Hutchings v. Tipsword
| Decision Date | 18 December 1962 |
| Docket Number | No. 31010,31010 |
| Citation | 363 S.W.2d 40 |
| Parties | Ralph B. HUTCHINGS, (Plaintiff) Respondent, v. Sherman L. TIPSWORD, (Defendant) Appellant. |
| Court | Missouri Court of Appeals |
Joseph Nessenfeld, Richard Marx, St. Louis, for appellant.
Goldenhersh, Goldenhersh, Fredericks, Newman & Lane, and Frank J. Lane, Jr., St. Louis, for respondent.
This is an action brought by plaintiff, Ralph B. Hutchings, against defendant, Sherman L. Tipsword, for damages based upon alleged fraudulent representations by said defendant. There was a verdict and judgment below in favor of plaintiff in the sum of $2,923.10. Defendant has appealed from the judgment.
The case was tried upon a second amended petition. In said petition it was alleged that defendant caused a corporation, King-Nat Company, Inc., to be organized, and solicited plaintiff to purchase shares of said Company. It was further alleged that defendant at said time did falsely and fraudulently represent to plaintiff that such shares were valid, subsisting and authorized by the corporation and registered on the books of the corporation; that in ignorance of the falsity of the representations and in reliance thereon, plaintiff purchased 14 shares of the stock which were issued in two certificates, one for 12 shares and one for 2 shares; that about August 1, 1956, the corporation retired its capital shares and paid plaintiff $17,538.60 for 12 shares; that thereafter plaintiff requested that the certificate for 2 shares be retired on the same basis; that then defendant acknowledged that said certificate had been issued by him personally, and was not of record on the corporate books of the corporation, and at said time plaintiff learned that said certificate representing 2 shares was not valid, and not authorized or of record on the corporate books; that defendant intentionally caused the certificate to be issued, knowing that said shares were not registered on the corporate books and were not authorized and that defendant did so with intent to defraud plaintiff. The prayer of the petition was for actual damages in the sum of $3,023.10, and punitive damages in the sum of $5,000.00.
Defendant's answer in addition to a general denial alleged that he was one of the incorporators of the corporation; that such corporation was dissolved and that plaintiff was paid $17,538.60 for his stock interest in the corporation pursuant to said dissolution.
On December 10, 1952, defendant entered into a contract with Highway Frontage Corporation to purchase a parcel of real estate at Kingshighway and Natural Bridge in St. Louis. The purchase price, according to the terms of the contract, was $375,000.00 to be paid in the following manner; $10,000.00 paid as earnest money, $140,000.00 in cash to be paid at the consummation of the sale, and the balance of $225,000.00 by promissory notes secured by a deed of trust on the premises.
Shortly after defendant entered into the contract, he and his business partner interested a number of persons in the formation of a corporation to take over the contract of purchase and develop the property. Defendant was a used car dealer, and it appears that the initial plan of the parties was to convert the property into a used car arena, with a finance office and an insurance office on the premises. Plaintiff was an insurance broker and was selling defendant insurance at the time. He was desirous of obtaining the insurance business that would be available if the property was used as planned.
According to plaintiff, at some unspecified time prior to the organization of the corporation, but after defendant had entered into the earnest money contract for the purchase of the property, he had a discussion with defendant concerning this proposed purchase of the land and the proposed corporation. Plaintiff testified defendant told him at the time that there would be 100 shares of stock in the corporation at $1,500.00 a share, and asked him if he was interested, and if so how much he wanted to buy. Plaintiff stated that he agreed to buy 14 shares of stock; that it was his understanding that the corporation was to issue him 14% of the stock for $21,000.00.
The real estate agent who handled the purchase of the property was Leonard O'Brien. O'Brien also became interested in the proposed project and became one of the incorporators. He employed an attorney, Oliver Erbs, at his own expense, to prepare the Articles of Incorporation and to organize the corporation in accordance with law. He also employed a certified public accountant to assist Mr. Erbs. Mr. Erbs, according to O'Brien, thereafter prepared the Articles of Incorporation based upon information furnished him by Mr. O'Brien and defendant. Defendant denied talking to Erbs prior to the preparation of the Articles of Incorporation.
The name of the corporation as shown by the Certificate of Incorporation was 'King-Nat Company'. The Articles of Incorporation show that there was a total authorized capital stock of 100 shares of no par value, and that all of the shares were subscribed for by the incorporators. They also show $150,000.00 as the amount of capital paid in, and that it was then in the custody of the first Board of Directors. The Articles of Incorporation listed the names of the shareholders and the number of shares subscribed by each. Plaintiff is listed as having subscribed to 12 shares. Defendant subscribed for 43 shares; Earl Tipsword, defendant's brother, is listed as having subscribed for 8 shares; John Hargis, a business associate of defendant, subscribed for 8 shares; Leonard O'Brien, 6 shares; John Sherman, 6 shares; Norman Spitzer, 7 shares; Raymond Coleman, 6 shares, and Cleve Tipsword, defendant's father, 4 shares. The Articles were signed and sworn to by all the subscribers. Plaintiff stated he knew they were Articles of Incorporation, and knew what they were for when he signed; that he knew he was a part of the corporation and owned 14% of it. He testified that for his subscription he paid the sum of $21,000.00. The check in payment of this amount was made payable to O'Brien Real Estate Company, as were all payments, made by the subscribers to the stock of the Corporation. This was done pursuant to instructions from defendant. Payments were made some time in January, 1953, and were made for the purpose of completing the payment of $150,000.00 called for under the contract of purchase. The Articles of Incorporation of the King-Nat Company were issued on February 3, 1953, and the sale of the land was completed February 10, 1953. On that date shares of stock were issued to each of the incorporators in the numbers shown to have been subscribed by them in the Articles of Incorporation. The stock certificates were signed by the defendant, who was president of the corporation, and by O'Brien as secretary. Plaintiff did not recall from whom he received the certificate issued to him. However, he testified that immediately after receiving the certificate and finding that it was for only 12 shares, he talked to defendant about it; about the percentage they had agreed upon. This conversation took place on defendant's used car lot at Fair and Natural Bridge. According to plaintiff this conversation concerned the fact that he got 12 shares when it should have been 14 shares, and that defendant told him he would see he got the other 2 shares of stock. Defendant denied there was any such discussion.
Plaintiff further testified that defendant subsequently gave him a certificate for 2 additional shares of stock. This certificate is dated January 22, 1954. He stated that prior thereto he had, on numerous occasions, unsuccessfully sought to obtain these 2 shares of stock from the defendant. Plaintiff testified with reference to the issuance of this certificate as follows: 'I had asked Tippy (defendant) for this certificate on many occasions, and finally on this particular date--we didn't exactly get into a hassle over it, but I just became insistent upon it, and he said 'Come on into the office, I will get you out of my hair', so to speak, and that's how it happened.'
Plaintiff further testified that the incident occurred in the small office on the used car lot operated by defendant and his partners at Fair and Natural Bridge. No one but plaintiff and defendant were present. Defendant took the stock book out of a drawer, filled out a certificate for 2 shares in the name of plaintiff, dated it January 22, 1954, and signed it as President. Plaintiff said he receipted for the certificate on the stub of the stock book and thereupon left the office.
When defendant handed plaintiff the certificate, it lacked the corporate seal, and was not signed by the Secretary of the corporation. After leaving defendant's office, plaintiff telephoned Mr. O'Brien, the Secretary, and told him about receiving these 2 shares of stock from defendant, and asked O'Brien if he would sign the certificate as Secretary. Mr. O'Brien assured plaintiff that he would do so. Plaintiff then went to O'Brien's office and the latter signed the certificate as Secretary, and put the corporate seal on it. O'Brien testified that when plaintiff arrived at his office, plaintiff did not relate the circumstances under which he received the certificate but did say 'I finally got my 2 shares of stock.' O'Brien stated that he looked at the certificate and recognized defendant's signature, and knowing both plaintiff and defendant, and the integrity of each, signed it. Mr. O'Brien further testified that after the original certificate for 12 shares was issued there was a discussion in regard to the number of shares plaintiff should get--whether 12 or 14--and to the best of his knowledge plaintiff was claiming 14 shares instead of 12. According to O'Brien it did not come as a surprise to him when plaintiff brought in the certificate for two shares.
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