Bank of Gresham v. Walch

• Decision Date: 06 April 1915
• Parties: BANK OF GRESHAM v. WALCH. [d]
• Court: Oregon Supreme Court

147 P. 534

76 Or. 272

BANK OF GRESHAM v. WALCH. ^[d]

Supreme Court of Oregon

April 6, 1915

Department 1.

Appeal from Circuit Court, Multnomah County; Henry E. McGinn, Judge.

Action by the Bank of Gresham against L. Walch. Judgment for defendant, and plaintiff appeals. Affirmed.

This is an action brought by plaintiff to recover the sum of $750 balance due upon the principal of a promissory note dated July 13, 1912, for $1,000, with interest and attorney's fees. To this complaint defendant interposed the defense of fraud, and, as a basis thereof, alleges the existence of a conspiracy between the plaintiff and the Co-operative Supply House. The details of the transaction are set forth in the answer, in substance, as follows:

That on or about June 22, 1912, the plaintiff corporation represented by John G. Sleret, its president, F. A. Holliday its vice president, and O. A. Eastman, its cashier, and the Co-operative Supply House, a corporation, by George J Hodder, its president, and P.J. Darche, its secretary, and both corporations and their respective officers represented by Englert & Hardley, who were selling agents of the Co-operative Supply House, agreed and confederated and acted together for the purpose of cheating and defrauding the defendant.

That before the defendant purchased some of the capital stock of the Co-operative Supply House the officers and agents of the two corporations named above caused to be prepared and written to show and read to the public for the purpose of inducing people in general to invest in the capital stock of the Co-operative Supply House a large number of letters signed by the officers of the plaintiff and other influential business men residing near Gresham, said letters to be delivered by the officers of the respective corporations to Englert & Hardley, their agents employed to solicit subscriptions to the capital stock of the Supply House to be used in selling such stock; that Englert & Hardley were authorized and directed by the plaintiff corporation and the Co-operative Supply House, and the officers thereof, to exhibit and read said letters to the defendant, to the end that the latter might believe the statements therein contained, and thereby be induced to purchase and pay for some of said corporate stock.

That the following is a copy of one of the letters written by one O. A. Eastman, cashier of the plaintiff corporation:

"Bank of Gresham, Gresham, Oregon.

"John G. Sleret, Pres.

"F A. Holliday, Vice Pres.

"O A. Eastman, Cashier.

"Emil G. Kardell, Asst. Cashier.

"June 22, 1912.

"Co-Operative Supply House, Portland, Oregon--Gentlemen: In reply to your request as to my opinion of the future possibilities of the Co-operative Supply House, would say I cannot see any reason why it should not prove a success and profitable investment owing to the fact that there is no concern of any prominence on the coast doing a mail order business.

"Previous to my coming West my attention was called to the remarkable success of the firm of Sears, Roebuck & Co., and I cannot see why under your plan of distributing stock among the people with a view of obtaining them as customers will not prove most profitable both to your company and the stockholders. As in evidence of my belief I have this day signed a subscription for a substantial block of stock through your representative Messrs. Englert & Hardley and predict a successful future for the company, as the business will be in the hands of capable men.

"Yours truly,

O. A. Eastman, Cashier."

That Englert & Hardley, agents of such corporations, and acting under their authority and direction, and with their full knowledge and assent, and for the purpose of inducing the defendant to purchase capital stock of the Supply House with the intent that he would rely upon and believe to be true the statements and representations contained in said letters, did on July 13th call at the home of defendant, and found him ill and suffering from kidney trouble and partial blindness, and, while in such condition, the said Englert & Hardley read to and showed defendant the original of the letter above mentioned, and a large lot of other letters of similar import and effect, and stated to defendant the following representations:

"(1) The Co-operative Supply House is a corporation organized with a capital stock of $3,000,000.

"(2) This is a rich concern, and it is backed by the Bank of Gresham, Or., which owns a large block of stock.

"(3) This stock is now worth $10 per share, and it will go to $15 per share next month, and this is the time for you to buy.

"(4) This company now has thousands of dollars worth of goods in its big warehouse in Portland, ready for distribution to the farmers, and if you become a stockholder now you will be entitled to buy goods from this company at extremely low rates.

"(5) In addition to getting goods at low rates, you will also receive large yearly dividends on your stock.

"(6) If you want to buy this stock, and have no money to pay for it now, the Bank of Gresham will take your note and issue you the stock."

That defendant relied upon all the foregoing statements and representations, and, believing them to be true, was induced to, and did, purchase capital stock of such corporation of the par value of $1,000 for the price of $1,000, and in payment therefor gave to plaintiff his negotiable promissory note for the sum of $1,000, although defendant thought at the time that he was purchasing only $100 worth of said stock for the price of $100; that the stock was the only consideration received by the defendant.

That all the aforesaid statements and representations were false and untrue, and known by the corporations and their officers and agents to be false when the same were made, or were made recklessly and wantonly and without knowledge that the same were true; that said stock was worthless, and that the Co-operative Supply House had no property, money, or credit whatever.

That as soon as the plaintiff was notified of the note held by the bank, which was the first that he knew of the note being for $1,000, he informed plaintiff of the fraud practiced upon him; that O. A. Eastman, cashier, informed defendant that his $1,000 note would be surrendered to him as soon as the matter could be arranged with the Co-operative Supply House, or that, if he made arrangements to purchase a smaller block of stock, the difference between the value of the stock he then had and his new purchase would be indorsed upon the $1,000 note; that defendant believed and relied upon the statements of said plaintiff made by its cashier, and thereafter, on January 22, 1913, plaintiff and the Co-operative Supply House...