Fletcher American Co. v. Culbertson

• Citation: 215 Ky. 695,286 S.W. 984
• Parties: FLETCHER AMERICAN CO. v. CULBERTSON ET AL.
• Decision Date: 22 June 1926
• Court: Kentucky Court of Appeals

286 S.W. 984

215 Ky. 695

FLETCHER AMERICAN CO. v. CULBERTSON ET AL.

Court of Appeals of Kentucky.

June 22, 1926

Rehearing Denied Oct. 26, 1926.

Appeal from Circuit Court, Jefferson County, Common Pleas Branch Third Division.

Action by the Fletcher American Company against Craig Culbertson and another. Judgment for defendants, and plaintiff appeals. Reversed and remanded.

Gifford & Steinfeld, of Louisville, for appellant.

Humphrey Crawford & Middleton and M. H. Taylor, all of Louisville, for appellees.

HOBSON C.

The Midwest Engine Company of Indiana was a manufacturing corporation, with its headquarters and principal plant at Indianapolis. The Midwest Engine Company of Delaware was a holding company, organized for the purpose of taking over the Indiana company, increasing its capital, and continuing the manufacturing business under these circumstances. The Indiana company was making automobile accessories, steam turbines and several kinds of pumps. In addition, it acquired, and began to manufacture, a moveable power plant, designed chiefly for farm use, called the "Utilitor." A short advertising campaign for the sale of the Utilitor resulted in orders for about 35,000 of them. The plant was able to turn out only 50 a day. Conceiving that a great profit could be made in the manufacture of Utilitors, which could only be put on the market by increasing its plant, the Delaware corporation was organized by it for this purpose, the scheme being that the Delaware corporation would raise $8,000,000 by the sale of its stock, and thus take over the plant of the Indiana corporation, which owned 65 acres of land at Indianapolis, and also a considerable plant at Anderson, Ind. R. M. Bowen was one of the agents selling the stock of the Delaware corporation to carry this scheme into effect. He sold to Craig Culbertson and Arthur Middleton 100 shares of the stock of the Delaware corporation, and they executed on October 1, 1920, a note to the Midwest Engine Company for $10,500, due four months after date. This note was sent by Bowen to the Fletcher American Company at Indianapolis, a corporation engaged in the business of buying and selling stock, bonds, and other securities, and acting as the syndicate manager of the syndicate selling this stock. It investigated the solvency of the makers, and, after such investigation, bought the note from the Midwest Engine Company, which indorsed it to the American Company. That company then paid Bowen his commission, and paid the remainder of the price to the Midwest Engine Company. The note was not paid at maturity, and thereupon R. M. Bowen, Craig Culbertson, and Arthur Middleton executed their note to the Fletcher American Company for $10,500, due June 1, 1921. This note was renewed on June 1st by the same parties for the same amount, due October 1st, and like renewals were executed every four months until February 2, 1923. This action was brought by the Fletcher American Company against Craig Culbertson and Arthur Middleton on the note executed February 2, 1923, for $10,500, and some part of the interest on the previous renewals which had not been paid. The defendants by their answer pleaded that the original note was obtained from them by fraud, and that the renewals were all executed in ignorance of the fraud which had been practiced upon them; that Bowen willfully misrepresented the condition of the Midwest Engine Company when he sold them the stock, and that in selling them the stock he was acting as the agent of the Fletcher American Company. The allegations of the answer were denied by reply. The case was heard before a jury, who returned a verdict for the defendants. The plaintiff appeals.

The only question we deem it necessary to consider on the appeal is whether the court should have instructed the jury peremptorily to find for the plaintiff. The admitted facts shown by the evidence are these: Bowen was a friend of Culbertson and Middleton. They were selling Packard cars, and he was talking with them of buying a car. He described to them the assets and prospects of the company, and finally, to induce them to buy the stock, told them that when the note was due, if they did not wish to take the stock, he would take it off their hands and pay the note. On September 30, 1920, or the day before the note was dated, he put the promise in writing in a letter to them in these words:

"Referring to your purchase of one hundred (100) shares preferred stock and fifty (50) shares of common stock of the Midwest Engine Company, for which you have given in payment your four months' note for $10,500.00, beg to advise that in consideration of your assistance to me in getting this issue before Louisville investors, I agree to purchase from you the stock mentioned above at the price you paid for same, namely $10,500, not later than February 1, 1921, provided you notify me not later than January 15, 1921, that you wish me to take this stock off your hands."

Before the note fell due they notified Bowen that they did not want the stock, and on February 12, 1921, Craig Culbertson wrote the Indianapolis people a letter in which, among other things, he said this:

"Mr. Bowen was to take this stock over, but stated to us that the Midwest Engine Company preferred renewing the note rather than have the transfer made, and as Mr. Bowen is really obligated for the above-mentioned stock, we were in the hope that this could be taken care of in the manner as outlined."

Two dividends of $200 each on the stock were paid to Middleton and Culbertson, and they turned this money over to Bowen, and he...