S & F Supply Co. v. Hunter, 12686

Citation527 P.2d 217
Decision Date03 October 1974
Docket NumberNo. 12686,12686
CourtSupreme Court of Utah
PartiesBlue Sky L. Rep. P 71,166 S & F SUPPLY COMPANY, a Utah corporation, et al., Plaintiffs and Respondents, Zions First National Bank, a National association, Intervening Plaintiff and Respondent, v. S. Craig HUNTER, Defendant and Appellant.

Page 217

527 P.2d 217
Blue Sky L. Rep. P 71,166
S & F SUPPLY COMPANY, a Utah corporation, et al., Plaintiffs
and Respondents,
Zions First National Bank, a National association,
Intervening Plaintiff and Respondent,
S. Craig HUNTER, Defendant and Appellant.
No. 12686.
Supreme Court of Utah.
Oct. 3, 1974.

Page 218

Walter P. Faber, Jr., of Watkins & Faber, John Taft Benson of Watkins & Faber, Henry E. Heath of Strong & Hanni, Salt Lake City, for defendant and appellant.

Alvin I. Smith, Richard H. Nebeker, Salt Lake City, for Zions Bank.

C. Nelson Day, U.S. Atty., and H. Ralph Klemm, Asst. U.S. Atty., Salt Lake City, for intervening plaintiff and respondent.

CROCKETT, Justice:

The foundation of this case is an action by the plaintiffs against defendant S. Craig Hunter alleging fraud and breach of a contract, by which he agreed to purchase 10,000 shares of stock in Universal Leasing Corporation. Defendant's defenses and a counterclaim included allegations that he was fraudulently induced into entering into the agreement, for which he sought rescission, and avoidance of the obligation. These he asserted both against the plaintiffs, and the intervened plaintiff, Zions First National Bank, who was holding the stock as security for a loan to the plaintiffs. The trial was to a jury, to whom the trial judge submitted a total of 25 interrogatories as to the disputed issues of fact. Upon the basis of the answers, all of which were adverse to the defendant's contentions, the court entered judgment for the plaintiffs. Defendant appeals.

In accordance with the standard rule of review, where the evidence is in dispute, we assume that the jury believed the evidence

Page 219

supporting their answers to the interrogatories. 1

Plaintiffs Souvall brothers were officers and principal shareholders of S & F Supply Company and Burger-in-the-Round. In the summer of 1969 these corporations jointly applied for a Small Business Administration (herein called S.B.A.) loan of $200,000. The first application was refused. But a second one, offering additional security of certain corporate assets, the equity in the Souvalls' homes, and 10,000 shares of stock in Universal Leasing Corporation, owned in equal amounts by the brothers, was approved. In August, 1969, S & F Supply Company and Burger-in-the-Round received $200,000, S.B.A. providing 75% and Zions Bank 25% of that amount. There is evidence that the Bank gave the Souvalls some help in preparing the loan application.

Only one installment had been paid on this loan when, in December, 1969, both of the borrowing corporations filed petitions in bankruptcy. The Souvalls requested and reached an agreement with S.B.A. and the Bank, giving them a chance to sell the other collateral, and apply the proceeds to repay the loan, and thus attempt to save their homes from foreclosure. In that same month Universal Leasing Corporation had engaged in a merger resulting in a new company, Universal-Rockwell. Under the terms of the merger, the 10,000 shares of Universal Leasing Corporation pledged to the Zions Bank could be exchanged for 4,530,000 shares of the new Universal-Rockwell Company.

On February 12, 1970, defendant Hunter, a licensed securities broker, attended a meeting at which Mark Eames, president of Universal-Rockwell, and Jerry Timothy, an officer of North Star Marine, discussed an upcoming merger of these two companies. Eames told the defendant about the 10,000 shares of Universal Leasing, owned by the Souvalls, which was held by the Zions Bank. He suggested that they might be for sale, and gave defendant two financial statements of Universal Leasing, dated March and November of 1969. The Universal Rockwell-North Star Marine merger was consummated on February 16, 1970.

Within a few days after the February 12th meeting, defendant contacted Donald Bennett, loan officer of the Zions Bank, to inquire about the 10,000 shares of Universal Leasing stock. Bennett told Hunter that the Bank held the stock as security; and that for any information about it he should go to the Souvalls. Upon his inquiry, the Souvalls sent Hunter back to the Bank; and authorized it to give him whatever information it had concerning Universal Leasing.

A critical aspect of this case is the sharp divergence in the evidence concerning the information furnished by the Bank about this stock. Hunter said that the Bank gave him only one financial statement on Universal Leasing and told him that was all the information it had. On the other hand, Mr. Bennett testified that he showed the defendant two financial statements, both dated 1969; that he pointed out that they were inconsistent; and advised the defendant to ascertain the value of the stock for himself. Of similar import is the testimony of John Langeland, another Bank official. He testified that he told the defendant that the Bank had no reason to have a current and reliable Universal Leasing financial statement; and that he advised the defendant to obtain whatever additional information he desired for himself by audit or otherwise. From the jury's answers to the interrogatories, as commented on below, it is obvious that they believed the Bank's version of this evidence.

It was the following month, on March 9, 1970, that the defendant signed the contract of concern here, in which he agreed to purchase the 10,000 shares of Universal Leasing Stock, along with the remaining collateral, for $133,500. It included provisions that trading restrictions on the stock should be removed; and that consent for the sale would be obtained from the bankruptcy

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court by the sellers, which provisions the latter complied with.

Later that month, on March 25, 1970, the defendant represented to Mr. Bennett that he was in the process of liquidating some stocks he held in New York, the proceeds of which would be applied on the contract. On that promise, Bennett turned over the certificates of Universal Leasing stock to Hunter. It seems...

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6 cases
  • Gustafson v. Alloyd Co. Inc., 93404
    • United States
    • United States Supreme Court
    • February 28, 1995
    ...see, e.g., Banton v. Hackney, 557 So.2d 807 (Ala.1989); Bradley v. Hullander, 272 S.C. 6, 249 S.E.2d 486 (1978); § & F Supply Co. v. Hunter, 527 P.2d 217 (Utah 1974), as well as private transactions, see, e.g., Towery v. Lucas, 128 Ore.App. 555, 876 P.2d 814 (1994); Jenkins v. Jacobs, 748 P......
  • Gohler v. Wood, 940306
    • United States
    • Supreme Court of Utah
    • July 5, 1996
    ...language of sections 61-1-1(2) and -22 and to read a reliance requirement into the Utah Act. They argue (i) that in S & F Supply Co. v. Hunter, 527 P.2d 217 (Utah 1974), this court interpreted the version of section 61-1-22 as requiring purchaser reliance and the legislature manifested its ......
  • Hermansen v. Tasulis, 990851.
    • United States
    • Supreme Court of Utah
    • May 17, 2002
    ...of some importance in determining whether to buy or sell.'" Gohler v. Wood, 919 P.2d 561, 564 (Utah 1996) (quoting S & F Supply Co. v. Hunter, 527 P.2d 217, 221 (Utah 1974)). It is clear to us that the defect in the property that caused substantial damage to the home, as occurred in this ca......
  • State v. Williams
    • United States
    • Court of Appeals of Utah
    • April 25, 2013
    ...and prudence would think to be of importance in determining whether to buy or sell a security.” See generally S & F Supply Co. v. Hunter, 527 P.2d 217, 221 (Utah 1974) (defining a material fact for purposes of securities fraud). ¶ 5 Williams asserts that these instructions were erroneous be......
  • Request a trial to view additional results

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