Jordan v. Walker

• Decision Date: 12 June 1913
• Citation: 78 S.E. 643,115 Va. 109
• Parties: JORDAN et al. v. WALKER.
• Court: Virginia Supreme Court

(115 Va. 109)

78 S.E. 643

JORDAN et al.

v.WALKER.

Supreme Court of Appeals of Virginia.

June 12, 1913.

1. Appeal and Error (§ 927^*)—Review—Demurrer to Evidence.

On a demurrer to the evidence, where it is such that a jury might have found for the demurree, it is the duty of the Court of Appeals to so find.

[Ed. Note.—For other cases, see Appeal and Error, Cent. Dig. §§ 2912, 2917, 3748, 3758, 4024; Dec. Dig. § 927.*]

2. Fraud (§ 22*)—Deceit—Duty to Investigate.

Where a defendant, who was a director of a corporation and had knowledge of its insolvent condition, represented to plaintiff, who was also a director, to induce him to purchase defendant's stock and that of another, that the corporation was not only solvent, but had a surplus of $3,000 in excess of its liabilities and capital stock, and immediately afterwards it was found that the corporation could not be continued, and on a sale of its assets in receivership proceedings the assets were only sufficient to pay creditors 30 per cent. of their claims, it was no answer to defendant's liability for fraud that plaintiff should not have relied on such representations, but should have investigated the corporation's condition for himself.

[Ed. Note.—For other cases, see Fraud, Cent. Dig. §§ 19-23; Dec. Dig. § 22.*]

3. Fraud (§ 20*)—Deceit—Reliance—Remedy.

Where a party represents as true what he knows to be false in such a way as to induce a reasonable man to believe it, and the representation is meant to be acted on, and he to whom the representation is made believes and acts on it and in consequence sustains damage, there is such a fraud as will support an action for deceit at law or a bill for rescission of the transaction in equity, whether the representation is made innocently or knowingly; the fraud in the one case being constructive and in the other actual.

[Ed. Note.—For other cases, see Fraud, Cent. Dig. §§ 17, 18; Dec. Dig. § 20.*]

4. Fraud (§ 22*)—False Representations-Duty to Inquire.

One to whom a representation has been made is entitled to rely on it as against the maker without further inquiry.

[Ed. Note.—For other cases, see Fraud, Cent. Dig. §§ 19-23; Dec. Dig. § 22.*]

5. Fraud (§ 64*)—Deceit—Reliance on Representations—Question for Jury.

In an action for fraud, whether plaintiff relied on defendant's representations, or whether he acted in whole or in part on his own knowledge, is for the jury.

[Ed. Note.—For other cases, see Fraud, Cent. Dig. §§ 65 1/2, 67-71; Dee. Dig. § 64.*]

Error to Circuit Court, Greensville County.

Action by L. G. Walker against R. W. Jordan and others. Judgment for plaintiff, and defendants bring error. Affirmed.

S. V. Southall, of Emporia, and R. B. Davis, of Petersburg, for plaintiffs in error.

Buford, Lewis & Peterson, of Lawrenceville, and E. C. Palmer, of Emporia, for defendant in error.

CARDWELL, J. The material facts out of which this litigation arises are as follows: The Tillar-Smith Hardware Company, incorporated under the laws of Virginia, was organized on January 1, 1906, with a capital stock of $12,500, divided into shares of $100 each, having its principal office at Emporia, Greensville county, Va., of which stock W. T. Tillar held $3,000, J. H. Smith $3,000, Rupert Ivey $500, L. G. Walker $3,000, R. W. Jordan $2,000, and B. D. Tillar $1,000. All of the stockholders at that time resided in the town of Emporia, and at the organization of the company L. G. Walker became one of its directors and its vice president, but owing to other business engagements he was unable to give his personal attention to the affairs of the company, and soon afterwards removed from Emporia and engaged in business elsewhere, and before the year 1909 he had ceased to be a director or to hold any official connection with said company. W. T. Tillar was president of the company from its organization, and J. H. Smith its business manager, who together with R. W. Jordan and L. G. Walker were its directors, while B. D. Tillar was a clerk in the store kept by the company, both Jordan and B. D. Tillar being connected with the company "the entire time it was running, " and both were familiar with its affairs and knew its financial status. The business of the company, it seems, was prosperous during the years 1906 and 1907, and a dividend of about 10 per cent. on its stock was declared in January, 1907, and again in January, 1908; but, during the year 1908, the company purchased and operated for a while a manufacturing plant which resulted in financial losses, whereby the capital stock of the company was somewhat impaired. Early in 1909 L. G. Walker became dissatisfied with the management of the affairs of the company: First, because J. H. Smith, its manager, had overdrawn his account to the amount of $1,368; and, second, because the company had engaged in the manufacturing business, which he regarded as being beyond the scope of the business for which the company had been chartered. And thereupon he (Walker), accompanied by his counsel, went to Emporia to inquire into these two matters, and in ascertaining the status of Smith's account Walker's counsel had to be assisted by the bookkeeper of the company. This investigation, it appears, resulted in a determination on the part of Walker to institute legal proceedings to require Smith to settle his account, and perhaps to remove him from the position of manager, and to prevent the company from engaging further in the "mill" business, which determination on the part of Walker was communicated to Jordan in an interview about March 18, 1909. On the day following this interview, Jordan wrote to Walker, who was then at Danville, Va., endeavoring to dissuade him from instituting the threatened legal proceedings, and suggesting the plan of buying up enough of the stock of the company to give control of the management of its affairs, and expressing a willingness to sell his stock and to aid in acquiring other shares of the stock. Then followed a lengthy correspondence between these parties, in which it appeared that Jordan and B. D. Tillar were, in fact, endeavoring to effect a sale of their stock, but Walker throughout stated that he did not wish to buy, and that he would only go so far as to unite with Jordan to get new parties interested in the business and to acquire a controlling interest in the stock, so that they might manage the business more satisfactorily; Walker believing then, as he had every reason to believe, from what had passed between him and Jordan, and to continue to believe from their subsequent dealings, that he and Jordan were co-operating in good faith to accomplish the same purpose. And it seems not to have occurred to Walker that such was not the case until after he had become the purchaser of the holdings of Jordan, B. D. Tillar, and Rupert Ivey in the company.

As a result of these negotiations, Walker, on July 31, 1909, went to Emporia with the view of interesting a Mr. Harper in the business, and to have him (a capable man) undertake the management of the company's affairs, and there and then Jordan, assisted by B. D. Tillar, went over the books and furnished Walker with a statement showing what the company owed, its assets, etc., by which it was made to appear that the business could pay all of its debts, pay the stockholders what they had put in, and still have a surplus left of about $3,000. Harper, however, did not become interested in the business, and later, and after further interview with Jordan, Walker, relying upon the truth of the statement as to the condition of the company's affairs made up by Jordan and B. D. Tillar, decided to take over to himself the stock of Jordan, B. D. Tillar, and Ivey, and accordingly, on August 3, 1909, he made settlement with these parties for their stock and placed his (Walker's) brother temporarily in charge of the business. Having purchased this stock under the circumstances narrated, Walker left Emporia, and in the course of a few days received from his brother, who had been temporarily put in charge of the business, a letter stating that the affairs of the company were in a desperate condition. He also received a letter from W. T. Tillar of similar import, and acting upon this information he returned to Emporia and sought an interview with Jordan, the result of which was that Jordan did not deny the truth as asserted by Walker, but refused to take back his stock, as Walker claimed he had agreed to do, giving as his only reason for refusing to do so that he had hypothecated the note given by Walker in part...