Harris v. Egger

• Decision Date: 05 October 1915
• Docket Number: 2596.
• Citation: 226 F. 389
• Parties: HARRIS v. EGGER.
• Court: U.S. Court of Appeals — Sixth Circuit

226 F. 389

HARRIS v. EGGER.

No. 2596.

United States Court of Appeals, Sixth Circuit.

October 5, 1915

Egger recovered a verdict and judgment against Harris for alleged fraud and deceit touching the purchase and sale of certain shares of stock, and Harris brings error. Egger owned 24 shares, of the par value of $2,400, in a Tennessee corporation, the Woods-Harris Iron & Supply Company, the name of which was changed to Harris Iron & Supply Company. Harris was president, and 'running the business,' of the company before and after the change in name, and during the time of the happening of the events which gave rise to this controversy. Harris resided in Memphis, Tenn., where the company was located, and Egger in West Point, Miss. In August, 1909 Egger called at the office of the company in Memphis, when he was invited by Harris to accompany him to the Tennessee Club. On the way to the club a conversation arose as to the condition of the company-- Egger testifying that Harris said the 'business had gone to h . . . l,' but that he could get Egger out then and make him safe; and Harris testifying that he said 'the company was narrowing down to a very close corporation, and he (Egger) was about the last outside stockholder, and that I would advise him to sell his stock. ' 'I am going to give you a good price for it, and a better price than you could sell it to anybody else. As you put in $1,000 I am going to give you $3,000 for your $1,000. ' The conversation was resumed at the club Egger stating that Harris said: 'I will get you out on $3,000. * * * You can either take that, or you won't get a d . . . n cent;' Egger responding, as he testifies 'I first refused-- told him I wanted a statement-- I did not know what the business was doing. * * * I told him that I had always had confidence in him, and felt that he would protect me in every way, and he assured me of that fact. ' Harris then caused a check for $3,000 to be prepared, which he signed and tendered to Egger. Egger testifies that he refused the check, and Harris tore it up and again told him that he 'would not get a d . . . n thing out of it' unless he took the sum named. 'Then I told him, if he felt that way about it, I would have to accept his check.'

This part of the transaction is not disputed in material part. Harris admitted in cross-examination that he was running the business, and knew at the end of each year what the company made; that he advised Egger as a friend concerning the sale, and that Egger always considered him as a friend; yet Harris did not state the financial condition of the company or the book value of the stock. Admittedly a second check, like the first, was prepared in favor of Egger and received by him, the check bearing date August 30, 1909; and Egger presented this check for payment, and received and retained the money. Egger did not have his certificates with him at the time he received the check. Patteson, secretary and treasurer of the company, was present and prepared the two checks at the Tennessee Club, and testified that upon accepting the last check Egger said he would send the certificates of stock to Harris, and further: 'Q. Was that a part of the agreement? A. Yes, sir. ' This was neither corroborated nor denied by Harris or Egger. Patteson and Harris both testified, however, that about a month later the former wrote to Egger requesting him to send the certificates; but they were not given to Harris until shortly before commencement of the suit in March, 1913. October 28, 1909, Egger wrote a letter to Harris, which was in substantial harmony with his testimony, and which contained a request for a statement showing the condition of the business of the company. This letter was received in evidence without objection, but the answer of Harris, dated October 29, 1909, was excluded as immaterial, except a paragraph in which Harris insisted that he had never told Egger that the business of the company was in bad condition, but that he had always told him 'the business was prospering.' Other letters of the parties, from November 3 to 29, 1909, were offered by defendant, and were rejected, and made the subject of assignments. No further correspondence passed directly between the parties; but two letters, one in February, 1910 (which was ruled out, though error not assigned), and another on March 1, 1913, were sent by Egger's counsel to Harris. Between the dates last mentioned, Egger was seriously ill, and so incapacitated for a period of about two years. With the last letter alluded to Harris received the certificates of stock in question. The letter is as follows: 'Dear Sir: I represent John R. Egger, who claims that you are indebted to him on account of alleged misrepresentations made with respect to the purchase of certain shares of stock of the company of which you are president. He recognizes your right to have the stock delivered, and I inclose the following certificates: (Certificates representing 24 shares described.) On behalf of Mr. Egger, it is my purpose to institute action against you, and of course with this you have no concern, except to make your defense. My present purpose is to deliver to you the certificates for the 24 shares of stock, and I inclose them. ' The stock had no market value. The purchase price in dispute was $125 a share. Evidence was introduced tending to show that at the time of this purchase Harris had become the owner of nearly all the capital stock of the company, which was $29,500 face value; that the stock was worth $210 a share; and that in September following the Egger transaction Harris paid Patteson $184 a share for his stock. Proof was also offered as to the value shown by the books of the company.

The issues were presented by declaration and pleas. The original declaration was in one count, and at the close of the evidence a second count was added. The first plea was the ordinary one of not guilty. The second plea was amended, and a demurrer thereto sustained, before trial on the merits. The original declaration, denied by the first plea, contains, among other allegations, in substance the following: Egger was ignorant of the financial condition of the company and of the actual value of the stock; Egger had implicit confidence in Harris and relied upon his representations: Harris conceived the idea of purchasing the stock of the company, knew its value, and as president bore a trust relation to the stockholders; Harris, knowing of Egger's ignorance of the condition of the company and of his faith in him, falsely and fraudulently represented to Egger that the company's affairs were in bad shape, that unless Egger sold his stock he would never get anything out of it, and that the stock was worth less than $3,000, when in truth it was worth approximately $7,500; Egger, relying upon these representations, was induced to sell his stock for $3,000, to his damage in the sum of $4,500.

By the amended second plea it is alleged that plaintiff is estopped to deny that the price paid was fair and reasonable because of certain facts stated and pleaded in bar of the action. These facts in effect were: Sale and purchase of the stock, August 30, 1909, by delivery and acceptance of check for $3,000; assurance then given by Egger, as part of the contract of purchase and sale, that the certificates would be promptly delivered; retention of the certificates until March 1, 1913, although repeatedly demanded, and their voluntary delivery on that date; failure to bring suit until March 4, 1913. The plea also contains copies of the letters above referred to, but their contents are not necessary to an understanding of the grounds urged in support of the plea. Assignments concerning the ruling upon demurrer to the plea and upon the allowance of amendment to the declaration are considered in the opinion.

R. P. Cary, of Memphis, Tenn., for plaintiff in error.

Caruthers Ewing, of Memphis, Tenn., for defendant in error.

Before WARRINGTON, KNAPPEN, and DENISON, Circuit Judges.

WARRINGTON Circuit Judge (after stating the facts as above).

The recovery below, if at all rightful, was moderate; it was $1,750. No special instructions to the jury were requested, and no exception was reserved to the general charge. The charge as a whole is not contained in the record; a portion of it is set out in the eighteenth assignment, but counsel frankly concede that this is not well taken because of the absence of exception. It must therefore be assumed that the instructions to the jury were rightly conceived and given; and, in view of the allegations of the declaration and the tendency of the evidence, the judgment should stand, unless prejudicial error intervened under the rulings upon the demurrer or in the course of the trial.

The question of leading importance is whether Egger condoned the fraud and deceit upon which his action is founded. This question was presented upon the demurrer to the plea, and counsel for Harris insist that it inheres in the admitted facts and operates to defeat the action. The theory of the second plea, as amended, is twofold: One feature is the delay and consequent acquiescence from 1910 to 1913, before instituting the suit; the other is the voluntary character of the delivery of the certificates of stock, independently of the delay. We are not impressed by the feature of delay. Assuming that it was competent for the parties to agree, and that it was agreed as stated in the plea, that Egger should promptly deliver the certificates, it is not perceived how the failure so to deliver operated to the prejudice of Harris. The certificates simply represented the familiar rights and interests of a stockholder in the corporation and in respect of its property. It does not appear that Egger attempted actively to...