Brown v. Irving-Pitt Manufacturing Co.

• Decision Date: 14 March 1927
• Docket Number: 25915
• Citation: 292 S.W. 1023,316 Mo. 1023
• Parties: Walter Brown, Appellant, v. Irving-Pitt Manufacturing Company, J. B. Pitt and William P. Pitt
• Court: Missouri Supreme Court

292 S.W. 1023

316 Mo. 1023

Walter Brown, Appellant, v. Irving-Pitt Manufacturing Company, J. B. Pitt and William P. Pitt

No. 25915

Supreme Court of Missouri

March 14, 1927

Motion for Rehearing Denied. April 9, 1927.

Appeal from Jackson Circuit Court.

Affirmed.

William C. Michaels and James M. Johnson for appellant Haff, Meservey, Michales, Blackmar & Newkirk of counsel.

(1) For the purposes of the demurrers the allegations of the petition must be accepted as true and liberally construed. Sec. 1257 R. S. 1919; Stillwell v. Hamm, 97 Mo. 579; Hood v. Nicholson, 137 Mo. 400; Erwin v. Commerce Co., 204 S.W. 820. (2) The allegations of the petition disclose the existence of all of the elements of a cause of action for fraud and deceit. The fact that all of the patents obtained by Irving and Pitt after the incorporation of the company belonged to the company and not to them individually was material. The representation that they were the property of the defendants individually was false, was known to the defendants to be false, was made for the purpose of deceiving plaintiff and his assignors, was relied upon by them, and was the inducing cause of the sale of their stock for $ 110,000 par value of the preferred stock, and they were justified in relying on the statements of defendants respecting such matters which were peculiarly within the knowledge of defendants. Judd v. Walker, 114 S.W. 979; Funding & Foundry Co. v. Heskett, 125 Mo.App. 516; Pomeroy v. Benton, 57 Mo. 531. (3) Since defendants Irving and Pitt were the executive officers of the corporation and knew the facts respecting the ownership of the patents, they occupied a fiduciary relation to the minority stockholders who had no knowledge of such facts and were bound to make full and true disclosures to the minority stockholders respecting the property of the company. Pomeroy and Benton, 57 Mo. 531; Oliver v. Oliver, 118 Ga. 362; Ritchie v. McMullen, 79 F. 522. (4) Limitations did not begin to run against the cause of action pleaded in the petition until the discovery of the fraud, and plaintiff was entitled to bring this action at any time within five years from such discovery. McClain v. Parker, 129 S.W. 506; 27 C. J. 26; Cottrell v. Krim, 100 Mo. 397; Pomeroy v. Benton, 57 Mo. 531.

Wendell H. Cloud and Morrison, Nugent, Wylder & Berger for respondents Irving-Pitt Mfg. Co. and J. B. Irving. W. S. Flournoy for respondent William P. Pitt; Wendell H. Cloud, E. R. Morrison and H. L. Hassler of counsel.

If the petition be construed as stating facts sufficient to constitute a cause of action in fraud and deceit, nevertheless it appears on the face of the petition that such cause of action accrued more than five years before the commencement of this suit and is barred by the Statute of Limitations. Sec. 1317, R. S. 1919; Mester v. Jones, 286 Mo. 56; State ex rel. v. Yates, 231 Mo. 290; Heisler v. Clymer, 179 Mo.App. 110; Bent v. Priest, 86 Mo. 475; Johnson v. United Rys. Co., 243 Mo. 278; Callan v. Callan, 175 Mo. 346; Shelby Co. v. Bragg, 135 Mo. 291; Wood v. Carpenter, 101 U.S. 135; Scott & Bowker v. Boswell, 136 Mo.App. 601; Powell v. White, 170 Mo.App. 598; Hays v. Smith, 213 S.W. 455; Cotrill v. Krum, 100 Mo. 397; Pomeroy v. Benton, 57 Mo. 531; McLain v. Parker, 229 Mo. 68.

Davis, C. Higbee, C., concurs.

OPINION

DAVIS

This is an action based on fraud. The defendants filed separate but like demurrers, which the trial court sustained, and, plaintiff refusing in open court to plead further in said cause, final judgment in favor of defendants was rendered, plaintiff appealing therefrom.

The petition omitting caption and signatures, reads thus:

"(1) Plaintiff states that he is assignee of all of the rights and claims of Amelia Brown, C. A. Brown and Etta M. Brown under the contract hereinafter mentioned.

"(2) Plaintiff states that prior to June 13th, 1913, he and his said assignors owned common stock of the Irving-Pitt Manufacturing Company, a Missouri corporation, of the par value of $ 9,900; that defendant J. B. Irving at all the times mentioned herein was the president of said company.

"(3) That on June 13th, 1913, plaintiff and his said assignors and the defendant J. B. Irving, acting for himself and for the other defendants herein, made a written contract, a copy of which is attached hereto and marked 'Exhibit A;' that by the terms of said contract, it was agreed that either a new company was to be organized with a larger amount of capital stock to take over the assets and properties of the Irving-Pitt Manufacturing Company, or that the capital stock of the said company be increased and that plaintiff and his assignors make an exchange of their then holdings of the common capital stock of said company for preferred stock to be issued by any new company so organized, or out of the increase of the capital stock of defendant company, and that if the capital stock should be increased, $ 200,000 thereof should be seven per cent preferred stock and that plaintiff and his said assignors were to exchange their said common stock for $ 110,000 par value of such preferred stock; that $ 90,000 of preferred stock should be sold at par and that a new corporation, or an increase of said capital stock of the old corporation should be completed within four months from July 1st, 1913; that thereafter on June 21st, 1913, the parties amended and supplemented said agreement by a writing dated June 21st, 1913, signed by defendant J. B. Irving, a copy of which agreement of June 21st, 1913, is marked 'Exhibit B,' attached hereto and made a part hereof, whereby it was agreed that in addition to said preferred stock to be issued in exchange for said common stock, plaintiff was to be paid in cash the difference between the sum of $ 12,500, less the cost of a reorganization mentioned in the original agreement of June 13th, 1913, and the sale of the $ 90,000 preferred stock; that at the time said supplementary agreement was signed, the said J. B. Irving was acting for and on behalf of all the defendants herein.

"(4) That before plaintiff and his said assignors entered into the said agreement and amendment, the said J. B. Irving, acting for all the defendants herein, submitted to plaintiff a copy of the financial statement of April 30th, 1913, of said company and represented to plaintiff that it was a correct and true statement of the assets and liabilities of said company; that a copy of said financial statement is marked 'Exhibit C' and attached hereto and made a part hereof; that in the item of assets in said financial statement, the patents owned by said company were valued at $ 50,000 and that the total assets of said company were $ 624,333.49; that plaintiff, acting for and on behalf of himself and said assignors relied upon said statement and thereupon signed the agreements aforesaid of June 13th and June 21st, 1913; that in truth and fact the said Irving-Pitt Manufacturing Company was at said time the owner of patents worth and valued at $ 450,000 in excess of the $ 50,000 specified in said financial statement and that plaintiff and his said assignors, by virtue of owning one-third of the common stock of the said Irving-Pitt Manufacturing Company, were entitled to $ 150,000 of said excess value of said patents; that the said J. B. Irving represented that there was no value in said excess patents belonging to said company because they were patents not assigned to said company and were not assignable to said company, having been taken out by defendant Irving and defendant Pitt, and plaintiff relied on said statements and did not learn until 1923 that at the time of the organization of said corporation in 1904, said defendants Irving and Pitt had made an agreement to the effect, as he is now advised, that all patents taken out by defendants Irving and Pitt, or either of them, at any time after 1903 in connection with the business of said company should become the property of defendant company; that if he had known of said agreement or the effect thereof, and of facts as they were, neither he nor his said assignors would have entered into said contract of June 13th, 1913, and said amended agreement; that when the said capital stock of said company was increased, $ 450,000 of said stock was issued to defendants Irving and Pitt as presumed sole owners of said patents, when in truth and fact said patents belonged to said company and that plaintiff and his assignors by virtue of owning one-third of the common stock of said company before said increase, was entitled to one-third of said $ 450,000.

"That by reason of the premises the defendants and each of them are indebted to the plaintiff in the sum of $ 150,000, with lawful interest thereon; that demand has been made therefor and that no part of said amount has been paid, for which sum with lawful interest and costs he prays judgment against defendants and each of them."

The only ground of the demurrer which we need notice follows: "That said petition does not state facts sufficient to constitute a cause of action in favor of plaintiff and against this defendant, in that it appears from the face of said petition that the plaintiff's cause of action, if any he had, accrued more than five years before the commencement of this suit and has become completely barred by the Statute of Limitations."

I. Defendants aver the petition shows on its face that the action was barred by limitation. The portion of the statute apposite, Section 1317, Revised Statutes 1919 reads: "Within five years: . . . fifth, an action for relief on the ground of fraud, the cause of action in such case to be deemed not to have accrued until the discovery by the aggrieved party, at any time within ten years, of the facts constituting the fraud."

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