Campbell v. Zion's Co-op. Home Building & Real Estate Co.

• Citation: 46 Utah 1,148 P. 401
• Decision Date: 12 December 1914
• Docket Number: 2626-2634
• Parties: CAMPBELL v. ZION'S CO-OP. HOME BUILDING & REAL ESTATE CO. (and eight other cases)
• Court: Supreme Court of Utah

148 P. 401

46 Utah 1

CAMPBELL v. ZION'S CO-OP. HOME BUILDING & REAL ESTATE CO. (and eight other cases)

Nos. 2626-2634

Supreme Court of Utah

December 12, 1914

Appeal from District Court; Second District; Hon. J. A. Howell Judge.

Separate actions by A. M. Campbell, by Fred King, by P. B. Haslet, by George King, by Fred W. Voll, by Fred Breining, by B. F Estes, by W. B. Haymond, and by B. F. Rugg against the Zion's Co-operative Home Building & Real Estate Company.

Judgment for plaintiff in each case. Defendant appeals.

AFFIRMED, with directions.

A. A Duncan for appellant.

A. G. Horn and Thos. Marioneaux for respondents.

STRAUP, J. McCARTY, C. J., and FRICK, J., concur.

OPINION

STRAUP, J.

These are actions to recover moneys from the defendant paid by the plaintiffs in the purchase of its capital stock. They are based on a rescission of contract for alleged deceit, misrepresentations, and fraud. There are nine cases--different plaintiffs, same defendant. The transactions and controversies arising out of them are similar. The cases were tried separately to the court. In each the plaintiff had judgment for the full demand of the complaint. The defendant appeals in each with separate transcripts and abstracts of the records. The cases were here argued and submitted together on briefs filed in the Campbell case and stipulated to apply to all of the cases.

The chief contention of the defendant is that the findings are not supported by the evidence, and that neither the statements or representations as found, nor as shown by the evidence, are of such material and existing or past facts or events as to be actionable; that they relate to mere expressions of opinion and beliefs, and to future events and promises. The facts were found as alleged in the complaints.

The defendant was organized on the 26th of August, 1908, to do a general real estate business, buy and sell real estate, commercial stocks, and all kinds of merchandise used in the construction of buildings, and to carry on a general contracting and building business. Its capital stock was 250,000 shares of the par value of one dollar each, of which 80,420 shares were subscribed for and issued, and were fully paid at par. The balance of the stock was held as treasury stock, to be disposed of by the board of directors. The defendant owned considerable improved real estate, and had and operated two lumber yards at Salt Lake, and later, in 1911, established one at Ogden. In August, 1909, the Bear Creek Land Company was organized with a capital stock of 200,000 shares of the par value of one dollar each and acquired timber lands and mills in Oregon. The defendant, shortly thereafter, purchased 40,000 of 84,500 issued shares of that company and paid therefor $ 40,000. On December 31, 1908, the defendant declared and paid its first dividend of $ 8,979.75; on February 23, 1909, a stock dividend of $ 50,000; and on December 30th a cash dividend of $ 32,265, which was paid January 1, 1910; and between February and December paid additional cash dividends. The total dividends declared and paid for the year 1909 were about $ 110,000. In 1910 it paid a cash dividend of about $ 35,000, in 1911, $ 14,185, and in 1912, about $ 6,000, mostly on preferred stock. In May, 1912, the defendant's net assets, as shown by its books and as testified to by its president, were $ 219,213.40. This, however, is claimed to have been exaggerated by adding pretended increased cost prices of material and market values of real estate. Its total issued stock then was 265,633 shares; its capital stock having been increased in the meantime to 500,000 shares, of which 150,000 were preferred shares. Every stockholder was given the privilege of converting common stock for preferred stock. All the stock purchased by the plaintiffs was common stock. Some of them, after their purchase, exchanged some common for preferred stock. The lumber yard at Ogden and the milling and lumber business in Oregon were operated at a loss.

It is alleged in the complaints, and admitted by the defendant, that on the 23d day of October, 1908, about two months after the defendant was organized, it authorized and empowered its president and secretary "to find purchasers for and negotiate the sale of and sell its treasury stock at the price and sum of one dollar per share." About that time the defendant put out a printed circular in which it stated:

"The directors of the company have set aside 50,000 shares of the capital stock of the company, amounting to $ 50,000, to provide for additional working capital. Said stock will be sold at par, and the directors assure the investing public that they will secure the stock at the same price as they have paid for their interests in the company. * * * If you desire to invest your money safely and at the same time get handsome returns from same, we would respectfully call your attention to the above opportunity. Remember that many of the greatest fortunes have been made along the lines we will follow out. Therefore you can readily see that you cannot possibly put your money in anything that will be so safe and at the same time productive of such handsome returns on your capital. The company will be able to pay dividends from the very start, and we can recommend the stock as a first-class investment that will improve as time advances. Our company is not experimenting on anything that has not been proven a success, and, if we can approximate the success that other similar companies have made in other cities, we are safe in saying that all our stockholders will be delighted with the returns from their investment. * * * We claim further that through having the combination of a large capital and experienced men handling same, and practically never owing one cent to any one, we can consistently guarantee to all investors that they cannot lose one cent and will receive dividends from the very start either payable quarterly or semi-annually in cash. Any excess over the cash dividend will be carried to surplus or distributed in stock dividends."

Copies were received by all of the plaintiffs before they purchased any stock. All of them testified that they, for a long time, had been well acquainted with the secretary and had the utmost confidence in him. They were all railroad employees. Formerly the secretary was also for a number of years in the employ of the same railroad company. All of the plaintiffs were solicited by the secretary, some of them by both the president and the secretary, to purchase the defendant's treasury stock.

In the Campbell case the evidence with respect to additional statements and representations made to Campbell by the secretary and president, and as testified to by Campbell, is: The secretary talked with him about purchasing stock several months before he purchased his first stock, which was 400 shares, February 6, 1909. The secretary said to him:

"I consider you one of my best friends, and I would like you to get all you can as quick as possible."

He told him who the directors and officers of the defendant were, their business experiences and connections, and stated:

"We own our own real estate; own buildings all rented as fast as we can get them completed. We own our own lumber yard and our own timber. We are doing an elegant business, and all the money you can get I would advise you to put into this company. It is worth a dollar a share, and we expect it to go to two dollars right away. Why save your money in the bank at four per cent.? We can guarantee eight. * * * I could guarantee it as a gilt-edge investment. It is no speculation. It is founded on a standard, reliable company. You can't lose one cent. * * * In from three to five years (if he purchased 5,000 shares) you will be independent, as everything is prosperous, and we are expecting to open up timber lands and sawmills in Oregon. * * * We guarantee eight per cent. for the next three years, and maybe more. It may be twenty-eight per cent. the way business looks now."

He further testified that the secretary assured him that he was taking no chances whatever, and that he was buying into the best thing that ever was sold; that the stock was good, dollar for dollar, at any bank in Salt Lake, and he or the defendant would give him dollar for dollar for his stock. After the witness had purchased the first stock, he had a further talk with the secretary in which he told him that the defendant owned its own timber lands, its own sawmills, and was shipping its own lumber, and had a market not dependent upon the Salt Lake market. He also thereafter had a talk with the president. He told him that:

"It is the finest investment you ever got into. I want to make you working boys some money."

He told him that the company was financially in first-class circumstances, did not owe a dollar, and that it paid cash for everything it bought, and that it guaranteed eight per cent., and maybe more, and that "if you get 5,000 shares we guarantee that in five years you will be an independent man; that you won't have to work for a railroad company or any other company"; that the company was financially reliable and guaranteed dividends on all outstanding stock and that there was no chance to lose a cent, and that the dividends would come regularly at eight per cent.; that the property was paying a good income; that the company had enough money coming from its property to guarantee the dividends it was paying; that the company had made the money that paid the dividends; and that they could be looked for regularly. He asked the witness if he had received the $ 100 dividend, the ten per cent. cash dividend (paid January 1, 1910), and stated that he could guarantee those dividends; that the company had made the...