W. W. Smith v. H. H. Reynolds

• Decision Date: 07 January 1920
• Citation: 108 A. 697,94 Vt. 28
• Parties: W. W. SMITH v. H. H. REYNOLDS ET AL
• Court: Vermont Supreme Court

108 A. 697

94 Vt. 28

W. W. SMITH v. H. H. REYNOLDS ET AL

Supreme Court of Vermont

January 7, 1920

November Term, 1918.

ACTION OF TORT for deceit in the sale of stock in certain telephone companies. Plea, the general issue. Trial by jury at the March Term, 1917, Chittenden County, Butler, J., presiding. Verdict and judgment for the plaintiff. The defendants excepted. The opinion states the case.

Judgment reversed, and cause remanded.

R E. Brown and Dunnett, Shields & Conant for the defendants.

V A. Bullard and C. P. Cowles for the plaintiff.

Present WATSON, C. J., HASELTON, POWERS, TAYLOR, and MILES, JJ.

OPINION

TAYLOR

The plaintiff brought suit against H. H. Reynolds, Fred Howes, and several others to recover damages for alleged deceit in the sale of certain stock in the Washington Consolidated Telephone and Telegraph Company. Service was had only upon defendants Howes and Reynolds, and they will be referred to when speaking of the defendants. The trial was by jury with verdict for the plaintiff against both defendants, who made separate and independent defences. They bring the case here on exceptions, claiming error in the admission and exclusion of certain testimony, in remarks by plaintiff's counsel in the presence of the jury, in certain portions of the court's charge, and in the refusal of the court to comply with certain requests.

At the time in question defendant Howes lived in Burlington, where he was engaged in the meat business with one Brown under the firm name of Fred Howes & Company. Defendant Reynolds, whose home was at Peterboro, N.H., was formerly a traveling salesman for a concern in Boston and had for some time been doing business with Howes and Brown. The transaction in question involved three telephone companies located in the state of Washington and incorporated under the laws of that state. Howes first became interested in the telephone business as a stockholder in the Washington Southern Telephone Company and assisted agents of the company in disposing of considerable of its stock in Burlington and vicinity. He interested Reynolds in the stock of the Southern and in October, 1910, Reynolds went to Washington in the interest of the Eastern stockholders. While there a plan was evolved to secure the property and franchises of an independent company, known as the Local and Long Distance Telephone Company. Finally to accomplish the consolidation of these companies a third, known as the Washington Consolidated Telephone & Telegraph Company, was organized. The Consolidated Company took over the Southern by exchange of stock, and acquired the line and other property of the Long Distance through purchase by Reynolds at a receiver's sale, but subject, as it turned out, to an incumbrance to secure outstanding bonds of the corporation. The funds with which to make this purchase were furnished by Howes and Brown and they received in return 150 shares of the common stock of the Consolidated, one-third of which they transferred to Reynolds. Reynolds and Howes became trustees of the new corporation, and at the organization of the board of trustees Reynolds was made president, and Howes treasurer. Soon after Reynolds resigned as president and Howes was elected to fill the vacancy. In the summer of 1911, arrangements were made with one Reed to act for the corporation in the sale of stock on commission, and Reynolds under Reed's employment engaged in the sale of stock in Burlington and vicinity. This arrangement continued until May, 1912, when Reed and Reynolds became partners in the undertaking. Howes cooperated actively with Reed and Reynolds in the sale of stock and they frequently referred prospective purchasers to him. There was evidence tending to show that Howes sold some stock on his own account, or, at least, received some of the commissions on sales.

The negotiations for sale of stock to the plaintiff were begun by Reynolds some time in October, 1911. While they were pending the plaintiff interviewed Howes at Reynolds' suggestion, and finally Howes' partner, Brown, came into the transaction. Plaintiff was induced to purchase preferred stock to the amount of $ 3,500, paying therefor by a real estate transaction with Brown of which we will have occasion to speak later. The deal was closed October 28, 1911, and two certificates of stock, one for twenty shares and the other for fifteen shares, were issued to the plaintiff under date of November 1, 1911. The claimed misrepresentations were that certain well-known business men of the vicinity, who were named, had bought and paid cash for the stock; that the preferred stock of the corporation was paying and had paid a dividend of eight per cent.; that the company was operating in the city of Spokane, had a switchboard, central offices, and between five and six hundred telephones there; that they had built in Spokane and were building a line from there to Seattle which they had about half done; that they owned the franchises of the line and there was absolutely no competition; that the stock was a perfectly safe investment; and that the defendants concealed the fact that the corporation was then insolvent.

Exceptions 1 and 2 were taken to the action of the court in striking out as not responsive certain answers of defendant Howes when under examination as a witness for the plaintiff. Having testified that he was treasurer in name during the time in question, he was asked: "What do you mean when you say you was only treasurer in name; do you mean to say that you did not do your duty as treasurer of the company?" Witness answered: "I think it was voted for Mr. Reed to handle the money." Against the objection that the witness' answer indicated that it was the duty of some one else to handle the money and not his duty, the answer on motion, was striken out. Later, having testified that he tried to perform his duty as treasurer of the company, as far as there was any duty assigned him, and that the money raised by the sale of stock was handled by another party, he was asked, "You were the treasurer?", and answered, "Yes, sir; but the other man was voted by the company to handle the money. " This answer was striken out on motion against the objection that it was responsive. The rejected answer to the latter question was clearly not responsive; and, as to the former, it depends upon the construction to be given the question. If it called for an explanation, the answer was responsive; but, construing the question as defendants' counsel did in stating their objection, it was not responsive. While the explanation that the witness attempted to give was pertinent to the inquiry, it was discretionary with the court whether it should be permitted at that time. Besides, if the vote referred to was a matter of record, plaintiff could not thus be deprived of the right to object to the form of proof. Defendants' counsel evidently did not regard the explanation as of any special importance, for they omitted to call the witness' attention to the matter when on the stand in defence, though he testified at length as to Reed's relations to the company. These exceptions do not disclose reversible error.

Exceptions 3, 4, and 5 relate to the admissibility of certain documents. Plaintiff's exhibit 2 was a statement of account between Fred Howes & Company and the corporation in which Howes & Company are charged with several items of stock sold, including that sold to the plaintiff, and credited, among other things, with commissions. It was offered in connection with Howes' testimony when called as a witness by the plaintiff as an admission in contradiction of his testimony that he had no part in selling stock to the plaintiff, and that he never received any commission on stock sold. It was received as "one of the acts of the defendant in connection with the transaction," against the objection that there was no evidence tending to show that Howes made the statement or knew anything about it. Howes had testified that the paper was something that Reed had made up and that he did not remember anything about it. He admitted that he had no doubt that it was one of the papers that he delivered to the plaintiff. It appeared that shortly after the plaintiff purchased his stock he was notified that he had been elected secretary and treasurer of the corporation; that thereupon he called for the books and papers; and that Howes, in compliance with the request, delivered certain papers to him. Plaintiff testified that the exhibit was among the papers so delivered. Any doubt in this regard is dispelled by evidence later introduced by the defendants.

Plaintiff's exhibit 4 consisted of ten typewritten sheets which the evidence tended to show contained an audit of the books of the company made by an expert accountant after the plaintiff called for the books, and which was delivered to him in lieu thereof by the defendants. So far as appears, only two of three sheets were called to the jury's attention, one a duplicate of exhibit 2, and the other a list of bonus stock, which tended to show that certain of the men, whom it was claimed the defendants represented as having bought and paid for stock, had received it as a gratuity. It was objected that the papers were not competent evidence of anything stated therein. As the record stands we have no occasion to consider the other pages of the exhibit. The exceptions to the admission of these two exhibits present the same question.

Ordinarily a statement to be an admission must be made by the party against whom the same is claimed to be an admission, or by his authority, or by some one having authority at the time to speak for him in the premises. Goehrig v Stryker, 174 F. 897; 16 Cyc. 1037. But the circumstances may be such that a party...