Campbell v. Creighton

• Decision Date: 05 March 1917
• Docket Number: 8705.
• Citation: 167 P. 975,63 Colo. 478
• Parties: CAMPBELL v. CREIGHTON et al.
• Court: Colorado Supreme Court

167 P. 975

63 Colo. 478

CAMPBELL v. CREIGHTON et al.

No. 8705.

Supreme Court of Colorado, En Banc.

March 5, 1917

Rehearing Denied Oct. 8, 1917.

Error to Court of Appeals.

Action by Charles B. Campbell against Basil B. Creighton and the Manitou Springs Bathing Company. To review a judgment of the Court of Appeals (27 Colo.App. 120, 149 P. 448), reversing judgment of the district court for plaintiff, plaintiff brings error. Reversed, judgment of district court affirmed and case remanded.

Carrigues J., dissenting.

is an irreconcilable antagonism between them. If they can be harmonized on any hypothesis, the judgment will follow the general findings.

E. C. Stimson and J. W. Sleeper, both of Denver and J. F. Sanford, of Colorado Springs, for plaintiff in error.

Samuel H. Kinsley, Martin M. Burns, Chinn & Strickler, and J. A. Ritter, all of Colorado Springs, for defendants in error.

TELLER J.

This cause comes before us on error to the Court of Appeals which reversed the judgment of the district court; one member of the court dissenting. 27 Colo.App. 120, 149 P. 448. The plaintiff in error was plaintiff below in an action for damages alleged to have been received because of the purchase of stock in the Manitou Bathing Company on fraudulent misrepresentations, of all of which the defendant is charged with having had notice when he bought a controlling interest in the company.

The complaint in this cause is very voluminous, setting up, among other things in addition to the charge of misrepresentation and fraud, that a suit begun by the plaintiff against defendant Creighton was abandoned by the plaintiff upon an agreement upon the part of Creighton that he would organize a new company, build a bathhouse, and cause to be issued to plaintiff stock in the new company to the amount of his holding in the old company. The trial court held that such agreement was not proved, but that there was a cause of action stated for fraud, and that the evidence of negotiations concerning said agreement was competent as throwing possible light upon the knowledge possessed by the defendants of the earlier transactions. The evidence fairly establishes the following facts:

In June of 1906, Campbell, the plaintiff in error, who resided in Omaha, Neb., bought of Hitchcock, who was then the president of the bathing company, stock in said company to the amount of 11,200 shares of the par value of $1 each, for which he paid $11,200. The sale was made on a representation by Hitchcock that the shares were a part of a block of 54,000 shares, which were to be sold for the purpose of raising funds to erect and equip a bathhouse on the property of the company at Manitou, Colo. He further represented that the property was clear of incumbrances, and worth $50,000; that the remaining 56,000 shares of the capital stock had been issued to him in payment for real estate conveyed to the company. Some time afterward Campbell moved to Manitou and was shown by Hitchcock five pieces of real estate, which he stated belonged to the company. Thereafter Campbell bought 10,000 more shares at par. In October of said year Campbell discovered from the county records that the real estate shown him did not belong to the company; that it had an option thereon at the price of $13,000; and that only a comparatively small amount had been paid on the property prior to his purchase of the stock. Some of Campbell's shares were issued to his wife, and in October, 1906, she began a suit in the district court of El Paso county against Hitchcock for an accounting as to the moneys received by him from the sale of stock, and for an injunction against the transfer of the 56,000 shares which had been issued to him. At the time this suit was begun, Creighton, one of the defendants in error, was the holder of 220 shares of the stock, which he soon after surrendered to the company.

A referee was appointed, and, upon the coming in of his report, in January, 1908, the court rendered judgment against Hitchcock for $24,308.59. In the meantime, that is, in August, 1907, Creighton became a director of the company, and was such when said judgment was rendered. In September, 1907, Creighton, as vice president and treasurer of the company, in conjunction with the secretary thereof, issued a statement offering for sale 4,000 shares of treasury stock, in which statement it was asserted that not a share had been sold at less than par, and that at a conservative estimate the assets of the company, exclusive of the value of the soda springs, would equal the amount of the capital stock. In March, 1908, the company made an assignment for the benefit of creditors, and the assets were then reported to be of the value of $15,305.10, and its liabilities $18,593.12. In September following the property was sold by the assignee and bid in by Burns, one of the attorneys for Creighton. It appears, also, that both Burns and Creighton took assignments of claims against the company and subsequently a part of these claims, at least, were allowed and paid by the assignee. Several claims against the company which had been assigned to Creighton were by him assigned to Burns. A short time after the sale the Manitou Springs Bathing Company was organized, the property purchased by Burns transferred to it, and Creighton became an officer of the new company. It is alleged that he owns all of the stock. Prior to the sale, Campbell had brought suit against the company and its officers to prevent what he alleged to be the carrying out of a conspiracy to wreck the company and place its property in the hands of Creighton and others to the damage of the other stockholders in the original company, and it was this action which Campbell claims was abandoned on the agreement by Creighton to build a bathhouse, as above mentioned.

The original company was organized in March, 1905, and Creighton's connection with it, so far as this record shows, began soon afterward by the issue to him of 500 shares transferred by Hitchcock from an issue of 53,700 shares to him on March 22, 1905. The 500 shares were subsequently reassigned to Hitchcock, and by him transferred to the treasury of the company. February 7, 1908, two certificates of stock, each for 28,000 shares, were issued to Creighton by assignment from the brother of Hitchcock.

The Court of Appeals held that the trial court erred in not directing a nonsuit on the ground that the breach of the contract alleged was the real cause of action, and that, it not being proved, the plaintiff had failed in his case. The record, however, discloses no objection made by the defendants to the ruling of the court that the complaint stated a cause of action for fraud, as it clearly did. After that ruling, the defendants proceeded to introduce evidence upon the issue of fraud and other matters. They cannot now be heard to say that no such issue was presented. D. T. & F. F. R. R. Co. v. Smock, 23 Colo. 456, 48 P. 681. The Court of Appeals was in error in stating that the trial proceeded over the protest of both of the parties. Neither party protested or objected. We cannot, therefore, agree with the Court of Appeals that there was error in the respect named.

It was further held that the court erred in the concluding portion of the first instruction which purported to be a statement at length of the issues tendered by the complaint; the error consisting, as stated, in the fact that there are no allegations in the complaint which justify the language used in the instruction. Inasmuch, however, as the objections to instruction No. 1 do not include the objection discussed by the Court of Appeals, and hence the trial court's attention was not called to the misstatement, if it were such, error cannot be predicated upon it.

In the discussion of the instructions the opinion seems to overlook or misconceive the theory upon which the cause was tried. It is not material that this theory was formulated by the trial court, since both parties accepted it and the trial proceeded in accordance with it. The theory on which the case was tried appears to be that Hitchcock, a former president of the company, had induced the plaintiff by misrepresentations to purchase a large amount of the stock of the bath company that the stock so purchased had been rendered of little value by the issue of 56,000 shares of the treasury stock to said Hitchcock, without any payment to the company therefor; and that this stock had been acquired by defendant Creighton with full knowledge that it had been so issued, and with the knowledge, also, of the misrepresentations made by Hitchcock to plaintiff. Also, that Creighton had caused the company to make an assignment, and that on a sale of the property by the assignee it was purchased in Creighton's interest and transferred to a new company of which he was the owner. These matters were all alleged in the complaint, which also charged that Creighton secured the assets by turning in to the assignee claims against the estate, some of which were fraudulent, and all of which he purchased for...