First Mobile Home Corp. v. Little

• Decision Date: 08 April 1974
• Docket Number: No. 47458,47458
• Citation: 298 So.2d 676
• Parties: Blue Sky L. Rep. P 71,127 FIRST MOBILE HOME CORPORATION et al. v. Travis LITTLE and Barbara Little. Travis and Barbara LITTLE v. Mrs. Helen Grissom WOOD.
• Court: Mississippi Supreme Court

Page 676

298 So.2d 676

Blue Sky L. Rep. P 71,127

FIRST MOBILE HOME CORPORATION et al. v. Travis LITTLE and Barbara Little.

Travis and Barbara LITTLE v. Mrs. Helen Grissom WOOD.

No. 47458.

Supreme Court of Mississippi.

April 8, 1974.

Scales & Scales, Derek Parker, Watkins & Eager, Jackson, for First Mobile Home Corp., and others.

Watkins & Eager, P. N. Harkins, III, Jackson, for Fidelity & Deposit Co.

Mitchell, McNutt & Bush, L. F. Sams, Jr., Tupelo, for Travis and Barbara Little.

RODGERS, Presiding Justice.

This is a suit based upon an illegal sale of stock in violation of the Mississippi Securities Law (Mississippi Code Annotated Sections 75-71-1 et seq. (1972)).

The suit was originally filed on June 7, 1971, in the Chancery Court of Lee County, Mississippi, by Travis and Barbara Little against the following named defendants: First Mobile Home Corporation and its surety, Travelers Indemnity Company; First National Investment Trust; First Securities Corporation and its surety, Fidelity and Deposit Company of Maryland; Kenneth Tribble, individually; Helen Grissom Wood, Individually; and Denver Wilson, individually. Proper service of process was had upon all of the defendants. Answers were duly filed by all the defendants except First Securities Corporation and Denver Wilson. A pro confesso order was entered against First Securities Corporation and Denver Wilson on January 14, 1972. The Fidelity and Deposit Company of Maryland filed a cross-bill against First Securities Corporation, Denver Wilson, Kenneth Tribble, and Helen Grissom Wood. Denver Wilson and First Securities Corporation failed to answer the cross-bill; therefore, a pro confesso decree was entered in favor of Fidelity and Deposit Company of Maryland against First Securities Corporation and Denver Wilson.

The chancellor heard the evidence introduced by all complainants and the answering parties. He took the case out for study in vacation and decided the issues in favor of the complainants against all the defendants except Helen Grissom Wood. The chancellor determined that Kenneth Tribble, the president of First Mobile Homes Corporation, caused Mr. and Mrs. Little to purchase stock in First Mobile Home Corporation from Helen Grissom Wood by certain false representations. Judgment was entered accordingly against all of the defendants except Helen Grissom Wood. A final decree was also entered in favor of Fidelity and Deposit Company of Maryland against Denver Wilson, but not Kenneth Tribble and Helen Grissom Wood. First National Investment Trust and Denver Wilson did not appeal. Helen Grissom Wood did not file a brief on appeal.

This is what is said to have caused the dispute and litigation between the parties: In December, 1969, Denver Wilson, who was the president of First Securities Corporation and president of First National Investment Trust, and Kenneth Tribble, who was president of First Mobile Home Corporation, contacted Helen Grissom (later) Wood in Tupelo, Mississippi, and employed her to sell the stock of First Mobile Home Corporation as an agent for First Securities Corporation. First Securities Corporation had been employed by First Mobile Home Corporation to sell its stock offered to the public. These three corporations shared offices in Jackson, Mississippi. They also had common offices at different times. It was apparent to the trial judge that Wilson and Tribble were acting together at the time they employed Mrs. Wood. After the suit was filed and subpoena duces tecum had been served upon the defendants for the records of the First Securities Corporation, Mr. Wilson left Mississippi, taking the records of the corporation with him. He is now said to be employed in Canaca.

Mrs. Wood met Mr. and Mrs. Little at a New Year's Eve party. They discussed stock investment, particularly the stock offered by Mrs. Wood in the First Mobile Home Corporation. Mrs. Wood later called on Mr. and Mrs. Little and explained the stock in more detail. The Littles advised Mrs. Wood, however, that they did not want to tie up their money in stock that could not be liquidated when they needed the money. Mrs. Wood did not know whether or not the company would repurchase the stock. She promised to find out, and did in fact call Mr. Wilson on the telephone, but since he could not be located, she talked with Mr. Tribble, the president of First Mobile Home Corporation. He advised her that they would furnish the Littles a market for their stock. Mrs. Wood communicated this information to the Littles and told them that the company would repurchase the stock if it became necessary. Whereupon, the Littles issued their check for four thousand dollars ($4,000.00) for two thousand (2,000) shares of First Mobile Home Corporation stock. The defendants Wilson and Tribble, however, issued stock in First National Investment Trust, instead of the stock purchased in First Mobile Home Corporation. The Littles immediately tried to get their money refunded. They contacted Mr. Tribble, the president of the company, who offered the stock, but were unable to reach Mr. Wilson on the telephone. Mr. Tribble first told the Littles that First Mobile Home Corporation and First National Investment Trust had merged. The Littles contacted the Secretary of State, and a short time before suit was filed, they received two thousand (2,000) shares of stock from First Mobile Home Corporation. The representation made by Mrs. Wood for Tribble, that the stock would be repurchased, was never honored.

The first issue presented for decision is the contention that Kenneth Tribble is not liable individually, because he was merely an officer in two or more corporations, and was acting for these corporations and not individually.

Our Court has, however, held to the contrary in the case of Irving v. Bankers' Mortgage Co., 169 Miss. 890, 151 So. 740 (1934). This Court said, in discussing Section 4185, Mississippi Code 1930, which is essentially the same as Mississippi Code Annotated Section 75-71-25 (1972) ¹ involved herein:

'In order to maintain an action under either the Blue Sky Law of 1930 or chapter 97, Laws 1916, it is not necessary that the suit shall be solely against the surety, or that the surety shall be joined at all. The right of action conferred thereby is against the corporation or investment company whose officers, agents, or employees have induced one to purchase its stock, bonds, or securities by means of any misrepresentation of any material fact concerning such stock, bonds, or other securities, and the bond required to be executed before any such company shall be authorized to engage in any such business is mere security provided 'for such person so purchasing such stock, bonds or other securities.' The liability of the surety is measured by that of its principal, and a party having a right of action under these statutes may proceed against the principal without joining the surety.' 151 So. at 743.

It is said in III Loss, Securities Regulation, Ch. 11B(c), at 1681 (2d ed. 1961), that:

'An officer or director (or, for that matter, any agent of a corporation) who actively participates in the commission of a corporate tort is individually liable at common law to third persons injured thereby; sometimes this liability is codified in the state's general corporation statute. Consequently, an officer or director who actively participates in the violation of a provision of the blue sky law which is essentially declaratory of common law-for example, a provision forbidding the sale of securities by fraud-is liable independently of statute.'

The next writers have stated this rule as follows:

'A director of officer of a corporation does not incur personal liability for its torts merely by reason of his official character; he is not liable for torts committed by or for the corporation unless he has participated in the wrong . . . If, however, a director or officer commits or participates in the commission of a tort, whether or not it is also by or for the corporation, he is liable to third persons injured thereby, and it does not matter what liability attaches to the corporation for the tort.' 19 Am.Jur.2d Corporations § 1382, at 778-779 (1965).

It is apparent have even if Mississippi Code Annotated Section 75-71-25 (1972) were limited to recovery against the bond, Tribble would still be liable for participating in the commission of a corporate tort. This rule is further illustrated by the following language:

'As a general rule a corporate officer or director is not liable for the fraud of other officers or agents merely because of his official character, but he is individually liable for fraudulent acts of his own or in which he participates. * * *

Directors and officers and agents of a corporation may be personally liable for a fraudulent or illegal issue of stock, and for fraudulent representations inducing subscriptions to corporate stock . . .' 19 Am.Jur.2d Corporations § 1384, at 780-781 (1965).

Moreover, Tribble's misrepresentation regarding the repurchase of the stock constitutes actionable fraud. The text writers define this tort as follows:

'As a general rule, one who makes a false representation of a material fact for the purpose of inducing another to act in reliance thereon in a business transaction or sale is liable to the other for the harm caused to him by his justifiable reliance upon the false representation.' 37 Am.Jur.2d Fraud and Deceit § 41, at 65 (1968).

Furthermore, in accordance with Irving v. Bankers' Mortgage Co., supra, recovery pursuant to Mississippi Code Annotated § 75-71-25 (1972) is not limited to an action on the bond, but allows an action against the principal as well. This section makes no mention of the liability of specific persons, and research reveals no cases on this point. There is a good article in the Mississippi Law Journal discussing the liability of corporate officers for violations of the Blue Sky Laws, in which the following...