Ashby v. Peters
| Decision Date | 25 November 1932 |
| Docket Number | 28264 |
| Parties | MINNIE I. ASHBY, APPELLANT, v. RICHARD C. PETERS ET AL., APPELLEES |
| Court | Nebraska Supreme Court |
APPEAL from the district court for Lancaster county: LINCOLN FROST JUDGE. Reversed.
REVERSED.
Syllabus by the Court.
1. A trial court should not direct the verdict of a jury, unless the evidence is so clear upon every point upon which the verdict must depend that reasonable minds could not come to any other conclusion.
2. Save for the purposes of conveyancing, a lease of more than one year is not real estate.
3. The officers of a corporation are responsible for the acts of the corporation, and in a suit for fraud, if fraud is proved, the law will look through the corporation to the officers who acted in the matter, and the officers who acted in the premises are proper parties defendant.
4. The purchaser of a bond has a right to rely upon the representations on the face of the bond as to the security for the bond, unless, as a matter of fact, he has actual knowledge to the contrary. That question of fact is for the jury to determine.
Appeal from District Court, Lancaster County; Frost, Judge.
Action by Minnie I. Ashby against Richard C. Peters and others. Judgment for defendants, and plaintiff appeals.
Reversed and remanded.
Howard Saxton, John E. Eidam and Allen & Requartte, for appellant.
Rose, Wells, Martin & Lane, Woods, Woods & Aitken and Virgil Haggart, contra.
George I. Craven, amicus curiae.
Heard before GOSS, C. J., DEAN, EBERLY, DAY and PAINE, JJ., and RYAN, District Judge.
The plaintiff began this action in the district court for Lancaster county to recover damages from the defendants because of alleged fraud in the issuance and sale of certain bonds purchased by the plaintiff from the defendants, which bonds were designated "Peters Trust Building Refunding First Mortgage Real Estate Gold Bond," and purported on their face to be secured by a trust deed conveying the real estate known as the Peters Trust Building (formerly Bee Building) Omaha, Nebraska, to the Peters Trust Company, as trustee. The plaintiff purchased bonds in the amount of $ 1,600 during the years 1923 and 1924.
These bonds were issued on May 17, 1923, by the Keystone Investment Company, a corporation, which held a ninety-nine year lease upon the real estate known as the Peters Trust Building, Omaha, Nebraska. The bonds were issued to take up a former issue of $ 400,000 of similar bonds, which would mature June 1, 1924, and these were to mature June 1, 1933, bearing interest at 6 per cent. from June 1, 1923.
The entire stock of the Keystone Investment Company, except directors' qualifying shares, was owned by the Peters Trust Company. The Peters Trust Company was a corporation organized as a trust company under the laws of the state of Nebraska and had been doing a general trust business for many years. The defendants are the directors of the Keystone Investment Company. The building known as the Peters Trust Building is a seven story office building, located on the northwest corner of Seventeenth and Farnam streets, in Omaha, Nebraska. The Keystone Investment Company held a ninety-nine year lease on said building, dated February 1, 1917, and expiring ninety-nine years from March 1, 1917. The fee of the said building was incumbered by a first mortgage lien in favor of the New York Life Insurance Company in the sum of $ 250,000. The fee to the real estate was vested in the Bee Building Company, subject to said mortgage and to certain party wall agreements with certain adjoining property owners.
On December 10, 1929, the Peters Trust Company filed a voluntary petition in bankruptcy and on the same date was adjudicated a bankrupt. Herbert S. Daniel was appointed receiver on the same date and on March 26, 1930, qualified as trustee in bankruptcy of said bankrupt. On October 1, 1930, the Bee Building Company commenced an action in forcible entry and detainer against the Keystone Investment Company and others in the municipal court of the city of Omaha to secure possession of said real estate, alleging default in the rentals provided for in the ninety-nine year lease, and on October 15, 1930, obtained judgment for possession and restitution of said premises. On November 4, 1930, the Bee Building Company filed a petition in the district court for Douglas county, Nebraska, against the Keystone Investment Company and others, alleging nonpayment of the rentals covenanted to be paid in the ninety-nine year lease and pleading the judgment of the municipal court of the city of Omaha and its possession under said judgment of restitution, and praying that said ninety-nine year lease be canceled and set aside and that title in and to the real estate be quieted in the plaintiff. Answers were filed on the same date and on November 5, 1930, decree was entered, canceling the ninety-nine year lease and quieting title to the real estate in the plaintiff. Interest was paid regularly upon said bonds as it fell due at the offices of the Peters Trust Company, up to and including June 1, 1929. The interest coupons due December 1, 1929, and thereafter were not paid and the bonds thereupon became worthless.
In her petition plaintiff alleges that the defendants Peters, Claassen, Cameron, Potter and Weston, who were the directors of the Peters Trust Company and Peters National Bank, and the defendant Kennedy, who was the secretary of the Keystone Investment Company, conspired and agreed together and with one Paul E. Armstrong and Ralph E. Smith to cheat, wrong and defraud the plaintiff and other persons who might be induced by means of fraudulent representations to become purchasers, owners and holders of the bonds of the Keystone Investment Company.
The alleged fraudulent representations claimed by the plaintiff are: (1) That said bonds were first mortgage real estate gold bonds, secured by trust deed of even date therewith, conveying certain real estate known as the Peters Trust Building (formerly Bee Building), Omaha, Nebraska; (2) that the deed of trust was a first mortgage lien upon said real estate; (3) that the security for said bonds was sufficient to cause and would cause the bonds and interest coupons attached to be paid at maturity; and (4) that the said defendants each assumed the obligation of said bonds as principal and they each consented to charge and did charge their separate estates for the payment thereof.
The amended answer of the defendants admits the identity of the Keystone Investment Company and the Peters Trust Company and their relationship to each other, their general business activities as alleged in the petition, and that the Keystone Investment Company owned and held a ninety-nine year leasehold on said Peters Trust Building under a lease from the Bee Building Company, dated February 1, 1917, and that said leasehold interest was subject to a mortgage lien on said premises in favor of the New York Life Insurance Company in the amount of $ 250,000. Defendants further admit that on or about May 17, 1923, the Keystone Investment Company executed its bonds in the principal sum of $ 400,000 secured by a trust deed on the leasehold interest of said company. The defendants also plead that plaintiff's cause of action, if any, is barred by the statute of limitations. At the close of all the evidence the learned trial judge instructed the jury to return a verdict in favor of the defendants. This action is assigned as error.
Plaintiff testified that her dealings were with Ralph E. Smith, who was employed as a salesman of securities for the Peters Trust Company; that she told him she had some bonds that had matured and also a little money that she wished to invest and wanted to be sure and place it in an investment that was perfectly safe, and that she was going to rely on him to place it where it would be safe; that he said he would advise her to buy Keystone Investment Company mortgage bonds, that there was nothing better; that it was a first mortgage real estate gold bond, secured by a first mortgage on the Peters Trust Building, and that they were perfectly safe. Plaintiff further testifies that she relied on the statements made to her by Ralph E. Smith and that she relied upon the integrity of the Peters Trust Company by whom he was employed; that she believed the statement on the face of the bond, wherein it is recited that it is a first real estate mortgage gold bond; and that she did not learn of the falsity of said statements until the fall of 1930. Other witnesses for the plaintiff, who were also purchasers of Keystone Investment Company bonds, testified that substantially the same representations were made to them by other employees of the Peters Trust Company. A. C. Heine, secretary of the Plaat Deutscher Verein, testifies that he and another officer of this society went to the defendant Claassen, at his offices in the Peters Trust Building, and stated that they had some money of the society to invest in real estate first mortgage bonds, and that Mr. Claassen referred them to one of their salesmen, who recommended and sold them Keystone Investment Company bonds.
Plaintiff further relies on the resolution passed at a special meeting of the board of directors of the Keystone Investment Company on May 17, 1923, as evidence of the conspiracy alleged wherein it is recited that "the Keystone Investment Company First Mortgage Real Estate Gold Bonds, executed by the Keystone Investment Company, secured by a trust deed on its leasehold interest on the property known as Peters Trust Building formerly the Bee Building * * * will mature June 1,...
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