Ankeney v. Brenton

• Decision Date: 29 September 1931
• Docket Number: No. 40878.,40878.
• Parties: ANKENEY v. BRENTON.
• Court: Iowa Supreme Court

214 Iowa 357

238 N.W. 71

ANKENEY

v.BRENTON.

No. 40878.

Supreme Court of Iowa.

Sept. 29, 1931.

Appeal from District Court, Dallas County; W. S. Cooper, Judge.

This is an action brought by the plaintiff to recover damages from the defendant because of the latter's fraud in inducing the former to sell him, for an unconscionable low price, 262 1/2 shares of the capital stock in the Ankeney Linseed Manufacturing Company. There was a trial to a jury, and, at the close of the plaintiff's evidence, the district court sustained the defendant's motion for a directed verdict in his favor. From this ruling, the plaintiff appeals.

Affirmed.Howard L. Bump, of Des Moines, Salinger, Reynolds & Myers, of Carroll, and White & Clarke, of Adel, for appellant.

Brammer, Brody, Charlton & Parker, of Des Moines, and Russell K. Craft, of Adel, for appellee.

KINDIG, J.

Harry E. Ankeney, the plaintiff-appellant, a man now about seventy-two years old, previous to the commencement of this action had engaged in the linseed oil business for approximately fifty years. This business was carried on by the appellant through many different organizations. However, in 1912, he assisted in organizing as an Iowa corporation, the Ankeney Linseed Manufacturing Company. Associated with him in that corporation were a Mr. Parrott and a Mr. Sears. Thereafter, in 1916, Mr. Ralph Bolton became a stockholder in the corporation and bought the interests of Parrott and Sears.

The Ankeney Linseed Manufacturing Company in all issued 750 shares of its capital stock, the par value of which was $100 per share. These shares, after said sale by Parrott and Sears, were held by the following persons in the amounts set opposite their names: Ralph Bolton, 405 shares; Grace Dawes, 7 1/2 shares; Ashton Clemens, 75 shares; and appellant, 262 1/2 shares. Clemens later died, and the corporation itself, on May 22, 1926, purchased from his estate the 75 shares of stock formerly owned by him, for $135 per share. After this purchase, those 75 shares of stock were held in the corporation as treasury stock.

On March 15, 1929, Ralph Bolton died, and the Des Moines Savings Bank & Trust Company and Mrs. Bolton, the surviving wife, became coexecutors of the estate. Clyde E. Brenton, the defendant and appellee, at that time was the president of the Des Moines Savings Bank & Trust Company, an executor aforesaid. Up to this time, appellant was neither a depositor in nor a customer of the Des Moines Savings Bank & Trust Company. Nor until then did the appellant have any business relationships with the Iowa National Bank, a sister institution of the Des Moines Savings Bank & Trust Company. Appellee then was also president of the Iowa National Bank.

Before this time, appellant and appellee had never had personal business dealings with each other. They were acquainted as fellow Rotarians, but had no other social relationships. When and because the Des Moines Savings Bank & Trust Company was thus appointed an executor of the Bolton estate, appellant called upon appellee in reference to the Ankeney Linseed Manufacturing Company business. During the conferences which followed between appellant and appellee, the future of the Ankeney Linseed Manufacturing Company was discussed. Among the matters thus considered was that of borrowing money, and on March 18, 1929, the appellee, through the Iowa National Bank aforesaid, loaned the Ankeney Linseed Manufacturing Company $60,000. Warehouse receipts were given as security, and the Ankeney Company opened a checking account with the Iowa National Bank. Then between the 20th and 25th of March, the appellant and appellee had daily conferences concerning the affairs of the Ankeney Company. As a result of these discussions, appellant, on March 25th, executed to appellee the following written option:

“Whereas, the undersigned, Harry E. Ankeney (appellant) is the owner of Two Hundred sixty-two and one-half (262 1/2) shares of the stock of the Ankeney Linseed Manufacturing Company of Des Moines, Iowa;

In Consideration of the sum of One Dollar ($1.00) in hand paid by Clyde E. Brenton (appellee), he hereby gives to the said Clyde E. Brenton the option to purchase said 262 1/2 shares of stock, until May 1, 1929, at the price of One Hundred Thirty-five Dollars ($135.00) per share;

Acceptance of this option to be made to the Iowa National Bank on or before May 1, 1929, and payable within ten (10) days thereafter, with interest at seven (7) per cent. from May 1, 1929, until the date of payment.

Signed this 25th day of March, 1929.

Harry E. Ankeney.”

Appellant received from appellee a copy of the foregoing option at the time the original instrument was executed. In accordance with the option, appellee elected to buy the stock April 1, 1929. Upon that day appellant delivered the stock to appellee and the latter paid to him the full consideration named in the option.

Soon thereafter, appellant, although no longer a stockholder, was hired to manage the production and sale of products for the Ankeney Linseed Manufacturing Company at a salary of $500 per month. That employment continued until the following August, when the appellee and the Bolton estate sold their interests to the Spencer, Kellogg & Sons Company. Before appellee and the Bolton estate thus sold their interests to the Spencer, Kellogg Company, appellant upon different occasions, in co-operation with others, attempted to buy the plant of the Ankeney Company, but an agreement could not be reached.

On the basis, however, that he was defrauded by appellee through the aforesaid stock sale, appellant, August 20, 1930, commenced the present action. It is stated by appellant that during the said conversations before the option had been executed, he made known to appellee his desire to purchase the Bolton stock. Appellee, appellant contends, acquiesced in that plan and encouraged him to purchase such stock. At no time, appellant declares, did he ever express a desire to sell his own stock. Hence, appellant maintains that he was forced to sell his stock through appellee's deceit. Fraud, it appears, is predicated upon the thought that appellee, through a scheme, induced the appellant to sign the option under a purported plan to thereby fix the price on the Bolton stock, in order that appellant might finally purchase it. To put the thought differently, appellant claims that he signed the option, not for the purpose of selling his stock to appellee, but rather under the latter's fraudulent pretension that by executing the option a price would finally be fixed upon the Bolton stock whereby appellant could buy the same from the Bolton estate. Damages arise, appellant says, because the stock at the time in question was worth a great deal more than $135 per share.

Because the district court decided there is no jury question involved, the appellant appeals. Our attention now will be directed to the propositions argued.

[1] I. The appellant pleaded fraud as the basis for his right to recover from the appellee. Therefore, the burden of proof is upon appellant to sustain that allegation by sufficient evidence. Under the circumstances, fraud will not be presumed. Smith v. Smith, 206 Iowa, 606 (local citation, 610), 219 N. W. 512;Stephenson & Peterson v. Svenson, 187 Iowa, 802, 174 N. W. 570;Blasier v. Doyle, 197 Iowa, 652, 198 N. W. 12;Wing v. Credit Guide Company, 181 Iowa, 370, 164 N. W. 627. Has appellant met the test? This is the first question.

A review of the record discloses that the evidence on this proposition is exceedingly close. There is no clear showing of fraud under the many facts and circumstances involved. No relationship of principal and agent existed between appellant and appellee, nor was there a confidential relationship between the parties. The theory upon which this case is decided makes it unnecessary for us to set forth an extensive statement of the evidence at this place. Under the circumstances, an elaborate discussion of the facts is not essential.

Two general claims, as before said, are made by appellant: First, he contends that appellee, through deceit, received an option to buy the stock when none was intended; and, second, he asserts that thereby appellee obtained an unconscionable bargain.

Assuming, however, without deciding that the reasonable value of the stock, when the option was signed, still remains a jury question, and likewise conceding, without determining, that it is for the jury to say whether appellee, through fraudulently pretending to purchase the Bolton stock for appellant, obtained his signature to the optional agreement, yet this does not mean under the record, as hereinafter will be shown, that the district court erroneously directed a verdict.

[2][3][4] II. Soon after he signed the option agreement, appellant learned of appellee's alleged fraud. So, he took a copy of the option contract to his attorney, John Gillespie. Some uncertainty exists whether appellant consulted Mr. Gillespie on Thursday, March 28, or Saturday, March 30. In any event, Mr. Gillespie was consulted by appellant for the purpose of avoiding the optional agreement.

Upon this occasion, appellant knew of appellee's alleged fraud and understood that the instrument executed by him was an option under which appellee might buy the stock. Likewise, on the same Saturday, appellant told appellee that he procured the option through fraud. Up to that time appellee had not exercised his right to buy the stock under the option. Notwithstanding this, appellant did not withdraw the optional offer. The only consideration named in the option agreement is one dollar. Yet the record expressly shows that such consideration was not paid. Not only that, but under the facts and circumstances revealed by the appellant, it is apparent that there was no consideration of any kind supporting a contract to sell this stock to appellee. Resultantly the statutory presumption arising out of the written document is...