Rardon v. Davis

• Decision Date: 13 June 1932
• Docket Number: No. 17313.,17313.
• Parties: RARDON v. DAVIS.
• Court: Missouri Court of Appeals

52 S.W.2d 193

RARDON v. DAVIS.

No. 17313.

Kansas City Court of Appeals. Missouri.

June 13, 1932.

Rehearing Denied July 5, 1932.

Appeal from Circuit Court, Sullivan County; Paul Van Osdol, Judge.

"Not to be officially published."

Action by Robert W. Rardon against Guy F. Davis. From the judgment for plaintiff, defendant appeals.

Reversed.

L. E. Atherton, of Milan, and Martin, Scheufler & Carbaugh, of Kansas City, for appellant.

P. M. Marr, of Milan, for respondent.

TRIMBLE, P. J.

This is an action to recover damages for fraud and deceit in the sale or exchange of defendant's twenty-five shares of bank stock and $1,500 in cash for plaintiff's stock of general merchandise. The bank and the general store were both in the town of Reger, a small town in Sullivan county, Mo. Defendant was the cashier of the bank and owned said stock; plaintiff owned the general store.

Plaintiff had lived in Reger thirty or thirty-two years. When he first went there he was in the general merchandise business. He was in a general store for about a year or a little over. Then he went to farming, and then traded and trafficked in farms for "quite a little bit," then bought and sold considerable stock. At one time he traded for, and owned and ran, a drug store; finally he traded for a stock of merchandise with Ryan & Ryan at Reger which was the stock he owned at the time he traded it for the bank stock and cash involved in this lawsuit.

From and after the bank's organization in 1910, plaintiff had been a stockholder in said bank, but the last dividends he had received on said stock was some five or six years prior to the trade involved herein. The exchange of bank stock and the $1,500 in cash was made for the stock of general merchandise at defendant's valuation of $5,500, and the written contract for the trade was signed and the deal closed on June 22, 1927. After the trade plaintiff on July 1, 1927, became cashier of the bank in place of defendant, and the latter took charge of the store. Nearly two and one-half years thereafter, to wit, on December 13, 1929, the bank closed its doors. This suit, for damages based on fraud and deceit, was brought March 29, 1930.

The evidence is that shortly before negotiations for the exchange of property began, plaintiff was about to put on a "closing out sale" of his entire stock of merchandise consisting of dry goods, shoes, notions, ready-to-wear garments, etc. He had arranged with the Morris Sales Company of St. Louis to put on that auction sale, and Mr. Aebersold was sent to Reger several days prior to June 22, 1927, to do that work; it is conceded that in the negotiations taking place thereafter and leading up to the trade involved herein, Aebersold was plaintiff's agent. He had worked in banks about seven years; and the books and records of the bank were submitted to him as plaintiff's agent and he checked the books and deposits and totaled the notes with the credits to see that the total of the notes equaled the bills receivable and it is claimed that he audited the books of the bank to arrive at the reasonable book value of the bank stock. However, the claim in plaintiff's behalf is that this audit or investigation was not for the purpose of ascertaining the book value of the stock but merely to see whether the books balanced or not.

Defendant said he had figured up the surplus and undivided profits and earned interest; that his twenty-five shares of stock at $100 per share was $2,500 and this with the surplus, undivided profits, and earned interest, made the stock worth $4,000. Plaintiff said his stock had inventoried $5,500. Aebersold, plaintiff's agent, says that defendant said he "had no objection at all" to an audit being made of the bank. After Aebersold had made whatever examination he desired to and did make, the defendant got out the notes in the note case of the bank and he and plaintiff went over them. Plaintiff says he and defendant went over all the notes in the bank; that there were notes signed by men that he (plaintiff) did not know and that he took defendant's word for them; that defendant said he would stand behind every note as being worth its face value and that every note would be paid. Plaintiff's agent Aebersold testified that plaintiff and defendant discussed the various notes and it was agreed between them that certain notes should have additional security and that defendant agreed to go with plaintiff and help get the additional security if plaintiff wanted him to. It also appears from plaintiff's own evidence that he was well acquainted with all except three or four of the makers of the notes held by the bank; that plaintiff knew the value of real and personal property in the neighborhood of Reger; and that the two, plaintiff and defendant, discussed the security on the various notes before the trade was made. Aebersold also testified that defendant called plaintiff's attention to notes objected to and criticized by the bank examiner; that he (Aebersold) checked them with defendant and so did plaintiff. And all the property securing the notes was in the neighborhood of the bank; that is, near Reger. Aebersold was not only plaintiff's agent in the trade but also his witness in the case.

There is no showing in the case anywhere of anything done to prevent or to hinder a full, free, and thorough examination of the assets of the bank by plaintiff or his agent Aebersold, and they did make as full and careful an examination as they themselves chose to make.

Thereupon a written contract was drawn up by Aebersold whereby defendant's twenty-five shares of bank stock at $100 par value and the surplus, undivided profits, and earned interest valued at $1,500, plus $1,500 in cash were exchanged for (and defendant received in return), plaintiff's merchandise stock valued at $5,500. The trade contemplated that plaintiff would be at once elected as cashier to succeed defendant and this was done. Plaintiff became cashier July 1, 1927, and continued to act thereafter and was such cashier on the date of the trial in January, 1931, drawing a salary as such during all that time. The evidence shows that plaintiff, after taking charge, made financial statements relative to the condition of the bank, which showed that the bank was solvent, and the state examiners and the plaintiff passed the same capital and surplus during the years that intervened between the sale or exchange herein involved and the closing of the bank.

Plaintiff admitted that, in addition to being a stockholder from the beginning as hereinbefore stated, he had been a director for a number of years when the bank was first organized, and at different times (at least twice when not a director) he had been on examining committees to examine the bank and to check up on the cashier. All the notes that were in the bank at the time of the trade (and which were examined by plaintiff just before the trade was made) were later renewed by plaintiff when he was cashier and this was approved by the board.

After the trade was made and plaintiff became cashier, defendant kept his bank account in the said bank. Only one of the notes was past due at the time the trade was made.

Over the objection of defendant, the court allowed plaintiff to show that on many of the notes very little or nothing could be collected. This was at some unknown time after the exchange, and no prior showing was made that the notes or the signers thereof were in the same condition at the time of the trade as at the time of the investigation of the worth of said notes and the discovery of their supposed uncollectibility. I have searched through the record to find when it was that the discovery was made as to the worthlessness of the notes, but notwithstanding defendant's objection that it was not shown that the notes were then in the same condition at the time of the exchange, no precise date was given; the best that could be discovered as to when the examination was made was that it was "some considerable time" after the trade, or that it was shortly after the exchange was made. The phrase "shortly after" and such like expressions are relative not specific, and in view of the well-known fact of sudden changes in solvency and the absolutely sudden decline in values in these times of "depression" and slump in business of every kind, it would seem that in order to make the evidence clearly admissible the lapse of time should have been clearly and definitely shown. The...