Elgin v. Snyder

• Decision Date: 17 October 1911
• Citation: 118 P. 280,60 Or. 297
• Parties: ELGIN v. SNYDER et ux.
• Court: Oregon Supreme Court

118 P. 280

60 Or. 297

ELGIN v. SNYDER et ux.

Supreme Court of Oregon

October 17, 1911

Appeal from Circuit Court, Marion County; Wm. Galloway, Judge.

Action by Charles F. Elgin against S.H. Snyder and wife. Judgment for defendants, and plaintiff appeals. Affirmed.

This is a suit to rescind a contract, whereby plaintiff conveyed to defendant S.H. Snyder 46 acres of land, valued at $2,000, in consideration of 35 shares of stock in the Salem Box & Lumber Company, a corporation, of the par value of $100 per share on the ground of fraud. From a decree in favor of defendants plaintiff appeals.

Plaintiff alleges, as the gist of his complaint, that said defendant his agents, servants, and associates, who were the officers and stockholders of the corporation, for the purposes of cheating, wronging, and defrauding plaintiff, knowingly and falsely represented to the public, and to plaintiff, that said stock was of the value of 75 to 80 cents on the dollar knowing that said shares were of no value whatever, and that the corporation was then insolvent, all of which is set out at length and with minute detail. For this purpose property of the value of about $3,500 was turned over to the company by Mason & Snyder, two of the incorporators, for $11,000 in stock. That on October 19, 1907, plaintiff, having no knowledge or means of knowledge of the falsity of such representations, believing them to be true and relying thereon, made the trade, caused the land to be conveyed to Snyder, and received the certificates of stock. "That said plaintiff did not discover the nature and extent of such fraud, and the evidence by which the same could be proven until long after March 16, 1908, when the petition had been filed in the United States court for the purpose of throwing said corporation into bankruptcy."

Defendants S.H. Snyder and wife admit that the contract and exchange were made, but deny the alleged fraud and false representations to plaintiff concerning the stock, and aver that plaintiff knew the exact value of the stock at the time, and that it was of equal value to the premises conveyed. Plaintiff, by his reply, denies the new matter of the answer.

Upon the trial, plaintiff testified, in substance, that prior to the making of the deal he asked Mr. Hofer, one of the stockholders, who was looking after the matter for Snyder, if the stock was worth 75 or 80 cents on the dollar. Hofer said, "Perhaps it would be." He made the exchange with defendant, and was chosen manager of the company, acting as such from October 25 to November 28, 1907. In a short time, finding out that the company did not amount to anything, and had no money to pay its bills, he told the directors that he would not serve in a firm that could not pay its bills, and resigned. He knew the company was in bad shape, but did not know that it was insolvent until March 16, 1908. While manager, he found statements of indebtness contracted the summer previous, and entered them in the books. He and Mr. Hofer were appointed as a committee to examine the books kept while Mr. Snyder was manager, but, as it was such a tedious job, they simply accepted Snyder's work without examination. On cross-examination, plaintiff further stated that he did not look at the plant before making the contract. Some one told him there was about $1,900 of the company's indebtedness when he took the stock. He made practically no inquiry before concluding the bargain. He supposed Mason thought he was doing him a good turn by asking him to buy this stock. Plaintiff also said that he never offered the stock back to Snyder until the amended complaint was filed in December, 1909, though he did not try to sell it to Mr. McGilchrist. Finding the material on hand, machinery, etc., appraised too high was one of the causes that made him wish to sell out.

George F. Mason, witness for plaintiff, testified to the effect that he was formerly in partnership with defendant Snyder, in the box business, for five or six months, doing very fairly. Not having money enough to carry on the business, they incorporated the company and turned the property over to the corporation at $11,000, in stock. By purchasing the Voget property for $2,000, and Hurst lot for $150, by building warehouses and additions to the buildings, and improving the plant generally, they placed themselves in debt about $9,000.

Wiley A. Moores, brother-in-law of plaintiff, testified in identification of the records of the directors' meetings. He stated that he was secretary of the company; that Snyder was manager from September 9, 1905, until plaintiff bought in; and, further, that he advised Elgin, before the deal was made, to make a thorough investigation of the business.

Defendant Snyder, in giving his version of the matter, stated that at the time the company was organized they took an inventory of the Mason-Snyder property, and put what they thought a fair price on it; new machinery at cost; old at a depreciated value; lumber at cost laid down at the factory; finished products at estimated cost. In March, 1907, the plant was moved from South to East Salem. October 7, 1907, he, as manager, represented liabilities of the company to be $8,223.91, including part of the costs of improvements. He then thought that, if they could get a little money to tide them over until they could collect in, they would be able to carry the business through. He considered the stock at that time worth 60 cents on the dollar. Snyder stated, in substance, that the only conversation he had with plaintiff in reference to the purchase was a telephone message, in which Mr. Elgin asked him if he had some stock in the box factory to trade for land. He (Snyder) answered that he had, and Elgin asked him to

call at his real estate office. Authorizing Mr. Hofer to act for him he first offered 30 shares, and Mr. Elgin offered to exchange for 35 shares. He made no false representation, and authorized none to be made. The farm was worth, or represented to be worth, in the neighborhood of $1,800. After trading with plaintiff, he lived here until the next August, but knew nothing about the business...