Chellis v. Cole

• Decision Date: 16 July 1917
• Citation: 116 Me. 283,101 A. 444
• Parties: CHELLIS v. COLE et al. (two cases).
• Court: Maine Supreme Court

101 A. 444

116 Me. 283

CHELLIS

v. COLE et al. (two cases).

Supreme Judicial Court of Maine.

July 16, 1917.

Report from Supreme Judicial Court, York County, at Law.

Two actions, by Daniel S. Chellis and by Lucinda M. Chellis, his wife, against Jerome W. Cole and another. Cases reported. Judgment against both defendants in each action.

Argued before CORNISH, C. J., and BIRD, HALEY, HANSON, and MADIGAN, JJ.

J. Merrill Lord, of Kezar Falls, and Mathews & Stevens, of Berwick, for plaintiffs. Emery & Waterhouse, of Biddeford, for defendants.

MADIGAN, J. Both of these actions are for fraud in the sale of stock of White's Express Company, a New York corporation, doing business in New York City and Brooklyn. By agreement they were reported to the law court upon so much of the evidence as is legally admissible, the law court to render final judgment thereon.

Daniel S. Chellis was about 60 years old, and had lived for many years with his wife, the other plaintiff, on a farm in a small country town in York county. They had on deposit in the Limerick National Bank in said county $5,000, $4,000 in his and $1,000 in her name. The defendant Mills was from New Haven, and a stranger to the plaintiffs, while Cole was a neighbor and was known to them as a successful trader and business man.

On March 21, 1911, the defendants drove into the yard of the plaintiffs' home and Cole introduced Mills to Mr. Chellis and asked him to take the defendants into the house as they wished to have some talk with them, Chellis and his wife. On that and two or three succeeding days on which the visits were repeated several hours were spent in trying to induce the plaintiffs to buy stock in the express company which Mills claimed to represent. A lengthy statement purporting to show the exact state of the company's assets and liabilities was exhibited and explained. Mills vouched for the truth of everything therein contained stating that with an expert he had recently spent some weeks making a complete examination of the affairs and condition of the company. He further represented that its property was fully insured, and its business was so flourishing that the officers were obliged to build additional buildings constantly, and that the company owned all of its real estate and terminals. The plaintiffs were repeatedly assured that everything about the company was all right, and that the stock was an excellent investment.

Because of the representations and allurements and advice of the defendants Daniel Chellis bought 400 shares of the stock, paying therefor $4,000, and his wife bought 100 shares, paying therefor $1,000. Four quarterly dividends at the rate of 7 per cent. per annum were paid, but the evidence clearly shows there was nothing in the condition of the company to warrant any one of these dividends. There is not the least doubt that the company was hopelessly insolvent when the stock was sold to the plaintiffs, and in the latter part of 1911 the company was in the hands of a receiver, and early in 1912 It was in bankruptcy. A dividend of 10 per cent. was paid the creditors with the prospect of a possible further final dividend of 5 per cent. The representations made to the plaintiffs by Mills were untrue in fact, and of his liability therefor there is no question. Wheelden v. Lowell, 50 Me. 499; Goodwin v. Fall, 102 Me. 353, 66 Atl. 727; Litchfield v. Hutchinson, 117 Mass. 195.

The defendants contend that Cole is not liable, because, at the most, his expressions were merely those of opinion. His conduct and statements were the controlling influence whereby the plaintiffs were defrauded. He was known to the plaintiffs to be a shrewd and successful business man, and was supposed by them to be interested in the sale of the stock. On three occasions he drove with the defendant Mills in a buggy a distance of four miles to their home, sat by and participated in Mills' conversation. He repeatedly assured the plaintiffs that the stock was all right; that it was a safe investment; that they would make no mistake in taking their money from the bank and buying this stock; that it was just as good as the bonds, which he exhibited to them. A check for $1,000 given by Daniel S. Chellis for a portion of this stock, made payable to the order of Chas. E. Mills, agent of White's Express Company, was indorsed by Mills, as agent, to Cole, who evidently received cash for the same at the bank, as the check bears no further indorsement. While it is not necessary for the maintenance of this action to show collusion between Cole and Mills, this, unexplained as it is, is strong presumptive evidence that Cole was personally secretly profiting by the sale' of this stock to the defendants. In Adams v. Collins, 196 Mass. 422, 82 N. E. 498, we find the following:

"The defendant * * * contends * * * that the evidence showed that the statement was made as matter of opinion, and not as a representation of a fact, and that he was not liable therefor. But he was the third party with no interest, so far as appears, in the trade. And he was bound to act honestly and in good faith, not only in regard to matters of fact, but also in regard to matters of opinion. * * * If he undertook to express an opinion he was bound to give his honest opinion. He had not the...