Cantrell v. Superior Loan Corp.

• Citation: 603 S.W.2d 627
• Decision Date: 09 September 1980
• Docket Number: No. 40132.,40132.
• Parties: Noel U. CANTRELL, Plaintiff-Appellant, v. SUPERIOR LOAN CORPORATION, L. F. Sweaney, B. J. Lockwood, William Black, Executor of the Estate of David Black, Defendants-Respondents.
• Court: Missouri Court of Appeals

603 S.W.2d 627

Noel U. CANTRELL, Plaintiff-Appellant, v. SUPERIOR LOAN CORPORATION, L. F. Sweaney, B. J. Lockwood, William Black, Executor of the Estate of David Black, Defendants-Respondents.

No. 40132.

Missouri Court of Appeals, Eastern District, Division One.

May 27, 1980.

Motion for Rehearing and/or Transfer Denied July 18, 1980.

Application to Transfer Denied September 9, 1980.

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Raymond R. Roberts, V. Kenneth Rohrer, Roberts, Roberts & Rohrer, Farmington, for plaintiff-appellant.

Richard D. Moore, Moore & Brill, West Plains, for L. F. Sweaney.

J. Lee Purcell, Glenn E. Easley, Hyde, Purcell, Wilhoit, Edmundson & Merrell, Poplar Bluff, for B. J. Lockwood.

Robert A. McIlrath, Mike Maynard, McIlrath & Maynard, Flat River, for William Black, Executor of Estate of David Black.

Superior Loan Corp., not represented by counsel.

Motion for Rehearing and/or Transfer to Supreme Court Denied July 18, 1980.

SNYDER, Presiding Judge.

This is an action for damages for fraudulent misrepresentation brought by Noel Cantrell against Superior Loan Corporation, L. F. Sweaney, B. J. Lockwood and William Black, executor of the estate of David Black, deceased, former St. Francois County Probate Judge. Cantrell alleges he was induced to invest $141,000 in the Superior Loan Corporation because he relied upon the false and fraudulent representations of Sweaney, Lockwood and David Black. There was a jury verdict in favor of all the defendants, Cantrell's motion for a new trial was denied and he appealed from the resulting judgment.

Appellant contends the court erred in allowing certain testimony and part of an opening statement, and by refusing to receive as evidence two exhibits offered by the appellant. Specifically, he alleges the trial court erred in: (1) permitting testimony concerning collateral transactions, evidence of which was irrelevant, and allowing impeachment of appellant by permitting inadmissible testimony concerning appellant's reputation; (2) permitting cross-examination of appellant about unrelated lawsuits and deed of trust transactions, and receiving in evidence appellant's answers to a request for admissions concerning lawsuits and loan transactions to which appellant was a party; (3) permitting respondent Sweaney in his opening statement to refer to his "moderate income," "savings" and "hard work," and to refer to appellant in derogatory terms in connection with business transactions, evidence of which was irrelevant; (4) permitting evidence of offers of compromise; (5) permitting references to respondent Sweaney's caring for "widows," "the elderly" and "destitute"; (6) refusing to receive in evidence appellant's Exhibit No. 25, an adjusted balance sheet prepared by appellant's expert witness; (7) refusing to admit into evidence appellant's Exhibit No. 22, a newspaper which should have been admitted as part of the res gestae or, in the alternative, under the curative admissibility doctrine; and (8) permitting respondent Sweaney's suggestion on voir dire that the jurors should put themselves in the position of Sweaney and his wife. Appellant asserts that the cumulative effect of the trial errors was to prejudice the jury against appellant.

Respondents Sweaney, Lockwood and Black argue that the trial court did not err in any of its rulings. In addition, they assert the trial court ruled properly in denying appellant's motion for a new trial, because he failed to make a submissible case against each of them. Respondent Black also argues that appellant's evidence of his conversation with the deceased Judge Black is inadmissible because of the Dead Man's Statute, § 419.010, RSMo 1978.

The facts will be stated in the light most favorable to the appellant in determining whether a submissible case was made. Additional facts will be related as required in discussion of the issues briefed by the parties.

Appellant is a retired farmer living in Marquand, Missouri. Respondent Superior Loan Corporation was a small loan corporation which was declared bankrupt in 1975. Its main office was in Poplar Bluff, Missouri. Respondent Sweaney was elected a director of Superior Loan in February 1966. Respondent Lockwood was Superior's vice president and supervisor of all its branch offices except the one in St. Louis. Respondent William Black is the executor of the estate of Judge David Black who was elected a director of Superior on February 16, 1968.

Appellant testified that he was in the St. Francois County courthouse in Farmington on May 3, 1968, with his wife, Glenda, when he was approached by Judge Black who introduced himself to them, told them that he had heard Cantrell had cashed in some mutual funds and he, Judge Black, knew of one of the better investments in the State of Missouri. He told appellant the Superior Loan Corporation was in excellent financial condition, was earning over 20 percent profit on its money, had income of over $100,000 a year on the sale of credit life insurance and had sufficient assets to cover its securities. Judge Black said that the common stock had a value of $3 per share, and that Superior sold subordinated debenture bonds paying 8 percent interest which were a safe investment. When appellant asked him about Superior's collections, Judge Black said collections were good and there was no delinquency problem. Judge Black told appellant further that if he invested by May 10 the corporation would date his debenture bond as of May 1 and he would draw interest as of that date.

The next day appellant drove from his residence in Marquand, Missouri to the Superior Loan office in Poplar Bluff, a distance of 70 miles, where he spoke with respondent Lockwood, who told him that the corporation was in excellent financial condition, earned 20 percent on its money and had income of over $100,000 a year from the sale of insurance. When appellant asked about the corporation's collection experience, Lockwood said that collections were good. Lockwood asked appellant how much he was planning to invest in Superior and appellant told him that if he could confirm what he had been told he would invest about $100,000. Lockwood also told appellant that if he put his money in by the tenth of May, "We'll date it back to May 1." Appellant asked Lockwood about respondent Sweaney, whom he had known some years before and who had once mentioned to Cantrell an investment with Superior. Lockwood told appellant that respondent Sweaney had large investments in Superior and was satisfied with them.

Appellant then drove to Sweaney's home in Thayer, a distance of 78 miles from Poplar Bluff. Meanwhile, Lockwood telephoned Sweaney to tell him appellant was interested in investing in Superior and was on the way to visit Sweaney.

Sweaney told appellant that the corporation was in good financial shape and was "sound as a rock," that collections were excellent, that the common stock had a value of over $6 per share and that it was the best investment he had ever made. Sweaney showed appellant a receipt book for sales of Superior securities Sweaney had made. He offered to give appellant a financial statement of the Superior but appellant refused it, stating that he could not read it.

On May 6, appellant drove from Marquand to Poplar Bluff again to speak with George Kneibert, who was president of Superior Loan at that time. He is now deceased and not a party to this litigation. He told appellant that the corporation was in sound financial condition, earned 27.9 percent on its money, and that collections were excellent and if appellant invested his money by May 10 his debenture would be dated and draw interest as of the first of the month.

On May 8, appellant returned to the Superior office in Poplar Bluff, where Kneibert again assured him that the corporation's collections were good. Appellant invested $105,000 in an 8 percent subordinated capital debenture. Appellant later purchased more of these debentures, the last on February 10, 1969, until his total investment in them was $141,000. Appellant became a director of the corporation on July 10, 1968, after he had purchased 350 shares of Superior's common stock at $3 a share. He remained on the board until June 1, 1970, when he resigned after he was refused access to the corporation's books and records.

Superior stopped paying interest on the subordinated debentures in 1970, went into common law receivership in 1971 or 1972 and finally declared bankruptcy in 1975. Appellant received $15,220.68 from the trustee in bankruptcy as his share of the available assets.

Appellant adduced evidence that Superior had sustained losses in 1966, 1967 and the first three months of 1968. There was also expert testimony that the balance sheets of the corporation did not accurately reflect the true financial condition of the corporation, because generally accepted accounting principles were not followed in preparing the statements, particularly as the principles applied to the write-off of bad debts and the transfer of unearned income from assets to the income account. There was expert testimony on behalf of the appellant that as of April 30, 1968, $641,796.42 of a total of $2,261,312.19 in loans should have been written off as worthless. The average delinquency of the worthless loans was 40.2 months. An additional $133,854.20 in loans were questionable, all being delinquent more than 90 days with only one payment having been received in the last 10 months. There was also evidence that the reported income of $100,000 per year from the sale of insurance was not net income, but gross income before the deduction of expenses, and that in fact the company was operating at a loss at the time appellant made his investment and had been for at least two years before.

All three of the individual respondents raise the issue that appellant failed to make a submissible case of fraud. In...