Donovan v. Dixon

• Decision Date: 12 January 1962
• Docket Number: No. 38244,38244
• Citation: 261 Minn. 455,113 N.W.2d 432
• Parties: , Blue Sky L. Rep. P 70,564 Leona A. DONOVAN, Respondent, v. C. L. DIXON et al., Defendants, William Lawin et al., Appellants.
• Court: Minnesota Supreme Court

Page 432

113 N.W.2d 432

261 Minn. 455, Blue Sky L. Rep. P 70,564

Leona A. DONOVAN, Respondent, v. C. L. DIXON et al., Defendants William Lawin et al., Appellants.

No. 38244.

Supreme Court of Minnesota.

Jan. 12, 1962.

Syllabus by the Court

1. It is for the triers of fact to resolve conflicts in testimony and it is for this court to determine on appeal whether the findings support the conclusions of law and the judgment.

2. This court will consider the testimony in the light most favorable to the prevailing party and if the evidence as a whole tends to support the findings they will not be disturbed. The findings of fact by the trial court and jury stand on an equal footing and are entitled to the same weight and will not be reversed on appeal unless they are manifestly and palpably contrary to the evidence. This rule applies whether the appeal is from a judgment or an order granting or denying a new trial.

3. The guaranty fund certificates here involved have so many of the substantial attributes of 'stock,' 'share,' 'evidence of indebtedness,' and 'investment contract' that they must fall within one or more of the foregoing concepts. Therefore, the trial court correctly held that the guaranty fund certificates sold to plaintiff were securities which had to be registered under the Minnesota Securities Act, Minn.St. c. 80, prior to sale.

4. Appellants are liable as participants aiding in the sale of the guaranty certificates to plaintiff.

King & Flora, Long Prairie, for appellants.

Bradford & Kennedy, Charles W. Kennedy, Wadena, for respondent.

NELSON, Justice.

Action by Leona A. Donovan to recover damages for sale of guaranty fund certificates issued by Consumers Mutual Insurance Company, a corporation, pursuant to Minn.St. 66.08. The certificates were not registered with the Securities Commission.

The plaintiff worked for said company at St. Paul from January 17, 1953, until March 7, 1953. At that time its offices were moved to Long Prairie, Minnesota, and she continued to work for it there. This action was brought against L. C. Dixon, LeRoy Dixon, and Dewert Gruening, directors and respectively president, secretary, and treasurer of said company, and against William Lawin, Arthur Lawin, Donald Hart, Arnold Griep, F. E. Houle, and N. D. Underhill, also directors. Upon the findings of a jury, judgment was ordered by the trial court against L. C. Dixon, LeRoy Dixon, William Lawin, Arthur Lawin, Donald Hart, F. E. Houle, and N. D. Underhill. ¹ All of said defendants except L. C. Dixon and LeRoy Dixon appeal from the judgment.

Plaintiff, after coming to Long Prairie was placed in charge of the underwriting department, which made out policies and endorsements, figured rates and premiums, and calculated risks. She continued in the employ of the company in that capacity until March 12, 1959, when the business of the company was being liquidated.

During the year 1953 plaintiff was informed that the company needed working capital. L. C. Dixon, then president, explained to her that the company was growing by leaps and bounds and had a surplus 'upwards of' $75,000 and that if she were to invest in the guaranty fund certificates they were about to issue, it would be as sound as putting money in the bank.

Plaintiff told L. C. Dixon that she had some money available for investment but planned to buy a house as soon as her daughter no longer needed a baby sitter. She claims that he promised her that if she invested in guaranty fund certificates of the company he would personally see to it that she could withdraw her money at any time she saw fit and receive interest at 5 percent per annum. Upon these and other representations, plaintiff invested $7,500 in guaranty fund certificates. This sale was acquiesced in generally by the board of directors.

Some time later plaintiff demanded her money back and gave L. C. Dixon 2 weeks in which to pay her the interest which had accumulated on the certificates. He paid her $225 interest in response to her demand and sold the first $500 of her investment. She made no further demands after being informed by Frank L. King, then a member of the board of directors, that her investment was a fixed asset and could not be returned until there was a market for her certificates. Later when the company was liquidated due to impaired capital plaintiff brought this suit, alleging that the issuance and sale of the certificates were illegal and not within the authority granted by Minn.St. c. 66 and that the defendants were negligent in the sale of the certificates and in permitting it when they knew or should have known that the financial condition of the corporation did not justify the issuance of said certificates.

The trial court submitted a special verdict to the jury for their consideration, explaining it in his instructions. This verdict was as follows:

'AS TO THE FRAUD COURT

'1. Did the defendant, L. C. Dixon, make a false representation or representations of material facts, knowing such representation or representations to be false, or as of his own knowledge without knowing whether such representation or representations were true or false, with the intention to induce plaintiff to act in reliance thereon?

'Answer yes or no--Yes.

'2. If your answer to the foregoing interrogatory is yes, then answer the following interrogatory: Did plaintiff rely upon such representation or representations in purchasing certificates?

'Answer yes or no--Yes.

'3. If your answer to the foregoing interrogatory is yes, then answer the interrogatory: Did the plaintiff thereafter ratify and confirm the transaction and waive any and all fraud?

'Answer yes or no--No.

'AS TO PROMISE TO REPAY PRINCIPAL AND INTEREST

'4. Did L. C. Dixon promise plaintiff that he would pay her interest on the money paid for the guaranty fund surplus certificates?

'Answer yes or no--Yes.

'5. Did defendant L. C. Dixon promise plaintiff that he would repay the principal of her investment on her demand?

'Answer yes or no--Yes.

'AS TO CONFIDENTIAL RELATIONSHIP

'6. Did a confidential relationship exist between the plaintiff and L. C. Dixon, such as to repose confidence and trust in him and reliance upon statements made to her negligently and carelessly omitting to disclose to plaintiff certain material facts relating to guaranty fund certificates?

'Answer yes or no--Yes.

'7. If answer is yes to last question, did plaintiff rely upon and was she deceived thereby?

'Answer yes or no--Yes.

'8. If answer is yes to last question did plaintiff nevertheless assume the risk of her investment?

'Answer yes or no--No.

'AS TO NEGLIGENCE

'9. Was the defendant, L. C. Dixon, negligent in the sale of guaranty fund certificates to plaintiff?

'Answer yes or no--Yes.

'10. If your answer to the last question is yes was such negligence a proximate cause of plaintiff's loss?

'Answer yes or no--Yes.

'11. Were the defendants LeRoy Dixon, William Lawin, Arthur Lawin Arnold (sic) Hart, F. E. Houle and N. D. Underhill negligent in the sale of guaranty fund certificates to plaintiff?

'Answer yes or no--Yes.

'(Written in by jury: LeRoy Dixon, Wm. Lawin, N. D. Underhill).

'12. If your answer to last question is yes was such negligence a proximate cause of plaintiff's loss?

'Answer yes or no--Yes.

'AS TO PARTICIPATION

'13. The Court having determined that in so far as L. C. Dixon, LeRoy Dixon and William Lawin are concerned, they did aid and participate in the sale of guaranty fund surplus certificates to plaintiff, and the Court having also determined as to all defendants that they did aid and participate in the sale of guaranty fund surplus certificates generally, the following question is submitted for answer by the jury:

'13. Were the defendants, Arthur Lawin, Donald Hart, F. E. Houle and N. D. Underhill aware of the sale of guaranty fund certificates at, the time of, or prior to, or within a reasonable time thereafter to the plaintiff?

'Answer yes or no--Yes.'

Upon return of the jury verdict, the trial court ruled that the guaranty fund certificates were securities within the provisions of Minn.St. c. 80; that they were sold without being registered; that all of the defendants aided and participated in the sale of certificates to plaintiff; and that plaintiff was entitled to recover against all of the defendants. It ordered judgment entered accordingly.

Appellants raise the following issues on appeal:

(1) Did the court err in denying the motion for summary judgment of dismissal on the ground that the guaranty fund certificates were not securities within the statutes requiring the registration of securities?

(2) Did the court err in finding that William Lawin aided and participated in the sale of the guaranty fund certificates to plaintiff?

(3) Did the court err in finding that all of the appellants aided and participated in the sale of guaranty fund certificates generally?

(4) Did the court err in submitting to the jury the question: 'Were the defendants, Arthur Lawin, Donald Hart, F. E. Houle and N. D. Underhill aware of the sale of guaranty fund certificates at the time of, or prior to, or within a reasonable time thereafter to the plaintiff?'

Essentially appellants contend that the guaranty fund certificates as a matter of law are not securities and that they are not liable because they did not participate in the sale to the plaintiff.

Since there has been no motion for a new trial and the appeal is from the judgment, the only question before this court is whether the lower court's findings, some of which were based upon the special verdict, are sustained by the evidence.

1. Upon appeal from the judgment, since no motion was made for a new trial, we are concerned first with whether the evidence sustained the jury's special verdict and the trial court's findings. It was for the triers of fact to resolve the conflicts in the testimony, and it is for this court to determine whether the findings support the conclusions of law and the...