Baird v. Granniss

• Decision Date: 24 December 1907
• Citation: 208 Mo. 426,106 S.W. 980
• Parties: BAIRD v. GRANNISS.
• Court: Missouri Supreme Court

106 S.W. 980

208 Mo. 426

BAIRD v. GRANNISS.

Supreme Court of Missouri, Division No. 1.

December 24, 1907.

1. FRAUD — ACTIONS — EVIDENCE — SUFFICIENCY.

Evidence examined, and held not to show that defendant was guilty of deceit, misrepresentation, or concealment in the sale of corporate stock to him by plaintiff.

2. APPEAL — REVIEW — HARMLESS ERROR — RULING ON PLEADING.

Under Rev. St. 1899, § 865 [Ann. St. 1906, p. 812], providing that the Supreme Court shall not reverse except for material error affecting the merits, any error in ruling that a petition stated a cause in equity rather than at law is not ground for reversal, where the evidence did not sustain the petition on either theory, and the case was disposed of on demurrer to plaintiff's evidence.

Appeal from Circuit Court, Jackson County; A. F. Evans, Judge.

Action by Charles O. Baird against Charles E. Granniss. Judgment for defendant, and plaintiff appeals. Affirmed.

J. J. McClintock, Jr., and Braley & Simpson, for appellant.

Haff & Michaels and W. M. Walker, for respondent, cited Crowell v. Jackson, 53 N. J. Law, 656, 23 Atl. 426; Board of Com'rs of Tippecanoe Co. v. Reynolds, 44 Ind. 509, 15 Am. Rep. 245; Carpenter v. Danforth, 52 Barb. (N. Y.) 581; Gillett v. Bowen (C. C.) 23 Fed. 625; Deaderick v. Wilson, 67 Tenn. 108; Percival v. Wright (1902) L. R. 2 Chan. 421, 71 L. J. Ch. 846, 51 W. Rep. 241, 1 Manson, 17; Hooker v. Steel Company et al., 215 Ill. 444, 74 N. E. 445, 106 Am. St. Rep. 170; Haarstick v. Fox, 9 Utah, 110, 33 Pac. 251; Walsh v. Goulden, 130 Mich. 531, 90 N. W. 406; Krumbhaar v. Griffiths, 151 Pa. 223, 25 Atl. 64; Fisher v. Budlong, 10 R. I. 525; O'Neil v. Ternes et al., 32 Wash. 528, 73 Pac. 692; Bloom v. Loan Company, 152 N. Y. 114, 46 N. E. 166; Johnson v. Laflin, 103 U. S. 800, 26 L. Ed. 532; Mulvane v. O'Brien, 58 Kan. 463, 49 Pac. 607; Perry v. Pearson, 135 Ill. 218, 25 N. E. 636; Smith v. Hurd, 12 Metc. 371, 46 Am. Dec. 690; Spering's Appeal, 71 Pa. 11, 10 Am. Rep. 684; Slee v. Bloom, 20 Johns. 669; Gilbert's Case, L. R. 5 Ch. App. 559; Grant v. Attrill (C. C.) 11 Fed. 469; Trisconi v. Winship, 43 La. Ann. 45, 48, 9 South. 29, 26 Am. St. Rep. 175; Converse v. United Shoe Mach. Co., 185 Mass. 422, 70 N. E. 444; Strong v. Gutierrez, 5 Official Gazette, 72 (Sup. Ct. Phil. Is., 1907); Cook on Corporations (4th Ed.) §§ 320, 350 (1898); Clark on Corporations, § 213; Taylor on Private Corporations (5th Ed.) § 695; Morawetz on Private Corporations, pp. 565, 537; Elliott on Private Corporations (3d Ed.) § 5027; 21 A. & E. Encyc. of Law (2d Ed.) 898; 10 Cyc. 796; Helliwell on Stocks and Stockholders, § 184; Beach on Private Corporations, §§ 614, 646; Wilgus, Corporation Cases, pp. 1706, 1707, 1791; State ex rel. Doyle v. Laughlin, 53 Mo. App. 542; Rev. St. Mo. 1899, § 966 [Ann. St. 1906, p. 862]; Bank v. Lanier, 11 Wall. 369, 20 L. Ed. 172.

VALLIANT, P. J.

Defendant, through a broker in Kansas City, purchased of plaintiff 170 shares of stock in a corporation called the "Missouri & Louisiana Yellow Pine Company" for which he paid $125 a share. The plaintiff now claims that he was over-reached in the transaction; that the stock was at that time really worth $187 a share, and that the defendant's relation to the plaintiff and to the corporation was such that he owed the duty to plaintiff to inform him of the facts that influenced the value; that the difference between the price paid and the real value of the stock was $10,591, for which with interest and costs the petition prays judgment. The statements in the petition, as constituting the plaintiff's complaint, leave it in some doubt as to whether this is a suit in equity to charge the defendant as an officer of the corporation for a breach of his trust, or an action at law for deceit and misrepresentation. The petition states that the defendant was the president and general manager of the corporation, and for that reason was the "trustee and agent" of the plaintiff in relation to his stock, yet in violation of that duty bought the stock for less than it was worth, without giving plaintiff information of certain material facts that defendant as president and general manager knew. The petition also alleged that defendant had in conversation promised that he would give the plaintiff all news and information relative to the Pine Company affecting the value of the stock; that plaintiff "was relying entirely upon said promise made to him by defendant and the information which he was to receive from said defendant, and which by reason of the facts aforesaid the defendant owed this plaintiff." The plaintiff resided in Philadelphia; defendant, in Kansas City, where the corporation was domiciled. Whilst the terms wrongfully and fraudulently are applied to defendant's acts, and "deceit, concealments, and misrepresentations" are charged in an abstract way, yet the only allegation as of a misrepresentation of a fact is that in the first letter of the broker opening the negotiations that ended in a sale of the stock it was said the stock was "slow sale." The gravamen of the complaint is that defendant failed to communicate to plaintiff material facts affecting the value of the stock. The sum of the whole case made by the petition is that the defendant, being the president and general manager of the corporation, well knowing that negotiations were on foot which were likely to lead to an advantageous sale of the corporation's property, without communicating that fact to the plaintiff, employed a broker to open negotiations with him for the purchase of his stock, which negotiations ended in a sale by plaintiff to defendant for $125 a share, plaintiff not then knowing for whom the broker was acting, when in fact the stock at the date of the sale was really worth $187 a share. In addition to the above is the allegation that the defendant promised the plaintiff to keep him informed of everything affecting the value of the stock. The answer was a general denial. When the cause was ready for trial, there was a difference of opinion between the counsel as to whether it was an action at law or a suit in equity, the counsel for plaintiff contending that it was an action at law, and demanded a jury trial, counsel for defendant that it was a suit in equity. The court construed it to be a suit in equity, and tried it as such. At the close of the plaintiff's case the defendant demurred to the evidence, which demurrer the court sustained, and rendered judgment for defendant, from which judgment the plaintiff has appealed.

1. As the plaintiff in his petition has mixed his facts on which he seems to have predicated a claim against the defendant on the theory that he was a trustee who had been unfaithful to his trust with facts on which he seems to base a cause of action for fraud and deceit, it will be necessary for us to separate the two classes of facts, and see if the plaintiff has a just cause of complaint on both or either ground. In so far as the plaintiff's claim rests on the theory that the defendant has been unfaithful to his trust as an officer of the corporation, it is upon the allegation that the defendant was the president and general manager of the corporation, that as such he knew its affairs, that he bought the stock through a broker without disclosing to the plaintiff who the purchaser was and without giving him information that negotiations were on foot which it was expected would result in an advantageous sale of the property of the corporation. Assuming those allegations to be true, do they make out a case of betrayal of trust for which the defendant can be held to account? We are leaving for the present out of view whatever there may be in the case to support the charge of fraud and deceit, and are viewing the defendant's acts as an officer of the corporation in relation to his dealings with an individual stockholder for the purchase of his stock. If the president of a corporation is a trustee for each individual stockholder in the sense and to the extent that he is bound to keep each stockholder informed of everything in existence or in prospect that would affect the market value of his stock or influence the stockholder in negotiating a sale of his individual holding, then this petition states a cause against the defendant as an unfaithful trustee. There is no question but what the officer of a corporation is a trustee for the corporation in the management of its affairs, and in that sense he is indirectly a trustee for the stockholders in general, but that is not the point in this case. Was the defendant, because he was president and general manager, in such a trust relation to the plaintiff that he could not buy the stock without first giving him all the information he had that would influence its market value? If there has been any direct decision of this question in this state, it has not been brought to our notice, and, in view of the research and industry shown in the briefs, we are satisfied that if any such decision existed it would have been found by the counsel. That no such trust relation exists has been often declared in the courts of other states, as by reference to the list of cases cited in the brief for respondent, which will be printed with this report, will appear. But interesting as that question is, do we not feel justified in deciding it in this case, because on a review of all the evidence bearing on this as well as on the question of fraud and deceit, which evidence will be summarized in the next succeeding paragraph, we are satisfied that, if the allegations of the petition aiming to charge the defendant with a breach of his duty as officer of the corporation to a stockholder are sufficient to call him to account, the proof does not sustain the allegations.

2. We come now to the charge that the defendant was guilty of fraud and deceit. The petition alleges that the plaintiff, because of his residence in Philadelphia, had no personal knowledge of the pine...