Snider v. McAtee

147 S.W. 136, 165 Mo. App. 260, 1912 Mo. App. LEXIS 471

• Court: Missouri Court of Appeals
• Decided: May 7, 1912
• Status: Published

Opinions

NORTONI, J.

This proceeding originated in the probate court and involves the allowance of a demand against the estate of Hugh R. Quinn, deceased, arising out of the sale of twenty-two shares of bank stock by Quinn to plaintiff. The finding and judgment were for plaintiff in both the probate and circuit court, to which the case was taken on appeal, and from the judgment of the latter court defendant appeals here.

It appears that Hugh R. Quinn in his lifetime owned considerable stock in the Exchange Bank of Jackson, Missouri, and was its cashier. About sixteen months before plaintiff purchased the twenty-two .shares of stock from Quinn, he was elected a-director of the bank and was vice president thereof on the date of the purchase. Quinn, desiring to sell sixty-five shares of the stock owned by him, submitted a proposition to plaintiff, B. S. Schwab and Blucher Sperling to -that effect. After considering the matter, plaintiff purchased twenty-two shares of the stock at $150' a share. Mr. Sperling purchased twenty-three of the shares and Mr. Schwab the remainder, all at the same price. Mr. Quinn having subsequently died, plaintiff filed the demand involved here for $1100, or fifty dollars per share, against his estate, by which he seeks to recover this amount and interest thereon, on the theory that, through misrepresentation, Quinn induced him to pay fifty dollars per share more than the stock was worth at the time of purchase. When the contract of purchase was entered into, plaintiff, Sperling and Schwab were present and negotiated with defendant concerning the sale of stock to each. Sperling was introduced as a witness for plaintiff and gave testimony tending to support his claim. Indeed, Sperling is the only witness who testified in the cause and his evidence stands uncontroverted in the record.

The first point urged for a reversal of the judgment goes to the effect that, in view of the subsequent death of Quinn, Sperling was an incompetent -witness, for it is said there was but one contract made between Quinn, Sperling and Schwab for the sale of the stock and that they subsequently divided it. The record by no means justifies this conclusion. Indeed, the evidence is plain and positive t'o the contrary. Sperling testifies that all three of the parties purchased the stock at the same time from Mr. Quinn on September 4th and that each purchaser paid $150 per share for the stock so purchased. It is true that all the parties were together at the time, and negotiated the contract of purchase with Quinn, but it appears, beyond question that each acted for himself. While Mr. Quinn sold the sixty-five shares of stock at the same time to the three purchasers mentioned, he dealt with each individually in so doing, for it conclusively appears that each party purchased directly from him on his own individual account and paid the purchase price. In other words, plaintiff and Schwab and Sperling did not jointly purchase the stock from Quinn and afterwards divide'it among themselves but each then and there purchased for himself. The statute (Sec. 6354, R. S. 1909) provides that in actions where one of the original parties to the contract or cause of action in issue and on trial is dead, or is shown to the court to be insane, the other party to such contract or cause of action shall not be admitted to testify either in his own favor or of any other party to the action claiming under him. The inhibition above quoted is without influence here, for the witness Sperling is in no sense a party to plaintiff’s cause of action or to the contract by which plaintiff acquired title to the twenty-two shares of stock which he purchased. Plaintiff did not acquire title through Sperling or through any contract by which they jointly purchased the stock, for each party individually purchased from Quinn and paid for a certain number of shares of stock. Neither is plaintiff ’s right derived in any sense through Sperling, the witness, but on the contrary it arises from his individual contract of purchase entered into with Quinn in the presence of Sperling and' Schwab. Obviously the witness Sperling. was competent to speak of the contract made in his presence by plaintiff and Quinn. [See Thompson v. Brown, 121 Mo. App. 524, 97 S. W. 242.]

The issue tried in the circuit court and on which plaintiff recovered pertained to a misrepresentation on the part of Quinn touching the value of the bank stock, and it is argued here the judgment should he reversed for the reason the pleading is insufficient on that score. It is true plaintiff’s demand filed in the prohate court is defective in the respect mentioned, but it seems that no question was made touching the matter at the trial. The statute (Sec. 206, R. S. 1909) provides that the probate court shall hear and determine all demands filed against' an estate in a summary way without the form of pleading. But it is said such demands shall be sufficiently definite to inform the .adverse party of what he must defend against. [Watkins v. Donnelly, 88 Mo. 322.] However, when it appears the parties have contested and tried out the issue as though it were made' by the pleadings and this, too, without any objection whatever, the appellate court should treat with and dispose of the case on the same theory as that voluntarily adopted at the trial. All of the evidence pertaining to the misrepresentations about the value of the stock and the condition of the bank was received without objection and, furthermore, much of this defendant elicited by his own examination. Such was the issue clearly made and tried by the parties on the informal statement of demand originally filed in the probate court and it is obvious that both came prepared to meet the particular issue on which the recovery was had. In such circumstances, it would be highly unjust for the appellate court to reverse the judgment and remand the cause for amendment, to the end that the identical issue, tried once without objection, should, be tried a second time. Instead of so doing, the rule of decision is, that the court will, in the interests of justice, treat the matter as within the pleadings. [Litton v. C. B. & Q. R. Co., 111 Mo. App, 140, 85 S. W. 978; Mellor v. Mo. Pac. B. Co., 105 Mo. 455, 16 S. W. 849; see, also, Deschner v. St. Louis & M. R. Co., 200 Mo. 310, 98 S. W. 737.]

The evidence tends to prove that defendant’s testator, Quinn, organized the Exchange Bank of Jackson in 1894, and, besides being the cashier, was the controlling spirit therein. Plaintiff, a lawyer by profession, purchased some of the stock and became a director in the bank about sixteen months before the purchase of the twenty-two shares of stock from Quinn out of which the present controversy arises. A couple of months before purchasing the twenty-two shares of stock, which was on the 4th day of September, plaintiff was elected vice president of the bank, but his relationship therewith was more nominal than real. At that time he was not familiar with the banking business and relied exclusively on Quinn, the cashier, who had organized the bank and dominated it during the course of its existence. The bank was incorporated with $20,000 capital and its monthly statement prepared by the cashier, Quinn, immediately before, showed it to have $10,000 surplus and $2000 undivided profits, besides being sound and solvent in every respect and its accounts properly balanced. On the statement thus prepared and the showing made by Quinn, its stock was worth on the market $150 per share, the par value of which was originally $100. It appears that Quinn, the cashier, represented these facts to plaintiff and the other parties who purchased the stock from him, and that they, relying on his statements to that effect, purchased the stock as above stated at $150 per share. One month and six days thereafter, it was discovered the bank was short in its accounts $23,550, and it was in that condition at the time plaintiff was induced to purchase the stock from Quinn. At all times Quinn, as cashier, had managed the bank and kept the books and was responsible for the shortage. On this appearing, it appears to have been conceded by Mr. Quinn and all others concerned, that the bank stock purchased by plaintiff was worth only $100 per share, instead of $150, at the time of the purchase. There can be no doubt that these facts entailed liability against the cashier, Quinn, on account of such representations, and this is true even though he did not personally know the condition of the bank at the time; for where one makes, as of his own knowledge, a false representation, not knowing whether it is true or false, it is a fraud as much as if he knew it to he false. If one makes false representations as of his own knowledge and asserts them to he true when, indeed, he possessed no knowledge whatever on the subject, the law then implies the scienter because of the reckless conduct about such representation and for the reason that a positive statement of the fact implies knowledge of such fact. [See Hamlin v. Abell, 120 Mo. 188, 25 S. W. 516; Serrano v. Miller, etc. Commission Co., 117 Mo. App. 185, 93 S. W. 810.] Furthermore, it is the rule, too, that where one, because of his peculiar position, has special means of knowledge, as here, and makes representations which he ought to have known to be false, if he did not, the law will imply scienter against him. In such oases, the law will not permit one to assert for knowledge what he must have known that he ought not to even have believed. [Serrano v. Miller, etc. Commission Co., 117 Mo. App. 185, 197, 93 S. W. 810; Raley v. Williams, 73 Mo. 310; 1 Bigelow on Fraud (1888), 509.] But it is argued, though such be true, plaintiff here is not entitled to recover, for, as a director of the bank and its vice president, he must be charged with full knowledge pertaining to its affairs. That plaintiff possessed no knowledge whatever concerning the shortage in the bank and the depreciated value of its stock for that reason, seems to be conceded; but it is said that the law affixed the duty upon him as director and vice president to know its true condition and, therefore, he may not be heard to complain of the cashier who had deceived him. There can be no doubt as to the responsibility of a director, in certain circumstances, as to a third party who occupies the relation of creditor to the bank, such as a depositor, but, obviously, the rule of such cases ought not to apply here. In the ordinary affairs of life, men enjoy relations of confidence and one frequently relies upon the good faith of another. Quinn, the cashier, had organized this hank in 1894 and dominated its affairs during all of the years. He was the cashier, had complete charge of its deposits, its accounts, its books, etc., and it appears plaintiff was more of a nominal officer than real, for he was not acquainted with the books or the accounts, nor was he able to ascertain the true condition of affairs without an extended examination. But it is said he. should be precluded of a right of recovery for the reason that he was negligent, as the books and accounts were open to him as an officer of the bank. It is true that neither law nor equity will afford relief for false representations where the subject-matter of dispute is equally known to both parties, and if one trusts to representations not calculated to impose upon a person of ordinary prudence, or neglects means of information within easy reach, he should suffer the consequences. Thus we declared the rule in Bradford v. Wright, 145 Mo. App. 623, 123 S. W. 108. But ifcannot be said that these parties were on equal footing or that the condition of the bank and the value of its stock were equally known to both. Instead of the true condition and the means of information being open and obvious, it was concealed through a system of bookkeeping revealed in the evidence as sufficient to mislead such expert accountants as the state bank examiners. This being true, it is not to be doubted that plaintiff had the right to rely upon affirmations of truth’ made by Quinn; for the law requires only that one shall exercise the care employed by an ordinarily prudent business man and in no sense imposed upon plaintiff the duty to exercise extraordinary diligence toward investigating the condition of the bank. [Brolaski v. Carr, 127 Mo. App. 279, 105 S. W. 284; Hines v. Royce, 127 Mo. App. 718, 106 S. W. 1091; Cottrill v. Krum, 100 Mo. 397, 13 S. W. 753.] Obviously, the principle obtains alike between plaintiff, the vice president of the bank, and Quinn, the cashier, from whom he purchased the stock, for plaintiff had a right to rely upon representations of fact affirmed by Quinn unless the means of information was equally open to him, which is shown not to be true. The judgment should be affirmed. It is so ordered. Caulfield, J., concurs. Reynolds, P. J., deems the opinion in conflict with that of the Supreme. Court in Lieber v. Lieber, 239 Mo. 1, 143 S. W. 458, and, therefore, dissents. Because of this, he requests the case be certified to the Supreme Court for final determination, <and it is so ordered.