Baird v. Granniss
| Decision Date | 24 December 1907 |
| Citation | 106 S.W. 980,208 Mo. 426 |
| Parties | CHARLES O. BAIRD, Appellant, v. CHARLES E. GRANNISS |
| Court | Missouri Supreme Court |
Appeal from Jackson Circuit Court. -- Hon. A. F. Evans, Judge.
Affirmed.
J. J McClintock, Jr., and Braley & Simpson for appellant.
(1) Plaintiff, upon the issues as made by the pleadings, was entitled to a jury trial. Constitution, art. 2, sec. 28; R S. 1899, sec. 691; Kitchen v. Railroad, 59 Mo. 514; Earl v. Hart, 89 Mo. 263; Briggs v Railroad, 111 Mo. 168; Benoist v. Thomas, 121 Mo. 661. (2) Defendant, by reason of the situation of the parties, and from the fact that he was not only a stockholder and a director, but was also the president and general manager of the Pine Company, which was practically in liquidation, owed the duty of keeping the plaintiff informed of the transactions and negotiations which affected the value of the plaintiff's stock, which he was attempting to purchase, and did purchase, and is liable for not so doing. Fisher v. Budlong, 10 R. I. 525; Commissioners of Tippecanoe v. Reynolds, 44 Ind. 509; Koshler v. Black Run Iron Co., Black 715; Graham v. Cummings, 208 Pa. 576; Milford v. Com., 144 Mass. 65. (3) Defendant was the agent of plaintiff under the circumstances of this case and could not lawfully make a secret profit on plaintiff's stock, and is therefore liable for the difference between what he paid for the stock and what he received in dividends thereon to the extent of $ 10,591.00 and interest thereon. Mulvane v. O'Brien, 58 Kan. 463; Mechem on Agents, secs. 1, 469, 937; Graham v. Cummings, 208 Pa. 516; Hertsog v. Hertsog, 29 Pa. 465; Machine Co. v. Clark, 15 Kan. 492; Fisher v. Bell, 91 Ind. 243; Brown v. Eaton, 21 Minn. 409. (4) Defendant obtained plaintiff's stock by fraud and deceit, and is therefore liable to plaintiff in damages. Fisher v. Budlong, 10 R. I. 525; Bigelow on Fraud, 330; Pomeroy's Equity Jurisprudence, sec. 1090; Chatlain v. Ins. Co., 86 Ill. 220; Forbes v. McDonald, 54 Cal. 98; Bispham on Equity, sec. 213; Stewart v. Wyoming Cattle Ranch Co., 128 U.S. 383; Walsham v. Stainton, 1 De G., J. & S. 678; Walsh v. Golden, 130 Mich. 531. (5) While it may not have been defendant's duty originally by virtue of his official position to have advised plaintiff of the affairs of the company affecting the value of the stock, yet after having written as he did in January, 1901, and through his agents in 1902, he then became a trustee for plaintiff and owed the duty to plaintiff to promptly keep him advised of all matters pertaining to the company and affecting the value of the stock. Harrison v. Murphy, 106 Mo.App. 465; Krumbhaar v. Griffiths, 151 Pa. St. 223; Jackson v. Ludeling, 15 Wall. 616; Beach on Trusts and Trustees (Ed. 1897), secs. 214-16-28; cases heretofore cited under point 2. (6) While some authorities hold that a director need not necessarily, by reason of such directorship, advise the stockholders of the affairs of the company, yet justice can be best subserved by holding that a president and general manager of the corporation stands in the nature of a trustee to the stockholder, and may not buy the stock of a stockholder unless he does so openly as the purchaser, and advises the stockholder of all negotiations and transactions affecting the value of the stock which he so desires to purchase. Commissioners of Tippecanoe v. Reynolds, 44 Ind. 509 (see dissenting opinion); Beach on Trusts and Trustees (Ed. 1897), sec. 228.
Haff & Michaels and W. M. Walker for respondent.
(1) There is no confidential relation between an officer of a corporation and a stockholder so far as a sale of stock between them is concerned, and an officer of a corporation may buy and sell its stock like any other individual. Crowell v. Jackson, 53 N. J. L. 656; Board of Commrs. of Tippecanoe Co. v. Reynolds, 44 Ind. 509; Carpenter v. Danforth, 52 Barb. (N. Y.) 581; Gillett v. Bowen, 23 F. 625; Deaderick v. Wilson, 67 Tenn. 108; Percival v. Wright, L. R. 2 Chan. (1902), 421; 71 L. J. Ch. 846; 51 W. Rep. 241; 1 Manson 17; Hooker v. Steel Company, 215 Ill. 444; Haarstick v. Fox, 9 Utah 110; Walsh v. Goulden, 130 Mich. 531; Krumbhaer v. Griffiths, 151 Pa. St. 223; Fisher v. Budlong, 10 R. I. 525; O'Neil v. Ternes, 32 Wash. 528; Bloom v. Loan Co., 152 N.Y. 114; Johnson v. Laflin, 103 U.S. 800; Mulvane v. O'Brien, 58 Kan. 463; Perry v. Pearson, 135 Ill. 218; Smith v. Hurd, 12 Met. 371; Spering's Appeal, 71 Pa. St. 11; Slee v. Bloom, 20 Johns. 669; Gilbert's Case, L. R. 5 Ch. App. 559; Grant v. Attrill, 11 F. 469; Tricom v. Winship, 43 La. Ann. 48; Converse v. United Shoe Mach. Co., 185 Mass. 422; Strong v. Gutierrez, 5 Official Gazette, 72 (Sup. Ct. Phil. Is. 1907); Cook on Corporations (4 Ed.), secs. 320, 350; Clark on Corporations, sec. 213; Taylor on Private Corporations (5 Ed.), sec. 695; Morawetz on Private Corporations, pp. 565, 537; Elliott on Private Corporations (3 Ed.), sec. 5027; 21 Am. and Eng. Ency. Law (2 Ed.), 898; 10 Cyc. 796; Halliwell on Stocks and Stockholders, sec. 184; Beach on Private Corporations, secs. 614, 646; Wilgus Corporation Cases, pp. 1706, 1707, 1791; Doyle v. Laughlin, 53 Mo.App. 542; R. S. 1899, sec. 966; Bank v. Lanier, 11 Wall. 369. (2) The evidence clearly shows that plaintiff knew all the facts known to defendant which might affect the value of his stock; that defendant was not only not guilty of fraud, deceit, misrepresentations or concealment, but treated plaintiff with extreme fairness. (3) Since plaintiff's evidence entitled him to no relief, it is immaterial whether the case was tried as a law or an equity case. Ward v. Quinlivin, 65 Mo. 454; Redman v. Adams, 165 Mo. 71; Carmody v. Hanick, 99 Mo.App. 357. (4) Courts will not aid those who err in business judgment. Bryan v. Hitchcock, 43 Mo. 531.
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 overreached 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 every thing 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 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.
I. 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...
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