Mohney v. Davis

176 P. 31, 104 Wash. 209, 1918 Wash. LEXIS 1170

Opinion

Parker, J.

This action was brought by the plaintiff, Mohney, against the defendants, Davis and Beck, in the superior court for Spokane county, seeking recovery of damages upon eleven causes of action, ten of which were assigned to him. Trial upon the merits in that court sitting with a jury resulted in verdict and judgment awarding the plaintiff recovery upon seven of the assigned causes of action and denying him recovery upon the other four causes of action, one of tlie latter being taken from the jury, the court deciding, as a matter of law, that the plaintiff could not recover thereon. The plaintiff appealed from the judgment in so far as it denies him recovery upon the four causes of action. The defendants thereafter appealed from the judgment in so far as it awards Mohney recovery against them upon the seven causes of action.

. The claim of damages made by Mohney and his assignors rests upon the alleged false and fraudulent representations made by Davis, Beck and others, acting in concert with a common design, as to the quality and value of lands owned by the Skeena Valley Land Company, inducing Mohney and his assignors to purchase shares of the capital stock of that company.

In the fall of 1909, one Callahan approached Davis and Beck with a view to inducing them to become interested with him in the organization of a corporation to purchase and sell lands situated in the Cassiar land district, in British Columbia. Callahan was apparently acquainted with the lands which it was contemplated should he acquired by the corporation. Davis and Beck were both residents of this state and knew nothing of the quality or value of the lands or of the agricultural possibilities of the district in which they were situated. After arriving at an understanding with Callahan, one Crane, and some others, touching the acquisition of the lands, the capitalization of the company and the number of shares of capital stock to be left in the treasury of the company to he offered for sale to the public, articles of incorporation were prepared and signed by Callahan, Crane, Davis, Beck and two others, which were duly filed in the proper offices of this state, resulting in the due incorporation of the Skeena Valley Land Company in May, 1910. In June, 1910, the first payments were made upon the lands to the proper officers of the British Columbia government, and sometime thereafter title thereto was perfected to the satisfaction of that government, through which title the land company acquired its title to the lands. Callahan, Crane, Davis, Beck and two others were the original trustees named in the articles of incorporation; Mohney, Clemmer and Dr. Balsiger, two of Mohney’s assignors, having become interested in the company by the purchase of treasury stock, were, at a meeting on July 30, 1910, duly elected trustees of the corporation, and thereafter, it seems to us, exercised as much as, or even more, active control over the affairs of the company than did either Davis or Beck. In June, 1910, Crane was authorized hy the trustees to go to British Columbia, examine the lands and report upon their quality and value, with a view to checking the information on that subject acquired from the talk with Callahan. Crane reported to the meeting of July 30, 1910. This report was favorable as to the quality and value of the lands, which, with the talk of Callahan, furnished Mohney, Clemmer and Dr. Balsiger all the information which Davis or Beck ever had on that subject until long after the purchase of stock by Mohney and his assignors. Most of the stock purchased by these three was purchased after this meeting. Clemmer, however, had purchased some stock before then, but he did so upon information of the same kind and from the same source as Davis and Beck had acted upon, to wit, the representations of Callahan. Long after the stock purchase by Mohney and his assignors, the lands were discovered to be of little value. While Davis and Beck were, in law, officers of the company, they were practically only nominally so in so far as the active management of its affairs were concerned, Callahan having the active management, especially in so far as the sale of the treasury stock was concerned. This was accorded him by Mohney, Clemmer and Dr. Balsiger, as well as by Davis and Beck. This action was commenced in March, 1915, more than four years after Mohney, Clemmer and Dr. Balsiger had purchased their stock, become officers of the corporation, and possessed all the knowledge as to the value of its lands which was possessed by either Davis or Beck.

The verdict and judgment, in so far as it awarded recovery to Mohney upon the seven assigned causes of action, was evidently rested upon the theory that Davis and Beck, being officers of the corporation, were liable to those assignors as strangers to the corporation, and hence, in law, liable for the misrepresentations made by Callahan as to the value of the lands, inducing those assignors to purchase the treasury stock. The verdict and judgment, in so far as it denied to Mohney recovery upon his own cause of action and those of Clemmer and Dr. Balsiger assigned to him, was evidently rested upon the theory that those causes of action were barred by the three-year statute of limitations; or upon the ground that there were no false representations made by Davis or Beck to Mohney, Clemmer or Dr. Balsiger, and that they, at the time they purchased their stock, were possessed of all the information, and from the same source, as to the value of the company’s lands as were Davis and Beck. The judgment, in so far as it denied to Mohney recovery upon the remaining cause of action which was assigned to him by Henry Balsiger, a cousin of Dr. Balsiger, was evidently rested upon the theory that there was no evidence of any representations, for which Davis or Beck were responsible, inducing Henry Balsiger to purchase his stock.

It is contended in appellant Mohney’s behalf that the trial court erred in giving to the jury its instruction No. 4 as follows:

“(a) Having laid before you the character of the action and the claims of the parties as set up in their pleadings, I will now state to you the law that is to govern you in your consideration of the evidence. At the threshold of the case we are met by a statute of the state of Washington which provides that actions for fraud shall be commenced within three years after the party claiming the fraud discovers the facts constituting the fraud. In this connection I instruct you that if the plaintiff, or any of his assignors, knew of the facts which they now claim to be fraudulent (or if the plaintiff or any of his assignors were in a position where, by the exercise of reasonable prudence, they could or would have discovered such facts, or if they were cognizant of snch facts that would arouse the suspicion of a reasonably prudent man, and put him on inquiry to ascertain the truth or falsity of such facts) more than three years prior to the 9th day of March, 1915 (the day on which this action was commenced), then the action of the plaintiff or the cause of action upon the assignment of such an assignor is barred by the statute and no recovery can be had on such cause of action. And in this connection you may take into consideration the official connection, as director or other officer of the corporation, of the plaintiff or assignor in determining at what time he came into s%ich knowledge of the facts, or came into a position where it was incumbent upon him to make inquiry or investigation, (b) And I further instruct you that a director or officer of the corporation is chargeable with knowledge of all facts which the records of the corporation disclose.”

We have italicized, as counsel have done, the portions of this instruction of which they complain as being “particularly objectionable.” We have also designated the two portions thereof by letters (a) and (b), since we think they require separate treatment by us. We are to remember that the only question of error here to be considered is as to whether or not this instruction was erroneous and worked to the prejudice of the rights of Mohney as to his own cause of action and as to those of Clemmer and Dr. Balsiger assigned to him. Manifestly this instruction did not work to the prejudice of Mohney’s rights to recover upon the seven causes of action assigned to him by strangers to the corporation upon which he was awarded recovery by the verdict and judgment, since the verdict and judgment determined, in effect, that those causes of action were not barred. We are also to remember that Mohney, Clemmer and Dr. Balsiger were, as early as July, 1910, more than four years prior to the commencement of this action, trustees of the corporation, and at least as actively engaged in the management of its affairs as were Davis and Beck, and also that they had, at that time, .as much knowledge of the quality and value of the lands as had Davis and Beck, which knowledge came to them from the same source as that from which Davis and Beck received their knowledge upon that subject.

It is argued that the instruction ignores the rule, as claimed by counsel, that, in such cases as this, in order to start the statute of limitations running against the injured party, he must have such knowledge as will put him upon inquiry as to the wrong which he claims worked to his injury. Beading the portion (a) of the instruction as a whole, we think it does not ignore to Mohney’s prejudice the rule invoked by counsel, in so far as we are concerned with his own cause of action and those of Clemmer and Dr. Balsiger. In the first italicized portion of the instruction, the jury are told that, “if the plaintiff or any of his assignors (this for present purposes means only Mohney, Clemmer and Balsiger) were in a position where, by the exercise of reasonable prudence, they could or would have discovered such facts,” then such cause or causes would be barred. As to these causes of action, the question was not merely of Mohney, Clemmer and Dr. Balsiger having knowledge of facts suggesting inquiry on their part as to the quality and worth of the lands, but it .was a question of their knowledge and duty in that respect as officers of the corporation with Davis and Beck. It is not a question of their rights as strangers to the corporation against Davis and Beck. The peculiar position in which we find Mohney, Clemmer and Dr. Balsiger, we think, calls for their exercising reasonable prudence and care in their official positions at that time looking to the learning of the quality and value of the company’s lands, in so far as their rights against Davis and Beck are concerned. If they had been strangers to the corporation and to Davis and Beck, instead of being trustees and fellow officers with Davis and Beck, there might be some reason for the narrower application of the rule invoked by counsel for Mohney. We think the portion (a) of the instruction, read as a whole, was as favorable to Mohney, touching his own cause of action and those of Clemmer and Dr. Balsiger assigned to him, as he was entitled to under the facts of the case. Indeed, it might well be argued that the facts of the case did not call for any instruction of this nature.

Contention is made in Mohney’s behalf that the portion (b) of the instruction was erroneous. There may be circumstances under which an officer of a corporation would not be chargeable with knowledge of all facts disclosed by the records of the corporation, but this portion of the instruction was clearly without prejudice in this case, because the facts upon which recovery was sought were not facts disclosed by the records of the corporation. .This portion of the instruction was so clearly foreign to any question the jury was called upon to decide that we think it must be concluded that the jury were not thereby in the least prejudiced against Mohney, Clemmer or Dr. Balsiger.

Contention is made that the trial court erred in. taking from the jury the cause of action assigned by Henry Balsiger to Mohney and deciding, as a matter of law, that no recovery could be had thereon; and in this connection it is contended that the trial court erred in excluding the deposition of Henry Balsiger taken in Colorado. This purchase of stock was made hy Henry Balsiger through Dr. Balsiger, his cousin. We think there was no evidence that Davis or Beck made or authorized any of the representations which induced this purchase by Henry Balsiger, but that the acts and words of Dr. Balsiger, his cousin, induced the purchase; and this we think must be the conclusion to be reached, even though the excluded deposition be considered in evidence, which deposition we find among the exhibits and have read. We think the court did not err in deciding, as a matter of law, that there could be no recovery upon this cause of action, nor was there prejudicial error in excluding the deposition, since the result must have been the same had the deposition been read in evidence at the trial.

Some contention is made that the lands were acquired from the government of British Columbia in fraud of its rights, and that therefore the land company never acquired any title to the lands. A sufficient answer to this contention seems to be found in the fact that title was acquired to the several tracts of land from the government of British Columbia by proceedings and payment of purchase price to its satisfaction, and that it is not in any manner challenging such title or seeking the setting aside of it upon the ground of fraud. This contention is made as affecting the measure of damages, it being claimed that had the trial court not, in effect, assumed, in the presence of the jury, that the corporation acquired good title, but left that question for determination by the jury, it might have awarded a larger amount of damages upon the theory that the company had no title to any land, rather than upon the theory that it had title to land of some value. But this view at once shows that the assumption of the court was, in any event, without prejudice to Mohney, because he is not appealing from the award of recovery made to him by the judgment rendered upon the seven causes of action, and hence there is no question of error here touching the measure of damages as to those causes of action; and, since the jury declined to award him any recovery upon his own cause of action and those of Clemmer and Dr. Balsiger, manifestly there is no question here of the measure of damages as to those causes of action.

Some other claims of error are made in behalf of Mohney, but we think they are without merit as affecting his rights touching the four causes of action as to which he was denied recovery. We conclude that the judgment must be affirmed in so far as it denies to Mohney recovery upon the four" causes of action.

While Davis and Beck have appealed from the judgment in so far as it awards recovery to Mohney against them upon the seven causes of action, and supersedeas bonds have been executed and filed in their behalf staying the execution of judgment against them, there is no assignment of error or argument made here in support of their appeals. This condition of the record also calls for an affirmance of the judgment in so far as it awards to Mohney recovery against Davis and Beck upon the seven causes of action.

We note that both Davis and Beck have died pending these appeals. Some questions arose because of their deaths, which were, in a measure, disposed of by our decision rendered May 7, last, Mohney v. Davis, 102 Wash. 158, 172 Pac. 919. Our disposition of Mohney’s appeal upon the merits renders it unnecessary to here notice those questions.

The judgment is in all things affirmed. Neither party shall recover costs in this court.

Fullerton, Tolman, and Mitchell, JJ., concur.