Harris v. Saunders

• Decision Date: 09 August 1919
• Docket Number: 15344.
• Court: Washington Supreme Court
• Parties: HARRIS v. SAUNDERS et al.

182 P. 949

108 Wash. 195

HARRIS v. SAUNDERS et al.

No. 15344.

Supreme Court of Washington

August 9, 1919

Department 2.

Appeal from Superior Court, King County; A. W. Frater, Judge.

Action by G. W. Harris against E. E. Gerlinger and R. L. Saunders. From that portion of a judgment directing a verdict for defendant Saunders, the plaintiff appeals. Reversed and remanded.

S. H Kelleran and E. E. Hess, both of Seattle, for appellant.

Earle &amp Steinert and C. H. Winders, all of Seattle, for respondent.

FULLERTON J.

In this action the appellant, Harris, seeks to recover from the respondent Saunders and the defendant Gerlinger the sum of $3,200, paid by him for shares of the capital stock of a corporation known as the Gerlinger Motorcar Company.

In his complaint the appellant charges that the persons named conspired together to induce him to purchase the stock by falsely representing the business condition and the financial condition of the corporation named. He charges that they represented to him that the corporation was engaged in the manufacture of a truck called by the trade name of 'Gersix'; that the truck had been thoroughly tested that it had an established reputation; had proven satisfactory to the trade; and that the output of the factory was meeting with a ready sale. He further charged that the defendants represented that they were officers and stockholders of the corporation, and had paid to the corporation the par value of their stockholdings in cash, that they were familiar with the financial condition of the corporation, that it was absolutely and completely solvent and in a flourishing condition, and that during the two years immediately preceding it had paid annual dividends to its stockholders of 12 per cent.; and promised that if he bought capital stock of the corporation and within 90 days became dissatisfied they would refund to him the money invested, and that to give their promise the semblance of good faith they caused a similar promise in writing to be made by the corporation, although they well knew that such a promise could not be enforced in law. He further charges that, relying on the good faith of the representations, he invested $3,500 in the capital stock of the corporation and received the written promise of the corporation to refund the money invested within 90 days in case he should become dissatisfied with his investment. He then charges the falsity of the representations, averring specifically that the truck the corporation was engaged in manufacturing was not a product of established reputation and had not proven satisfactory to the trade; that the corporation was not then in a flourishing condition nor solvent, but was in fact insolvent; that it had not paid 12 per cent. dividends on its capital stock annually during the preceding two years, nor any dividends thereon; and that the respondent Saunders, instead of paying cash at the par value for his stock, did not pay anything for such stock. He further alleged that he discovered the falsity of the representations within the 90-day period and made demand for the return of the money invested; that $300 thereof, and no more, had been returned to him; that the corporation had been adjudged insolvent, and at the time of the filing of the complaint was in the hands of a receiver.

The defendant Saunders answered separately. He denied generally all of the allegations of the complaint, save the allegations that the appellant purchased certain of the capital stock of the corporation named; that the corporation had given its obligation to repurchase the stock at the end of 90 days; that the corporation was then in the hands of a receiver; and that but $300 of the appellant's investment had been returned to him. The defendant Gerlinger also appeared and answered, but prior to the trial withdrew his appearance and default was entered against him.

On the issues framed a trial was entered upon by the court, sitting with a jury. At the conclusion of the appellant's evidence a challenge to its sufficiency was interposed by the respondent and sustained by the court. The court thereupon charged the jury to return a verdict in favor of the respondent Saunders and against the defendant Gerlinger. This was done and a judgment entered accordingly. This appeal is from that part of the judgment in favor of the respondent Saunders.

The appellant's assignments of error question the correctness of the order or the trial judge sustaining the challenge to the sufficiency of the evidence. In determining the question it must be kept in mind that the judge was not the trier of the facts. The complaint stated a cause of action, and the appellant was entitled to recover if his evidence proved the substance of his cause of action. The action was one of legal cognizance, being tried by the jury as such. The trial judge therefore was warranted in sustaining a challenge to the sufficiency of the evidence only if there was no substantial evidence on the part of the appellant tending to support the material issues. Disputes in the evidence and disputed inferences arising from the evidence were for the jury to determine, not the trial judge. It must be remembered also that in passing upon this question the appellant was entitled to have considered, where the evidence is contradictory, or where favorable or unfavorable inferences can be drawn from the evidence, that part of the evidence most favorable to his contention. It is not the rule that a litigant is bound by the unfavorable testimony of a witness, even though that witness may be one he himself produces; that is to say, if a plaintiff produces evidence tending to support his allegations and then introduces a witness who contradicts his former evidence, he may still go to the jury on the question, as the contrary rule would always place him at the mercy of a designing witness.

The testimony as we view it, tested in the light of the foregoing principles, warranted the jury in finding the following facts: The Gerlinger Motorcar Company was an Oregon corporation, organized in 1910, with a capital stock of $50,000. The stock was issued principally to the defendant Gerlinger, who, so far as appears from the books of the corporation, gave no consideration therefor. The corporation first began business at Portland, Or., selling motor passenger cars and motor trucks of other manufacture. In 1913, or earlier, it opened a branch business at Seattle, Wash., of which the respondent Saunders was later appointed local manager, receiving for his services a small salary and commissions on the motor cars and trucks sold by him. After he had been manager for some months, he was presented by Gerlinger with shares of the capital stock of the corporation of the par value of $500, and shortly thereafter elected a trustee and vice president of the corporation. In the early part of 1916, he was given by Gerlinger additional stock of the par value of $4,500, making his holdings $5,000. This stock was given him to induce him to remain with the corporation, whose service he then contemplated leaving.

The corporation had manufactured a few trucks at Portland, which it called the Gersix truck, and in March or April of 1916 opened a factory at Tacoma, Wash., to enter into their manufacture on a more extensive scale. At this time the capital stock of the corporation was increased from $50,000 to $100,000.

The appellant is a civil engineer and draughtsman by profession and his principal occupation has been along those lines. In July, 1916, being desirous of making an investment in an established business, he inquired of one Algase for such an opportunity, and was referred to the respondent Saunders. He visited Saunders and stated to him his desires, and was advised by him to invest in the capital stock of the Gerlinger Motorcar Company. As an inducement for him to purchase, the respondent stated to...