Shelton v. Healt

• Decision Date: 20 December 1901
• Citation: 50 A. 742,74 Conn. 265
• Court: Connecticut Supreme Court
• Parties: SHELTON v. HEALT.

50 A. 742

74 Conn. 265

SHELTON

v. HEALT.

Supreme Court of Errors of Connecticut.

Dec. 20, 1901.

Appeal from superior court New Haven county; George W. Wheeler, Judge.

Action by William R. Shelton against John E. Healy. Prom a judgment in favor of plaintiff, defendant appeals. Affirmed.

The substituted complaint alleged in part that the defendant on May 27, 1897, was the owner of 640 shares of the stock of the Charter Oak Brick Company, and that ever since its organization he had been a director and the president and manager of the company, and had full knowledge of its condition and business; that the business of said company prior to said day had been, and then was, unprofitable, and said company was then largely indebted, and was in embarrassed circumstances, all which was known to the defendant and that on the 18th of October, 1897, it made an assignment in insolvency; that on said 27th of May, 1897, to induce the plaintiff to exchange certain premises owned by him in New Haven, of the value of $15,000, subject to a mortgage of $8,000, for 240 shares of the stock of said company and $1,000 in money, the defendant "falsely and fraudulently represented to the plaintiff that said company was doing a very prosperous business, and that its business then and for a long time prior thereto had yielded net profits of $100 per day; that its stock was worth par, and that large dividends were earned and would be paid on the same; and as a further inducement to the plaintiff to make said exchange the defendant then and there undertook that said company should employ the plaintiff as its secretary at a salary of $1,200 a year, and promised him that said employment should be permanent"; that the plaintiff was thereby induced to make said exchange, and become a stockholder in said company, and was made its secretary; that said shares were then, and have ever since been, worthless; that said company was not then doing, and never had done, a prosperous business, and did not then earn, and never had earned, profits of $100 per day, or any profits, and had never earned profits from which dividends could be declared, but was then insolvent, as defendant well knew. The court found that said company was organized in July, 1895, with a capital stock of $25,000, divided into 1,000 shares of $25 each, which were all subscribed for by the defendant and Peter McQuaid and Daniel Col well; that said stockholders were elected directors, and the defendant elected president, and Colwell secretary, and McQuaid manager; that on said day a certificate of organization, sworn to by said directors, was filed with the town clerk of New Haven, showing that $10,000 of the capital stock had been paid in cash and $11,000 in property; that on said date no cash had been paid in, and no property transferred to said company; that on August 1, 1895, each of said stockholders transferred to the company certain property, which was credited to them upon the books of the company at a sum much greater than its real value, on account of the Stock issued to them; that in January, 1896, the stock of said company was increased to $35,000, of which increase $3,500 was issued to the defendant, and the same amount to said Colwell, neither paying anything therefor, and that afterwards 180 shares of stock surrendered by McQuaid were issued 120 shares to the defendant and 60 to Colwell, for which they paid nothing; that all the stock issued to defendant and Colwell and McQuaid was entered upon the books of the company as fully paid and nonassessable; that up to January 1, 1897, when defendant was elected manager of the company, he knew generally of the financial condition of the company and its business, and thereafter was thoroughly familiar with the same; that on the 20th of May, 1897, the defendant induced the plaintiff, who was 20 years of age, to exchange a house and lot of the value of from $13,000 to $14,000, subject to a mortgage of $8,000, for $1,000 in cash and 240 shares of said stock at the par value of $6,000; that, to induce the plaintiff to make said exchange, the defendant fraudulently represented that said company was doing a prosperous business; that its output was 6,000,000 brick a year; that then and for a long time it had yielded a net profit of $100 per day; that all the brick for the summer of 1897 were sold; that its stock was fully paid in cash; that the defendant did not know what it would bring, but that he would not sell his stock for 150; that a good income would come from the stock; and that the defendant promised the plaintiff that he should be employed as secretary of the company, permanently, at a salary of $1,200 a year. It is found that the company did very little business in 1897, and was unable to sell its product in that year; that at the time said transfer of stock...