Grabow v. Bergeth

• Decision Date: 13 February 1930
• Docket Number: No. 5572.,5572.
• Citation: 229 N.W. 282,59 N.D. 214
• Parties: GRABOW v. BERGETH et al.
• Court: North Dakota Supreme Court

59 N.D. 214

229 N.W. 282

GRABOW

v.BERGETH et al.

No. 5572.

Supreme Court of North Dakota.

Feb. 13, 1930.

Syllabus by the Court.

The plaintiff and a number of others purchased stock in a bank in reliance upon representations of the defendants alleged to have been falsely and fraudulently made.The purchasers other than the plaintiff assigned to him their claims against the defendants accruing by reason of the alleged false and fraudulent representations, and the plaintiff sued in his own name seeking to recover damages for the alleged fraud and deceit of the defendants.It is held:

Section 5446, Compiled Laws of 1913, which provides that a thing in action arising out of the violation of a right of property or out of an obligation may be transferred by the owner and upon his death passes to his personal representatives, provides one rule for survivability and assignability of things in action.

In determining the meaning of a statute, a construction should be adopted that gives meaning to every word, clause, and sentence in the enactment, and, where a clause is used as a limitation upon that which has gone before, it must be so construed, if possible, as to be made effective.

Where there is doubt as to the sense in which a given word is used in a statute, it is proper to refer to cognate or related legislation to determine the sense in which the word was employed in the particular statute.

In the limiting clause in section 5446, Compiled Laws of 1913, which provides for assignability and survivorship of things in action, the term “obligation” is used, which term is elsewhere treated in the Civil Code in two senses; in one of which it relates to obligations arising from contract or by operation of law (chapter 54 of the Civil Code), and in the other of which it refers to obligations imposed by law (chapter 56 of the Civil Code).Held, it plainly appears that in the clause in question the term cannot have been employed in the broad sense which includes both kinds of obligations.

Section 8800, Compiled Laws of 1913, which provides that executors and administrators may maintain actions against any person who has wasted, destroyed, taken, carried away, or converted the goods of the testator in his lifetime (also for trespass committed on real estate), does not authorize actions for wrong to be brought where the injury to the estate flowing from a tort or wrong committed is incidental, and does not involve an injury to specific property or estate; hence such a cause of action does not survive, and is not assignable.

A fraud or cheat resulting in a pecuniary loss is not a damage to the goods of the testator or intestate within section 8800, Compiled Laws of 1913, and a cause of action arising therefrom does not survive, and is not assignable.

A mere naked right of action for fraud and deceit is not a thing in action arising out of the violation of a right of property or out of an obligation within section 5446, Compiled Laws of 1913.

An act done or statement made by one conspirator is admissible in evidence against his co-conspirator only when in furtherance of the common design or purpose.

In an action to recover damages for fraud and deceit, it is incumbent on the plaintiff to prove reliance upon the alleged fraudulent representations, and it is error to instruct the jury that it will be presumed that the party to whom the representations were made relied and acted thereon.

Burke, C. J., dissenting in part.

Appeal from District Court, Ward County; John C. Lowe, Judge.

Action by William Grabow against H. J. Bergeth and another.From an adverse judgment, and from an order denying their motion for judgment notwithstanding the verdict or for a new trial, defendants appeal.Reversed and remanded for new trial.

E. R. Sinkler and G. O. Brekke, both of Minot, for appellants.

William Langer, of Bismarck, and McGee & Goss, of Minot, for respondent.

BIRDZELL, J.

This is an action to recover damages for deceit alleged to have been practiced, in pursuit of a conspiracy between the two defendants, in the sale of bank stock in the Aurelia State Bank at Aurelia, N. D.In the trial courtthe plaintiff had judgment.The defendants moved for a judgment notwithstanding the verdict or for a new trial.The motion being denied, the defendants appeal from the judgment and from the order denying the motion.

Prior to the 29th of March, 1926, the defendant Bergeth was the owner of 37 shares of the stock of the bank, and was its president and in active control of the institution.Hillis was the owner of 30 shares, was vice president, and lived at Berthold some 20 miles distant from the village where the bank was situated.He was engaged in the practice of his profession of physician and surgeon.Both had been connected with the bank for many years.Hillis in his testimony claimed that prior to 1926he had paid in to the bank $20,000 in money for the purpose of keeping up the reserve, taking out in exchange paper that was not readily convertible into cash.It appears that just prior to the 29th of March, 1926, the reserve of the bank was depleted, and the officers contemplated its immediate closing on this account; Hillis claiming that he was no longer willing or able to put up additional money to keep up the reserve.On Saturday, the 27th of March, 1926, five men in the community who had heard that the bank was likely to close called upon Hillis in Berthold.They talked about the condition of the bank and of the possibility of its being reorganized.On the Monday following this meeting a meeting of the interested people of Aurelia was held to consider ways and means of keeping the bank open.Hillis attended that meeting, and presided as chairman.This action is predicated largely, if not entirely, upon statements made at this meeting.Hillis claims he stated to those present his willingness to turn in his stock, so that it could be sold at par value and the amount received put in the bank to build up the reserve.He says he made no statement concerning the condition of the bank aside from the fact that its reserve was depleted, and that he did not expect to get anything for his stock.There is testimony, however, to the effect that the bank was represented to be in A-1 condition, excepting that the reserve was low; that he would turn over all his stock, and, when the bank again became prosperous, it could pay him for it.After this meeting 55 shares of stock held by Hillis and Bergeth were transferred.There was a reorganization of the bank; Grabow, the plaintiff in this action, being elected president and one H. B. Lysne, cashier.Grabow claims that he at the time disclaimed knowledge of the banking business, and did not want to act, but that Hillis told him to take the presidency for a few days, and, as soon as he could buy some more stock, he would take it off his (Grabow's) hands.The bank remained open some 5 or 6 weeks on the strength of the reserve derived from the sale of the Hillis and Bergeth stock to the new stockholders.Twenty-four of the purchasers assigned their causes of action to the plaintiff, who sues in his own name.

On this appeal errors are assigned which present, among other questions, prejudicial error in the charge of the court to the jury and the assignability of the causes of action upon which the judgment is based.Having come to the conclusion that a new trial must be had, and it appearing that the other questions are such as are not likely to arise upon another trial, we shall consider but the two questions stated, and these in the inverse order of their statement.

The complaint, briefly summarized, charged the defendants with knowledge of the condition of the banking corporation on the 29th of March, 1926; that they conspired and confederated to sell the stock of each to persons named by falsely and fraudulently representing to them that the corporation was solvent and the stock worth par; that in pursuance of the conspiracy, and for the purpose of carrying the same into effect, the defendant Hillis falsely and fraudulently represented to the plaintiff and the other persons named that the bank was solvent; that such persons believed the statements so made by Hillis, and in reliance thereon purchased from him and from Bergeth 55 shares, the purchasers and the number of shares purchased being alleged; and that the purchasers paid to the defendants $100 for each share.The statements and representations are alleged to be false, in that the corporation was hopelessly insolvent, and known by the defendants to be so.The purchasers are alleged to have sustained damages in proportion to the amount of stock purchased, and each of them is alleged to have assigned his claim against the defendants“accruing by reason of the false and fraudulent representations” to the plaintiff.

At the commencement of the trial, the attorneys for the defendants requested to know whether the plaintiff was suing to recover upon an unlawful conspiracy and for fraud and deceit or to recover for a breach of warranty.It was then announced by the attorneys for the plaintiff that they expected to recover for fraud and deceit and for conspiracy.The defendants' attorneys then moved that they be required to elect as between fraud and deceit based upon conspiracy and for breach of warranty.One of the plaintiff's attorneys asserted the right to elect after proof was in, and in ruling on the motion the court stated that, if it appeared an election was proper, he would require the plaintiff to elect at the end of the plaintiff's case.No election was made.Hence in this court the question is presented as to whether the various causes of action for deceit in the sale to the various purchasers of the stock are assignable.

[1] In support of the contention that such a cause of action for deceit is assignable, counsel for the respondent stress the more liberal rule favorable to assignments than existed at the common law, and also rely...