Tuthill v. Sherman

• Decision Date: 22 November 1917
• Docket Number: 4193,4185
• Parties: S. G. TUTHILL, Plaintiff and Appellant, (and cross-respondent), v. P. F. SHERMAN, Defendant and Respondent (and cross-appellant.)
• Court: South Dakota Supreme Court

39 S.D. 464

165 N.W. 4

S. G. TUTHILL, Plaintiff and Appellant, (and cross-respondent), v. P. F. SHERMAN,

Defendant and Respondent

(and cross-appellant.)

South Dakota Supreme Court

Appeal from Circuit Court, Minnehaha County, SD

Hon. Joseph W. Jones, Judge

##4185-4193--Reversed, on plaintiff's appeal, and order modified

Boyce, Warren & Fairbank

Attorneys for S. G. Tuthill.

Cherry & Abbott

Attorneys for P. F. Sherman.

Opinion filed November 22, 1917

(See 36 SD 237, 154 N.W. 518)

WHITING, J.

This cause was before us upon appeal from a judgment rendered on a former trial, our opinion being reported in Tuthill v. Sherman, 154 N.W. 518. Reference is made to such opinion for a statement of the cause of action then pleaded. It will be seen that, upon the former trial, plaintiff sought to recover the alleged purchase price of certain insurance stock, such alleged right of recovery being based upon a written contract the material parts of which will be found recited in our former opinion, plaintiff's theory being that the contract was one of sale under which title to the ten shares of stock had passed to defendant, thus giving plaintiff a right to recover under section 2302, C. C. We held that the contract was not one of sale, but for a sale to be thereafter consummated; that the title to the stock had never passed to defendant; and that plaintiff could only recover under subdivision 2, § 2303, C. C. We suggested that it would become necessary for the appellant, before another trial, "to seek an amendment of his complaint." Plaintiff was allowed to amend his complaint. Thus, while the second action was brought upon the same contract, it was brought to recover the damages allowed under said subdivision 2, § 2303, C. C., being the difference between the agreed purchase price of said stock and the value of said stock on the 20th day of December, 1911, the time on or before which defendant had covenanted to consummate the purchase. Defendant, answering, alleged that the contract was not binding upon him because procured through fraud and deceit. Trial was had to a jury. There was verdict for plaintiff in the sum of $800 upon which a judgment was entered. From such judgment and orders denying a new trial each party has taken an appeal, which appeals have been consolidated for the purposes of presentation and disposition.

Plaintiff's assignments of errors present in reality but two matters: Were the facts proven sufficient to justify the court in submitting to the jury the question of fraud? If the answer to the first question should be in the negative, then was there such undisputed evidence as to the value of the insurance stock as to entitle plaintiff to a direction of verdict?

Defendant's assignments of error present but three matters: Was it error to allow plaintiff to amend his complaint? Was it error to exclude certain testimony offered upon the question of the value of the insurance stock? Was there error in the instructions given and in the refusal to give certain instructions?

We will consider the various questions raised in what seems to us to be their regular order, to-wit: (1) That relating to the amendment of the complaint. (2) That relating to the exclusion of evidence as to value of insurance stock. (3) Those relating to plaintiff's right to an instructed verdict, including therein: (a) Question of sufficiency of proof of fraud; (b) Certainty as to highest value of insurance stock under the undisputed evidence. (4) Those relating to instructions given and refused.

The decision of this court upon the former appeal left the trial court entirely free to determine whether an amendment to the complaint should be granted, and, if so, upon what terms. Defendant contends that the proposed amendment would so change the cause of action as to render its allowance an abuse of judicial discretion. Under both complaints plaintiff sought to recover upon the one contract, and, while, under the one, he was seeking to recover upon the theory that the contract was one of said under which title to the stock had passed to defendant, and, under the other, upon the theory that the contract was one for sale under which the title to such stock did not pass, the trial court did not abuse the discretion in it vested when it allowed the amendment. The right to amend was granted subject to the condition that, if plaintiff was ultimately successful, he should have no right to tax any costs accruing prior to the time of the amendment. Defendant contends that, under the uncontradicted showing made by him as to the expenses he had been put to in meeting the unfounded claims presented upon the first pleading, the terms imposed on plaintiff were too light. We think the order allowing the amendment should be modified so that, regardless of the final outcome of this cause, plaintiff be not allowed to tax costs for the first trial, but be required to pay such costs on the first trial as defendant would have been entitled to tax if he had been successful upon that trial.

The evidence showed that the insurance stock in question had no established market value. There was testimony as to what one party had given for some of such stock. There was received in evidence on behalf of plaintiff a written report or statement made by the insurance company to the insurance department of this state. After the receipt of this statement in evidence, defendant offered evidence based upon the theory that such financial statement was not conclusive evidence of the real value of such stock; and that defendant had a right to introduce evidence tending to show the real financial condition of the insurance company as a going concern, and as a basis for that to prove that the insurance company was a going concern having a line of agencies established at considerable cost and of a money value to the corporation. Such evidence was excluded. This was clearly error. it is the supposed value of a corporation as a going concern, and not necessarily the mere amount of its tangible assets and liabilities as shown by their book values that fixes the market value of stock. But even where there is an established market value, such market value is but prima facie evidence of the true value—the true value is not the supposed, but the actual, value of the corporation as a going concern. This is a proposition too well settled to admit of question at this date. Ewert v. Taylor, 160 N.W. 797; 2 Cook on Corporations (6th Ed.) § 581. The report to the state insurance department gave the "book value" of certain assets. It is at least questionable whether such a report standing alone, is competent evidence of value. We are inclined to agree with the following from Patterson v. Plummer, wherein the court was considering a report of a national bank made to the Comptroller of the Currency as evidence of the value of the bank's stock:

"What evidence has been offered to show that it had an actual value greater than its par value? None whatever. No testimony was introduced to show the actual value of the stock, and no evidence as to the actual value of the property of the corporation. The report of the cashier to the Comptroller is not evidence of the value either of the property or the stock. It does not purport to give an estimate of the value of either. It is apparent that it was not within the scope or purpose of the report to declare upon the actual values of the various items of property owned by the corporation, and it does not do so. It is also apparent that the sum deduced from such reports as book value are purely arbitrary, and have no reference to actual value. This can be seen at once by considering that the actual value of the stock would necessarily rise or fall with changes in the actual value of the property of the corporation, but the book value would not change. It would remain fixed and entirely unresponsive to conditions rendering the assets of the bank highly valuable or entirely worthless. ... Whether the report was admissible for any purpose we need not discuss or determine. It is sufficient to say that, it did not furnish evidence of the value of the assets, or data from which the actual value of the stock could be deduced."

But plaintiff contends that the ruling of the court excluding the evidence offered by defendant was nonprejudicial if erroneous, because, under the evidence received, the greatest possible value of the stock was not to exceed about $130 per share, and in giving a verdict for plaintiff of only $800 the jury valued the stock at $375 a share, an amount so clearly beyond all possible value that such stock could have had that, even with all the testimony sought to be introduced, no such value could have been established. We agree with plaintiff. In the light of all the evidence received tending to show the status of the business of the insurance company during the years immediately preceding December 20, 1911, such evidence being in part letters written by defendant, it is impossible to conceive that the stock of this company could have had a value much, if any, in excess of its par value, $100 per share. We are of the opinion that, if the witnesses had been allowed to advance opinions as to the value of such stock—basing such opinions on the report and all matters proper to be considered in connection therewith—and such witnesses had put such value at anywhere near $375 a share, the trial court would have been justified, of its own motion, in setting aside any verdict which showed that the jury accepted such valuation as correct.

Was plaintiff entitled, to a directed verdict? The motion for a directed verdict was based upon the ground "that the defendant has not proven any facts sufficient to constitute a defense," but plaintiff, instead of...