Dart v. McDonald

• Decision Date: 09 July 1919
• Docket Number: 15187.
• Citation: 107 Wash. 537,182 P. 628
• Court: Washington Supreme Court
• Parties: DART et ux. v. McDONALD et al.

182 P. 628

107 Wash. 537

DART et ux. v. McDONALD et al.

No. 15187.

Supreme Court of Washington

July 9, 1919

Department 1.

Appeal from Superior Court, Spokane County; Bruce Blake, Judge.

Action by L. S. Dart and wife against Maude S. McDonald and others. Judgment for the plaintiffs, and the named defendant appeals. Reversed as to her in her individual capacity.

A. E Gallagher and Graves, Kizer & Graves, all of Spokane, for appellant.

F. W Girand and Fred M. Williams, both of Spokane, for respondents.

MAIN, J.

The purpose of this action was to recover damages alleged to have been caused by a fraudulent conspiracy by which the plaintiffs were induced to purchase stock in a certain corporation.

After the issues were framed the cause came on for trial before the court and a jury, and resulted in a verdict against four of the defendants, two of whom were D. K. McDonald and Maude S McDonald, his wife.

Mrs McDonald moved for judgment notwithstanding the verdict and for a new trial, which motions were overruled. Thereupon judgment was entered upon the verdict. The judgment was against each of the defendants, including Mr. and Mrs McDonald, but no judgment was entered against them as a community. From this judgment Mrs. McDonald alone appeals.

It will only be necessary to state the facts and review the evidence as bearing upon the question of whether Mrs. McDonald was a party to the conspiracy by which the respondents were defrauded.

During the spring of the year 1913, D. K. McDonald conceived the project of obtaining a contract for the purchase of two tracts of land, containing about 1,378 acres, near Palo Alto in the state of California, and subdividing, improving, and selling the same. As a part of this plan a corporation, under the name of the Spokane-Stanford Land Company was organized under the laws of the state of Washington, with a capital stock of $280,000, its shares having a par value of $100. Subscriptions to its stock were obtained on the representation that it owned or would own the California land, and that a large profit would be made by the subdivision and sale of the same. The respondents subscribed for 100 shares of this stock, and agreed to pay par value therefor.

Certain other subscribers to the stock who, according to the contract of subscription, were to pay par value for the stock subscribed by them were, by private arrangement with McDonald, to acquire the stock for less than $100 per share, its par value.

At the time the corporation was organized McDonald had acquired an option on the California land, and had the contract made in the name of D. K. McKinnon. According to the option contract the purchase price was $392,500. Shortly after the corporation was organized it took over the option contract, agreeing to pay for the land the sum of $517,500. George E. Snyder cooperated with McDonald in securing subscriptions to the capital stock of the corporation. The enterprise was a failure. The land has been lost by the corporation, and the investing stockholders have realized nothing upon their investment, and the money so invested has been a total loss. The parties against whom recovery is sought in this action were the stockholders who had subscribed and agreed to pay par value for the stock, but were, by private arrangement with McDonald, to pay less--D. K. McKinnon, the holder of the option contract, George E. Snyder, the solicitor for the sale of the capital stock, and Mr. and Mrs. McDonald.

The theory of the complaint was that the parties against whom recovery was sought had entered into a conspiracy to defraud, and as a result thereof a fraud was worked upon the respondents. As above indicated, the verdict and judgment were against the four last-mentioned persons. No verdict or judgment was obtained against the stockholders who had subscribed agreeing to pay par value, but were, by private arrangement with McDonald, to pay less. Mrs. McDonald owned no stock in the corporation, had no part in its management, and had no knowledge of the contents of its books. The question presented by this appeal is whether the evidence shows that she was a party to the conspiracy. The complaint upon which the action was tried is comprehensive in its allegations, but the trial court in submitting the cause to the jury withdrew from their consideration all charges of fraud, except two: First, the allegation that all subscribers to the stock were to pay par value therefor when in truth and in fact certain of the subscribers were to pay a less sum; and, second, the alleged representation that the lands were paid for and free from incumbrances. In other words, the cause was submitted to the jury to determine whether it had been represented to the respondents, at the time they subscribed for their stock, that all stockholders were paying par, and that the land was paid for and free from incumbrances. It is not claimed that Mrs. Mcdonald had any part in the immediate transaction by which the respondents were induced to purchase the stock. If she is to be held, it must be because the evidence shows that she had entered into a fraudulent conspiracy with the other persons sought to be held in the action, to misrepresent in the two matters which were submitted to the jury.

Before Mrs. McDonald can be held liable it must be shown that she was a party to the conspiracy prior to the time the...