Butler v. Martin

• Citation: 247 Mass. 169,142 N.E. 42
• Parties: BUTLER v. MARTIN.
• Decision Date: 29 December 1923
• Court: United States State Supreme Judicial Court of Massachusetts

247 Mass. 169

142 N.E. 42

BUTLER

v.MARTIN.

Supreme Judicial Court of Massachusetts, Suffolk.

Dec. 29, 1923.

Exceptions from Superior Court, Suffolk County; J. D. McLaughlin, Judge.

Action in tort by Joseph A. Butler against George J. Martin to recover damages for false representations alleged to have been made by the defendant in the sale to the plaintiff of shares of corporate stock. The court found for defendant, and plaintiff brings exceptions. Exceptions overruled.

See, also, 141 N. E. 668.

H. V. Cunningham and W. S. Bangs, both of Boston, for plaintiff.

Hurlburt, Jones & Hall, F. P. Garland, and A. B. Tyler, all of Boston, for defendant.

BRALEY, J.

The case having been referred to three auditors whose findings of fact were to be final, a trial was had upon the coming in of their report before a judge sitting without a jury, who found for the defendant, and the case is here on the plaintiff's exceptions to his refusal to rule as requested and to the rulings given.

It appears from the report that the plaintiff seeking an advantageous opportunity for investment had interviews with the defendant, who during all the negotiations was president, general manager and majority stockholder in active control of the business of the Martin Manufacturing Company, a domestic corporation. At the first interview the defendant told the plaintiff, ‘that the * * * company had during the last year done business to the value of from * * * $350,000 to $400,000.’ But no definite representation concerning the value of the assets was made. A second interview followed at which the defendant solicited the plaintiff to take ‘ten thousand preferred stock and ten thousand common stock and that he would be made vice-president.’ The character of the stock was explained by the defendant, ‘that the prefferred was cumulative and came ahead of the common stock, and had always paid eight per cent.’ The plaintiff informed the defendant that since the first interview he had examined the certificate of condition filed by the company as required by statute, and ‘was familiar with its contents,’ and the certificate which was introduced in evidence showed that the machinery was valued at ‘$24,677. 29.’ The plaintiff testified that the defendant then said:

‘The figures shown in the statement filed were way below the real value of the property, that in making up those figures ‘everything was shrunk to nothing;’ that the property was really worth a great deal more than those figures showed, and the several items * * * in the certificate of condition were discussed in detail.'

The defendant's version was that ‘he told the plaintiff that he, Martin, had dollar for dollar in assets, * * * no good will charged in there at all, or 100 cents on the dollar; that the assets were enough to make the common stock worth $130 a share,’ and the statement of condition was the same as shown on the books of the company, and ‘these figures were what he was talking about’ when he told the plaintiff ‘he had dollar for dollar in assets.’ The defendant after some computations said to the plaintiff, that ‘the common stock was valued at $130 per share, and that there would be issued to him one hundred and seventyseven shares.’ The defendant further said, that the common stock ‘was worth $130 as shown by the assets.’

[1][2][3] The plaintiff bought the stock and received certificates for seventy-seven shares of common, and one hundred shares of second preferred for which he paid the company ‘$20,000.’ The defendant's representation that the stock was worth $130 a share should be considered in connection with his knowledge, full management, and control of the corporation's affairs, and the statement, that ‘he had dollar for dollar in assets,’ and the auditors' finding, that he knew ‘or ought to have known’ that the machinery valued in the certificate of condition at $24,677.29 was in real value worth only $7,500. Pearson v. Howe, 1 Allen, 207, 208;Litchfield v. Hutchinson, 117 Mass. 195, 198;Kerr v. Shurtleff, 218 Mass. 167, 171, 172, 105 N. E. 871. The auditors' general finding however is that the stock was of the value represented. The question, of course, was one of fact. Stewart v. Joyce, 201 Mass. 301, 87 N. E. 613. But in coming to this conclusion they admitted as evidence of value at the date of purchase, the sale by the plaintiff of the stock on March 23, 1916, for $20,800. The plaintiff having duly excepted contends that the evidence was inadmissible. G. L. c. 106, § 56. It does not appear that the stock was ever dealt in on the market, but was inactive, and we...