Downs v. National Share Corp.

• Decision Date: 18 February 1936
• Citation: 152 Or. 546,55 P.2d 27
• Parties: DOWNS et al. v. NATIONAL SHARE CORPORATION et al. DOWNS v. SAME (two cases).
• Court: Oregon Supreme Court

55 P.2d 27

152 Or. 546

DOWNS et al. v. NATIONAL SHARE CORPORATION et al. DOWNS v. SAME (two cases).

Supreme Court of Oregon

February 18, 1936

In Banc.

Appeal from Circuit Court, Multnomah County; James W. Crawford Judge.

Actions by Samuel U. Downs and others, and by Mabel Downs against the National Share Corporation and the Blanchard Securities Corporation and another, to recover sums paid for 282 shares of the capital stock of the National Share Corporation which plaintiffs alleged they were fraudulently induced to purchase. From judgments for plaintiffs for $7,050, plus costs, named defendants appeal, and the actions were consolidated for purposes of appeal.

Judgments affirmed.

Where buyers in actions to recover money paid for valueless stock purchased in reliance on agent's false representations alleged payment of stock at $25 a share, evidence that buyers exchanged securities valued at specified amount held not inadmissible on ground of variance, where it could be inferred that defendants intended to convert securities into cash. ORS 16.630.

George D. La Roche, of Portland, for appellants.

Vernon J. Veron and Fred W. Bronn, both of Portland, for respondents.

ROSSMAN Justice.

The plaintiff Samuel U. Downs, 80 years of age at the time of the trial June 1, 1934, had been principal of a Portland grammar school for 46 years. At the time of the trial he was retired. His daughter, Mabel Downs, the other plaintiff, was a teacher in a Portland high school. Each of them had accumulated a modest competency which was invested in bonds and preferred stocks. In December, 1930, the defendant Graham, a salesman of stocks and bonds, called upon the plaintiffs and urged them to purchase some of the common stock of the defendant National Share Corporation. At the same time he asked them to give him a list of securities which they owned, stating that he would send the list to San Francisco for appraisal. A list was given to him. He called again on December 22, 1930, at which time Miss Downs purchased 10 shares of the common stock of the National Share Corporation, and jointly with her father, purchased an additional 40 shares of the same stock at $25 per share. The plaintiffs in payment handed to Graham no cash, but delivered to him such of the securities mentioned in their list as he stated were acceptable. On September 28, 1931, Graham induced the father to purchase 140 shares of the same stock and his daughter to purchase 92 shares. The price again was $25 per share. Immediately prior to this transaction the plaintiffs, as at the time of the previous purchase, had delivered to Graham a list of securities they owned. Some of these securities were accepted as payment for the new purchases.

The complaint alleges that Blanchard made the following representations in order to induce the plaintiffs to make their purchases, and that they relied upon them: (1) That the National Share Corporation "was a good, safe and reliable corporation dealing in securities listed on the New York Stock Exchange"; (2) that the shares of the capital stock of that corporation "were readily and easily marketable"; (3) that that corporation, as well as the other two defendants, would promptly redeem, at $25 per share, any of the stock which the plaintiffs purchased. At the time of the trial the plaintiffs were permitted to amend their complaint by adding the following averment: "*** and when said stock was so sold said defendants were not nor either of them licensed or authorized as by law required to sell said stock." The complaint, in alleging the manner in which the representations were made, states the relationship of each of the three defendants to each other in the following language: "The defendant National Share Corporation, a corporation, by and through its agents, representatives and officers, the Blanchard Securities Corporation, a corporation, by and through its agents, representatives and officers, and E. H. Graham, and each of them, being desirous of making a sale to said plaintiffs of shares. ***" The complaint alleges that, in reliance upon these representations, the plaintiffs purchased the aforementioned stock, "paying the sum of $25.00 a share." It avers that the above representations were untrue, and that, although the plaintiffs demanded that the defendants redeem the stock, the defendants failed to do so. In each cause of action the plaintiffs aver they were damaged to the extent of the stock purchased at the rate of $25 per share. The two corporations filed a joint answer, and Graham filed his individual answer. The answers deny the averments of fraud, agency, damage, and payment. During the course of the trial the answers were amended by inserting the following averment: "On the 8th day of April, 1932, the plaintiff, Mabel Downs, accepted an agreement in writing from E. H. Graham in which she agreed to return or sell the stock concerning which she is suing in this action, and accepted a contract for the price thereof and by so doing waived any fraud." The evidence offered by the plaintiffs is uncontroverted.

The appellants contend that the complaint fails to state a cause of action, that the averment of agency is insufficient to have permitted the introduction of evidence showing the relationship of the defendants to each other, that the evidence failed to substantiate the averments of the complaint, that the evidence failed to prove that Graham was the agent of the other two defendants, and that the evidence disclosed no damage.

The National Share Corporation was organized under the laws of Delaware. One R. A. Blanchard was its president, and an individual named L. R. McGee was its secretary. The business in which the company was engaged was speculation in securities listed upon the New York Stock Exchange. So far as is disclosed by the record, the concern was engaged in business only in Portland and San Francisco. At the same time there existed another corporation, the defendant Blanchard Securities Corporation, an Oregon corporation. The aforementioned Blanchard was also the president of that corporation, and the aforementioned McGee was its secretary. The Blanchard Securities Corporation was authorized by its articles of incorporation to act as broker in the sale of corporate stock. June 10, 1930, it applied to the corporation commissioner of this state for a permit to sell as dealer 2,000 shares of the capital stock of the National Share Corporation at a price of $25 per share. A part of the application was a financial statement of the National Share Corporation which showed that its assets consisted of $6,500 cash, prepaid expenses amounting to $1,000, and two apartment houses located in the state of California worth $100,000. Its sole liabilities were its outstanding stock. August 13, 1930, the commissioner granted the desired permit in an order which stated that he acted in reliance upon the truthfulness of the application. July 6, 1931, the commissioner, upon discovering that the corporation had no interest whatever in the apartment houses mentioned in the application, canceled its permit. Thus, the permit was in effect for the period of August 13, 1930, to July 6, 1931, being approximately eleven months. According to the records of the corporation commissioner, the defendant Graham was registered as an agent of the Blanchard Company in the period of April 28, 1931, to June 30, 1931. Thus, at the time when the aforementioned transactions were consummated with the plaintiffs Graham lacked a permit, and the Blanchard Company possessed one only when the transactions of December 22, 1930, consisting of the sale of 50 shares, was consummated, but possessed none September 28, 1931, when the plaintiffs bought 232 shares.

We shall first consider defendants' contention that the allegation of agency was insufficient. The sufficiency of the complaint was not tested by motion or demurrer. It will be observed that an act done through an agent may be averred in any one of three ways: (1) It may be described as the act of a principal without mention of the agency; (2) it may be described as the act of the agent performed on behalf of the principal; or (3) it may be described as the act of the principal performed through the instrumentality of an agent. The defendants seem to believe that the complaint should have averred the agency in greater detail and that the averment should have been accompanied with a statement that Graham was acting within the scope of his authority. In Davis v. Houghtellin, 33 Neb. 582, 50 N.W. 765, 766 14 L.R.A. 737, the court held that the following language, "was acting for said defendants in the due course of his employment as aforesaid, and, pursuant to his instructions and orders" was "a mere conclusion, and not a statement of any fact." In Partridge v. Badger, 25 Barb. (N.Y.) 146, the court said: "The allegation in the complaint, that the drafts were accepted by the company by their treasurer, includes an averment of authority to the treasurer to accept the drafts, as the company could not accept by him unless he had such authority. *** What is necessarily understood or implied in a pleading forms part of it, as much as if it was expressed." In Duvall Investment Co. v. Stockton, 54 Fla. 296, 45 So. 497, the court held that since a corporation acts only through its agents, an averment of the name and particular authority of the agent is generally unnecessary. From McAdow v. Kansas City Western Railway Co., 100 Kan. 309, 164 P. 177, 179, L.R.A.1917E, 539, we quote: "The usual form of averment, that the contract was made by defendant's duly authorized agent, or words of like import, must be held sufficient to sustain evidence of any appropriate manner of authorization short, at least, of...