Staker v. Reese
| Decision Date | 24 September 1918 |
| Docket Number | 3619. |
| Citation | 97 S.E. 641,82 W.Va. 764 |
| Parties | STAKER v. REESE. |
| Court | West Virginia Supreme Court |
Submitted September 17, 1918.
Rehearing Denied Jan. 8, 1919.
Syllabus by the Court.
Where the managing officer of a corporation, with full knowledge that a sale of the assets thereof is about to be consummated approaches one of the stockholders, who is also a director of such corporation, for the purpose of purchasing his stock and upon inquiry informs such owner that there are no such negotiations pending or contemplated, and relying upon this statement, and in ignorance of such contemplated sale of the corporate assets, the owner of the stock parts therewith for a sum grossly less than its actual value as measured by the price at which such assets are being sold, the purchaser is guilty of fraud and deceit, which will sustain a civil action for the recovery of damages.
One to whom a representation has been made as an inducement to enter into a contract has the right to rely upon it as true quoad the maker, without making inquiry or investigation to determine the truth thereof.
Where one is induced to make a sale of his property for an inadequate price by false and fraudulent representations of the purchaser, the measure of his damages for such fraud and deceit is the difference between the amount received by him for the property and the actual value thereof at the time.
Where a director, who is the managing officer of a corporation, with full knowledge that negotiations are pending for a sale of the assets of such corporation, which are reasonably certain of consummation, for the purpose of securing the stock of another director, represents to him that there are no such negotiations pending or contemplated, and in reliance upon which, and without knowledge of such contemplated sale of the corporate assets, such other stockholder sells his stock for an amount materially less than it is worth, should the sale of the corporate property in contemplation be made, and such corporate assets as a result of the then pending negotiations are sold, the measure of damages to which the defrauded stockholder is entitled is the difference between what he received for his stock and what he would have received therefor as a participant in the distribution of the sale of the corporate assets, had he retained said stock.
Where the jury has been fully instructed upon a pertinent proposition of law, it is not error to refuse other instructions propounding the same legal principle.
Error to Circuit Court, Cabell County.
Action by L. A. Staker against L. R. Reese. Judgment for plaintiff and defendant brings error. Affirmed.
Holt Duncan & Holt and Campbell, Brown & Davis, all of Huntington, for plaintiff in error.
Simms & Staker, of Huntington, for defendant in error.
This suit was instituted for the purpose of recovering damages for the alleged fraud and deceit of the defendant in the purchase from the plaintiff of certain shares of stock of the New Rex Coal & Coke Company. Both of these parties were stockholders and directors of that company. The defendant was also the president thereof, and as such president he was the managing officer of the company, controlled its destinies, and was in full charge of its fiscal affairs. The plaintiff owned 49 shares of stock, together with certain shares of stock in another coal company, which, on the 15th day of March, 1917, he transferred to the defendant, receiving $9,500 for the New Rex Coal & Coke Company stock and $5,500 for his stock in the other company. The only thing involved in this litigation is the stock of the New Rex Coal & Coke Company. The plaintiff contends that, a few days before he made this transfer, he was approached by the defendant with the inquiry as to whether or not he desired to sell this stock; that he informed the defendant that he was perfectly satisfied with the company, and with the defendant's management of it; that he had perfect confidence in the defendant, and that he did not care to sell his stock; and inquired why the defendant made the inquiry. The defendant informed him, so he says, that he (the defendant) thought plaintiff might be dissatisfied with the stock, and might desire to sell it on account of a loss the company had sustained of $15,000 or $20,000, and that he further informed the plaintiff that the company was hampered in its business by embargoes on coal shipments, and by car shortages, and generally depreciated the value of the company's stock. Notwithstanding this, the plaintiff still expressed his satisfaction with the company's affairs, and his confidence in the defendant's management. A day or two later the plaintiff says that the defendant again approached him on the subject of buying his stock, and told him that he wanted to get it so that he could control the affairs of the company; that some of the stockholders were getting dissatisfied, and he wanted to be in position to control the company, so that they could not put him out. Plaintiff says that he expressed surprise that the defendant would desire to purchase his stock, inasmuch as they had always been close friends, the plaintiff had always relied on the defendant, and defendant had always expressed the greatest confidence in the plaintiff, and inquired why he did not attempt to purchase the stock of some of the other stockholders who were not so well satisfied, and also inquired of the defendant if there were any negotiations on for the sale of the company's property which might affect the value of the stock, informing the defendant that he had heard of cases where people had entered into negotiations for the sale of properties of this kind at a good price, and then purchased the stock from the holders thereof without their knowledge of such negotiations, and he states that the defendant assured him that there were no such negotiations pending or contemplated. About this time it appears that the plaintiff contemplated moving his office from the building in which it was located to the same building in which the defendant had his office. The plaintiff and his partner desired three rooms for the purpose of their offices, and the superintendent of the building showed them three rooms such as they desired, one of which was occupied by the defendant. The plaintiff suggested that the defendant would be willing to move into another room, so that he might get the three connecting rooms, believing that on account of their close association this would be perfectly satisfactory with the defendant; that a day or two after this time the defendant called the plaintiff over the telephone, and asked him to come to his office. In response to this invitation plaintiff says that he went to the office of the defendant, who then charged him with trying to get an office in close proximity to him, so that he could spy on the business of the company, with having no confidence in his management and having circulated among the stockholders false reports in an attempt to get them dissatisfied with his management of the company, in order to put him out, and asserted that one or the other of them would have to get out of the company, stating that he would either sell his stock or buy the plaintiff's. Plaintiff says that he remonstrated that he had not attempted to purchase any stock, that he had not circulated among the stockholders any report to get them dissatisfied--in fact, had thought of no such thing. After some further conference the defendant insisted on his making a proposition. He states that he made the defendant a proposition to take $15,000 for his stock in the two companies, $9,500 for his New Rex Coal & Coke Company stock and $5,500 for his stock in the other company; that in making this proposition he relied upon all of the statements that the defendant had theretofore made to him in regard to the condition of the company's affairs, and particularly did he rely upon the defendant's statements that there were no negotiations pending for the sale of the company's property; that he thought $9,500 for this stock was a good price, basing his opinion upon this information; that the defendant accepted this proposition, and told him to go and get his stock certificates; that he went and got them and returned in a very short time, and transferred them to the defendant, and the defendant gave him two checks covering the amount of the purchase price. A few days afterward the company's assets were sold for the sum of $325,000, more than $400 a share, $25,000 of which, however was paid to the broker as compensation for making the sale leaving $300,000 net to the company. The plaintiff, upon learning of this sale, so advantageous to the stockholders, inquired of the defendant if he had told him the truth when he represented to him, at the time he purchased his stock, that there were no negotiations pending for the sale of the company's property; and he insists that the defendant reiterated the statement that he had told him the entire truth in that regard, that at that time no negotiations were pending, and that the negotiations which resulted in the sale were begun only a day or two before the sale was actually consummated.
The defendant denies practically all of the statements made by the plaintiff, at least so far as they are in any wise material in the case. He denies that he ever made any statements to the plaintiff as to the condition of the company; he denies that he ever stated to him that there were no negotiations pending for the sale of the company's property; he denies that he ever approached the plaintiff for the purpose of buying plaintiff's stock, but insists that the plaintiff approached him and insisted upon selling his stock, and it was only upon the...
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