Reed v. Cooke

55 S.W.2d 275, 331 Mo. 507, 1932 Mo. LEXIS 676

• Court: Supreme Court of Missouri
• Decided: November 3, 1932
• Status: Published

Opinions

FERCUSON, C.

This is an action for damages for fraud and deceit. Plaintiff charges that-he was induced by false and fraudulent statements of defendants to'purchase 250 shares.of bank stock, having á market value of $95 per share, at a price of $135 and to resign a position in -which, he was earning a salary of $4,000 per year upon the promise of -defendants,. stockholders in the .bank, to procure ,his appointment as general manager of said bank which they failed to do. Actual damages in the sum of $30,000 are alleged and punitive damages in the sum of $15,000 asked. The defendants filed separate, but identical, demurrers to the petition on the ground that “said petition fails to state a cause of action.” The demurrers were sustained and plaintiff, refusing to plead further, appealed from the .judgment dismissing his petition. The petition is as follows:

“Comes now the above named plaintiff and for his first amended petition states; that on the first day of October, 1923, and for a long time prior thereto, he was in the employ of the United States Government as a National Bank Examiner at a salary of $4,000 per year, and as such examiner had gained much knowledge of the banking business, and is and was at all said times an experienced banker and capable and competent to manage and direct the affairs of a bank; that as a result of years of dealing with bankers and financial interests, plaintiff had built up a large acquaintance and personal following among such people living in the states of Missouri, Kansas and territory adjacent to and tributary to Kansas City, Missouri: that as a basis for the prosecution of the banking business in said territory, said acquaintance and following was of great value.

“That sometime shortly prior to October 1, 1923, the defendant Thornton Cooke, and all of the above named defendants, entered into an unlawful and malicious conspiracy to cheat and defraud this plamtiff, and in order to carry out and give effect to their wrongful designs, the defendant Thornton Cooke acting for himself and as agent or trustee for the other above named defendants, stated and represented to this plaintiff that he, Thornton Cooke, and certain of his associates, including all of the above named defendants owned a controlling interest in the stock of the 12th Street Bank of Kansas City, Missouri, and that he, Thornton Cooke, and his associates, the above named defendants had assembled and pooled some 250 shares of the capital stock of said bank, and that said stockholders had appointed the said Thornton Cooke agent or trustee to represent the above named owners of the stock included in said pool in the disposal and sale of same at an agreed and fixed price of $135 per share, and that the Board of Directors and officers of the 12th Street' Bank had also appointed the said Thornton Cooke, as agent for the bank to select and designate a man to act as advisor and general manager to assist the officers and board of directors of said 12th Street Bank in building up and conducting the business of same, and that the person selected for that position by him, Thornton Cooke, would be required to purchase said 250 shares of stock at the price above mentioned; that as an additional assurance and inducement for plaintiff’s purchasing said stock at the price of $135 per share, the said Thornton Cooke stated and represented to this plaintiff that he, Thornton Cooke, and his associates owned a controlling interest in the stock of said bank and by virtue of that fact were in a position to demand, and would request, and he did guarantee to this plaintiff, that the Board of Directors of said bank would appoint or select plaintiff to the office or position of advisor and general manager in said bank if he' purchased the above mentioned 250 shares of stock at the price of $135, and that as such officer or employee this plaintiff could and would exercise great power and influence in directing the affairs of the said 12th Street Bank; that the said Thornton Cooke did at said time state and represent to plaintiff that he had consulted the Board of Directors of said Bank with reference to Ms selection of this plaintiff for the said position as Advisor and General Manager, and that said Board of Directors had informed h:m, Thornton Cooke, that this plaintiff’s elevation to that office or position was agreeable and desirable, and that as compensation for such services as he might render said bank he was to and would receive a salary from said bank of at least $300 per month, for the time of his connection with the bank, which-should and would be simultaneous with his purchase of said stock until such shares of stock were worth and were of the market value of $135 per share, and for such longer time as such employment was mutually agreeable; that at said time the shares of stock of said bank were only of the approximate market value of $95 per share.

“That plaintiff relying upon the statements and representations of the above named defendants, acting through and by their agent, servant or trustee, Thornton Cooke, and believeing that the said Thornton Cooke was acting as agent and representative of said bank in the selection for it of an advisor and General Manager, and believing that the said Thornton Cooke, and his associates owned a controlling’ interest in the stock of said bank, and that they were in a position to and would insist upon, and could secure, his appointment, by the Board of Directors of said Bank, to the position as General Manager of said bank, and at the salary heretofore mentioned, and that as said officer or agent he could and would be permitted to outline, suggest and direct the business policies of said bank, subject to the approval of said Board of Directors, plaintiff did thereafter make an examination of said bank, and as a result of same became convinced that if he were in a position to help direct or control the policies of said bank he could in time build up the business of said bank until the shares of stock would be worth $135 per share or more, and this plaintiff did, as a direct result of said promises and representations of the defendants, as above mentioned resign his position as National Bank Examiner, and did thereafter on or about the first day of November, 1923, purchase of defendants the said 250 shares of bank stock at the. price of $135 per share.

“That plaintiff did not secure the position as General Manager of said bank and defendants did not, at any time after the purchase of said stock by plaintiff, secure or attempt to secure such an appointment, office or position for plaintiff as per defendant’s promises and agreements heretofore named, and did not control nor direct the policies nor officers of said bank, nor majority of the stockholders of said bank, and did not own, control or represent a majority of the shares of stock of said bank, and the said Thornton Cooke was not the agent, representative nor designated or named as the person to select an advisor and general manager for the Board of Directors of said bank, and the statements, representations and promises made to this plaintiff by the defendants by and through their agent or trustee Thornton Cooke were false and fraudulent, and were at said time by said defendants, and all of them, known to be false and untrue and were made and uttered by defendants for the purpose and with the intent to cheat and defraud this plaintiff, and at the time said representations and promises were made, the defendants had the fixed intention and purpose of not delivering to or securing for plaintiff any office as general manager, or of placing him in any position where he would participate in the management of said bank, or of attempting to do so, and they had the fixed purpose and intention of not paying or having paid to him a salary of at least $300 per month until such time as the said bank stock reached a marketable value of $135 per share. That all of said statements, representations, promises and agreements made by each and all of said defendants were made, done and said for the fraudulent purpose and with the sole intent on the part of defendants to induce plaintiff to purchase said stock of defendants at the exorbitant price of,$135 per share; that as a direct result of the false and fraudulent acts, and of the unlawful and deliberate scheme and conspiracy to defraud, done and perpetrated as aforesaid by defendants, plaintiff was caused to and did resign his position as National Bank Examiner, and to be deprived of his salary and was induced to and did pay $10,000 in excess of the reasonable marketable value of said stock, wherefore he says that as a direct, result of defendants’ said acts he has been damaged in the sum of $30,000 actual damages.

“Plaintiff further states that because the acts of defendants above complained of were done wilfully, deliberately, unlawfully, wrongfully and maliciously he is entitled to a further sum of $15,000 as punitive or exemplary damages.

“Wherefore plaintiff prays judgment against each and all of the within named defendants in the sum of Thirty thousand dollars actual damages, and because of the unlawful, wrongful and deliberate acts of the defendants, plaintiff prays the additional sum of Fifteen thousand dollars as punitive or exemplary damages, together with his costs herein expended.”

The petition may, we think, be fairly reduced and summarized as follows, that plaintiff was an experienced banker, capable and competent to manage and direct a banking business; that the defendants, a group of stockholders in the 12th Street Bank, pooled 250 shares of the capital stock of the bank and appointed defendant Cooke as their agent to sell same at a fixed price of $135 per share though' the market value of said stock .was, at the time, approximately $95 per share which was known to plaintiff; that Cooke represented and stated to plaintiff that he (Cooke) was the agent of the bank to “select and designate” a general manager for the bank and that the person selected for that position would be required to purchase the 250 shares of stock at $135 per' share; that as an inducement, to plaintiff to purchase said stock at that price Cooke' “stated and represented” to plaintiff that defendants “owned a controlling interest in the stock” of the bank “and would request and he (Cooke) did guarantee to plaintiff that the board of directors would appoint or elect plaintiff to the office or position” of general manager after he purchased the 250 shares of stock at the price fixed and that Cooke stated and agreed that plaintiff’s employment as general manager would commence simultaneously with the purchase of the stock, at a salary of $300 per month, and continue at that salary until the shares of stock of the bank “were worth and were of a market value of $135 per share and for such longer time as such employment was mutually agreeable;” that plaintiff then made an examination of the bank and purchased the 250 shares of stock at the price of $135 per share and resigned his position preparatory to becoming general manager of the bank but was not elected to that position and “defendants did not at any time after the purchase of said stock by plaintiff secure or attempt to secure such appointment for plaintiff as per defendants’ promises and agreements;” that defendants did not own a majority of the shares of stock of said bank and that the “statements, representations and promises,” made by Cooke were false and fraudulent and were made “for the purpose and with the intent to cheat and defraud plaintiff, and at the time they were made defendants “had a fixed intention and purpose of not . . . securing for plaintiff” the office of' general manager at the salary and upon -the terms stated. • '

In this State certain special statutory provisions vest the management of the “business and affairs” of banking corporations in the board of directors provided for by statute (Sec. 5363, R. S. 1929) and empower the board of directors to “appoint and remove any cashier or other officer or employee at pleasure:”' [Sec. 5380, R. S. 1929.] It is not alleged that any oí the defendants were members of the board of directors but merely that as stockholders they promised to request plaintiff’s appointment as general manager of the bank by the board of directors. It is alleged that Cooke represented that he was an agent for the bank 7 to select and designate a man to act as general manager” and that the board of directors had advised him that “plaintiff’s elevation to that office was agreeable and desirable” and that Cooke “would guarantee that the board of directors would appoint or elect plaintiff to the office of general manager.” The petition states that plaintiff was experienced in and familiar with the banking business and he must have therefore known that the appointment of bank officers and the management of the affairs of the bank was exclusively vested in the board of directors and since the plain provisions of our statutes so declare he must, in common with all men, be presumed to know the law. Thus plaintiff must be held to have known that the appointment of bank officers was an exclusive power and function of the board of directors acting in that capacity, which could not be delegated to an individual and that Cooke’s so-called guarantee was not supported by any power or authority possessed by him or the other defendants to make same effective. [2] Further in view of the provisions of the statute, supra, relating to banking corporations, that “the directors may appoint and remove any cashier or other officer or employee at pleasure” plaintiff must have known that the alleged agreement or promise by Cooke that plaintiff would be employed as general manager at a salary of $300 per month to continue until such time as .the stock of the bank became worth and had a market value of $135 per share was not enforceable and would not have been enforceable even if such an agreement had been entered into by the board of directors. [Citizens Bank of Hayti v. Wells, 269 Mo. 190, 190 S. W. 314.] Plaintiff cannot therefore maintain his claim to have been deceived by the alleged statements by Cooke that he was empowered to select a general manager or his promise to cause plaintiff’s selection by the board of directors to that position under a contract to continue him in such position at the stated salary until the stock became worth and had a market value of $135 per share.

The real gravamen of plaintiff’s complaint is that he was induced to buy stock at $135 per share by the promise of defendants to thereafter effect his election as general manager of the bank at a salary of $300 per month and to continue him in such position until the stock of the bank became worth and had a market value of $135 per share but that he was not elected to that position hence the damages claimed. The other matters alleged are collateral. “The general rule which is supported by numerous decisions in almost all jurisdictions,” is that the alleged fraudulent representations must relate to a present or preexisting fact and that fraud “cannot ordinarily be predicated on unfulfilled promises or statements as to future events.” [51 A. L. R. 49.] However, in the application of this general rule exceptions or limitations have arisen. Also distinctions have been made between material representations which are to be regarded as in effect statements of present and existing facts and those which are wholly promissory in their nature and cases may be found where alleged false representations relating to a present condition or existing facts are so blended and inseparably linked with the promise to do something in the future as to afford the basis of an action for fraud but the alleged misrepresentations of fact with which the promise is blended or associated must not be of a collateral matter merely. It will be observed that in this case the material statements ascribed to defendants, upon which plaintiff says he relied, and which are alleged to have induced him to buy the stock, relate to something to be done and performed by defendants in the future and are wholly promissory. The representations as to certain purported existing matters are merely collateral. [Shoup v. Tanner-Buick Co., 211 Mo. App. 480, 245 S. W. 364.]

One limitation of the general rule, adopted in many jurisdictions, and which has been denominated by text-writers as the majority rule, is “that fraud may be predicated on a promise accompanied by a present intention not to perfonn it and made for the purpose of deceiving the promisee and inducing him to act where otherwise he would not have done so and by virtue of which the promisor has procured either real or personal property from the person to whom the promise is made.” [12 R. C. L. p. 261.] It is quite clear that plaintiff has attempted to bring himself within this rule as appears by the allegations of the petition that the “statements, representations and promises made to this plaintiff by the defendants . . . were false and fraudulent, and were at the time by said defendants, and all of them, known to be false and untrue and were made and uttered by defendants for the purpose and with the intent to cheat and defraud this plaintiff and at the time said representations and promises were made, the defendants had the fixed intention and purpose of not delivering to or securing for plaintiff the office of general manager . . ., or of attempting to do so, and they had the fixed purpose and intention of not paying or having paid to him a salary of at least $300 per month until such time as the said bank stock reached a marketable value of $135 per share.” But the rule in this State is “that fraud cannot be predicated upon a mere promise even though accompanied by a present intention not to perform it, on the ground that even under such circumstances the promise is not a misrepresentation of--an existing fact.” [12 R. C. L. p. 262.] In Younger v. Hoge, 211 Mo. 444, 455, 111 S. W. 20, 22, this court, said: “One reading the plaintiff’s testimony is impressed with the idea that his main grievance is that he was not given the position of secretary and treasurer at a salary of $100 per month. Assuming ■ that the evidence- proved that such promise was made, it would not justify a rescission of the contract on the theory of misrepresentation. A -promise, though made without intention to fulfill, is not a misrepresentation of an existing fact. [Wade v. Ringo, 122 Mo. 322; Estes v. Desnoyers Shoe Co., 155 Mo. 577.]” The rule as thus announced seems to have been adhered to by our courts. The St. Louis Court of Appeals in Missouri Loan and Investment Co. v. Federal Trust Co., 175 Mo. App. 646, 651, 652; 158 S. W. 111, 113, says; “A representation, to amount to fraud, must assert a fact or facts -as existing- and cannot relate to the future. • If it does, it is not fraud, whatever-may be the intention of the party or the effect of his statement.” In Metropolitan Paving Co. v. Brown-Crummer Inv. Co., 309 Mo. 638, 664, 274 S. W. 815, 823, this court said: “A promise to do-a certain thing, with a present intention not to do it, is not actionable.” Citing with:approval Younger v. Hoge, supra, and Missouri Loan & Investment Co. v. Federal Trust Co., supra, this court said in Bryan v. L. & N. Railroad Co., 292 Mo. 535, 545, 238 S. W. 484, 487, “The implied representation might have amounted'to a promise of defendant as to indefinite future action but not as to a fact then existing. This béing true under the adjudicated eases in this State defendants conduct -is not actionable.” Again in Grand Lodge of the United Brothers of Friendship, etc., v. Massachusetts Bonding & Ins. Co. (Mo.); 324 Mo. 938, 25 S. W. (2d) 783, 788, it is said: “Another well-settled rule is that false representations, in order to constitute actionable fraud, must relate to past or existing facts. Representations, although - false, which relate to something to be done in the future, cannot be made the basis of a charge of fraud.” [See, also, Estes v. Desnoyers Shoe Co., 155 Mo. 577, 56 S. W. 316; Shoup v. Tanner-Buick Co., supra; Mathews v. Eby, 149 Mo. App. 157 and Hockley v. Hulet’ Bros. Storage Co. (Mo. App.), 16 S. W. (2d) 749.] Following the rule prevailing in this State and applying same to the allegations of the petition herein it is'our opinion that the -judgment of the trial court should be affirmed. It is so ordered.

The divisional opinion of FbrgusoN, C., is adopted as the opinion of the court "en banc.’

Ragland,' Frank,-Fllison' and Tlemóood, JJ., and Atwood, C. J., concur; Gantt, J., dissents in separate opinion in which White, <7., concurs.