Zeitinger v. Steinberg

• Decision Date: 03 November 1925
• Docket Number: No. 18942.,18942.
• Citation: 277 S.W. 953
• Parties: ZEMNGER v. STEINBERG et al.
• Court: Missouri Court of Appeals

277 S.W. 953

ZEMNGER v. STEINBERG et al.

No. 18942.

St. Louis Court of Appeals. Missouri.

November 3, 1925.

Appeal from St. Louis Circuit Court, Franklin Miller, Judge.

"Not to be officially published."

Action by George E. Zeitinger against Mark C. Steinberg and another, copartners doing business as Mark C. Steinberg & Co. Judgment for defendants on demurrer, and plaintiff appeals. Reversed and remanded.

Foristel, Mudd, Hezel & Habenicht, and Christian F. Schneider, all of St. Louis, for appellant.

M. N. Sale, of St. Louis, for respondents.

SUTTON, C.

This is an action to recover damages arising out of the sale by defendants to plaintiff of 25 shares of the preferred capital stock and 5 shares of the common stock of the Great Eastern Paper Company, Limited.

The defendants demurred to the petition on the following grounds:

"First. That several causes of action have been improperly united.

"Second. That said amended petition is incoherent and presents no tangible or understandable issues; that it is without form and void, and violates almost every known rule of good pleading.

"Third. That the amended petition does not state facts sufficient to constitute a cause of action."

The demurrer was sustained by the court, and, the plaintiff declining to plead further, judgment was given for the defendants. Plaintiff appeals.

Defendants' learned counsel very properly concedes that the second ground of the demurrer is nothing more than the third ground put in different and more impressive language, so that in reality the petition is assailed on two grounds only, to wit: (1) That several causes of action have been improperly united; and (2) that the petition does not state facts sufficient to constitute a cause of action.

In the petition it is alleged, in substance: That on or about the 3d day of June, 1920, defendants were copartners, doing business under the firm name and style of Mark C. Steinberg & Co., and are so now engaged in the business of buying and selling and dealing in bonds, stocks, and securities, with offices on the mezzanine floor in the Boatmen's Bank building, in the city of St. Louis, Mo.; that on or about June 1, 1920, the defendants sent or caused to be sent through the United States mail to plaintiff a certain communication in print, which announced that they had for sale capital stock of the Great Eastern Paper Company, Limited, 8 per cent. preferred cumulative stock, hereinafter referred to, which they offered at price of par and accrued dividends; that said circular represented that said stock was well secured by net assets of over $3 for every dollar of such preferred stock, and listed such assets, which showed such value and by such circular represented that they had underwritten and guaranteed the said stock as being of such value as represented by said circular, and further represented that said preferred stock was a first claim or lien on the assets of said Great Eastern Paper Company, Limited; that there were no bonds or bonded indebtedness or other secured debts of said company at that time—and further represented and stated, "The tangible assets, according to appraisal, are $9,198,000, net worth," and detailed said assets as follows, to wit:

                Plant (including freehold land, railway
                  equipment, wharf, boats, pulp mill
                  hydraulic equipment, power development
                  and rights, sawmill, cottages).............   $1,253,000 00
                Freehold timber .............................       45,000 00
                Timber limits ...............................    7,200,000 00
                Logs cut and ready for mill .................       25,000 00
                Cash ........................................      450,000 00
                Inventory of uninstalled lumber equipment
                  etc. ......................................       25,000 00
                                                                ______________
                   Total ....................................   $9,198,000 00
                                    Liabilities
                Notes and accounts payable...................   $  392,808 44
                Reserve to complete plant....................       15,000 00
                Preferred stock .............................    2,500,000 00
                Common stock ................................    4,000,000 00
                Surplus .....................................    2,290,191 56
                                                                ______________
                                                                $9,198,000 00
                

That said circular also contained a statement as follows, to wit:

"It will be noted that the net book value of the preferred stock is $351.61 per share, and, after allowing for the preferred, the net value of the common stock is $157.25 per share."

That also, under the heading of "Properties," said circular stated:

"The Great Eastern Paper Company holds 460 square miles (approximately 300,000 acres) of timber limits under license from the crown, and 1,400 acres of freehold timber in Gaspe county, province of Quebec, on the St. Lawrence river. The plant comprises a barking mill, a sawmill with a capacity of 10,000,000 board feet a year, a ground wood pulp mill with a capacity of 20,000 tons a year, and a water power development with 5,000 horse power units installed and a total capacity of 27,000 horse power. The company owns also a railway of 7½ miles from the plant to the St. Lawrence, with the necessary rolling stock and equipment, and the dock, shipping facilities, lighters, etc., at this terminal."

That said circular also recited, under the heading of "Earnings," as follows:

"On the basis of the present current prices for lumber and ground wood pulp, which price should steadily increase, the net earnings of the company, after taxes and sinking fund, should greatly exceed a million dollars a year, without computing any gain from Canadian exchange."

That said circular next recited that the legal matters pertaining to the property and business of the company had been in the hands of several competent legal firms, naming them, and that the auditors of the company are Price, Waterhouse & Co.

That reference to the price of said stock is made as follows, to wit:

"When, as, and if issued and received, price 100 and accrued dividends, with 20 per cent. in common stock."

That the said circular further recited:

"The plant has been appraised by the Canadian Appraisal Company, Limited, and the limits and plant have been examined for us (Mark C. Steinberg & Co.) by Mr. E. Maltbyshipp, consulting engineer."

That the said circular further recited that the Equitable Trust Company of New York was the New York transfer agent of said company; the Mercantile Trust Company of New York were New York registrars; Bankers' Trust Company of Montreal, Montreal transfer agent, and. National Trust Company of Montreal, Montreal registrar.

That all of said representations and statements were made for the purpose of creating the belief and impression that the said stock was of great value, far in excess of its par value, well secured by property and assets of the said Great Eastern Paper Company, and that the business and management of said Great Eastern Paper Company was in competent and trustworthy hands and plaintiff herein so believed by reason of said representations and relied on them.

That said circular further recited:

"Application will be made in due course to list both classes of stock on the New York, Boston, Philadelphia, and Montreal Stock Exchanges."

That the meaning of such stock being listed, and is so generally understood, is that the same has been fully investigated by competent and reliable investigators, and after full investigation found to be sound and of full value, and plaintiff so believed and relied on reading said circular, and was so further assured by the defendants, their agent, servant, and employé, Milton K. Lederer, to whom plaintiff had been specially referred by said Louis M. Steinberg; that by said circular defendants falsely advertised that they were "investment bankers."

That plaintiff, having read the said circular and believing the representations therein contained, as aforesaid, he called on the said Mark C. Steinberg & Co. at their place of business, the mezzanine floor of the Boatmen's Bank building, Broadway and Olive street, St. Louis, Mo., on June 3, 1920, with said circular, and there engaged in conversation with reference thereto with said Louis M. Steinberg, who informed plaintiff that said Milton K. Lederer was their sales manager and attended to such matters, and that plaintiff would be well taken care of by the said Wilton K. Lederer.

That thereupon the said Milton K. Lederer engaged plaintiff in conversation with reference to said stock of the said Great Eastern Paper Company. That said Lederer had a copy of said circular on his desk, and, showing it to plaintiff, said, "Here is a highgrade stock investment," and, continuing, said, "I want to interest you in this, and want you to purchase as much of this as you can." That thereupon plaintiff informed said Lederer that he (plaintiff) would prefer to buy bonds, whereupon said Lederer stated to plaintiff; "This stock is as good as bonds, because the net assets of said company are over $3 for every dollar of such preferred stock. Said company has no bonded indebtedness and no secured indebtedness; therefore the preferred stock is a first claim on the entire assets over and above current liabilities."

That said Lederer also stated at the time aforesaid: "Said company (Mark C. Steinberg & Co.) has underwritten said stock, and that said Mark C. Steinberg is a director of said Great Eastern Paper Company." That said Lederer also stated that the said preferred stock had been listed on the New York Stock Exchange since the said circular was issued, that said firm (Mark C. Steinberg & Co.) could not afford to underwrite, and Mark C. Steinberg be a director of, said Great Eastern Paper Company unless they knew it was sound and safe, and that the common stock of said company would also be listed on the New York Stock Exchange in a short time....