Shores v. Hutchinson

• Decision Date: 17 July 1912
• Parties: SHORES et ux. v. HUTCHINSON et al.
• Court: Washington Supreme Court

125 P. 142

69 Wash. 329

SHORES et ux. v. HUTCHINSON et al.

Supreme Court of Washington

July 17, 1912

Department 2. Appeal from Superior Court, Pierce County; C. M Easterday, Judge.

Action by E. A. Shores and wife against Ernest Hutchinson and others. From a judgment dismissing the action, plaintiffs appeal. Affirmed.

Gordon Easterday & Askren, of Tacoma, for appellants.

Bates Peer & Peterson, of Tacoma, for respondents.

ELLIS J.

This is an action by E. A. Shores and wife against Ernest Hutchinson and wife to set aside a transfer and conveyance by plaintiffs to the defendants of certain improved lots in the city of Tacoma, with the household furniture therein, certain timber lands in Thurston county, and certain standing timber in Jefferson county, made in exchange for 320 shares of the capital stock of Michigan Furniture Company, hereinafter called the company. The company had a capital stock of $150,000, divided into 1,500 shares of a par value of $100 each. 1,255 shares of an aggregate par value of $125,500 had been issued. The grounds upon which rescission is sought are alleged fraudulent representations by the defendants as to the amount and value of the assets of the corporation and as to the value of the stock, and misrepresentation and concealment as to the extent of its liabilities. A trial on the merits resulted in a dismissal of the action. The plaintiffs have appealed.

The evidence is voluminous and conflicting. No good purpose would be served by reviewing it in detail. It will suffice to say that, upon a careful consideration of the statement of facts we are satisfied that the following facts were established by a fair preponderance of the evidence. In the latter part of January or early in February, 1911, the respondent Ernest Hutchinson, who had recently retired from the presidency and management of the company, desiring to dispose of his stock therein, placed it in the hands of the real estate firm of Fettig & Busselle for sale, advising them to call upon the appellant E. A. Shores, who, as it appears, had formerly evinced some interest in the concern. After considerable negotiation, which was conducted mainly if not wholly by these agents with the appellant E. A. Shores, an agreement was reached by which the 320 shares of stock were to be transferred to the appellants in exchange for the property sought to be recovered in this action. A contract evidencing this agreement was executed by the appellants and respondents on February 16, 1911. It provided that, if the respondents within 30 days from the date of the contract deliver to the appellants the 320 shares of stock duly and regularly issued to E. A. Shores, the appellants would thereupon deliver their deeds of the property to the respondents. The respondents, at the time of the signing of the contract, delivered the stock to the appellants' attorney, and on February 18, 1911, it was transferred to the appellant E. A. Shores upon the books of the company. The stock certificate was actually delivered to Shores personally about March 10, 1911. While he testified in effect that he did not consider himself the owner of the stock until he delivered to respondents deeds of the property on March 14, 1911, it is undisputed that, between the making of the contract, February 16th, and the date of the delivery of the deeds to the respondents, March 14th, he attended several meetings of the stockholders, and was recognized by the company as the owner of the stock. At these meetings it appears that the affairs of the company were fully discussed, and at one of them, held on March 11, 1911, a detailed statement of its financial condition was read, showing that $30,000 was immediately required to keep the company a going concern, and the appellant E. A. Shores was then appointed as a member of a committee to devise some plan for financing and reorganizing the company. He also attended an adjourned meeting of the stockholders on March 14, 1911, before delivering the deeds, at which meeting a motion was carried to endeavor to get each stockholder to pay a 30 per cent. cash assessment, or put up 50 per cent. of his stock for the purpose of raising operating capital. In the latter part of February, 1911, Shores went out to the plant and had a conversation with one Bradner, the manager of the factory, in which the management, condition, and prospects of the company were discussed, and Shores then told Bradner that the company ought to have $20,000 at once, thus showing that he then realized that the concern was in immediate need of working capital to make it pay and to preserve a value in the stock. There was also evidence that both Shores and his son visited the plant and looked over the goods and materials on hand, and that Shores and his attorney made an examination of the stock books and records of the company. While it appears that, prior to the transfer of the stock on February 18th, the officers of the company declined to give Shores information and discouraged the purchase of the stock, after that time they accorded to him every opportunity to examine the books and look into the affairs of the company. There was also evidence that Jones, the then president of the company, and certain other stockholders advised Shores not to purchase the stock. He seems to have entertained the idea that these persons were trying to depreciate the stock in order to purchase it at a low figure themselves, and their advice merely whetted his determination to become a stockholder.

We fail to find that either the respondent Hutchinson or his agents Fettig and Busselle made any representations as to the value of the stock or as to the affairs of the company, which could have reasonably misled the appellants as to what they were trading for, or as to its worth. Shores testified that Hutchinson told him some of the stock had been sold for 90 cents a share, and that it was worth that. While it seems to be admitted that either Hutchinson or his agents did tell Shores that stock had been sold recently at that figure which was true, Hutchinson, Busselle, and Fettig all testified that no representation was made at any time by any of them as to the actual value of the stock. They testified that, at the time of the signing of the contract on February 16, 1911, Busselle told Shores that they placed no value on the stock because they did not know what it was worth, and that Shores answered in effect that he did not want any information from them, as he preferred to get his information 'first-handed.' Certain balance sheets and statements of bills payable came into Shores' hands pending the negotiations. He claims that these were given to him by Hutchinson as representing the actual cash valuations of the property, accounts, and debts of the company. The evidence is by no means plain that any of these were furnished to him by Hutchinson or his agents, but it is plain that some of them were secured by him at the meetings of the company which he attended. In any event, they were what they purported to be--mere statements made from the...