Hockley v. Hulet Bros. Storage & Moving Co.

• Decision Date: 29 April 1929
• Docket Number: No. 16533.,16533.
• Citation: 16 S.W.2d 749
• Court: Missouri Court of Appeals
• Parties: HOCKLEY v. HULET BROS. STORAGE & MOVING CO.

16 S.W.2d 749

HOCKLEY v. HULET BROS. STORAGE & MOVING CO.

No. 16533.

Kansas City Court of Appeals, Missouri.

April 29, 1929.

Appeal from Circuit Court, Jackson County; Willard P. Hall, Judge.

"Not to be officially published."

Action by Frank W. Hockley against the Hulet Bros. Storage & Moving Company. Judgment for plaintiff, and defendant appeals. Reversed, and remanded for new trial.

James W. Hawes, of Kansas City, for appellant.

Gardner Smith and Carson E. Cowherd, both of Kansas City, for respondent.

LEE, C.

This is an action for damages for alleged fraudulent representations by which plaintiff was induced to purchase 25 shares of stock in defendant, a Missouri corporation doing business in Kansas City.

The evidence showed that defendant was incorporated on December 14, 1922, with an authorized capital of $100,000, of which $50,000 was paid up, succeeding a partnership which had been doing business since 1912; that on or about December 14, 1923, plaintiff purchased 25 shares of the corporation stock for $2,500, being at its par value of $100 per share. Plaintiff had recently come to Kansas City, and responded to an advertisement of the Adamson Sales Company, a business brokerage company, and through them was introduced to defendant's officers, and after several conferences the stock purchase was made. Plaintiff alleges that he purchased the stock, relying on the following representations, which he says were made to him, and he entered defendant's employ at once at a salary of $40 per week:

(a) That the stock was worth $100 per share.

(b) That the corporation was solvent, and was a growing concern.

(c) That it had been and was doing a large business, and making money, and that the stockholders were receiving large dividends.

(d) That the company was arranging to open up new departments and expand its business, and that plaintiff's money was to be used for this purpose.

(e) That plaintiff would be given a permanent position, and placed in charge of one of the new departments.

The petition then alleges the falsity of these representations; that defendant had no intention of opening new departments; that his money was not so used; and that plaintiff was not given a permanent position.

Plaintiff states that about the middle of April, 1924, business having become very poor, defendant discharged him, and refused to return his money. Thereupon plaintiff brought this action for damages, alleging the falsity of the said representations, and that defendant had no intention, at the time they were made, of opening new departments.

There was a verdict and judgment for plaintiff for $2,000, from which defendant appeals.

There was no evidence of any direct representations as to the value of the stock other than the statement that for his investment he "would be issued shares of stock that would represent his pro rata of the interest in the business," and that it was actually issued to him at par. To negative this valuation of the stock, plaintiff introduced in evidence the defendant's financial statement as of December 31, 1923. Outside of its capital stock, it showed notes and accounts payable of $5,520.49. On the asset side it showed cash on hand and in bank of $1,839.72, and other items consisting of furniture and fixtures, supplies, equipment, etc., rolling stock, leaseholds, good will, and notes and accounts receivable, all valued at an amount equal to the liabilities including capital stock.

The statement on its face shows a solvent condition of the company; and there was no evidence impeaching the value of the various items which went to make up the asset side of the statement at that time. As tending to disprove these valuations, plaintiff offered, over defendant's objection, the Jackson county assessment list of the corporation filed as of June 1, 1924, in which the valuation of the personal property of the corporation was placed at $640. Whether or not such assessment list, currently made, would be competent evidence of the actual value of the property listed, in an action of fraud, we need not decide in this case, for the reason that this return was made 5½ months after the time of the stock purchase under the alleged misrepresentations; and there is no evidence or presumption that the same conditions prevailed at both dates. Nor does it appear whether or not the company had other assets on June 1, 1924, which were not returnable under this tax statement. There was no evidence introduced tending to show insolvency of the defendant, and plaintiff himself, in response to the question, "Did you ever find out they were insolvent?" testified, "No, I never heard they were insolvent."

Plaintiff alleges false representations to him as to the prosperous condition of the company and the profits which it had theretofore earned. Disregarding the alleged statements of Mr. Moffett, of the Adamson Sales Company, as mere general statements preliminary to bringing about the meeting of the parties, and as based on a proposed investment of $5,000, which plaintiff refused to make, we find plaintiff's testimony to be that Mr. Hulet told him it was a flourishing business; that it had been very successful both in 1922 and 1923; that they had made 42 per cent. profit in 1922 (on what capital does not appear, nor whether this referred to the partnership or to the corporation; it being in evidence that, except for about two weeks, the business in 1922 was that of the partnership before the incorporation); that he did not have the figures for 1923, but "that he didn't expect they had made as much profit in 1923." Plaintiff states that they showed him their books at the office of the secretary, Mr. Reilly. Mr. Hulet testified: "Mr. Reilly immediately produced the books and records of the company, laid them on the desk and started to explain them to Mr. Hockley. Mr. Hockley said he was an accountant and that it was not necessary to explain them. He spent some 30 or 40 minutes looking at the books, and said he was satisfied, and was ready to close the deal." Plaintiff testified that there was no undue haste in taking the books away from him; that prior to purchasing the stock he drove by the warehouse, but did not go in, though he could have done so if he had wished to; that he could have made all the investigation he wanted to so far as the defendants were concerned; that he took their word and let it go. Mr. Hulet testified that a new furniture department was opened "in the spring" of 1924, but plaintiff denied that any such new department was opened before he left the company.

There was no direct evidence as to the amount of business which the company had done in 1923 prior to plaintiff's stock purchase. The state income tax return for 1922 showed no taxable income for the 16 days of the company's existence in that year. For the year 1923, the evidence showed that there was no taxable income, but the return itself was not put in evidence. The amount of income tax paid by Henry J. Hulet, Joseph M Hulet, and Jules G. Hulet for the year 1922 was testified to, and showed a very small tax in each case. This evidence had no probative value, as it did not apply to the defendant corporation; and it would be purely speculative as to what items of personal profit or loss, outside the storage business, entered into their individual tax returns.

Defendant's officers denied having discharged plaintiff, but stated that he asked for an increase in salary; at which time he was told that they could not pay more, but, if business increased, they would gladly pay more; that they asked him to take charge of the books, as he was an accountant; but he refused, and he then suggested a 30-day vacation, which he took, and did not return; that they had to employ other help; that it was perfectly agreeable to them for plaintiff to remain in their employ; that "the position is still open, and he can come back any time he wants to, at the same salary."

1. Appellant assigns as error the refusal of the court to compel plaintiff to elect, for trial, between a cause of action on contract and one on an alleged tort. The petition alleges that, being desirous to sell its stock to plaintiff, the defendant made certain representations alleged to have been false, and that, relying thereon, plaintiff purchased the stock. Some of these representations were as to alleged past and present facts, of a sort demonstrable as true or false at the time. Others were of present intents for the future, as to opening up new departments and expanding the business; and two were in the nature of promises—one being to use plaintiff's money for said expansion, and one being to give plaintiff a permanent position in the company's employ in charge of a new department. The petition negatives the truth of the statements of past and present facts, and also negatives the company's then present intention of opening new departments. It also alleges that the company did not use plaintiff's money for such expansion, and did not give him permanent employment, and that he was not placed in charge of any department of the business, but after a few months was discharged without cause. It makes no allegation, however, as to any original fraudulent intention on the part of defendant not to keep these two promises. It alleges damage "by reason of the fraudulent representations and statements of defendant as aforesaid." These alleged representations as to the proposed use of plaintiff's money and as to his permanent employment, being as to matters in futuro, and not being alleged to have been made with the then present inability or fraudulent intention not to perform them, could...