Davis v. Hukill

Opinion by Mr. Justice Mitchell, It is conceded that no fraud in fact was intended by the appellant. The learned judge charged the jury on that basis, saying in his instructions on the measure of damages, “ if it had been a case of actual fraud there would have been no difficulty about it, he (Yoder) would‘have had to pay the full value of this stock because he could have taken no benefit by it.” The question is therefore, was there evidence to support an inference of fraud in law. The circumstances as shown by all the testimony were these. The Gas Company had been prosperous, but had been got into difficulties by Hukill’s operations with the Water Company. As he was the owner of all the shares in the Water Company and all but four in the Gas Company, financial difficulty for him either personally or as representing the Water Company, of course meant like difficulty for the Gas Company. In fact every share that he owned in the latter had been pledged for loans to carry the former, and in September, 1893, he had in his own phrase come to the end of his string. The Water Company’s paper was out and could not be met. The creditors were threatening to sue. Hukill was indorser to the extent of $20,000, and as he says, the creditors seemed to think the Gas Company ought to father the debts of the Water Company, and made threats that they would pursue the Gas Company and his stock. As already said every share he owned was pledged for loans, and he was of opinion that if attached and his equity in it sold, “ the whole thing would become complicated, and waste would follow,” but that if it could all be held together until he had an opportunity to sell it as a whole, there would be enough realized to pay all the debts, both the company’s and his own. In this situation Hukill called upon appellant, stated the foregoing facts and “ told him that something would have to be done.” The significance of this last remark lies in the fact that appellant was a creditor of Hukill for $5,000, apparently unsecured, and was contingently liable for $10,000 more, as indorser on the notes of Hukill held by various banks. He had therefore a direct and considerable pecuniary interest in Hukill’s [144] ability to meet his obligations. The latter’s view was as already said that if the stock could be held together until a sale of the whole plant could be made, enough money would be realized to pay all claims, and appellant first made an effort to induce the banks who held the stock as collateral to act in concert to carry out this plan. They however refused to come into it, and then appellant, with the assistance of Vandersaal whom he induced to join him, paid the amounts due the banks, took assignments of the stock, and held it as owners, for repayment and possible profit. This is the substance of the appellant’s action which plaintiff complains of, and on which the jury found their verdict. Two additional circumstances are relied upon to sustain the claim of legal fraud. Appellant at the end of the transaction was a creditor of Hukill for about $36,000, made up of his original claim, and the amount he had advanced to repay the banks. He then agreed with Hukill that in case the latter sold the Gas Company plant, he might have half the excess over $40,000, and it was urged that this was a fraudulent benefit to the debtor, which tainted the whole transaction. But the undisputed testimony is that this agreement was not made until after appellant had become the owner of the whole stock, and was looking around for means of realizing on it. Hukill says-distinctly that nothing was said of any money to come to him until Yoder had got control of all the stock, and elected a new board of directors. Then it was agreed he should have a commission in case he succeeded in selling. Of course it was previously understood that there was to be a sale. The whole plan hinged upon that, and the object of putting in more money to redeem the stock and hold it together, was to get the benefit of a sale of the plant as a whole. This is the closest point in the case and might justify an unfavorable view by the jury, if there were any doubt or conflict in the evidence as to the time this agreement was made, but there is not.. Appellant had become the owner of the property, not with the idea of running the company, but to get out of his liabilities in regard to it without loss. To do this he must sell, and there was no legal objection, under the circumstance, to his employing the previous owner' to make the sale, and paying him even a liberal commission. The other circumstance urged as sustaining the idea of fraud. [145] is the excessive value of the stock, as compared with what appellant paid for it. A clear excess of value of property transferred, over the debt due and a reasonable margin for delay and expense in converting the property into money, is evidence of fraudulent intent. But it is conceded here that there was no actual fraud intended, and the excess of value is too uncertain and contingent to be a safe basis for an inference of law. Hukill says indeed that the value of the stock was “ assumed ” to he $20.00 a share, but this assumption was on the basis of a sale of the whole fifty-one hundred shares for $100,000, which the event proved could not be made. Before the difficulties of the Gas Company arose, or at least were known, the stock was pledged for loans running from $2.75 to $14.00 a share and the banks refused to loan- any further amounts on it. The small number of shares pledged at $14.00 were sold by the holders, Spang Chalfant & Co. and did not bring the amount of the loan for which they stood as collateral. And finally Vandersaal who seems to have been the first to make a careful businesslike examination of the Gas Company’s affairs, testifies that he “ didn’t think we could go out in the market and sell the plant for enough to pay its debts,” and he was willing to go out for the amount he had put in, and lose the interest. This evidence of the value at the time is not overcome by the fact that the company subsequently became profitable under the new management of Vandersaal, with closer attention, more economical administration and additional capital, for all of which the jury do not seem to have made any allowance at all. In this review we have taken the evidence of Hukill and Yoder, on which the case must rest, with every unfavorable inference that it will fairly support, and are of opinion that it is not sufficient to sustain the conclusion of fraud in law any more than in fact. If appellant had been a volunteer the result would have been different. But he was a bona fide creditor to a large amount, with still greater contingent liabilities in case Hukill failed to pay. He took a large property to secure himself, but to do so he was obliged to put in additional capital to double the amount of his first risk, and to take a property of uncertain and shifting value which might or might not reimburse him. The difference between the position of a volunteer who comes forward to assist a failing debtor to delay or hinder his creditors, and that of a [146] bona fide holder of an existing debt, has been recently stated in Werner v. Zierfuss, 162 Pa. 860. Appellant stood in that position in regard to Huldll, and we see no sufficient evidence that in his action he exceeded his legal rights. The defendant’s first point should have been affirmed, and a verdict directed in his favor. Judgment reversed.