Beeman v. Richardson

OLNEY, J.

The plaintiff brought suit to recover from the defendants the sum of five thousand five hundred dollars, which he had paid a corporation known as the Richardson, Holmes

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Lamb Company for fifty shares of its capital stock. The cause of action as set out in the complaint was that the defendants were the stockholders and officers of the corporation; that the plaintiff had been induced to purchase the stock by their fraudulent representations made to him, pursuant to a conspiracy between them to defraud him, and that the stock had proven worthless. After trial the lower court made findings in substantial accord with the averments of the complaint, and gave judgment for the plaintiff. The defendants . appeal, and the sole grounds urged for reversal are that there is no evidence to sustain the findings as to (1) fraudulent representations, (2) conspiracy, and (3) damage to the plaintiff.

[1]

As to the finding of fraudulent representations, it is not necessary to detail all the representations which are

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alleged and found to have been made and the evidence concerning each. If the finding is sustained as to one material fraudulent representation, it is enough. That there was evidence of one representation of this character is certain.

[2]

The complaint alleged, the plaintiff testified, and the court found that to induce the plaintiff to make the purchase it was represented to him that the company was a prosperous one, with a surplus of forty thousand dollars and a rapidly growing business which required more capital, and that the stock was being sold for the purpose of obtaining it. The facts of the matter, practically uncontroverted, were that the corporation was in straitened circumstances, so straitened that it failed five months later and paid its creditors but seventy cents on the dollar and its stockholders nothing; that instead of a surplus of forty thousand dollars it had, according to its own books, a surplus of only a little over six thousand dollars; that the stock was sold the plaintiff not solely for the purpose of securing more capital for the company, but also for the purpose of securing funds to meet pressing personal obligations of the defendants, and that the plaintiff’s money was in part so used. With this contrast between the representation and the facts, it would seem well-nigh beyond argument that the representation was false, fraudulent, and material. The representation that the company was prosperous and had a surplus of forty thousand dollars, when the fact was that it was hard pushed for money and had a book surplus of but six thousand dollars, was more than a mere statement of opinion upon which the buyer had no right to rely. The statement that the sale was to secure more capital for the company was made when it was the intention that some at least of the plaintiff’s money, in case he purchased, should not be so used. The plaintiff conceived, and it was in effect represented to him, that he was buying treasury stock, the purchase price of which would go to strengthen the company, when it was the intention to sell him, and there was sold him in fact, stock already issued, so that a part of his purchase price was diverted from the company to the defendants.