Blaine v. Lowery, 13105.

• Decision Date: 05 December 1941
• Docket Number: No. 13105.,13105.
• Citation: 157 S.W.2d 713
• Parties: BLAINE v. LOWERY et ux.
• Court: Texas Court of Appeals

157 S.W.2d 713

BLAINE v. LOWERY et ux.

No. 13105.

Court of Civil Appeals of Texas. Dallas.

December 5, 1941.

Appeal from District Court, Dallas County; Paine L. Bush, Judge.

Suit by Carl W. Lowery and wife against M. H. Blaine and others, to recover damages based on allegedly false representations of defendants inducing the plaintiffs to trade stock of merchandise for worthless stock. From an adverse judgment, the named defendant appeals.

Judgment affirmed.

John W. Pope, Sr., of Dallas, for appellant.

Robert B. Hershey, of Dallas, for appellees.

BOND, Chief Justice.

Carl W. Lowery and wife brought this suit against M. H. Blaine, E. F. Patterson and Robert A. Blaine, Jr., for damages based on actionable fraud in regard to a transaction in stock in a corporation.

The Lowerys were the owners of a drug store located at Waxahachie, Texas, of the reasonable market value of $2,300. They inserted an advertisement for sale in a Dallas newspaper, causing M. H. Blaine to become interested, apparently to purchase the business, which finally resulted in a transfer of their stock of merchandise for forty shares of stock in a corporation represented by the defendants to be of a reasonable market value of $50 per share.

The cause was tried to a jury; M. H. Blaine and E. F. Patterson were found to have made the representation, in substance, that the stock involved in the transaction was worth $50 per share; that such representation was a material inducement to plaintiffs to purchase said stock; that the stock was worthless at the time of its delivery "in the condition and under the circumstances then existing"; that such representation by said defendants was purposely made, with knowledge that same was untrue, and that plaintiffs should be awarded damages, actual and exemplary, in the sum of $4,000. Accordingly, the trial court entered judgment in favor of the plaintiffs against M. H. Blaine and E. F. Patterson, jointly and severally, and in favor of Robert A. Blaine, Jr. M. H. Blaine alone has presented this appeal.

Appellant seeks reversal on only two assigned propositions of law: First, where a prospective purchaser makes for himself an investigation of properties offered to him either for purchase or exchange, he cannot be heard to say that he relied upon representations as to value, or otherwise, in the absence of positive proof that he was hindered in making such investigation; and, second, where there is competent and probative evidence showing that the property purchased has a value, a finding by a jury that the property is worthless will be set aside on the ground of insufficiency of evidence to support the verdict. In the light of the two propositions urged, actionable fraud in the transaction must be conceded; appellant seeks to avoid its damaging consequences by lack of diligence on the part of the purchasers to discover the fraud by timely investigation of facts that would have led to a full disclosure; and for lack of sufficient evidence to support the jury's verdict that the stock purchased in the corporation was worthless. We think the jury's verdict has ample support in evidence and that the trial court properly rendered judgment against the offending parties.

Mrs. Lowery testified, and her testimony is fully corroborated by that of her husband, that three or four days after the advertisement appeared in the newspaper, M. H. Blaine came to Waxahachie to interview her and her husband relative to the sale of the advertised drug store and, while there, made an appointment for them to come to Dallas and meet him at Dallas Thrifty Drug Store, on Bishop and Seventh Streets, to talk over the matter. She testified that on arrival at Dallas, they went to the drug store and while there, M. H. Blaine advised them he would like to go in the drug business at Waxahachie,—seemingly very interested in buying the stock. After talking awhile, Blaine took them for a ride over the City of Dallas; told them he owned 22 drug stores in Dallas, pointing out various drug stores, buildings, and manufacturing plants which he claimed to own; said he intended to have a chain of 50 stores within a very short while. He impressed them as being quite wealthy, with an unlimited amount of money and credit. On that occasion, Mr. Blaine arranged another meeting for the next morning, saying "he would like to come down to Waxahachie and bring his appraiser to look over our stock and to tell him what it was worth." The following morning, Blaine and Patterson came to Waxahachie; Blaine introduced Patterson as his appraiser, saying "This is the man I have hired to do this, because I don't know how to appraise stock; that's what I hired him for." Patterson looked over the store and while he was doing so, Blaine asked "how would we like to join a big corporation and have a drug store in Dallas to run as our own, it would be like our own, only we would be in with a corporation where we would make a lot more money than running it individually; that he had a great big corporation in Dallas, and rather than buy us out in Waxahachie, we would join the chain and take stock in the corporation; my husband would be manager of the store, and I would be cashier; in other words, the store would be just like ours, only we would have a chance to make much more money." Blaine represented to them, so Mr. and Mrs. Lowery testified, that the corporation, Dallas Thrifty Drug Stores, Inc., was incorporated for $40,000; that he was the owner and controlling head of the business and had $5,000 in cash to carry on the business; that the stock in the corporation was actually worth $50 per share. Mrs. Lowery testified that, in discussing the holdings, Mr. Blaine said that "the drug manufacturing plant was a big thing, and that all the stores he owned were doing a good business; money was no object to him; that he was putting in more stores right along and needed managers." After looking over the drug store at Waxahachie, Patterson advised Blaine that the stock was worth $2,300. Thereupon, Blaine offered $2,000 for the stock of merchandise, payable with stock in the corporation, or 40 shares represented...