McGuire v. Gunn
| Citation | 300 P. 654,133 Kan. 422 |
| Decision Date | 03 July 1931 |
| Docket Number | 29,781 |
| Parties | J. A. MCGUIRE, Appellee, v. W. R. GUNN, W. K. CALHOUN et al., Appellants |
| Court | United States State Supreme Court of Kansas |
Decided July, 1931.
Appeal from Reno district court; JOHN G. SOMERS, judge.
Judgment affirmed.
SYLLABUS BY THE COURT.
CONTRACTS--Rescission for Fraud--Evidence. In an action to rescind a contract on the ground of fraud and to recover the amount paid thereunder, the record is examined, and it is held: (1) That the evidence establishes actionable fraud. (2) That the special findings of the jury are not in conflict with the general verdict. (3) That the admission of certain evidence was not reversible error.
Carr W Taylor, Harry H. Dunn, both of Hutchinson, and Douglas Hudson, of Fort Scott, for the appellants.
F. Dumont Smith, J. N. Tincher and Don Shaffer, all of Hutchinson, for the appellee.
This is an action to rescind a contract on the ground of fraud and to recover the amount paid thereunder. The plaintiff prevailed, and the defendants appeal.
The Hulland-Gunn-Holt Motor Company was a corporation organized under the laws of Kansas and engaged in business at Hutchinson, Kan., and prior to July 4, 1927, W. R. Gunn was its president and owned one-third of its stock; Fred Holt was the secretary-treasurer and manager and owned one-third of its stock, less one share; and R. G. Hulland owned about one-third of the stock; W. K. Calhoun and J. R. Beeching each owned one share, and these parties were the directors of the company. In June, 1927, Gunn mentioned to a Mr. Gordon that he desired to sell his interest in the company. Gordon was acquainted with the plaintiff, who was an experienced and successful Chrysler salesman at Kiowa, and he arranged a meeting between Gunn and the plaintiff in Hutchinson on July 3, 1927. They looked over the property, which included new cars in the showroom, used cars, repairs and the repair shop. McGuire was interested and a conference was held the next morning at the Lassen hotel, which resulted in the drawing and execution of a contract by the terms of which the defendants agreed to sell to the plaintiff 225 shares of the capital stock of the company of the par value of $ 100 per share for the sum of $ 17,500, of which amount $ 1,000 was payable on the execution of the contract, $ 4,000 July 14, 1927, and the balance in deferred payments, and that the plaintiff would assume an active interest in the business of the company within fifteen days. The plaintiff discovered the alleged fraud a few days after the $ 5,000 payment was completed and the deferred payments arranged for, whereupon he tendered back to the defendants the stock he had received and demanded the return of the $ 5,000, which tender and demand were refused. This suit followed.
It is alleged in the petition that the defendants, W. R. Gunn, president of the company, and its acting manager, Fred Holt, and W. K. Calhoun conspired together and made false and fraudulent representations to the plaintiff for the purpose of inducing the plaintiff to purchase the stock; that they represented that the corporation owned a contract with the Chrysler automobile manufacturers and that the plaintiff would receive the full benefit of such contract, through the purchase of the stock; that they knew at the time the Chrysler Manufacturing Company would not permit anyone to have control of the Chrysler agency; that they knew there was an agreement and understanding that Fred Holt, personally, would control the Chrysler agency contract or franchise; that they knew Holt did not intend to permit the plaintiff to manage and control the corporation; that they presented a false and fraudulent statement of the condition of the corporation to the plaintiff, showing an item of $ 63,000 as bills receivable and an asset of the corporation, which, in truth, was a liability and not an asset, and asked judgment for $ 6,000. An answer was filed by the defendants, who are appellants, which was in effect a general denial. The corporation was a party and filed a separate answer.
The plaintiff's evidence tended to show that after looking over the property on July 3, 1927, the plaintiff, his brother, Harry McGuire, and the defendants met at the Lassen hotel in Wichita, on July 4, 1927; that Gunn represented to the plaintiff that he controlled the Chrysler franchise; that defendants presented to the plaintiff a financial statement of the company showing an asset listed as bills receivable in the amount of $ 63,000; that relying on these statements as true he signed the contract and paid the $ 5,000 provided for in the contract; that after the payment of the $ 5,000 the plaintiff learned that the item of $ 63,000 was not an asset, but was in fact a contingent liability representing notes which had been taken on the sale of cars and indorsed and sold by the company; that Holt, one of the officers of the company, had a contract to manage the corporation, which contract was produced, identified as exhibit L and introduced in evidence. The contract was dated April 1, 1927, in which Holt was first party, R. T. Hulland second party, and W. R. Gunn third party. It provided that second party resign as vice president, and that he obtain the resignation of J. R. Beeching as a director and the surrender of his stock; that the third party resign as president and obtain the resignation of W. K. Calhoun as a director and the surrender of his stock. It further provided:
At the close of the plaintiff's evidence the defendants demurred, which demurrer was overruled as to the appellants and sustained as to the corporation.
The defendants' evidence tends to show that at the conference held on July 4, 1927, at the Lassen hotel, the condition of the company was fully exhibited to the plaintiff, who was assisted in the conference by his brother and his attorney; that he was furnished a balance sheet showing the financial condition of the company as of May 31, 1927, which balance sheet did not contain an item of $ 63,000 listed as an asset, but it did show the value of the capital, including surplus and profits, to be $ 43,000.83; that $ 1,000 of the purchase price was paid the date the contract was signed, $ 2,000 was paid July 7, 1927, and the balance of the $ 5,000 was paid July 12, 1927, and in this time the plaintiff had the opportunity and did make some investigation of the company through his advisers, and that Gunn did not at any time represent to the plaintiff that he controlled the Chrysler franchise.
The defendants offered in evidence the by-laws of the company, which, among other things, provided:
"The stockholders shall have power, by a majority vote at any such meeting, to remove any director or officer from office."
Also a copy of the Chrysler franchise, which provided, among other things:
". . . either party shall be at liberty to cancel and annul this agreement upon fifteen (15) days' written notice . . ."
On this evidence, under proper instructions, the jury returned a general verdict in favor of the plaintiff and made the following special findings:
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