Potter v. Necedah Lumber Co.

• Decision Date: 26 September 1899
• Citation: 80 N.W. 88,105 Wis. 25
• Parties: POTTER v. NECEDAH LUMBER CO. ET AL.
• Court: Wisconsin Supreme Court

105 Wis. 25

80 N.W. 88

POTTER

v.NECEDAH LUMBER CO. ET AL.

Supreme Court of Wisconsin.

Sept. 26, 1899.

Syllabus by the Judge.

1. If different minds can reasonably come to different conclusions from the evidence, as to the rights of the parties, it should be left to the jury to draw the proper conclusion.

2. If a person, by fraudulent representation to another as to the character, amount and future prospects of property owned by the latter, for the purpose of inducing and which causes such other to sell such property to such person at a price determined by such false representations, and the relations between the parties be such that such person owes to such other good faith in such a transaction as regards disclosing the true condition of the property, the former may recover of the latter the damages sustained by him which are the natural and proximate consequences of the wrong.

3. In the circumstances stated in the foregoing, if the actual value of the property sold exceeds the selling price, the difference between the two, with interest in a proper case, is the measure of damages, and if the actual value be not more than the value received, the wrong is not actionable.

4. In the absence of some special circumstance locating some other standard, from which to compute damages to a wronged party by fraud in the sale of property, within the scope of natural and proximate result of the fraud, the difference between the thing as represented and upon which the price was made, and the actual value, is the legal standard, whether the defrauded party be the vendor or the vendee.

5. When stock in a corporation is sold in good faith for less than its full value, and a certificate is issued therefor, void because issued for stock not fully paid, the consideration for such stock is not thereby lost to the certificate holder.

6. Stock in a corporation may be sold for its par value in money and services rendered to the corporation.

7. If stock in a corporation be issued to and paid for by a person in good faith, which is void because in excess of that authorized by law, the payor may reclaim the consideration paid.

8. If stockholders of a corporation all surrender a like percentage of their stock at less than its actual value, one induced to make such surrender by fraudulent representations suffers no actionable wrong.

Appeal from circuit court, Juneau county; A. J. Vinje, Judge.

Action by Lottie E. Potter, as guardian, against the Necedah Lumber Company and others. From a judgment for defendants, plaintiff appealed. Affirmed.

Action to recover damages for wrongfully inducing plaintiff to part with capital stock in the Necedah Lumber Company belonging to her ward, for less than its fair value, the wrong consisting in purposely falsely representing the character and value of the corporate property, the facilities for profitably continuing the business of the corporation, and the advisability of reducing the capital stock, for the purpose of inducing plaintiff to surrender for cancellation a part of her stock and to sell the balance for $110 per share, when the stock was worth much more than that amount, which fraudulent purpose was accomplished, plaintiff acting in the matter in the belief that such representations were in accordance with the truth. The facts as claimed by plaintiff were set out in the complaint with considerable particularity. Among other things it was stated that George A. Potter, plaintiff's husband, was a stockholder of the defendant corporation for many years prior to the time of the commission of the wrongs complained of; that during the time of such commission Potter was under treatment for insanity, was unable to give any attention to business matters, and was under the legal guardianship of plaintiff because of his mental condition; that in such situation plaintiff, who was entirely unacquainted with business matters, relied upon defendant Babcock, one of the officers of the corporation, for advice as to the handling of the Potter interest therein, and that he was conscious of that fact and consented to act as such adviser; that while the relations between Babcock and plaintiff were as stated, he and the other officers named as defendants conspired to obtain possession of the Potter stock at less than its true value, and, to carry out that purpose, on the 15th day of July, 1891, they secretly issued 179 shares of corporate stock, 80 shares going to Babcock and 99 shares to John M. Burch, at $85 per share, charging up the difference between that price and the par value of the stock as a loss; that in April, 1892, in furtherance of the fraudulent scheme aforesaid, the board of directors caused a reduction of one-third of the capital stock to be made at one-half of its fair value, and obtained the consent of plaintiff thereto by falsely inventorying the corporate property for much less than its value, and entering the result thereof on the corporate books so as to make it appear that the reduction of stock as stated was for the best interests of the stockholders and consistent with its value; that later, in June of the same year, the defendants obtained the balance of the stock controlled by plaintiff, by inducing her to transfer it to the corporation at $110 per share when it was worth $200 per share, by false representations knowingly made, particularly by Babcock, acting on behalf of all of the defendants, upon whom she, to his knowledge, relied for proper direction as to the handling of the property; that the corporation was out of pine; that no more dividends on stock could be expected; that the corporation owned no hardwood and could obtain none with which to continue the business; that the cutting of lumber was practically ended; that the corporate lands were worthless, and that the value of the stock did not exceed $110 per share. The defendants answered the complaint, putting in issue all of the allegations thereof on the subject of fraud, and stating facts to the effect that the transactions between the defendants and the plaintiff referred to in the complaint were free from wrong, and that plaintiff obtained, at the time she surrendered and sold the Potter stock, the full value thereof. The issues formed by the pleadings were submitted to a jury on the evidence produced on the trial, resulting in a verdict of no cause of action, upon which judgment was rendered in defendant's favor, from which plaintiff appealed.

O'Connor, Hammel & Schmitz and J. G. Flanders, for appellant.

Olin & Butler, for respondents.

MARSHALL, J. (after stating the facts).

As properly said by the learned counsel for appellant on the trial of this case, the two vital questions on the side of the plaintiff were, was the plaintiff induced to sell her ward's stock by false and fraudulent representations made by the defendants, or any of them, and if so to what extent, if any, was she damaged thereby? Those two elements are still the vital questions to be considered. While the assignments of error contained in the brief of counsel present some matters that if reached would be worthy of judicial consideration, the two matters indicated are of such controlling importance that the decision of either of them in defendants' favor would require an affirmance of the judgment regardless of whether any or all of such assignments of error are good or not. Is there any credible...