Rhines v. Skinner Packing Company

• Citation: 187 N.W. 874,108 Neb. 105
• Decision Date: 28 March 1922
• Docket Number: 22006
• Parties: ELIPHAL RHINES, APPELLANT, v. SKINNER PACKING COMPANY, APPELLEE
• Court: Supreme Court of Nebraska

187 N.W. 874

108 Neb. 105

ELIPHAL RHINES, APPELLANT, v. SKINNER PACKING COMPANY, APPELLEE

No. 22006

Supreme Court of Nebraska

March 28, 1922

APPEAL from the district court for Douglas county: L. B. DAY, JUDGE. Reversed.

REVERSED.

Crofoot Vinsonhaler, Fraser, Connolly & Stryker, for appellant.

Sullivan Wright & Thummel, Hastings, Ritchie & Canaday, and Arthur F Mullen, contra.

Heard before MORRISSEY, C. J., ALDRICH and ROSE, JJ., RAPER and STEWART, District Judges.

OPINION

ROSE, J.

This is an action to recover $ 12,500, the purchase price paid by plaintiff to defendant for 100 shares of the latter's preferred stock. The grounds of recovery are invalidity of the sale and fraud perpetrated by defendant in persuading plaintiff to make the purchase. Plaintiff alleged that, upon discovery of the fraud, he rescinded the contract. He tendered back the stock or its equivalent. Defendant pleaded that the sale was valid and denied the fraud charged. When the evidence on behalf of plaintiff had been adduced, the trial court, on motion of defendant, excused the jury and entered an involuntary nonsuit. Plaintiff has appealed.

Plaintiff contends that the judgment should be reversed because defendant entered into the contract of sale in Missouri in violation of a penal statute of that state, the sale by reason thereof being void, and because plaintiff was induced by false representations of defendant and its agents to buy the stock. Proper deductions from the evidence in connection with the law applicable to the facts lead to the conclusion that both points are well taken and that the trial court erred.

Was the sale void? Was plaintiff, on the case made, entitled to recover back the purchase price?

A statute of Missouri declared it unlawful for a foreign corporation to sell, or attempt to sell, its stock in that state without filing with the bank commissioner thereof documents showing the nature of its organization and its methods of transacting business. Before selling, or attempting to sell, corporate stock there, defendant and its agents were required to pay a fee and to procure a license. Violations of the statute were punishable by fine and imprisonment. Rev. St. Missouri 1919, secs. 11919-11932. Defendant was a corporation organized under the laws of Maine and had a principal office in Omaha, Nebraska. There was no attempt to comply with the statute of Missouri.

Plaintiff was 80 years of age. He had been a farmer. He had sold a farm in Iowa and proceeds to the extent of $ 12,500 were secured by a mortgage. While he was residing in Excelsior Springs, Missouri, an agent of defendant, knowing that the mortgage would soon become due, approached defendant there, repeatedly importuned him to buy stock, and with the aid of another agent induced him to make the purchase. Plaintiff was told that the income from the stock would exceed the interest on the mortgage. Other alluring and deceitful inducements were offered. As a result plaintiff signed at Excelsior Springs a subscription contract and a note for the amount of the purchase price. Later he there received by mail from Omaha a certificate for 100 shares of the preferred stock of defendant. The note was afterward paid.

Plaintiff had a right to assume that defendant and its agents had complied with the legislative requirements of Missouri before attempting to sell stock there. The collection of fees was an incident of legislation. One of the principal purposes of the statute was to protect the public from fraud and imposition in the sale of stock issued by foreign corporations having no authority to transact business in Missouri. The penalties were directed alone to corporations and their agents. The duty of defendant to qualify itself in Missouri before attempting to transact business there did not rest on plaintiff to any extent. He did not violate any provision of the Missouri law, nor did he participate with defendant or its agents in any criminal act. He was therefore entitled to assert his right to the protection of the Missouri statute.

The sale, if a Missouri contract, seems to be void when tested by the public policy of Missouri, as declared by the judiciary of that state in enforcing statutes of this kind. Booth v. Scott, 276 Mo. 1, 205 S.W. 633; Amalgamated Zinc & Lead Co. v. Bay State Zinc Mining Co., 221 Mo. 7, 120 S.W. 31. Many other courts have taken the same view of similar statutes. 14a C. J. 1296, sec. 4004, note 95; Edward v. Ioor, 205 Mich. 617, 172 N.W. 620; note in 15 A. L. R. 256, 262.

To defeat the action defendant argues that the sale was a Nebraska contract unaffected by the laws of Missouri. In this connection it is asserted that the stock was obtained in Omaha, Nebraska, that the note for the purchase price was accepted there, and that it was there the final act of approving the sale was performed. This position is clearly untenable. Defendant sent its agents to Excelsior Springs Missouri, to negotiate the sale. The representations and inducements resulting in the purchase were made there. It was there that the subscription for the stock and the purchase money note were signed. It was there the stock was received by plaintiff and accepted by him. If the concluding act in the negotiations is an...