Weissinger Tobacco Co. v. Van Buren

• Decision Date: 17 December 1909
• Citation: 135 Ky. 759
• Parties: Weissinger Tobacco Co. v. Van Buren
• Court: Kentucky Court of Appeals

Page 759

135 Ky. 759

Weissinger Tobacco Co. v. Van Buren

Court of Appeals of Kentucky.

December 17, 1909.

Appeal from Jefferson Circuit Court (Chancery Branch, Second Division).

SAMUEL B. KIRBY, Judge.

Judgment for plaintiff, defendant appeals. — Affirmed.

BULLITT & BULLITT for appellant.

WEHLE & WEHLE, A. S. BRANDEIS and LOUIS B. WEHLE for appellee.

OPINION OF THE COURT BY WM. ROGERS CLAY, COMMISSIONER — Affirming.

Charging that he was induced to purchase 20 shares of the capital stock of the Weissinger Tobacco Company by the fraudulent representations of its authorized agent, appellee, A. A. Van Buren, instituted this action against appellant, Weissinger Tobacco Company, to rescind the contract of subscription and to recover the sum of $2,000 which he paid for said stock, together with interest thereon from the date of payment. The court below gave judgment in favor of appellee, and the Weissinger Tobacco Company appeals.

In 1895 the Green River Tobacco Company owned a plant at Maysville, Ky., which it desired to sell. Henry Y. Weissinger, who had been connected with that company, persuaded several New York men to put in $50,000 for the purpose of buying the plant, with the understanding that he (Weissinger) would furnish $20,000 so as to raise the sum of $70,000, which sum he represented to be the purchase price of the plant. The Weissinger Tobacco Company was then formed. For the purpose of organizing this company, the New York capitalists subscribed for 500 shares, Henry Y. Weissinger for 194 shares, and William Marshall Bullitt and L. H. McHenry for 3 shares each. The subscription by Bullitt and McHenry were made in order to permit them to qualify as directors; they being selected for the purpose of representing the interests of the eastern subscribers. Thus it will be seen that 700 shares of stock were subscribed for in all. The Green River Tobacco Company, by deed dated July 1, 1905, conveyed the Maysville plant to the Weissinger Tobacco Company. The consideration expressed in the deed was $70,000 cash, and the receipt of that sum was acknowledged.

On July 11, 1905, the first meeting of the board of directors was held. Henry Y. Weissinger was elected president, and William Marshall Bullitt secretary-treasurer. The acquisition of the Green River plant was ratified. Weissinger then began to solicit subscriptions for the 300 shares of stock which remained in the treasury of the company. Appellee, A. A. Van Buren, was a former resident of Louisville, but for several years had been residing part of the time in Boston and the remainder of the time in Florida. He became acquainted with Weissinger while living in Kentucky. On August 10, 1905, he received a letter from Weissinger soliciting a subscription for some of the treasury stock of the Weissinger Tobacco Company. In this letter Weissinger used the following language: "You will observe this property was reported on by two auditors, and there is no question as to its value. We have paid $70,000.00 for the Green River Tobacco Company, and have organized the Weissinger Tobacco Company." Accompanying this letter was a prospectus purporting to furnish information with reference to the organization of the new company, and giving the amount of its capital stock, the value of its assets, etc. This prospectus contains the following statement: "Capital stock to be $100,000.00 at the par value of $100.00 per share. $70,000.00 has been subscribed by eastern capitalists, and the property of the Green River Tobacco Company has been purchased with the $70,000.00, leaving a balance of $30,000.00 unsold, which will represent the cash working capital." On the second page of the prospectus, under the heading, "Distribution of Capital," there is this line: "Cash paid for the plant, $70,000.00."

From the foregoing it will be seen that Weissinger represented to appellee that stock worth $70,000 had been subscribed for, and that $70,000 had been paid in cash by the Weissinger Tobacco Company for the plant of the Green River Tobacco Company. As a matter of fact, only $50,000 was paid for the plant, and the record does not disclose that any further sum was ever paid. It does appear, however, that Weissinger represented to Bullitt that he (Weissinger) was to pay $20,000 additional to the Green River Tobacco Company. It was afterwards ascertained by the members of the directory that Weissinger was only expecting to pay $12,500 for the plant, and in return for that was proposing to get $20,000 in stock of the Weissinger Tobacco Company. In other words, he was to get a commission of $7,500, and the real purchase price of the property was $62,500, instead of $70,000. As a matter of fact, none of the $20,000 was ever paid. Therefore, when Weissinger...