Western Newspaper Union v. Woodward

• Decision Date: 08 August 1955
• Docket Number: No. 9617.,9617.
• Citation: 133 F. Supp. 17
• Parties: WESTERN NEWSPAPER UNION, a corporation, Plaintiff, v. Ned K. WOODWARD, Defendant.
• Court: U.S. District Court — Western District of Missouri

133 F. Supp. 17

WESTERN NEWSPAPER UNION, a corporation, Plaintiff, v. Ned K. WOODWARD, Defendant.

No. 9617.

United States District Court W. D. Missouri, W. D.

August 8, 1955.

Byron Spencer, and Joseph J. Kelly, Jr., of Spencer, Fane, Britt & Browne, Kansas City, Mo., Frederick W. P. Lorenzen of Dwight, Royall, Harris, Koegel & Caskey, New York City, for plaintiff.

Paul R. Stinson, Lawrence R. Brown and M. J. Bogutski, of Stinson, Mag, Thomson, McEvers & Fizzell, Kansas City, Mo., for defendant.

WHITTAKER, District Judge.

This action for rescission is now before me upon defendant's motion for a summary judgment in his favor. His contention is that the averments of the complaint, and of a portion of paragraph 4 of his answer (stipulated by the parties to be taken as true for the purposes of this motion and its decision), and the recitals of the affidavits and exhibits on file, show that all claims of the plaintiff against the defendant were liquidated, satisfied and discharged as the legal effect of a general release given by plaintiff to one W. W. Brown, in New York, on August 16, 1954, and that, therefore, defendant is entitled to judgment as a matter of law.

Reduced to essence, the complaint alleges that plaintiff, hereinafter called Western, a Delaware corporation, maintaining its principal office in New York City, owned 1,000 of the 1,500 issued and outstanding shares of capital stock of Midwestern Paper Company, a Missouri corporation, hereinafter called Midwestern, of which the defendant, a citizen of Missouri, was President, and owned 225 shares of its capital stock; that prior to, and on, March 29, 1951, W. W. Brown was one of plaintiff's directors and its Vice President and General Manager, stationed in its New York City office, and that E. L. Walters was its Vice President and Purchasing Agent, stationed in its Omaha, Nebraska office, and that both occupied "fiduciary positions" with, and were "influential and trusted employees of", the plaintiff; that defendant, knowing all this, did, prior to March 29, 1951, secretly offer a reward of 100 shares of the capital stock of Midwestern to each of Brown and Walters for the wrongful purpose of inducing them, and did thereby induce them, "to breach their fiduciary relationship to plaintiff" and "to assist and aid defendant in obtaining from plaintiff 1,000 shares of Midwestern Paper Company stock * * * owned by plaintiff", without "disclosure of their own interest", and, by this means and "fraudulent conduct", defendant, on or about April 4, 1951, fraudulently induced plaintiff "to sell to defendant said 1,000 shares of capital stock of Midwestern Paper Company at $125 per share at a time when the value of said stock was in excess of $300 per share"; that defendant, upon obtaining the certificates for the shares, caused plaintiff's name, as owner of the shares, to be stricken from the stock books and records of Midwestern, at its "offices in Kansas City, Missouri", and caused himself or his nominees or transferees to be recorded on said record as the owner or owners of said shares, thus depriving plaintiff of all its rights as the holder of 1,000 shares of the capital stock of Midwestern.

That plaintiff did not learn of the fraud until June of 1954, when it discovered that about April 12, 1951, defendant, in accordance with his earlier promise to Brown and Walters, transferred to Brown 100 shares of the capital stock of Midwestern for the purported consideration of Brown's promissory note in the amount of $12,500 (no part of which had been paid to the time of the discovery of the fraud in June, 1954, though, meanwhile, Brown had received approximately $18,000 in dividends on said 100 shares), and transferred to Walters 100 shares of the capital stock of Midwestern "for an actual consideration, if any, unknown to plaintiff", and that Walters had, to the time of the discovery of the fraud in June, 1954, received approximately $18,000 in dividends on said 100 shares.

That on August 16, 1954 "plaintiff demanded and received from W. W. Brown the 100 shares of capital stock of Midwestern Paper Company which had been transferred to him by the defendant as aforesaid", and, subsequently, (on September 2, 1954)¹ plaintiff notified defendant that, because of the fraud, "it rescinded said sale * * * and demanded defendant return to plaintiff 900 shares of the capital stock of said company, together with all dividends received thereon from April 4, 1951, to date, an amount unknown to plaintiff, but at least the sum of $162,000, less the purchase price of $112,500", but defendant failed to comply with the demand; that defendant is still the record holder of 900 shares of the capital stock of Midwestern; that plaintiff has no adequate remedy at law and that defendant should not, in good conscience, be permitted to profit by his perversion of plaintiff's fiduciaries, but should be compelled to return to plaintiff 900 shares of the capital stock of Midwestern and all dividends received thereon since the date of the fraudulent sale, less $112,500, the amount paid to plaintiff by defendant for the stock, and the complaint concludes with a prayer accordingly.

It is stipulated by counsel that paragraphs numbered 1, 2, 3, 6 and 7, of the complaint are true, and that all other parts of the complaint shall be assumed to be true for the purposes of this motion and its decision, and that, for the purposes of this motion and its decision, the following allegations of paragraph 4 of defendant's answer shall be assumed to be true, to-wit:

"That in August, 1954, a dispute arose between plaintiff and the said Brown * * *, that said dispute was settled by an exchange of releases between Brown and the plaintiff, and the transfer to plaintiff by Brown of said 100 shares of stock which had been transferred to Brown; that on receipt of said certificate the plaintiff sent the same to Midwestern Paper Company and a new certificate was issued and sent to plaintiff, accepted by plaintiff, and since that time the plaintiff has received dividends thereon; * * * that in addition, the plaintiff and Brown exchanged documents in the city, and county and state of New York, copies of which are hereto attached, marked Exhibits A, B and C, and made a part of this answer. * * *"

Exhibit A is an agreement between Brown and plaintiff, made and delivered in New York, and, omitting signatures, reads as follows:

"Memorandum of agreement between William W. Brown (hereinafter called "Brown") and Western Newspaper Union (hereinafter called "Western").

"Whereas, divers disputes have arisen between the parties hereto and they have determined to settle all accountings and disagreements between them as hereinafter provided,

"Now, therefore, in consideration of the premises and of the provisions hereinafter contained, the parties hereto do hereby agree as follows:

"1. Brown shall deliver to Western 100 shares of the capital stock of Midwestern Paper Company (which Brown represents and warrants is all the stock he or any member of his family owns or ever owned), duly endorsed in blank or accompanied by duly executed stock power for transfer of the same with the name of Western. This delivery shall be made without any cost or expense in any way to Western at the office of Dwight, Royall, Harris, Koegel & Caskey, on or before August 27, 1954.

"2. Western agrees to accept said 100 shares of capital stock of Midwestern Paper Company in full satisfaction of all its claims against Brown to the date hereof.

"3. Brown acknowledges that any claim or claims he has against Western have been offset by Western's claims against him.

"4. The parties hereto agree to enter into mutual general releases, one from the other.

"In witness whereof, this memorandum has been duly signed and sealed this 16th day of August, 1954."

Exhibits B and C are general releases of all claims made, executed and delivered by plaintiff to Brown, and by Brown to plaintiff, respectively, in New York City, on August 16, 1954. The only express reservation in the releases was "that nothing contained herein shall release said party from its obligations under an agreement between said parties of even date herewith".

There are two affidavits before me, one by W. W. Brown (filed by defendant), and one by Farwell W. Perry (filed by plaintiff).

Brown's affidavit recites that he became a director of plaintiff in 1938, and that he became its Vice President, Treasurer and General Manager in 1945; that defendant, for many years, had been offering to purchase plaintiff's stock in Midwestern, and that in 1951 he renewed his offer, to Brown, saying he would sell his stock for $150 a share or purchase plaintiff's stock for $125 per share, and that if plaintiff did not sell to him at that price he proposed to leave Midwestern and set up a new competitive business. Brown communicated this offer to plaintiff's president, Perry, who called a meeting of the directors of the plaintiff in New York City. At this meeting, Brown's affidavit says, "I repeated to the directors what I had said to Mr. Perry, and the directors decided to accept Woodward's offer. All of the directors, including myself, voted in the affirmative." He attaches a copy of the directors' resolution. It is dated March 29, 1951, and, omitting recitals of plaintiff's ownership of the stock, and a description of the several certificates evidencing the same, reads as follows:

"And whereas, N. K. Woodward, of 6810 Penn Street, in Kansas City, Missouri, has offered to purchase all of said 1,000 shares for the sum of $125,000,

"Now, therefore, be it resolved that this corporation accept the offer of said N. K. Woodward, and sell to him said 1,000 shares of capital stock of Midwestern Paper Company for the sum of $125,000, and that W. W. Brown, as Executive Vice President of this corporation, be, and he hereby is, authorized and directed to deliver or cause the delivery of said shares to Mr. Woodward,

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