Clark v. Edgar

• Decision Date: 06 June 1882
• Citation: 12 Mo.App. 345
• Parties: JAMES CLARK, Plaintiff in Error, v. TIMOTHY B. EDGAR ET AL., Defendants in Error.
• Court: Missouri Court of Appeals

12 Mo.App. 345

JAMES CLARK, Plaintiff in Error,

v.TIMOTHY B. EDGAR ET AL., Defendants in Error.

St. Louis Court of Appeals, Missouri.

Jun. 6, 1882.

1. A declaration that certain bonds are “first mortgage bonds” is untrue if there is a prior mortgage upon the property to secure promissory notes.

2. A statement made by directors of a corporation, in print, across the face of bonds issued by them, that the bonds are “first mortgage bonds,” if untrue, will render the directors liable to an action of deceit at the suit of one who, on the faith of such statement, bought the bonds on the market.

3. In such a case, the mere fact that the title of the property was of record will not defeat a recovery.

4. Directors who put upon the market false securities in the name of the corporation, are individually liable in an action of deceit to those thereby injured.

APPEAL from the St. Louis Circuit Court, BOYLE, J.

Reversed and remanded.

JOHN FLOURNOY and CREWS & BOOTH, for the plaintiff in error: If the representations were calculated to deceive, and did, in fact, deceive, it matters not that they are susceptible of a construction which may be literally true; they are only the more dangerous for that reason. But whether they were made with the intent that they should be understood in the sense which induced plaintiff to act, is a question of fact to be found by the court or jury.-- Clark v. Dickson, C. P. 5 Jur. (N. S.) 1029; 1 Smith's Ld. Cas. (7th Am. ed.), pt. 1, top p. 353; Kerr on Fraud, 92-95. It is immaterial that the defendants did not personally go to plaintiff and make said fraudulent representations.--1 Smith's Ld. Cas., pt. 1, top p. 301, side p. 240; City Bank v. Phillips, 22 Mo. 85. “Fraudulent representations in respect of the title of land, will entitle the aggrieved party to relief; but the misrepresentations must be concerning something unknown to the party injured, who has been induced to act or abstain from examination from some special confidence reposed in the other party, as in this case, where the vendor prevents the vendee from making an examination of the records in regard to the title, by assurances that the title is perfectly good and the property free from incumbrances, and, upon the faith of such assurances and representations, the vendee abstains from making the proper examination.”-- Bailey v. Smock, 61 Mo. 213; Holland v. Anderson, 38 Mo. 55; Brownlee v. Hewitt, 1 Mo. App. 360. Plaintiff, having believed and relied upon the truth of these representations, and, by reason thereof, bought the bonds, without notice of their falsity, defendants are clearly liable for any damage he has thereby sustained.--Story's Eq. Jur., sect. 191; Wannell v. Kem, 57 Mo. 478; Dulaney v. Rogers, 64 Mo. 201; Brownlee v. Hewitt, 1 Mo. App. 360. This action is properly brought against the defendant, and not against the corporation.--Green's Brices Ultra Vires, 252, 253, 255, and notes on pp. 250, 251, 636.

CLINE, JAMISON & DAY, for the defendants in error: “If the buyer trusts to representations which are not calculated to impose upon a man of ordinary prudence, or if he neglects the means of information easily in his reach, he must suffer the consequences of his own folly and credulity.”-- Dunn v. White, 63 Mo. 184; Buford v. Caldwell, 3 Mo. 477. A representation as to the title of real estate cannot stand upon any different basis than one made respecting its boundaries; and it is held that, if the purchaser of real estate has the means of ascertaining the true boundary line and neglects to inform himself, he cannot recover of the vendor damages for making a false representation as to the boundaries.-- Clarke v. Baird, 7 Barb. 65; Brooks v. Hamilton, 15 Minn. 33, 34. Representations of the character sued on in this case are within the statute. And, though the representations may be made by an officer, agent, or member of a corporation, relating to its credit and in connection with some transaction in which he may have a direct interest, the statute still applies, and no action can be maintained on account of such representations, unless they are in writing and subscribed by him.-- McKinney v. Whiting, 8 Allen, 208; Wells v. Prince, 15 Gray, 562; Kimball v. Comstock, 14 Gray, 510; Browne on Stat. Fr., sect. 184; Swann v. Phillips, 8 Ad. & E. 457; Walther v. Menell, 6 Mo. App. 370. And as the representations are averred to have been made orally, a demurrer lies to the petition.--Browne on Stat. Fr., sect. 509; Randell v. Howard, 2 Black, 585.

BAKEWELL, J., delivered the opinion of the court.

This is an action in the nature of an action for damages for deceit. The petition alleges that, in July, 1872, and from thence to 1879, an incorporated company, called The Martindale Zinc Company, was doing business in Carondelet, Missouri; and, on November 17, 1873, executed and delivered to one Hill its promissory note for $15,000, with interest notes, and, at the same time, executed and delivered, to secure these notes, its deed of trust upon the real estate of the corporation, and its machinery and improvements, which deed was duly recorded. From January, 1875, until October, 1879, defendants were the only directors and officers of the corporation, and had control of its property and business, and in January, 1875, defendants, as officers and directors of the corporation, for the purpose of raising money for the corporation, adjusting its debts and debts for which defendants were liable as sureties, caused to be executed and issued by the corporation, seventy-five bonds for $1,000 each, payable on January 1, 1885, with semi-annual coupons attached, for interest at ten per cent; and at the same time caused to be executed, delivered, and recorded, the deed of trust of the corporation upon the same real estate above mentioned, to secure these bonds and coupons. This deed of trust contained no mention of the prior deed of trust, and contained the covenants implied in the words “grant, bargain, and sell.” Defendants caused to be inserted in each of these bonds, the following recital:--

“This bond is one of a series of seventy-five bonds, of the same amount and date, numbered from one to seventy-five, inclusive, issued by said corporation, the payment of which is secured by a deed of trust upon real and personal property owned by said corporation, bearing even date herewith, duly recorded, and made to Oliver Garrison and Timothy B. Edgar.”

Defendants also caused to be conspicuously printed on the back of each bond, the following indorsement: “First Mortgage Bonds. $1.000. Martindale Zinc Company. Interest, ten per cent. Interest and principal payable in St. Louis, on the 1st of January and July.”

In March, 1875, defendants, as officers of the corporation, placed five of these bonds, numbered 46, 47, 48, 49, and 50, in the hands of an agent for sale, and the same were purchased by plaintiff for $5,000, cash.

The petition charges that defendants, in so offering said bonds for sale for and on behalf of said corporation, with the said recital contained therein, and the said indorsements made thereon, by said recitals and indorsements, then and there represented to plaintiff that the deed of trust so executed to secure the payment of said bonds and coupons, was a first lien upon the property thereby conveyed, and that said property was not subject to any prior incumbrance; and it further charges that defendants caused said agent, who was the agent both of defendants and of the corporation, at the time of offering said bonds for sale to plaintiff, to verbally represent, and he did then and there represent and state to plaintiff, for the purpose of inducing him to purchase the same, that said...