Montgomery v. Hundley

• Citation: 103 S.W. 527,205 Mo. 138
• Parties: MONTGOMERY v. HUNDLEY.
• Decision Date: 29 May 1907
• Court: United States State Supreme Court of Missouri

103 S.W. 527

205 Mo. 138

MONTGOMERY v. HUNDLEY.

Supreme Court of Missouri, Division No. 1.

May 29, 1907.

1. PRINCIPAL AND AGENT—MUTUAL RIGHTS— AGENT TO BUY—PURCHASE FROM SELF.

An agent to buy cannot purchase of himself, and the principal may rescind such a sale, though it may have been fair, and the agent's purpose may not have been fraudulent.

2. SAME—ACTIONS BETWEEN—EVIDENCE—SUFFICIENCY.

In an action to rescind a sale of corporate stock, on the ground that defendant was plaintiff's agent to purchase stock and sold his own stock to plaintiff, evidence held to support a finding that defendant was plaintiff's agent, and that defendant held an option on the stock purchased by plaintiff.

3. SAME.

One who has an option on corporate stock is such an owner thereof as to bring him within the rule that an agent to buy cannot purchase of himself, and that the principal may rescind such a sale, though it may have been fair, and the agent's purpose may not have been fraudulent.

Appeal from Circuit Court, Buchanan County; A. M. Woodson, Judge.

Action by J. F. Montgomery against S. W. Hundley. From a judgment for plaintiff, defendant appeals. Affirmed.

Culver & Phillip, for appellant. Charles F. Strop and Eugene Silverman, for respondent.

GRAVES, J.

This is an action to rescind a contract of sale, and to recover $7,000, the amount of the purchase price involved in such sale. The facts are these: The Union Mercantile Company was a corporation, whose principal place of business was at St. Joseph, Mo. It was engaged in the mercantile business, and had stores at St. Joseph, Mo., Topeka, Kan., and Lincoln, Neb. Its capital stock was $15,000, divided into 150 shares of $100 each. Of these shares the defendant Hundley owned 75, or one-half of the total; J. F. Shackelford owned 37½, or one-fourth; and C. K. McKnight 37½ or one-fourth. A part of one of the by-laws of the corporation reads as follows: "Any stockholder desiring to sell his stock must offer it and give the preference to this corporation before selling the same to a new stockholder." It appears that J. L. Shackelford, owing to the illness of his wife, desired to dispose of his 37½ shares of stock, and go West for his wife's health. He offered the stock to Hundley and McKnight for $5,750. Defendant said he was not able to purchase at that time, but would sell the stock, as it was worth more than the price asked by Shackelford. He and Shackelford then agreed that defendant might sell said stock and have all he could get over the $5,750. At this juncture in affairs, the defendant, who was a business friend of the plaintiff, wrote the plaintiff the following letter: "St. Joseph, Mo., 4-23, 1903. Mr. Montgomery, Maryville, Mo.— Dear Sir: Would you like to buy in a mercantile business here that is `gilt edge'? I have one half. The other half is owned by two parties active in the business. One of them wants to sell his ¼ interest. Will take $7,000.00 to buy him out—not necessarily all cash. Will make you 40 or 50 per cent. at least on your money. If interested will write you more fully. It's a `hummer.' Yours truly, Woodson Hundley." In a few days after the receipt of this letter, the plaintiff went to St. Joseph, looked through the stock there, saw some statements as to the business furnished by the bookkeeper, and after asking Hundley if $7,000 was the least money that would buy the stock, and being assured by Hundley that it was, and further assured that said sum was the least money that would buy the stock, and that there was nothing in it (the deal) for Hundley, he then told Hundley to buy the stock for him. Plaintiff then returned home, and later sent part of the money to Hundley, and still later the balance to Shackelford, receiving the certificates of stock assigned by Shackelford to him.

In evidence, and upon which plaintiff largely relies, is the following letter: "St. Joseph, Mo., May 28, 1903. Mr. J. F. Montgomery, Maryville, Mo.—Dear Sir: In reply to yours of 5-26, contents very carefully noted. It is evident to my mind that you have not looked into this business carefully enough to satisfy yourself as to the good points of it, and on account of the stand you have taken regarding it I do not see any use arguing the good points with you. However, I will make one explanation regarding the statement you made in your letter—that Mr. Shackelford gave me $1,200.00 to make the sale. This is false. I do not mind telling you that I got $1,250.00 out of it, but he did not give it to me. I had an option on his stock at $5,750.00 and you bought it at the lowest possible dollar that would buy it. When he first offered his stock for sale, he offered it to me by virtue of a clause in our by-laws which provided for such an arrangement. He had to give me or McKnight the opportunity to buy it before offering it to any one else. Mr. Shackelford was anxious to get out, and apparently did not know or care anything about the value of this stock. He made me the price, and I immediately took an option upon it, intending to buy it myself, if I could not find some satisfactory person to take it. I was not in shape at the time to buy it myself, and thought you would be glad to get an investment of this kind. I cannot see that you have any complaint to make regarding the price. The stock is worth more than you paid for it, and I can prove it. Now, put yourself in my place, and see if I have done anything wrong. When I bought in that business myself, I paid one of the parties a bonus, and knew it at the time I bought in, and I bought in there exactly on the same basis you did. However, if you are not satisfied, I will see that you get out and get out whole. It will not be necessary for you to lose any money on the deal, but I want you to understand that I have misrepresented nothing to you about that business, to the best of my knowledge. Whatever I told you about it I believed was right and wish you would look up my record and see if I am in the habit of doing anything of that kind. I feel that you have hardly done me justice in this thing in jumping at conclusions the way you have, and at the same time understand that through your lack of familiarity with the business, and lack of confidence in us, with perhaps some influences at work, which are unjust, you have hastily made up your mind to sell out. This, I repeat, is all right, and I am willing to help you out at the very earliest time possible, and will see that you lose nothing by this deal. At the same time I say this to you, I ask you to rest assured that there is absolutely no ill feeling in this matter whatever, on my part, and that I only wish to do what is right toward you, and see you satisfied. I cannot do anything with this matter this week, however, as we are invoicing, but will let you hear from me next week, something more definite. With best regards, I am, Yours very truly, S. W. Hundley."

The stock was shortly thereafter tendered back to defendant, the purchase price demanded of him, and upon September 5th following this suit was instituted. There are allegations in the petition of fraudulent representations, other than the statement made by defendant that there was not a cent in the trade for him. Of these, however, there is no evidence. Plaintiff testified that defendant was his agent to buy the stock, and that he had bought goods of defendant's father for a great number of years, and had an intimate business acquaintance with the defendant for two or three years, and relied fully upon defendant's statements. For the defendant, a part of the evidence tended to show that he had no other option on the stock in question than the one provided for in the by-laws of the corporation. J. L. Shackelford, one of defendant's witnesses, on cross-examination, testified: "Q. You had an agreement with him [Hundley] that he could take this stock and handle it for you at $5,750? A. Yes, sir." By defendant it was also shown that defendant had a copy of the by-laws before he directed the purchase of the stock. Defendant also testified that he did not buy the stock for plaintiff, and that he did not tell plaintiff that he (defendant) was not interested in the stock in any way, and was getting nothing out of it. The defendant, among other things, says: "Q. Did Mr. Shackelford offer the stock to you pursuant to the terms of the by-laws? A. He did. Q. Did you buy it? A. No. Q. Why didn't you buy? A. I didn't have the money to buy it at the time. Q. Now, what arrangement, if any, was that made between Shackelford and yourself regarding the stock? A. Mr. Shackelford seemed very anxious to get out, and I told him that I thought I could get a better price for it, that I thought he was selling the stock entirely too cheap, and I thought I could get more money for it, and I asked him if he would allow me to have all I could get over that price. I looked into the business, and I found that I thought that $7,000 would be a reasonable price for it, and I put that price on the stock myself, and the arrangement with Mr. Shackelford was that I was to sell this stock for him, and was to make whatever price on it I wanted to, as long as I got him the amount of money he was asking for it. He realized, and said at the time he knew, he was selling the stock cheaper than it was worth." And on cross-examination the same witness says: "Q. You never did tell Montgomery that you were making any commission out of this until after this was over? A. No. Q. You concealed that fact from him, didn't you? A. Well. I didn't tell him. Q. It was your purpose to keep him from knowing that fact, wasn't it? A. I did not think it was necessary to the transaction. Q. You didn't think so. You did not think it worth while to tell him, but you did purposely keep it from him, didn't you? A. If you want to construe it that way. * * * Q. You say it was not convenient for you to handle the stock at $5,750? A. Yes, sir. Q. You say he made a price for the stock, and...