Mason v. Laramie Rivers Co., 3978

• Decision Date: 26 November 1971
• Docket Number: No. 3978,3978
• Citation: 490 P.2d 1062
• Parties: Oda MASON, Trustee, and Howard T. Carroll, Appellants (Plaintiffs below), v. LARAMIE RIVERS COMPANY et al., Appellees (Defendants below).
• Court: Wyoming Supreme Court

Page 1062

490 P.2d 1062

Oda MASON, Trustee, and Howard T. Carroll, Appellants (Plaintiffs below), v. LARAMIE RIVERS COMPANY et al., Appellees (Defendants below).

No. 3978.

Supreme Court of Wyoming.

Nov. 26, 1971.

George J. Millett of Pence & Millett, and Gordon W. Davis of Davis & Costin, Laramie, for appellants.

David N. Hitchcock, Laramie, for appellees.

Before McINTYRE, C.J., and PARKER and GRAY, JJ., and RAPER, District Judge.

District Judge RAPER delivered the opinion of the court.

On February 4, 1963, the board of directors of Laramie Rivers Company, a Wyoming corporation, met. The minutes of that meeting reflect that the secretary reported that W. E. Hitchcock and C. A. Hitchcock, both defendants in this action, had tendered to him a certified check in the amount of $27,000 for the purchase of 270 shares of capital stock of the company to insure water storage in Lake Hattie for the City of Laramie. M. E. Corthell, president of the board of directors, according to the minutes said 'that he was also a party to this offer.' The board of directors authorized the sale and the stock certificate was issued on that same date.

The following day the stockholders of the corporation met. The minutes of that February 5, 1963, meeting disclosed that Clinton A. Hitchcock, in whose name the stock had been issued, was present and voted the 270 shares, together with the 7 1/4 shares which he already owned. Plaintiffs had been members of a group seeking by proxy to gain control of the corporation as opposed to the Corthell-Hitchcock alliance. The additional 270 shares moved the power to the latter.

Present at the meeting was George J. Millett, attorney for the plaintiffs herein, and as disclosed by the minutes he declared that the sale of 270 shares of stock to C. A. Hitchcock made the day previous was 'unlawful, on the ground that unsold shares must be offered to all of the other stockholders in proportion to their present holdings, and he protested the sale.' It further appears in the minutes that 'Mr. Millett's protest in writing is attached to and made a part of these minutes.' However, the record does not disclose the presence of that written protest and counsel indicate that it cannot be found or has not been produced. Also present at the stockholders meeting was plaintiff Howard Carroll, a stockholder, and he had the proxy of plaintiff Oda Mason, a stockholder. The stock book discloses that on April 11, 1963, 150 of the 270 Hitchcock shares were issued to M. E. Corthell, who on the same date assigned them to four daughters.

On July 2, 1969, the appellants, plaintiffs below, filed this action challenging the issue by the Laramie Rivers Company, a Wyoming corporation, of the 270 shares of its previously unissued stock to Clinton A. Hitchcock on the ground that the shares were fraudulently issued and that appellants and other stockholders were not given the opportunity to exercise their preemptive rights to purchase their proportionate share and sought the cancellation of the certificates issued for said 270 shares or in the alternative to have the sale set aside and to have the shares offered to all stockholders on a proportionate basis.

It is contended by the plaintiffs that the issue of the stock was fraudulent in that it had been concealed from the other stockholders; that M. E. Corthell, the president and a director of the corporation, was in fact the purchaser of 150 shares of the stock; and that the real purpose of the sale of the stock was to vest the controlling interest of the corporation in M. E. Corthell now deceased, in the defendants, and in their families and relatives. All of the individual defendants are in some way related to each other and to M. E. Corthell. Plaintiffs claim that they did not discover this allegedly true purpose until on or about May 22, 1969, nor learn about the interest of M. E. Corthell until the same time, and claim ignorance of the transaction prior to then.

On motions for summary judgment made by both sides, the foregoing undisputed facts are disclosed. The trial judge sustained the motion of the defendants on the grounds that the relief sought was barred by the four-year statute of limitations, § 1-18, W.S.1957, and in that Mr. Corthell had declared at the board of directors' meeting that he was also a party to the offer, the matter was outside the realm of fraud.

Does the statute of limitations strike down the action? Section 1-18 in pertinent part provides:

'Within four years, an * * * action for relief on the ground of fraud; but the case (sic) of action in such case shall not be deemed to have accrued until the discovery of the fraud.'

The basic principle recognized by plaintiffs and prevailing in most jurisdictions, applicable to both law and equity, is that the statute begins to run in fraud cases when there is discovery by the aggrieved party of the facts constituting the fraud. Actual knowledge of the fraud will be inferred if the aggrieved party by the exercise of due diligence could have discovered it. Some representative cases out of many in the western states showing its various applications and demonstrating the rule are Tovrea Land and Cattle Company v. Linsenmeyer, ...