Dalton v. Hill

• Decision Date: 10 June 1950
• Docket Number: No. 37893,37893
• Citation: 219 P.2d 710,169 Kan. 388
• Parties: DALTON v. HILL et al.
• Court: Kansas Supreme Court

Page 710

219 P.2d 710

169 Kan. 388

DALTON v. HILL et al.

No. 37893.

Supreme Court of Kansas.

June 10, 1950.

Rehearing Denied July 7, 1950.

Syllabus by the Court.

In an action to recover damages for fraud alleged to have been committed by officers and directors of a corporation in acquiring shares of stock from another stockholder at a sale price of far less than its actual value the defendants demurred to the amended petition on the ground that pleading failed to state a cause of action. After overruling the demurrer the court stayed further proceedings on the merits until after appellate review of its ruling on the demurrer. The record is examined, and it is held:

(1) The trial court's action in staying the proceeding was tantamount to the granting of a continuance and was largely discretionary.

(2) An order overruling a demurrer is appealable and entitled to consideration when it reaches the Supreme Court through proper channels without regard to the status of the action in District Court.

(3) Averments of the amended petition describing the right, title, and interest of the plaintiff in the shares of stock in question, although differently stated in the petition, did not constitute a departure in pleading.

(4) A petition, otherwise sufficient, expressly alleging the fraud therein relied on was not discovered until a date certain, which was less than the two years from the date of the commencement of the action, and containing no other facts suggesting a source from which such fraud could or should have been discovered earlier in the exercise of reasonable diligence is sufficient to withstand an attack by demurrer based upon the ground it fails to state a cause of action.

(5) Adherence to Dalton v. Lawrence National Bank, 169 Kan. ----, 219 P.2d 719, this day decided, compels a conclusion the amended petition herein involved states a cause of action for actionable fraud and requires affirmance of the trial court's order and judgment overruling a demurrer to that pleading.

C. C. Stewart, of Lawrence, argued the cause and O. K. Petefish, of Lawrence, was on the briefs, for appellants.

A. B. Mitchell, of Lawrence, argued the cause, and Donald S. Hults and George K. Melvin, both of Lawrence, were on the briefs, for appellee.

The opinion of the court was delivered by

PARKER, Justice.

This is an action to recover damages for fraud alleged to have been committed by the defendants in acquiring 72 shares of stock of the Lawrence Paper Company from the plaintiff at a sale price of far less than its fair actual value. The appeal is from an order of the trial court overruling a demurrer to the amended petition.

The action was commenced on June 10, 1948, by the filing of a petition. Motions to strike portions of this pleading were filed by each of the two persons named therein as defendants. They were only partially sustained. Defendants then moved to set aside unfavorable portions of the trial court's rulings. In January, 1949, and before there last motions were presented, the plaintiff filed an amended petition. The defendants attacked this pleading by separate motions to elect, to stike and to make more definite and certain. These motions were overruled in part and sustained in part. Thereafter each defendant demurred to the amended petition on grounds that two causes of action were improperly joined, that it failed to state a cause of action against either defendant, and that it disclosed on its face that the cause of action attempted to be stated against both defendants were barred by the statute of limitations. When these demurrers were overruled the defendants perfected this appeal. Thereupon the trial court stayed all proceedings in the cause pending its disposition.

We pause to note two questions raised by appellee. He challenges the power of the trial court to stay the proceeding and the right of appellants to be heard on the instant appeal prior to the trial of the cause on its merits. Neither point deserves much consideration. If after overruling the demurrer the district court, either upon application of the appealing party or its own motion, deemed it advisable to continue the hearing of the cause on its merits for purposes of appellate review it had that right, G.S.1935, 60-2933, and its action in doing so was largely discretionary, Bliss v. Carlson, 17 Kan. 325; Westheimer v. Cooper, 40 Kan. 370, 19 P. 852; Gurney v. Steffens, 56 Kan. 295, 43 P. 241. The granting of the stay amounted to nothing more than a continuance. Appellee makes no showing of abuse of discretion. In its absence we cannot say the trial court's action was erroneous. More than that, even if it had been, the error would be of no avail to appellee at this stage of the proceeding. Under the statute, G.S.1935, 60-3302 (second), and our decisions, Sanik v. Shryock Realty Co., 156 Kan. 641, 645, 135 P.2d 545; Bartholomew v. Guthrie, 71 Kan. 705, 81 P. 491, a ruling on a demurrer, whether sustained or overruled, is appealable and when it reaches this court through proper channels is entitled to consideration.

From what has been stated it is apparent the sufficiency of the amended petition is the principal issue and that matters antedating it, although they may be incidentally involved, are of secondary importance. For that reason to quote such pleading in toto will not only tell the story and result in an accurate recital of the facts upon which the right of the parties depend but dispense with all possibility of confusing those facts, as counsel have been prone to do in their briefs and arguments, with others involved in extended litigation, Dinsmoor v. Hill, 164 Kan. 12, 187 P.2d 338; also Dalton v. Lawrence National Bank, Murphy v. Lawrence National Bank and Hurst v. Lawrence National Bank, consolidated, and decided and reported this date, as Dalton v. Lawrence National Bank, 169 Kan. 401, 219 P.2d 719, pertaining to the settlement and disposition of the M. G. Bowersock Trust but not here in question because they are not to be found in such pleading. Omitting formal allegations of little or no importance it reads:

'That the Lawrence Paper Company is a corporation organized and existing under and by virtue of the laws of the State of Kansas and having its office and principal place of business at Lawrence, Kansas. That at all times concerned herein the Lawrence Paper Company had issued and outstanding 4,000 shares of capital stock.

'That this plaintiff was the owner of the entire interest in and to 72 shares of stock in the Lawrence Paper Company, which stock was held in the name of the M. G. Bowersock Trust. That this plaintiff was entitled to a distribution to him of said 72 shares of stock from said M. G. Bowersock Trust under an agreement dated September 3, 1942, which agreement covered all shares held in the name of M. G. Bowersock Trust but that no distribution of said shares of stock had been made by said trust at the times herein complained of. That after September 3, 1942, and prior to May 23, 1944, the defendants, Irving Hill and Justin D. Hill, acting and conspiring together determined to purchase a sufficient amount of Lawrence Paper Company Stock which had been held by the M. G. Bowersock Trust to give the Hill family more than 50 per cent of said stock and the controlling interest in said paper company and so acting and conspiring together for the purpose of defrauding this plaintiff did through misrepresentations and failure to disclose the facts within the knowledge of defendants as hereinafter described acquire on the 23rd day of May, 1944, from this plaintiff his rights in and to 72 shares of Lawrence Paper Company Stock and at the time of acquiring the same, defendants failed and neglected to inform plaintiff that they were buying his stock together with other stock for the purpose of securing majority control of said company.

'That the defendant, Irving Hill, was at all times herein mentioned the President and General Manager of said Lawrence Paper Company, and the defendant, Justin D. Hill, was the Vice President and Manager in charge of production in the business of said company.

'That the defendant, Irving Hill, on or about the 20th day of May, 1944, falsely and fraudulently represented to this plaintiff knowing said representation to be misleading, false and fraudulent, that Lawrence Paper Company Stock paid no dividends, and that it had no real value, and that it was not a good investment, and that the plaintiff would be acting for the best interests of his son Loring, to whom plaintiff told Irving Hill he wanted to sell his stock, if he sold his stock to Justin D. Hill, and that the plaintiff and his son Loring would be better off if plaintiff sold plaintiff's stock to Justin D. Hill, son of Irving Hill, at the price offered by Justin D. Hill.

'That Justin D. Hill caused to be sent to plaintiff on the 19th day of May, 1944, from the Trust Department of the Lawrence National Bank of Lawrence, Kansas, a letter, knowing the contents of said letter to be misleading, false and fraudulent, offering to buy plaintiff's 72 shares of stock in the Lawrence Paper Company at a price of $107.50 per share, said letter falsely and fraudulently represented that said stock was of the value of not to exceed $107.50 per share, and that said stock was not a dividend payer, and that earnings were used to develop the business, and that there was no market for this stock, and that an examination and audit of the value of the shares had been made, and that from said examination and audit Justin D. Bowersock sold his 234 shares and the Fanny P. Bowersock Trust had sold its 90 shares of Lawrence Paper Company Stock to Justin D. Hill upon their solicitation to Justin D. Hill to buy from them at said price. That a true and correct copy of said letter is attached hereto and marked 'Exhibit A' and made a part hereof.

'That Irving Hill and Justin D. Hill, officers of said Lawrence Paper Company as herein alleged,...