Ludowese v. Amidon
| Decision Date | 09 January 1914 |
| Docket Number | 18,432 - (260) |
| Parties | NICHOLAS B. LUDOWESE v. L. H. AMIDON and Another |
| Court | Minnesota Supreme Court |
Action in the district court for Marshall county against L. H Amidon and Rebecca T. Amidon to cancel a conveyance from plaintiff to L. H. Amidon and one from the latter to his mother, the defendant Rebecca. The case was tried before Grindeland, J., who made findings and ordered judgment in favor of plaintiff. The court denied the motion of plaintiff and the motion of defendant Rebecca for amended findings. From orders denying separate motions for a new trial defendants took separate appeals. Affirmed.
Value of bank stock -- documentary evidence.
1. The books of a bank and statements of its condition made by or under the direction of its president and general manager are competent evidence tending to prove the value of the shares of stock, and furnish a basis for expert testimony in an action against the president for the rescission of an exchange of land for such stock procured by misrepresentations of the condition of the bank, and of the actual value and book value of its shares of stock.
Rescission of contract to exchange property.
2. An action to rescind will lie where defendant by misrepresentations of material facts, relied on by plaintiff, accomplished the deal, without proof that plaintiff was damaged.
Material misrepresentations.
3. Representations that the bank was not indebted related to a material fact. And representations as to actual value of its shares of stock made by its president and general manager were not mere trade talk which an intending purchaser had no right to rely on, since he could not well acquire, even by an examination of the books, the same knowledge as the president possessed of such value.
Uncontradicted evidence.
4. Where a fact is proven by uncontroverted testimony the reception of some testimony in the nature of legal conclusions to prove the same fact is not reversible error.
Burden of proving purchase in good faith.
5. Fraudulent misrepresentations being proven in an action to rescind, the defendant, who claims title from the one guilty of the fraud, has the burden of showing himself a bona fide purchaser without notice.
Purchase in good faith.
6. The court found, and the proof supported the finding, that plaintiff was in possession by tenant when the defendant Rebecca received the conveyance from the defendant guilty of the misrepresentations. She made no inquiries of the tenant or of plaintiff, the landlord, as to their rights. She was ignorant of the misrepresentations having been made. Under the evidence she was not entitled to a finding that she was a good-faith purchaser without notice.
Notice to purchaser.
7. A tenant's possession is notice of his landlord's rights in the premises, and one who claims as a good-faith purchaser under that situation must be charged with such information as an inquiry of the landlord would have elicited.
A. N. Eckstrom and Case & Case, for appellants.
John A. Pearson and Julius J. Olson, for respondent.
The action is to rescind an exchange of properties. Plaintiff prevailed and defendants appeal from an order denying their separate motion for a new trial.
Plaintiff, a young man of 31 years of age with limited business experience, advertised his desire to exchange land for bank stock. Defendant L. H. Amidon, the president, manager, and holder of the majority shares in Florence State Bank of Florence, South Dakota, a bank capitalized at $10,000, responded; and on August 23, 1911, plaintiff, who was living in North Dakota, went down to Florence to investigate. Upon his second visit to the place, September 8, 1911, an agreement to trade was made and at least partially carried out. Plaintiff was to convey a farm of 320 acres in Marshall county, Minnesota, subject to $3,500 encumbrance and pay $3,400 in cash or securities in exchange for 76 shares of stock in defendant's bank, the face value of the stock being $100 a share. Plaintiff on that day delivered to defendant L. H. Amidon a deed to the land and received 46 shares of the stock. The payment to Amidon of the $3,400 and the receipt by plaintiff of the balance of the shares was left to the future. L. H. Amidon went immediately to Lake City, this state, where his mother, the other defendant, lived, and agreed to convey the farm to her for which she canceled his past-due debt of $4,500 and agreed to pay him $1,500. He was to make out and record the deed to her. He returned to Florence and on September 11, 1911, executed the deed as agreed and sent it together with the deed received from plaintiff to Marshall county for record where they were both recorded at 8:30 a.m. September 13, 1911.
It also appears that when plaintiff acquired the farm in the spring of the year it was in possession of a tenant of the former owner. This tenant remained in possession until the latter part of November, 1911, when plaintiff leased to another who took possession and has ever since occupied the land. On September 23, plaintiff claims he first learned that matters concerning the bank stock had been misrepresented. At once he returned the 46 shares received and demanded a rescission. The defendant L. H. Amidon refusing, this action was immediately begun and lis pendens filed. Because of faulty indexing by the register of deeds plaintiff failed to learn that the son had conveyed until the following summer, when Rebecca T. Amidon was made a party defendant. She claims she paid the $1,500, the balance of the purchase price, to the son in the spring and summer of 1912 before she knew of this action, but long after filing notice of lis pendens.
The complaint contained allegations of fraud and misrepresentations as to the condition of the bank and the value of the stock, inducing plaintiff to trade. The defense was that none were made; that plaintiff fully investigated for himself and dealt with his eyes open; and that defendant Rebecca T. Amidon was a purchaser in good faith without notice.
Upon the issues the court found, among other matters not necessary to set out, that defendant L. H. Amidon falsely represented that the bank stock was worth $125 per share, that the book value thereof was $107 per share, and that the bank was not indebted in any sum. It is found that plaintiff relied on the representations being true in making the deal, but that these were false to the knowledge of L. H. Amidon. In fact, the bank building representing part of its capital stock was mortgaged for $1,400, the bank was indebted on its promissory note in the sum of $7,000 and the value of its shares of capital stock was greatly less than $107 per share. The court also found that plaintiff returned the shares he obtained and demanded a reconveyance of the land immediately upon discovering the fraud; that the land, during all the time referred to, was in the actual possession of one John Johnson, Jr., who was, during all said time, plaintiff's tenant; and that Rebecca T. Amidon did not know of the actual fraudulent misrepresentations made by L. H. Amidon to plaintiff when the land was conveyed to her. The court directed both the deed to L. H. Amidon and the deed from him to Rebecca T. Amidon to be cancelled.
It stands admitted upon the record that the shares returned to L. H. Amidon as well as those he was to transfer have been disposed of by him and are now beyond his control. So that, even conceding technical errors in the admission of testimony, he is hardly in a position to resist rescission. But we believe the court was right in the rulings during the trial with few exceptions, and, as to these, we deem them without prejudice, because the facts to which the testimony related were established beyond controversy by other competent evidence.
We shall, however, notice generally certain alleged erroneous rulings of which appellants complain. The books of the bank and the statements of its condition for some time immediately prior to the trade, and also subsequent, were received over defendants' objection. The books and statements were properly verified as being kept or issued under the direction of L. H. Amidon. It also appeared that those remote from September 8, 1911, tended to prove the actual condition of the bank on that date. This evidence was properly received, not only as directly bearing on the falsity of L. H. Amidon's representations, but also to serve as a basis for expert testimony as to the condition of the bank and the value of its shares of stock. That the books and statements of a bank do not alone determine the value of its stock may be conceded, for the location of the bank, the reputation of the men in charge, and other matters have a bearing. But the evidence referred to, and received, was certainly of the most reliable kind and indispensable in arriving at the value of the shares whether it be actual value or book value. It requires a good deal of assurance to assert that bank stock may intrinsically be worth more than par, when the books of the bank disclose a large depletion of its capital. The numerous assignments of error growing out of the reception of the evidence referred to, and permitting expert opinion of value based thereon, are not well taken.
The appellants are mistaken in the claim that there was no misrepresentation in regard to book value of the stock. Plaintiff testified positively that L. H. Amidon represented the book value to be $107 per share. This is also shown by Amidon's written...
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