Lariscy v. Hill

• Decision Date: 30 January 1968
• Docket Number: No. 43303,No. 2,43303,2
• Citation: 159 S.E.2d 443,117 Ga.App. 152
• Parties: Wilber LARISCY et al. v. G. M. HILL, Jr
• Court: Georgia Court of Appeals

Page 443

159 S.E.2d 443

117 Ga.App. 152

Wilber LARISCY et al. v. G. M. HILL, Jr.

No. 43303.

Court of Appeals of Georgia, Division No. 2.

Jan. 30, 1968.

Syllabus by the Court

1. A petition for damages for fraud and deceit which does not affirmatively allege, or contain allegations of fact from which it may be inferred, that the plaintiff was diligent to protect himself in the transaction does not set forth a cause of action.

2. When the evidence presented with the defendants' motion for summary judgment on their cross-action does not support the allegations of the cross-action, denial of the motion for summary judgment is not error.

The defendants appeal from judgments overruling their general demurrer to the plaintiff's petition and denying their motion for summary judgment based upon their cross-action. The plaintiff sued the defendants for damages for fraud and deceit, alleging that, in the course of negotiations which led to a contract on July 23, 1965 for the purchase by the plaintiff of the defendants' corporate stock, the defendants made several specified false and fraudulent representations to the plaintiff concerning the values of the corporation's inventory on hand, real estate, paid-in surplus, undivided profits, excess of assets over liabilities, and book value of the shares. At the time of the alleged transaction the defendants were majority stockholders, directors, and president and secretary and treasurer of the corporation. The plaintiff was a minority stockholder, owning one-third of the shares, and a director and vice president. The petition alleged that due to the fact that the plaintiff was a resident of and engaged in business in Atlanta he took no active part in the operation of the corporation, which was located in Sylvania, Georgia.

W. Colbert Hawkins, Sylvania, for appellants.

L. H. Hilton, Sylvania, for appellee.

HALL, Judge.

1. The plaintiff's petition-The allegations of the complaint present us with the problem of alleged fraud on the part of the defendants and lack of diligence on the part of the plaintiff. 'The policy of the courts is on the one hand, to suppress fraud and, on the other, not to encourage negligence and inattention to one's own interest. The rule of law is one of policy. Is it better to encourage negligence in the foolish, or fraud in the deceitful? Either course has obvious dangers.' 23 Am.Jur. 948, § 146. The majority of jurisdictions hold that 'judicial experience exemplifies that the former is less objectionable and hampers less the administration of pure justice.' Am.Jur. supra; see also 37 C.J.S. Fraud § 30 c, page 274. Nevertheless, in Georgia a plaintiff cannot recover where he could have prevented the fraud by the exercise of ordinary care. Brim v. Couch, 184 Ga. 310, 191 S.E. 94. 'In seeking to choose between a fraudfeasor and a negligent party, the Georgia law unfortunately goes with the alleged crook.' Cole v. Cates, 113 Ga.App. 540, 545, 149 S.E.2d 165, 169.

The question of whether the plaintiff could have protected himself by the exercise of ordinary diligence is usually left to the jury. A. M. Kidder & Co. v. Clement A. Evans & Co. Inc., 111 Ga.App. 484, 490, 142 S.E.2d 269; Blanchard v. West, 115 Ga.App. 814, 156 S.E.2d 164. However, where 'the petition does not affirmatively allege that the plaintiff was diligent or contain averments of facts from which his diligence may be reasonably inferred, the petition sets forth no issue to be passed upon by the jury.' Scott v. Fulton Nat'l Bank of Atlanta, 92 Ga.App. 741, 744, 89 S.E.2d 892. See also Roley v. Coffey, 220 Ga. 447, 448-449, 139 S.E.2d 290, 895.

'A director in dealing with another stockholder for the purchase of his stock is under the same duties as partners, agents, and other fiduciaries to make a full disclosure of all material facts relative to the value of the corporate property under his control, known to him and unknown to the selling stockholders. * * *' However, 'A director in buying (or selling) the stock is not under such duty to the corporation or the...