Ligon v. Minton

• Decision Date: 23 February 1910
• Citation: 125 S.W. 304
• Parties: LIGON v. MINTON.
• Court: Kentucky Court of Appeals

125 S.W. 304

LIGON v. MINTON.

Court of Appeals of Kentucky.

February 23, 1910

Appeal from Circuit Court, Graves County.

"Not to be officially reported."

Action by Ed. B. Ligon against John W. Minton for deceit.From a judgment for defendant, plaintiff appeals.Reversed.

Robins & Thomas and R. G. Robins, for appellant.

W. J Webb, for appellee.

O'REAR J.

Appellee was a director in the corporation, May Pants Company.The corporation issued a statement showing the condition of its affairs.If the statement had been true, the shares of stock of the corporation would have been worth $125 each.Relying on the statement, appellant bought of appellee 10 of the shares, paying $1,250 for them.Thereafter appellant was elected a member of the board of directors of the corporation.He soon learned that it was in a sinking condition.He and his associates took steps to save it.They indorsed its notes, procured the stockholders to agree to a reduction of the capital stock of more than 50 per cent., and extended its credit in other ways.Notwithstanding, the concern went to the wall.

Appellant then brought this action against appellee for deceit in the false and fraudulent misrepresentations of the condition of the affairs of the corporation and of the stock sold to him suing to recover the amount paid for the stock, under the allegation that it was actually worthless when sold to him that appellee then knew it was worthless, or might by the exercise of due care as director have known it, and fraudulently concealed the true condition of the corporation from appellant at the time of the purchase, with intent to cheat him.Appellee pleaded the action of appellant in becoming a member of the directorate of the corporation and in the conduct of its affairs as stated as a ratification of the sale after he had learned the true state of its affairs.The circuit court held that the answer presented a complete defense to the suit, and dismissed the petition.

It was held in Allen v. Neale,121 S.W. 612, that the published statements made by the directors of a corporation were representations to the public concerning its affairs and that the directors promulgating the statement will not be heard to say that it was innocently made if in fact it was materially false; that they are held by our statute to know that which it was their legal duty to know, and which they would have known but for a failure to discharge their duty; and that unequivocal statements of fact in such a statement, purporting to be of the knowledge of the directors, and being of facts presumably within their knowledge, will be deemed fraudulent in law, if materially untrue.One whose duty it is to know, and who speaks as if he had discharged that duty,...