Kline v. Hedges

• Decision Date: 31 May 1910
• Citation: 129 S.W. 515,229 Mo. 126
• Parties: KLINE et al. v. HEDGES.
• Court: Missouri Supreme Court

129 S.W. 515

229 Mo. 126

KLINE et al. v. HEDGES.

Supreme Court of Missouri, Division No. 1

May 31, 1910.

Rehearing Denied June 14, 1910.

1. JOINT ADVENTURES (§ 5)—ACTION FOR ACCOUNTING —BURDEN OF PROOF.

In an action for an accounting and to recover secret profits on the purchase and sale

of corporate stock, plaintiffs held under the evidence to have the burden of proof.

2. JOINT ADVENTURES (§ 4)—UNDUE INFLUENCE —CONFIDENTIAL RELATION.

In an action for an accounting and to recover secret profits on the purchase and sale of corporate stock, that plaintiff was, and for several years, had been a tenant in a building controlled by defendant did not create such a confidential relation between the parties as to raise the presumption that plaintiff was thereby subjected to defendant's domination and undue influence.

3. EVIDENCE (§ 441)—PAROL EVIDENCE—CONTEMPORANEOUS PAROL AGREEMENTS.

When a contract is reduced to writing, the law presumes that the entire agreement was embodied in the writing and the same must stand as written, until impeached for fraud or some other equitable ground.

4. JOINT ADVENTURES (§ 5)—MUTUAL RIGHTS AND DUTIES—ACTIONS—EVIDENCE.

In an action for an accounting and to recover secret profits on the purchase and sale of corporate stock, evidence held to sustain a judgment for defendant.

Appeal from St. Louis Circuit Court; Danl. G. Taylor, Judge.

Action by William L. Kline and another against Isaac A. Hedges. Judgment for defendant, and plaintiffs appeal. Affirmed.

This suit was brought by plaintiffs against the defendant for an accounting and for the recovery of their proportional parts of certain secret profits alleged to have been made by the latter, growing out of a joint deal entered into between the three to purchase a majority of the capital stock of the Grand Avenue Masonic Temple and Odeon Building Company, situate in the city of St. Louis. The secret profits alleged to have been made by defendant are stated to have been $20,000. The cause was tried before the court, which resulted in a finding of facts and decree of the court in favor of the defendant. After moving unsuccessfully for a new trial, the plaintiffs duly appealed the cause to this court. A proper disposition of the legal propositions presented for adjudication does not call for a statement of the pleadings, and for that reason they are omitted from the statement of the case. The record in this case is quite voluminous, the evidence alone covering something over 200 pages of solid printed matter. This will prevent us from stating more than a comparatively brief summary of the more important portions of the testimony of each witness. The plaintiffs' evidence tended to show that defendant called upon them and stated that he could secure control of 510 shares of the stock of the Odeon Company for $60,000, and if they would each contribute $20,000, he would contribute $20,000, towards the purchase price of said stock, and through the ownership of said stock defendant was to be elected president, and plaintiffs directors, and the three of them were to direct and control the corporation during the World's Fair.

Westen, on cross-examination, testified that defendant said: "Westen, I have got an elegant proposition. I can buy the controlling interest in the Odeon for $60,000. * * * I have not got so much money; if you want to put up $20,000, and Kline $20,000, I put in $20,000, and that is sixty. Q. Was not the $60,000 mentioned as the basis for the valuation of the two interests—of the three interests? A. No; when he told me— Q. (Interrupting) I am asking you if it was not the fact that it was reached as a basis for your calculation? A. No. Q. It was not? A. No. Q. You thought that he was going out in the market and going to buy 510 shares of stock and pay $60,000 for it? A. That is about the size of it. Q. That is what you thought? A. Yes, sir. Q. That is what you understood? A. That is the idea. Q. That is what he told you? A. What he told me. Q. Yes. A. I can tell you only what I have mentioned so often; he came and told me that he can buy fifty-one shares (per cent.) of the Odeon stock for $60,000. `I will put up $20,000, you put up $20,000, Kline put up $20,000. We can each put up $20,000, that makes the $60,000, when we go together on that basis I will be president of the Odeon, receive a salary of $3,000.' That is the whole circumstance. Q. Then you understood that he was going out in the market, going to buy stock, 510 shares? A. I didn't bother what he will do on going out. Q. Is it not the fact—it is the fact, that you were figuring more upon the valuation of the stock, you had that in mind, thought of the worth naturally more than how he was going to get the stock? A. Well, I was always under the impression if he goes and buys that stock that he is to put up his $20,000 just as well as we. Q. That was an impression only; you had no talk about it. He didn't tell you anything of the kind? A. He told me that he will put up $20,000." Plaintiff Kline's testimony was substantially the same as that of Westen and corroborated him as to most of the details of the transaction.

While defendant was making this agreement with plaintiffs he was also negotiating with W. A. Swasey, who was the president of the Odeon Company, for the acquisition of the 460 shares. On March 2d, 1903, he got Swasey to reduce his price from $46,000 to $40,000, and to agree to accept in payment $20,000 in cash and 100 shares of Colonial Trust stock valued at $200 per share. Swasey testified on behalf of plaintiffs: "Q. Will you state what Mr. Hedges said on that subject to you during the negotiations? A. He stated that he and two other gentlemen wanted to get the controlling interest of the Odeon stock. He wanted to know what I would take for mine. Q. What else did he state, if you remember—go ahead and state the negotiations briefly, what the result was? A. Well, I told him that the Odeon had gotten on its feet at that time, and everything looked very prosperous. And I didn't care to sell out unless at par. He said it would be impossible for him to get par for the stock, but he would see what he could get, and let me hear from him again. My recollection is he came in two or three times regarding the matter, and each time he stated that he couldn't get as much as I thought the stock was worth, and he finally made me an offer for it, for the stock I owned, and the stock I controlled. He was to pay $41,000." On cross-examination Swasey testified: "Q. What led you to understand anything different? A. Because he told me that he had two partners. Q. That he had two partners? A. Yes, sir. He said, `I am going into this thing with two other gentlemen. We want to get the control of that stock. I am going to put in what I have got and we are going to divide up on this thing.' Q. Now, Mr. Swasey, isn't this the way the matter was presented to you, that Mr. Hedges and some other parties were desirous of getting control of that theater and that he was going to sell part of the stock to the other parties—part of this stock was going to be sold to the other parties, Captain Laird and others? A. No; I understood the three of them were buying it together. Q. Well, were your dealings with Hedges in any way conditioned upon what he did with the stock? A. I understood that he wouldn't make the deal with me unless these other gentlemen agreed to what his negotiations were and that he had to have time to see if they would buy. I understood it was three parties, including Hedges. He had to find out from them whether they would buy the stock at figure stated. Q. You understood that he was disposing of part of the stock to somebody else? A. I didn't understand that he was disposing of the stock at all. He was taking it; I supposed he was taking it representing each of the three parties, and I didn't care what he represented as long as I got my pay. Q. But you paid no particular attention to what Hedges was doing and didn't care what he was doing? A. Yes, sir; I knew that he was getting money and getting a great deal of stock from other people. He repeatedly told me he had to get it from other people and as soon as he could it would be done. Q. The knowledge that he conveyed to you was that they were simply going in with him, going on the board? A. The knowledge he conveyed to me was that he had found two other parties who were going in with him and control the stock of the Odeon Company. Q. He didn't convey any idea to you that they would buy this stock from you? A. Yes, sir. Q. What did he say to you? A. Well, the way—I forget his words, but the impression it left on my mind— Q. I would like to get the words as near as you can? A. He said: `I have interested two of my friends in this matter and they are ready; they believe that this is a good thing. If I will take hold of it and take the presidency, they will take me up, and I have told them that I will go in with them if we can get control—get hold of the controlling interest of that stock—and I want to see what you will take for it.'" The evidence further tended to show that defendant owned 50 shares of the stock at the time he made the agreement with plaintiffs to go into this enterprise. He then purchased of Swasey and his associate 460 shares more for the sum of $40,000, making a total of 510 shares, which was 51 per cent. of the capital stock of the company. That each of the plaintiffs paid to defendant $20,000, and each received in return therefor 170 shares of said stock. That the plaintiffs never learned the details of the transactions had between defendant and Swasey regarding the purchase of this stock until about three years subsequent to the date of the purchase and a few months prior to the institution of this suit.

Defendant's evidence tended to show that some time prior to February 16, 1903, defendant conceived the plan of securing a control of the majority of the stock of that company with a view...