Ralph A. Badger & Co. v. Fidelity Building & Loan Ass'n

• Decision Date: 01 February 1938
• Docket Number: 5937
• Citation: 75 P.2d 669,94 Utah 97
• Parties: RALPH A. BADGER & CO. v. FIDELITY BUILDING & LOAN ASS'N
• Court: Utah Supreme Court

75 P.2d 669

94 Utah 97

RALPH A. BADGER & CO. v. FIDELITY BUILDING & LOAN ASS'N

No. 5937

Supreme Court of Utah

February 1, 1938

Appeal from District Court, Third District, Salt Lake County, Roger I. McDonough, Judge.

Action by Ralph A. Badger & Co. against the Fidelity Building & Loan Association to recover difference between face amount of certificate of defendant association and amount plaintiff had received for the certificate from the Atlas Realty Company the defendant's alleged agent. From an adverse judgment plaintiff appeals.

JUDGMENT REVERSED AND CAUSE REMANDED, WITH DIRECTIONS.

Irwin Clawson, of Salt Lake City, for appellant.

Stephens Brayton & Lowe and Calvin Behle, all of Salt Lake City, for respondent.

HANSON Justice. FOLLAND, C. J., and MOFFAT and LARSON, JJ., WOLFE, Justice, concurring.

OPINION

HANSON, Justice.

On June 24, 1925, the defendant, a building and loan association organized under the laws of Utah, issued to Arthur and Celina Le Clerc of Tonapah, Nev., a certificate for 50 shares of its capital stock, known as "Investors' Guarantee Dividend Stock." Under the terms of the certificate, the defendant promised to pay, upon the maturity of the certificate, the sum of $ 5,000 as provided by section 2, article 10, of the by-laws of the association. The Le Clercs matured said certificate in May, 1932, and on December 27, 1932, filed notice of withdrawal with the defendant for the entire matured value. Defendant paid nothing on the certificate. On January 2, 1934, the Le Clercs transferred, by assignment, their interest in the certificate and plaintiff became the owner of a half interest therein. The certificate was surrendered to defendant and two new certificates representing the same class of stock were issued, each for 25 shares and each containing a promise to pay the sum of $ 2,500. One of these certificates was issued in the name of Ralph A. Badger, but it is conclusively shown that the plaintiff was the owner thereof and had it issued in that name as a matter of business convenience. It was understood by both plaintiff and defendant that the notice of withdrawal originally filed by the Le Clercs would stand for plaintiff's certificate so that it would be paid in the order fixed by the original notice of withdrawal.

Plaintiff, on two or three occasions, made inquiries of defendant concerning the payment of its certificate, the last such inquiry being made August 24, 1934, when it was informed by defendant that payments were not being made on withdrawals and payment of the certificate was refused. Thereafter, plaintiff sent the certificate to the Atlas Realty Company at Ogden, Utah, and received the sum of $ 1,250 for it. Later plaintiff learned that the Atlas Realty Company had acted as the agent for the defendant in procuring said certificate; that the money paid therefor had been furnished by defendant; that said certificate had been surrendered to defendant and had been canceled. Plaintiff then brought suit to recover the difference between the face amount of the certificate and the amount it had received from the Atlas Realty Company for the certificate.

Plaintiff's complaint contains three causes of action. Nothing is claimed for the second cause of action. In the first and third causes of action, plaintiff alleges ownership of said certificate on August 24, 1934; that the certificate was then matured and demand for payment was made on that date, but defendant refused to purchase it, and informed plaintiff that it was not yet obligated to purchase, as there was approximately $ 50,000 in book value of stock listed for purchase ahead of plaintiff's certificate; that, after defendant's refusal to purchase the certificate plaintiff sold it to the Atlas Realty Company for $ 1,250; that the latter company was the principal buyer of outstanding stock of defendant, and was engaged in purchasing it on behalf of defendant for defendant's benefit; that defendant supplied various parties with the names of its stockholders to enable them to acquire stock at a small fraction of its real value and defendant supplied a market for such parties to resell the stock so obtained to the profit of defendant; that in so doing it was the purpose of defendant to obtain said investment stock for a fraction of the amount owing thereon by defendant to its stockholders and to defraud them of the amount to which they were entitled, to the profit of defendant and holders of its permanent reserve fund stock; that defendant supplied the money to make such purchases and refused to apply on withdrawals funds which should have been so applied, thereby creating the impression that there was no likelihood of payment by defendant as contracted for a period of years so as to "freeze out" its investors and compel them to sell at a discount; that between December 27, 1932, and August 24, 1934, defendant, in violation of its duty under its contract, decreased the amount which it should have applied on the purchase of investment stock, and from August 1, 1934, ceased altogether to purchase any stock on withdrawal or maturity as contracted, and falsely informed plaintiff and other investors that it was not legally required to pay anything further on maturity or withdrawal; that defendant had full knowledge of the facts of its liability to purchase plaintiff's stock and plaintiff had to, and did, rely on defendant's statement that it was not legally required to make further purchases, and plaintiff thereupon sold said certificate for $ 1,250, to its damage in the sum of $ 1,250.00 together with interest.

In the first cause of action, it is alleged that, had the defendant applied one-half of the monthly receipts from December 27, 1932, to August 24, 1934, to the payment of stock listed on December 27, 1932, for withdrawal and maturity, in the order that the same was listed, defendant would have paid the plaintiff at or prior to August 24, 1934, the sum of $ 2,500 for said certificate.

In the third cause of action, it is alleged that, if defendant had applied one-half of its monthly receipts from December 27, 1932, to June 26, 1933, to the payment or purchase of stock listed for withdrawal and maturity, and thereafter applied one-half of the net receipts as defined in chapter 7, Laws of Utah 1933, to the purchase of certificates listed on December 27, 1932, for purchase, defendant would have purchased plaintiff's certificate on or before August 24, 1934.

By its answer, defendant admitted the certificate matured May 1, 1932; that Ralph A. Badger requested payment of the value of the stock on August 24, 1934, and defendant refused to make such payment; that said certificate would have been paid prior to August 24, 1934, had defendant applied to withdrawals one-half of its receipts from December 27, 1932, to August 24, 1934; that the certificate was sold to the Atlas Realty Company which purchased stock in handling real estate to the benefit of all stockholders. All else in the complaint was denied. Defendant alleged certain affirmative defenses which need not be here stated, as they do not bear upon the issues before us.

After the case had been tried and while it was held under advisement by the trial court, defendant was permitted to file an amendment to its answer in which it alleged that on August 20, 1934, there was a dispute between plaintiff and defendant as to when the certificate was due and payable, plaintiff asserting it was then due and payable and defendant asserting in good faith that it was not then due and payable; that on August 24, 1934, defendant paid plaintiff the sum of $ 1,250, which was paid and accepted in full settlement, satisfaction, and discharge of all plaintiff's rights under said certificate; that the certificate was delivered indorsed in blank and defendant accepted and canceled it.

Upon the filing of this amendment to defendant's answer, the court made findings of fact and entered its judgment in favor of defendant, no cause of action. The following findings of fact are not questioned by plaintiff or defendant: That a certificate for 50 shares was issued to the Le Clercs on June 24, 1925; that this certificate matured in May, 1932, and a notice of withdrawal was filed with defendant December 27 1932; that the certificate was sold to plaintiff January 2, 1934, and was surrendered to defendant, who issued to plaintiff 2 certificates in the amount of $ 2,500 each in lieu thereof; that on August 1, 1934, defendant adopted a policy under which it ceased to pay on withdrawals of stock, matured or unmatured, and used all income for other purposes; that plaintiff's certificate for $ 1,250 was presented for payment on August 24, 1934, but defendant refused to pay the same and informed plaintiff that it was not due and payable, that there were certificates aggregating $ 50,000 ahead of plaintiff's, and that it was problematical when plaintiff's certificate would be paid; that the financial condition of defendant was then discussed and all information requested by plaintiff was furnished; that said certificate was then in fact due and payable and only $ 20,000 in withdrawals were ahead of plaintiff's certificate; that plaintiff relied on the information given by defendant, and on August 24, 1934, sold the certificate to the Atlas Realty Company for $ 1,250, the established market value being then 43 per cent of the withdrawal value; that the Atlas Realty Company acted as agent, and, under instructions from defendant, paid for said certificate with funds furnished by the defendant, but paid in the name of Atlas Realty Company; that said company delivered this certificate, and others purchased in a similar fashion, to defendant; that the funds so used were obtained by defendant by selling certain...