Bradley v. Poole

Chapman, J. After the plaintiff’s testimony was put in, the defendant’s counsel requested the court to rule that, assuming that all the facts offered to be proved by the plaintiff were actually and fully proved, the plaintiff was not entitled to recover, and the case should be withdrawn from the jury and a verdict directed for the defendant. This motion was denied, and tin defendant excepts to the decision. But it is settled that it is a matter of discretion with the presiding judge whether he will grant or deny such a motion. Bassett v. Porter, 4 Cush. 487. McGregory v. Prescott, 5 Cush. 67. Wentworth v. Leonard, 4 Cush. 418. No exception therefore lies to his decision. The defendant then proceeded to offer evidence in the case; and, by the authority of the cases cited, this was a waiver of his motion. After all the evidence was in, the defendant renewed his motion that the jury be instructed that there was no evidence of false and fraudulent'representations on the part of the defendant. The judge declined to make such a ruling, and the evidence was submitted to the jury. The ruling is to be sustained if there was any evidence sufficient in law to authorize the jury to find that there were materially false and fraudulent representations on the part of the defendant. But several points were argued before the jury, and the instructions given to them by the presiding judge not only included the point above stated, but embraced the general principles of law which are applicable to cases of this character. These instructions are excepted to. The attention of the jury was directed not only to the representations made to the plaintiff at the time he purchased the stock, and the condition of the corporation at that time, but to the original character and object of the scheme. The representations proved and relied upon were: “ They are going right to work upon it. It is all right.” It was properly left to the jury to interpret these statements. In connection with the circumstances of the case and the rest of the conversation between the parties, they would be authorized to interpret them as representations that the company had pecuniary means to engage in the business of mining upon their lands in — 180 — Colorado, and had made arrangements to do so immediately and that no legal obstacle existed to the prosecution of theit business or the transfer of stock upon their books. The evidence tended to show that the actual condition of things was very different from this. The company was organized in February 1864, and the defendant was one of the projectors. The capital stock was fixed at five hundred thousand dollars, and the par value of the shares at five dollars, so that there would be a hundred thousand shares. It would be legally competent to the jury to find that this small value of the shares was intended rather as a lure to certain classes of purchasers of shares who might be easily imposed upon, than as indicating an intention to prosecute the business of mining. No money was paid by any of the associates to constitute this stock. All the property which the corporation had was certain mining lands in Colorado which were conveyed to them by Cofiin. They paid him no money for them. They fixed the price at a hundred and twenty thousand dollars and gave checks for that amount. But they had no money on deposit to pay these checks; and the jury might believe that it was a fictitious arrangement, for the checks were immediately given up, and Coffin accepted in their stead thirty thousand shares of the stock. His land being the. only capital possessed by the company, these shares were equivalent .to three tenths of it; subject however to a debt of ten thousand five hundred dollars due to the defendant for money which he had advanced. If they valued the shares at the price for which the defendant sold to the plaintiff, Coffin’s shares would be worth forty-five thousand dollars. If they were valued at par, they would be worth a hundred and fifty thousand dollars, so that the price of one hundred and twenty thousand dollars was merely nominal. The value of the land was then called four hundred thousand dollars, and twenty thousand shares were reserved to be sold in order to obtain the other one hundred thousand dollars. The jury might believe that they never expected to raise such a sum in such a way; and that a hundred and twenty thousand dollars was, to the knowledge of all of them, a grossly exaggerated estimate of the value of the land, and that the — 181 — projectors understood that the principal value of their stock consisted in the ingenious scheme which they had adopted for putting the shares in the market. While they were in possession of no property except the land, and owed the defendant ten thousand five hundred dollars, the president, treasurer, and three directors, of whom the defendant was one, made a certificate under oath, and filed it with the treasurer of the Commonwealth on the 16th of March, 1864, in compliance with the requirements of Gen. Sts. c. 61, § 8, in which they made the following statement: “ The amount of capital stock is five hundred thousand dollars; the par value of the shares is five dollars per share; the amount paid in is four hundred thousand dollars.” The jury might believe that this statement as to the amount paid in was false and fraudulent, and was designed to defraud the public. On the 6th day of September 1864, an injunction was served upon the company, restraining them from doing any more business because they had not paid a tax of three hundred dollars which had been assessed upon them by the Commonwealth; and this injunction has never been removed. The jury would be authorized to take this fact into consideration in estimating the value of their property, and deciding whether their scheme was bond fide or fraudulent. After this, the plaintiff purchased his stock, and it was transferred to him on November 29, 1864. The jury might upon this evidence believe that the company was not all right, but that it could not legally proceed to do any business; that it was not going right to work, and had neither the means nor the intention to do so; that the original scheme was fraudulent, and, the property was estimated at a grossly fictitious value, and that the defendant and his associates had been guilty of false swearing in their official certificate for the purpose of promoting their scheme. All these matters were properly submitted to the jury with instructions sufficiently full and appropriate. It may be well to refer to some of the cases in which some of the principles stated by the learned judge have been discussed. In Campbell v. Fleming, 1 Ad & El. 40, it was held that ona — 182 — who was induced to purchase stock in a mining company by fraudulent representations as to its value might repudiate the transaction if he would do so as soon as he was informed of the fraud. In Duvergier v. Fellows, 5 Bing. 248, it was held that a contract made between two persons who were engaged in getting up an illegal and fraudulent enterprise, and made for the purpose of carrying on such enterprise, could not be enforced at law. Chief Justice Best says of the case: “ It is manifest that the scheme in which the parties to this action were engaged was one of those bubbles by which, to the disgrace of the present age, a few projectors have obtained the money of a great number of ignorant and credulous persons, to the ruin of those dupes and their families, and by which a passion for gambling has been excited that has been most injurious to commerce and to the morals of the people.” He further says that such schemes are fraud-traps and injurious to the public welfare, and that the forming of them is indictable at common law. These remarks are applicable to many transactions that have occurred in this country, and, if the jury found them applicable to this case, there would be no ground to say that there was no> legal evidence to sustain such finding. The weight of the evidence is not now before the court. The case of Bagshaw v. Seymour, 4 C. B. (N. S.) 873, was an action against the chairman of the directors of an Australian gold mining company. By a false representation as to the amount of money which they had paid in, they procured the committee of the stock exchange to place the stock on their list, and thus give it character and credit. The plaintiff was thereby induced to buy some shares of one Barclay on the stock exchange. It was held by the common bench that the defendant was liable to the plaintiff on the ground of this fraudulent representation made to the directors of the stock exchange. The case was carried by the defendant to the house of lords and there abandoned. The doctrine established in the case was that all the associates who had united in the fraudulent representation to the public were equally liable to a purchaser whom they had thus deceived and injured. — 183 — In Bedford v. Bagshaw, 4 H. & N. 538, the court of exchequer held the same doctrine in application to another Australian gold mining company. Pollock, B., remarked: “ If a director of a company, one of the persons who puts the shares forth into the world, deliberately adopts a scheme of falsehood and iraud, the effect of which is that parties buy the shares in consequence of the falsehood, I should feel no difficulty in saying that in such case an action is maintainable.” In Clarke v. Dickson, 6 C. B. (N. S.) 453, where there was a sale of shares in a lead and copper mining company, the directors in their prospectus made a representation that the property had been purchased at a certain large price, when in truth it had been purchased by one of the directors at a very insignificant price. It was held that a purchaser could recover of one of the directors, although the false representations were not the sole inducement to him to purchase. In Watson v. Earl Charlemont, 12 Q. B. 856, all the judges concurred in holding that if an untrue representation appears to be the act of the body of directors, and it is fraudulently made, the members are all answerable for the fraud; also that if an untrue statement is published which is likely to induce a party to enter into a contract, and he does so, the person who made the false statement is bound, independently of any proof that the other party was actually induced by it to contract; and that primd facie it will be taken that he was influenced by it. In Jarrett v. Kennedy, 6 C. B. 319, there had been a fraudulent suppression of facts by a majority of a railway committee. It was held that the plaintiff, who had subscribed for some shares and paid the deposit to the company, might recover it back from one of the committee in an action for money had and received. In the light of these cases it is apparent that the representations alleged to be false were material; and that there was evidence sufficient in law to authorize the jury to find that they were false and fraudulent in material particulars; so that the court cannot set aside the verdict on the ground that, in these respects, there is no evidence sufficient in law to support it. — 184 — But it is contended that the defendant contracted with the plaintiff as the agent of other persons, and that there is no evidence which is sufficient in law to authorize a verdict against him on the ground that he was the principal. On this point the plaintiff testified that when he proposed to buy some stock the defendant answered, “ I think I can let you have some,” or “ can buy you some,” and in speaking of the price said he would probably get it at a dollar and a half per share. He also said, “ It is one of the best properties in Colorado. It is very valuable. They are going right to work upon it. It is all right. You had better buy some of the stock and get your friends to do so.” The jury would be authorized to consider these expressions as evidence tending to show a personal interest in the sale rather than disinterested friendship. They might also consider the fact that the defendant was interested to get back the sum of ten thousand five hundred dollars which he had advanced, rather than make sales of stock for the benefit of his associates. It appeared also, in the plaintiff’s evidence, that the transfer of the certificate to him was signed by Durham as the defendant’s attorney, and that the' money was paid by him to the defendant, who did not profess to receive it as agent, Durham corroborating him by stating that he made the transfer by the defendant’s direction and as his attorney. This testimony is sufficient in law to authorize the finding that the defendant acted as principal in the sale. None of it tends to show that he made the sale as the agent of Sargent and Pierce. The plaintiff testifies that he did so, and paid the money to them. But there is nothing to corroborate this statement, and its credibility was for the jury to decide upon. It is also contended that the plaintiff had knowledge of the condition of the company to such an extent that he was not deceived. So far as this depends on the statements of Poole, the defendant, the jury might not be satisfied with them. The plaintiff admits that he did not suppose the property cost the company five hundred thousand dollars. But they did not represent that it cost over four hundred thousand dollars. He also says he did not suppose that it was put in at the par value — 185 — of the shares. It was never represented that it was put in at that price. Poole also told him that the stock would be a dollar and a half per share. But that is a mere statement of the price at which Poole was ready to sell it, or at which he could probably get it. All this is far from including the material facts in the case. It is not necessary to refer to all the details of the instructions given to the jury. It is sufficient to say that they were in conformity with the decisions above referred to, and with the established principles of law as recognized both in England and this country. Exceptions overruled.