Baker v. Mathew

115 N.W. 15, 137 Iowa 410

• Court: Supreme Court of Iowa
• Decided: February 17, 1908
• Status: Published

Opinion

Deemer, J.

Pursuant to negotiations between plaintiff and defendant they entered into a written contract of sale or exchange, the material parts of which read as follows:

Article of agreement by and between J. O. Baker, party of the first part, and J. M. Mathew, party of the second part. The party of the first part, in consideration of the promises and agreements hereinafter made by the party of the second part, hereby bargains and sells, transfers and conveys unto the party of the second part all of his stock of shoes and fixtures now located in what is known as the Mina Burgy store building in Marengo, Iowa. All of said stock of shoes which are good salable stock to be invoiced and taken at their actual cost to the party of the first part. The balance of said stock of shoes which are not good salable stock, to be taken at a price to be agreed upon between the parties to this contract, and if said parties cannot agree as to the price that shall be made upon the part of the stock of shoes which are not good salable stock, then said parties agree to allow A. M. Lyon to fix the price of said goods which are not good salable stock and if said parties shall disagree between themselves as to the part of said stock of goods that are good salable goods and those that are not good salable goods, then said matter shall be determined by the said A. M. Lyon, and both of said parties hereby agree to be bound as to both of said last named matters by the decision of the said A. M. Lyon. All fixtures in said store building to be taken at what’they are now actually worth and if said parties to this contract cannot agree upon what said fixtures are worth, then said price shall be fixed by the said A. M. Lyon. The invoice of said stock of goods to be commenced on December 26th and completed as soon thereafter as possible, and, as soon as completed, said stock of goods and fixtures shall be turned over to the same J. M. Mathew. In consideration of the foregoing promises on the part of the said party of the first part, the party of the second part hereby transfers, sells and sets over unto the party of the first part twenty (20) shares of stock in the Marengo Savings Bank, Iowa, ten (10) shares of stock in the Independent Mutual Telephone Company, of Shenandoah, Iowa, and ten (10) shares of stock in the Marengo Telephone Company of Marengo, Iowa, and five (5) shares of stock in the Long Distance Copper Telephone Co. whose headquarters are at Marshalltown, Iowa. Said stock to be accepted by the party of the first part at fifty-five hundred dollars ($5,500.00). The balance of the purchase price of said stock of goods to be paid as follows: One thousand ($1,000.00) dollars cash at the time the invoice of said stock of goods is completed. The balance of said purchase price to be paid by a good bankable note of the party of the second part with interest at 6 per cent. Said note to be executed by the party of the second part at the time the invoice of said stock of goods is completed and said note shall be payable one year from date of the completion of said invoice with interest at 6 per cent.

Plaintiff claims that defendant, who was the vice president and a director of the Marengo Savings Bank, falsely and fraudulently represented that the shares of stock in that bank which plaintiff was to receive in payment or exchange for his shoe stock and fixtures were worth $150 per share, whereas in truth and in fact they were not worth to exceed $50 per share; that he was induced by these representations to make the trade, and as a result thereof was damaged to the amount of $2,000. Defendant denied that he made any representations to plaintiff regarding the worth or value of the shares, admitted that they were worth but $50 per share, pleaded that plaintiff relied upon his own investigations regarding the value of the stock, and averred that in no event was plaintiff damaged because his stock of shoes was not worth to exceed fifty cents on the dollar of the invoice price. On these issues the case was tried to a jury, resulting in a general verdict for plaintiff in the sum of $2,000. The jury also found specially that defendant made the representations as claimed., and that he knew when he made them that the stock was not worth to exceed $50 per share. Upon every material issue of fact there was a conflict in the evidence, and the questions arising upon this appeal are almost wholly of law, and these are not seriously in dispute save as to their applications to the facts.

1. Examination of witness exclusion of evidence: discretion. Certain rulings on evidence are complained of, to which we shall first give attention. Plaintiff was asked upon cross-examination as to why he made inquiries of others (as he did) if he relied upon the statements made by the defendant regarding the value of the stock, This was objected to as incompetent and not cross-examination. The objection was sustained, and the ruling is complained of. The extent, subject-matter, and manner of cross-examination is a matter within the discretion of the trial court, and this discretion will not be interfered with on appeal save in exceptional instances. While the objection as made may not have been good, the court itself had the power to exclude the testimony upon any legal and tenable ground, although the objection itself might not be broad enough to suggest the real point. Other testimony disclosed the fact that plaintiff made his inquiries of other persons before he personally saw or had any negotiations with the defendant, and, of course, such outside inquiries might have been made and yet full dependence have been placed upon .defendant’s representations. It could not, of course, have been surmised that defendant would make any representations regarding the stock, and plaintiff, in making inquiries before seeing defendant, did not thereby indicate that he would not rely upon defendant’s representations. For this reason the court might in its discretion very well have sustained the objection. The trial court instructed, as we shall see, that plaintiff must have relied upon defendant’s representations, and it was a matter of argument as to whether he did or did not, in view of his previous inquiries. It was not for plaintiff to show that he relied wholly upon defendant’s representations. He may have inquired of others and yet have done so. It is not necessary that the representations should be the sole, or even the principal, inducement to the sale or trade; for it is enough to show that he relied to some extent thereon and but for them would not have made the deal.

2. Same. One Henderson, the cashier of the savings bank, was a witness for plaintiff, and testified that various matters affecting the value of the bank stock were before the board of directors of the bank. On cross-examination he was asked regarding the situation of these various matters of account, and as to how the loans came to be made. This was objected to as not proper cross-examination, and the objection was sustained. Of this complaint is made. What is heretofore said regarding the matter of cross-examination applies here, and perhaps with more force than to the preceding matter for the reason that it was an easy matter for defendant to have made the cashier his own witness and elicited the matter sought to be brought out on cross-examination. Moreover, strictly speaking, the matter was not cross-examination.

3. Evidence; hypothetical question. One Beatty was called as a witness for defendant, and a hypothetical question was propounded to him regarding the value of the shoe stock given by plaintiff in exchange for the stock. Objection to the question was sustained, and of this complaint is made. The . question embodied some matters not shown by the testimony when it was propounded, and it was not renewed after these matters were established. This was sufficient ground for excluding the answer. But in any event, no prejudice resulted, for defendant was permitted by other witnesses to show the value of the shoe stock, and this testimony was not attacked or in any manner contradicted.

4. Evidence: prejudice. Plaintiff was asked as to what reason he gave defendant for disposing of his shoe stock. This was objected to by defendant as self-serving and immaterial, but the objection was overruled. As it was a part of the very transaction in controversy, there was no error in the ruling. At any rate, the answer given was manifestly not prejudicial. Plaintiff said that he stated to defendant that it did not agree with his health to be indoors all the time, as he had to do in the shoe business. This was in no manner contradicted, and no claim is now made that it was untrue. So much for the rulings on testimony.

5. False representations: knowledge of falsity: proof of same: instructions. II. Defendant asked the following instruction: “ It is admitted that the defendant was an officer in the Marengo Savings Bank, a corporation, the stock of which was transferred from the defendant to the plaintiff in . # ^his acti°n- You are instructed that the mere fact that the defendant in this action was an officer in such corporation and a member of its finance committee is not in itself sufficient to show that the defendant had knowledge of the condition of said corporation or the value of the stock of said corporation, and the defendant in this action cannot be held liable unless you find that he had actual knowledge, and, if you find by a preponderance of the evidence that the defendant made the representations as claimed by the plaintiff, the plaintiff cannot recover unless' he shows that the defendant had actual knowledge. Knowledge would not be imputed to the defendant by reason of the ♦fact that he held the position of director and vice president in the Marengo Savings Bank and was a member of its finance committee.”

This was refused, and in lieu thereof the trial court gave the following:

If you find that the defendant made such representations as to the value of said bank stock, you will next proceed to consider and determine whether or not the defendant knew at said time that said representations were false. Upon this question you will consider and weigh all of the evidence introduced by both parties upon the subject as to whether or not the defendant had knowledge of the value of said bank stock at said time. You will consider all of the evidence as to the relations which defendant sustained to the bank, as vice president and director, the condition of the bank, so far as shown, the opportunities of defendant for knowing or ascertaining the condition of said bank and the value of its stocks. You will consider the evidence as to the overdrafts in said bank, and the losses sustained thereby, and whether or not the defendant knew of the same, and, if so, to what extent his knowledge thereof extended. In short, you will carefully consider and weigh all of the evidence which will throw any light upon the question as to whether or not the defendant knew the value of the bank stock at the time of said alleged representations, and if you find that the plaintiff has established by a preponderance of the evidence that the defendant knew that said bank stock was not worth $150 per share (if you find the said representation was made by defendant), then you will proceed to the further consideration of the case, but if you do not so find, your verdict will be for the defendant. In this connection you are informed that plaintiff must establish that defendant had actual knowledge of the value of said bank stock at said time, and had actual knowledge that it was not worth $150 per share at the date of said alleged representation.

Error is assigned upon the denial of the request, and the instruction given is challenged. Reliance is placed upon Boddy v. Henry, 113 Iowa, 462, in support of these assignments of error. The holding in that case seems to be misunderstood. It was there held erroneous for the court to say as a matter of law that an officer of a corporation would be held to know what it was his duty to know. It was not held that the opportunity to know should not be considered in determining whether or not the officer did know. Surely, in determining whether or not one does know a certain fact to be true, it is proper to consider his opportunity for knowing. True, the opportunity to know is not the equivalent of knowledge, and the trial court did not so instruct; but opportunity should unquestionably be considered in determining whether or not there was knowledge in fact. There was no error in either of the respects claimed.

6. Same: instruction: means of knowledge. III. Another instruction asked by defendant reads in this wise: “ You are hereby instructed that if the said J. C. Baker had equal and available means and opportunities for information to ascertain the value of the . s^oe^ °£ the Marengo Sayings Bank transferred to the defendant to prevent inquiry or investigation by the plaintiff, then you must find that the plaintiff made use of his means of knowledge before he can recover on the- ground that he was misled by the defendant.” This instruction is obscure, and probably is misquoted in the abstract. As applicable to this case this is not the law. Plaintiff had no such means of learning of the value of the stock as did the defendant. Defendant, as we have seen, was an officer of the bank and one of its managing directors. The instruction might be proper enough in some cases, but in this it would have been misleading and erroneous.

7. Instructions: burden of proof. IV. This instruction was also asked and refused: “ You are instructed that the law presumes that all persons transacting their business transact the same honestly and in good faith until the contrary appears, and that. ü , xt is presumed m this action, until the con-1 7 % trary appears, that the transaction between the plaintiff in this action .and the defendant was 'fairly and honestly made; and the plaintiff in this action must show by the preponderance of the evidence that the defendant in this action made a false and fraudulent representation upon which he had a right to rely, and did rely, at the time that he entered into the contract with the defendant, and unless he has so shown your finding will be for the defendant.” The trial court did instruct several times that the burden was upon plaintiff to establish the affirmative of all his allegations by a preponderance of the testimony, and that if he failed the verdict should be for the defendant. This is all that the law requires. If plaintiff did produce that quantity of the evidence, then he was entitled to the verdict, no matter if it did convict defendant of dishonesty. In order to find for plaintiff, the jury had to be convinced that the transaction was as plaintiff claimed it to be by the preponderance of the testimony, and, if they so found, they necessarily determined that the transaction was not an honest one. The instruction asked by defendant would not have aided them in the solution of this question, for the plain reason that the burden was properly placed where it belonged, and when it was made to appear that the defendant was not acting in good faith the presumption of honesty disappeared. If there be such a presumption as is claimed, it does not stand as substantive proof, but as a shield casting the burden upon the plaintiff of estabing his claim. There was no error here. The instruction is not in line with the authorities cited to sustain it. Compare it with Schofield v. Blind, 38 Iowa, 175, and Bixby v. carskaddon, 55 Iowa, 535, and the distinction will readily be observed. It is not contended that the instruction refused did more than east the burden upon plaintiff of showing want of good faith upon the part of the defendant, and this was what the instructions given did.

8. Instruction: fraud: reliance upon. Moreover, the instruction asked introduced a factor which should not be considered, and that is whether or not the misrepresentations were such as.plaintiff had a right to rely upon. By this instruction the matter was left to the uiry to determine whether or not ^ d d plaintiff had. a right to rely upon the representations. This is not the law, and the instruction was properly refused for this reason, if for no other.

9 Fraud: reliance upon representations: instruction. V. Instruction 13% given by the trial court and reading as follows is complained of: “ If you find in the manner required that defendant made the false representations as alleged, and that he knew the same were false an(l that plaintiff relied upon said false representations, and did not- know of its falsity, and was induced thereby to accept said stock, as heretofore explained, then it makes no difference whether he made inquiry from others, or whether he could have made inquiry from others, as to the value or condition of the stock, which would have given him knowledge of the true situation. Under said circumstances, if you so find, he was not required to make such inquiries.” This is said to be erroneous for the reason, not that it was incorrect abstractly considered, but because it was inapplicable to the facts. Defendant asked no instruction with reference to the subject-matter of this paragraph of the charge, and hence is in no position to complain unless the instruction as given was misleading. There is nothing in it .which suggests that plaintiff might'recover if he relied wholly upon the inquiries made of others. On the contrary, he was required-to show that he did in fact rely upon the statements of the defendant, and was induced thereby, and for no ofher reason, to make the trade. If he did, then it was immaterial what he ascertained from others. On the contrary, if he relied upon inquiries made of others and did not rely upon defendant’s representations, then, under all the instructions, he was in such a position that he could not recover. There was no error in giving the instruction, and in not stating the converse, in the absence of a specific request therefor.

We have now referred to all the errors assigned which are deemed of sufficient importance to justify consideration, and; finding no prejudicial error, the judgment must be, and it is, affirmed.