Brumley v. Chattanooga Speedway & Motordrome Co.

• Decision Date: 27 October 1917
• Parties: BRUMLEY ET AL. v. CHATTANOOGA SPEEDWAY & MOTORDROME CO. ET AL.
• Court: Tennessee Supreme Court

198 S.W. 775

138 Tenn. 534

BRUMLEY ET AL. v. CHATTANOOGA SPEEDWAY & MOTORDROME CO. ET AL.

Supreme Court of Tennessee.

October 27, 1917

Certiorari to Court of Civil Appeals.

Bill of John Brumley, by next friend, and others against the Chattanooga Speedway & Motordrome Company and others. Decree for plaintiffs, and defendants appealed. Certiorari by defendants to review a decree of the Court of Civil Appeals modifying decree of chancellor. Decree entered, and case remanded to chancellor for further proceedings.

WILLIAMS J.

The bill of complaint was filed by two brothers, John and S.E Brumley, against the Speedway & Motordrome Company (hereinafter called the Speedway Company), the Chattanooga Sash & Door Company, a body corporate, and W. B. Hughes, a managing officer of the last-named corporation, charging participation in a civil conspiracy with one Silvers to defraud complainants in the sale to them of shares of the capital stock of the Speedway Company which were worthless or about to become so.

The case is before this court on certiorari to the Court of Civil Appeals, under petitions filed by the Sash & Door Company Hughes, and complainants. The special chancellor, W. G. M Thomas, Esq., and the Court of Civil Appeals have concurred in finding the facts of the existence of a conspiracy on the part of the Sash & Door Company and Hughes with Silvers, who was the active agency in making the sale to complainants; that John Brumley was an imbecile; and that there was a gross fraud perpetrated on both of the complainants to their injury. This concurrence makes a detailed recital of the facts by us unnecessary.

It appears that for the construction of the building of the Speedway Company, the Sash & Door Company had furnished materials, and the latter company was exercised as to realization on its claim. Along with several other creditors, in order to avert a greater loss, it accepted shares of stock in the Speedway Company in payment of one-half of its demand, the certificates being issued to Hughes, trustee, for his company, and Hughes became a member of the board of directors and vice president of the Speedway Company.

Notwithstanding this settlement an indebtedness outstood against the company, considerable enough to send it staggering speedily to a fall, so disastrous that the stockholders stood to receive only a pittance on their shares. Before the crash came, however, the Speedway Company placed in the hands of Silvers for sale an additional block of stock, $3,500 face, and this was the stock sold to complainants, the Brumleys. Its sale tended to the advantage of the Sash & Door Company. The complainants declined to receive the small dividend left for the shares, and tendered back the certificates in this suit.

A "civil conspiracy" may be defined to be a combination between two or more persons to accomplish by concert an unlawful purpose, or to accomplish a purpose not in itself unlawful by unlawful means. McKee v. Hughes, 133 Tenn. 455, 181 S.W. 930, L. R. A. 1916D, 391.

A subdivision of civil conspiracies are those concerted to defraud a third person.

A "conspiracy to defraud" on the part of two or more persons means a common purpose, supported by a concerted action to defraud, that each has the intent to do it, and that it is common to each of them, and that each has the understanding that the other has that purpose. Ballantine v. Cummings, 220 Pa. 621, 70 A. 546, citing United States v. Frisbie (C. C.) 28 F. 808. The agreement need not be formal, the understanding may be a tacit one, and it is not essential that each conspirator have knowledge of the details of the conspiracy. Patnode v. Westenhaver, 114 Wis. 460, 90 N.W. 467.

As to the liability of the corporate defendant, the Sash & Door Company:

Whatever may have been the conception and holding in former times as to the liability of a body corporate for its participation in a civil conspiracy through the medium of its agents, the doctrine is now firmly established that it may be so held. West Virginia, etc., Co. v. Standard Oil Co., 50 W.Va. 611, 40 S.E. 591, 56 L. R. A. 804, 88 Am. St. Rep. 895, quoted at length with approval in Standard Oil Co. v. State, 117 Tenn. 618, 665, 100 S.W. 705, 10 L. R. A. (N. S.) 1015; State v. Standard Oil Co., 120 Tenn. 86, 110 S.W. 565.

A corporation may be liable for conspiracy to defraud even though the transaction by means of which the fraud was accomplished was outside the scope of its corporate powers. Zinc Carbonate Co. v. Shullsburg, etc., Bank, 103 Wis. 125, 79 N.W. 229, 74 Am. St. Rep. 845; Dorsey Machine Co. v. McCaffrey, 139 Ind. 545, 38 N.E. 208, 47 Am. St. Rep. 290.

Both the special chancellor and the Court of Civil Appeals held that the corporate defendant was liable, but...