Higbee v. Walsh
| Decision Date | 12 November 1940 |
| Docket Number | 45159. |
| Citation | 294 N.W. 597,229 Iowa 408 |
| Parties | HIGBEE et al. v. WALSH et al. |
| Court | Iowa Supreme Court |
Appeal from District Court, Des Moines County; Paul H. McCoid and E O. Newell, Judges.
Action at law for damages based on alleged fraud and deceit. From an order sustaining a demurrer to the petition, plaintiffs have appealed.
Reversed.
Clark Hale & Plock, of Burlington, and Havner, Flick & Powers and Margaret I. Cunningham, all of Des Moines, for appellants.
Hirsch, Riepe & Wright and LaMonte Cowles, all of Burlington, and Lane & Waterman, of Davenport, for appellees.
This is an action at law to recover damages for alleged fraud and deceit. The case comes to us on the pleadings. The trial court sustained a demurrer to the petition on the ground that the cause of action was barred by the statute of limitations. This presents the only issue in the case.
The petition is quite lengthy, but, in substance, shows that four brothers, E. C. Walsh, J. W. Walsh, C. H. Walsh and M. A. Walsh, and Col. George H. Higbee, about the year 1895, associated themselves together in a joint adventure in the utility business in eastern Iowa in the cities of Burlington, Clinton, and Davenport, and surrounding territory, the nature of which, in its inception, is disclosed by a written proposition, a copy of which is attached to the petition and designated in the record as Exhibit " C", which reads as follows:
We the undersigned, propose that should you desire to purchase a portion of the stock, amount to be agreed upon between us, in the Burlington Electric Lighting Company, of Burlington, Iowa-said stock is fully paid and non-assessable-You shall have the right to a proportionate amount of the stock in the Burlington Gas and Fuel Company on the ground basis of the same, and also have a right to the same proportion of stock in the Burlington Street Railway Company-in case we come into control of said stock and shall share your proportion according to the amount of stock in the profits arising from the manipulation of the said companies from whatever source the same shall be derived-so long as we control said properties.
We further propose that whenever we shall desire to sell out our interest in said properties, or any of them, that your interest shall be offered at the same price or prices as we are to receive for ours, and in case you shall desire you shall have the right either by yourself or your heirs to purchase our interest in said stock at the price that we are to receive for our interest to any purchaser, and at the same price which we are to pay you in case of sale.
The intention being that said Col. Higbee shall pro-rate to the amount proportionate with the said stock taken with all the profits of said properties, proportionate as aforesaid to the amount of stock held.
Intention being that said Walsh Bros. shall have the management of said property and shall make the most out of the same that they can by and with the advice of said Col. Higbee. A bond of honor shall also be entered into by Walsh Bros. that they will in all ways protect the interest of said Col. Higbee whether held by himself or his heirs-and shall in no manner directly or indirectly manipulate said properties, or any of them so as to depreciate the value of said Col. Higbee's interest therein. Nothing herein shall be construed to mean that said Walsh Bros. shall not have the management of said property, but that they shall manage the same as in their best judgment seems fit, and that said Higbee shall receive his just proportion of the profits thereof.
To be accepted by Jan. 22, 1895.
All of which is respectfully submitted.
E. C. Walsh.
C. H. Walsh.
Jan. 22, 1895
20000 taken today
Option 30000 @ 40
Until March 1, 1895.
E. C. Walsh."
It is further alleged that, by virtue of said written proposition and in response thereto, the said George H. Higbee, in the year 1895, invested funds in various corporations, some of which, with the number of shares owned in each, are named and described in the petition; others of which are named or described in the petition, with the general allegation that the exact amount invested and the exact names and descriptions of the various utility companies or corporations are unknown to the plaintiffs but which were known and readily ascertainable by the defendants. All of said corporations, companies or properties were under the complete and absolute dominion and control of C. H. Walsh and M. A Walsh, each being members of the board of directors thereof-the said C. H. Walsh being manager and chief executive officer of all said properties-and were such during all the years intervening between the investment of funds in stock of said companies by said Col. Higbee under said written proposition and the year 1926, and during which time said Walsh brothers were in the control, management and manipulation of said corporations and of the properties thereof; that Col. Higbee died testate in 1918 owning a one-fourth interest in said properties and by his last will and testament devised all his property to his wife, Frances Nealley Higbee, and, by virtue of which, she became invested with said one-fourth interest; that in 1924 a contract or contracts in writing were entered into for the sale of a greater part of said properties to " George M. Bechtel & Company and/or Iowa Southern Utilities Company" for the agreed consideration of a sum in excess of $3,500,000, the exact amount unknown to plaintiffs but known to defendants, a part of which was discharged by assumption of debts but of which the sum of $1,905,490.41 was paid in cash before the end of the year 1925; that the said M. A. Walsh and C. H. Walsh negotiated said sale and knew the terms thereof and the payments received; that, in the year 1926, said M. A. Walsh and C. H. Walsh, together with their brothers, E. C. Walsh and J. W. Walsh, both now deceased, and said Frances Nealley Higbee owned all the stock of said various companies and corporations; that said M. A. Walsh and C. H. Walsh conspired with each other and with their said brothers to defraud the said Frances Higbee of her right and equity in said companies and in the proceeds of such sale and designed to violate their duties as said officers of said corporations to the said Frances Higbee by concealing from her the terms of said sale and payments made thereunder and to violate the obligation of the aforementioned proposition to protect the interest of the said Col. Higbee against depreciation in its value whether held by him or his heirs and so, conspiring and designing, the said M. A. Walsh and C. H. Walsh sought to procure for said corporations and through said corporations for themselves and their said two brothers the stock and interest of said Frances Higbee; that said Frances Higbee never handled any of the business relating to such stocks or properties; that George G. Higbee was the agent and representative of his mother; that, knowing said plaintiff to be such agent, the said C. H. Walsh and M. A. Walsh, conspiring and designing as aforesaid, falsely and fraudulently told the said agent that all such properties in which his mother was interested had been sold for a cash consideration of $500,000; that, on or about the first day of August, 1926, the said C. H. Walsh told the said George G. Higbee that, after deducting obligations from the sum received and upon proper calculation, the share of his mother in said properties was $85,000; that delay had been due to his brothers; that M. A. Walsh was not in town that day but that he, the said C. H. Walsh, had bonds of the value of $85,000 which he was willing to give to said Higbee but that it would be necessary for said Higbee to act that day. There was accordingly delivered to him bonds as aforesaid. Whereupon, said C. H. Walsh told said agent that without the good work of the said C. H. Walsh the matter would not have been cleaned up and that he felt the said Higbee owed him a commission of $10,000. Higbee agreed to such request and paid over the said $10,000 to said C. H. Walsh. Thereupon, said George G. Higbee, being still without knowledge of the facts or the truth and still believing the statements aforesaid of said C. H. Walsh and M. A. Walsh and relying thereon and being still deceived and actuated thereby, executed and delivered in behalf of his mother a written contract or release and assignment of the stock and interest of his mother in said corporations and properties; that in truth and in fact there were properties remaining and not sold in said sale of a reasonable value in excess of $200,000 which were retained by said corporations; that in truth and in fact, upon proper distribution of the funds and properties of said corporations, the said Frances Higbee would have been entitled to one-fourth of the said sum of $1,905,490.41 and to one-fourth of the value of the properties unsold and retained; that, by reason of the written proposition, exhibit " C", and the investments made by the said George H. Higbee in response thereto, as previously alleged, and that as such officers of said corporations, the said M. A. Walsh and C. H. Walsh bore a fiduciary relationship and held positions of trust toward said Frances Higbee, as a stockholder thereof, and were obliged to speak truthfully to her agent concerning the condition and affairs of the corporations and to fully reveal and disclose the terms and conditions of said sale and extent of the properties sold and retained in making distribution of the assets of said corporations and for themselves; that the said M. A. Walsh and C. H. Walsh were intimate friends of long standing with said Frances Higbee and...
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