Kimbrell v. Taylor

The opinion of the Court was delivered by Mr. Justice BeEase. Kimbrell Eurniture Company, a corporation, had 30 shares of capital stock outstanding. The defendants, Mrs, Emma D. Taylor and W. M. Kimbrell, each owned 10 shares of the stock. They bargained to sell their shares to Jeff E. Buyck and W. F. Kleckley, two of the plaintiffs, who, contemporaneously, agreed to sell five of the shares which they were purchasing to their coplaintiff, W. E. Kimbrell. W. M. Kimbrell, one of the defendants, acting for himself and for his codefendant, Mrs. Taylor, had a lawyer to draw a — 323 — written contract as to the sale of the stock, which contract was signed by the defendants and delivered to the plaintiffs. This contract contained the following clause: “The foregoing sale is based on the statement heretofore given by the sellers to buyers, approximating assets $123,-098.43, liabilities $26,022.55. It is agreed by both the sellers and buyers that the taxes for the current year 1920 and the insurance and license will be duly prorated up to the time of the consummation of the said sale.” Some time after the sale and transfer of the stock had been completed, the United States government required of the corporation payment of the sum of $3,902.81 as income taxes, which should have been paid prior to the sale and transfer of the stock. It seems that none of the sellers or purchasers of the stock knew of this liability to the government, and the same was not listed as a liability of the corporation at the time of the sale of the stock. The purchasers of the stock, the plaintiffs in this action, who are the respondents here, brought suit against the sellers, Mrs. Emma D. Taylor and W. M. Kimbrell, to recover $2,601.88, two-thirds of the amount due by the corporation to the government, which amount the purchasers of the stock had lost because of the government’s claim. The complaint alleged that the liabilities of the corporation had been misrepresented, and that the shares purchased by the plaintiff of the defendants were not of the value placed upon them at the time of the sale, because of failure to include the liability to the government; that the plaintiffs would not have purchased at the price which they paid if the true amount of the liabilities of the corporation had been stated to them. In their answer, the defendants admitted the sale of the stock and the execution of the written agreement, but they denied all the allegations as to misrepresentation by them. At the close of all the testimony, the presiding Júdge directed a verdict in favor of the plaintiffs for the full amount claimed in the complaint. — 324 — From this judgment, Mrs. Emma D. Taylor has appealed. Her codefendant, W. M. Kimbrell, has not appealed. The appeal raises these questions: (1) That defendants’ motion for a nonsuit should have been granted for the reason that no misrepresentation was shown to have been made by the defendants, and that the plaintiffs had equal opportunity with the defendants of ascertaining for themselves the assets and liabilities of the corporation. (2) That the verdict should have been directed for the defendants upon the same grounds upon which the motion for nonsuit was based. (3) That it was error to direct a verdict for the plaintiffs, there being no evidence that the defendants warranted the liabilities of the corporation to be exactly $26,-022.50, nor was there any evidence of misrepresentation on the part of the defendants, and the undisputed facts showed that plaintiffs’ ability to' ascertain the true assets and liabilities of the corporation was superior to that of the defendants. A careful examination of the record bears out the statement of the trial Judge to the effect that there was no testimony going to show that the contract between the parties meant otherwise than what was expressly stated therein. The result of the cause must therefore depend entirely upon the language of that written instrument. The contention of the plaintiffs is that the contract contained an express warranty as to the amount of the liabilities of the corporation. The county Judge sustained that position. The appellant argues, with considerable force, that the purchasers of the stock had superior knowledge to her as to the value of the stock, since she was not acquainted with the business of the corporation. The testimony bears out her claim in this respect. But since the appellant signed the written agreement, and it appearing that her execution of that paper was done fairly, freely, and honestly, she is, of course, bound by its terms. — 325 — It seems clear that the language which we have quoted from the contract is an express warranty, so far as that language went. In construing the contract, the real question, it seems to us, is this: Does the word “approximating” have reference only to' the assets of the corporation, or does it also apply to the liabilities? It is our opinion that this particular word has no reference to the liabilities. And we think it is easy to understand why the assets would be stated “approximately,” while the liabilities would be given at a definite sum. In the furniture business, it might be right difficult for even the owners, though in constant touch with the business, to state precisely the values of the stock in trade. On the other hand, a corporation, ought to be able tO' give readily a detailed statement of its liabilities. Purchasers of stocks in a furniture corporation can see the furniture and other stock in trade, but they cannot know what notes, accounts, and other liabilities a corporation may have outstanding, even if they are permitted to see the books. The very fact that the liabilities were listed and furnished to the purchasers of the stock seems tO' us to1 be conclusive of the fact that the sellers were warranting to the purchasers that no' other liabilities existed. In addition, it also occurs to us that the agreement that the taxes for the year 1920, in which the sale of the stock was made, was to be prorated by the parties, indicates that the sellers in a way guaranteed that all taxes prior thereto had been paid by them, or the corporation, a liability which rested upon the corporation and its stockholders. The appellants seems to rely upon the cases of Montgomery v. Scott, 9 S. C., 35; 30 Am. Rep., 1; Mobley v. Quattlebaum, 101 S. C., 221; 85 S. E., 585 ; and Whitman v. S. A. L. Ry., 107 S. C., 200; 92 S. E., 861; L. R. A., 1917F, 717. We do not think that these cases are in point, for in neither of them does it seem to us that there was an express warranty, as is found here. — 326 — In the case at bar there was such warranty, and it is immaterial whether the sellers knew that their statements were untrue or not. 35 Cyc., 378. There were only three issues properly before the trial Court. These were: (1) Was there a warranty as to the liabilities? (2) Did the corporation have liabilities other than those which were listed? (3) Did the plaintiffs suffer loss on that account ? While the facts in the case of Iler v. Jennings, which was heard in this Court twice, being reported at 87 S. C., 87; 68 S. E., 1041, and at 93 S. C., 185; 76 S. E., 276, are not identical with the facts in the case here, the principles involved in that case are very much similar to the principles here. In the cited case, the defendant, a director of the corporation, referred the plaintiff, who wished to purchase stock, to the bookkeeper of the corporation for information.- Upon the statement shown by the bookkeeper, the purchase was made. It was discovered later that the statement was incorrect. This Court held that there was a warranty on the part of the seller of the stock. While Mrs. Taylor was not a director of the corporation, and although it appears that she did not know anything about the business of the concern she sold her stock upon the written representation that the liabilities only aggregated a certain amount, and, it appears, furnished to the purchasers a list showing these liabilities. While she was perfectly innocent of the liability to- the government, the debt existed at the time she sold her stock, and it was proper for the Court to hold that she was responsible to the purchasers for the loss they sustained on account of the purchase of her stock. All the testimony sustained the claims of the plaintiffs. It appears, however, that, in so far as the appellant Mrs. Taylor is concerned, that it was error to direct a verdict against her for the full amount claimed by the plaintiffs. The stock sold by Mrs. Taylor and her codefendant was not owned by them jointly. Mrs. Taylor only owned 10 shares, and her codefendant owned 10 shares. She had — 327 — nothing to do with the sale of his stock. Mrs. Taylor should have been required to pay only one-half of the plaintiffs’ claim. When attention was called to this fact in this Court, the respondents readily conceded that this was right and just. The matter seems to have been overlooked in the county Court by the trial Judge and all the attorneys. The judgment of the county Court in favor of the plaintiffs should therefore be reduced and corrected as stated. In accordance with the views herein expressed, it is the judgment of this Court that the judgment of the county Court of Richland County be reversed'and a new trial of the cause be ordered, unless the plaintiffs shall, within 20 days after the filing of the remittitur in the said county Court, remit on the record of their judgment the sum of $1,300.94, as to each of the defendants; upon such remission, that the judgment of the county Court be affirmed. Mr. Justice Watts concurs. Mr. Justice Stabeer, and Mr. Acting Associate Justice Purdy concur in result. Mr. Justice Cothran dissents.