at the time of the sale, tendered the amount received by him to date, and offered to deliver the note covering the balance.

Neither side giving way and each rejecting the other's overtures, respondent, to resolve the resultant impasse, sued to enforce delivery of the stock, tendering payment in full or substitution of adequate security. Appellant countered with answer and cross-complaint, [139 P.2d 246] detailing respondent's duplicity thus:

"That from 1929 respondent was the actual manager of the business and personally directed and carried it on, was at all times thoroughly acquainted and...