Case Name: JOHN A. SNIDER, Respondent, v. S. M. McATEE, Executor, Appellant
Court: St. Louis Court of Appeals
Jurisdiction: Missouri
Decision Date: 1912-05-07
Citations: 165 Mo. App. 260
Docket Number: 
Parties: JOHN A. SNIDER, Respondent, v. S. M. McATEE, Executor, Appellant.
Judges: 
Reporter: Missouri Appeal Reports
Volume: 165
Pages: 260–287

Head Matter:
JOHN A. SNIDER, Respondent, v. S. M. McATEE, Executor, Appellant.
St. Louis Court of Appeals,
May 7, 1912.
1. WITNESSES: Competency: Separate Contracts Made with Decedent About Same Subject-Matter: Competency of Contracting Parties. In an action against an executor for fraudulent misrepresentations alleged to have been made by his testate concerning the sale of corporate stock, where it appeared that plaintiff and two others purchased stock from decedent, and, although all were together at the time of the purchase, decedent dealt with each one individually and each acted and contracted for himself, such two other purchasers were not incompetent to testify for plaintiff, under section 6354, Revised Statutes 1909, providing that, where one party to a contract in issue is dead, the other party may not testify in his own favor, or in favor of any other party to the action claiming under him.
Held, by REYNOLDS, P. X, dissenting, that the facts disclosed by'the record are as follows: Decedent, the cashier of a bank, was indebted to the bank. In order to raise funds to discharge this indebtedness, he proposed to sell to three directors of the bank sixty-five shares of the capital stock of the bank, evidenced by two certificates for forty and twenty-five 'shares, respectively, at the price of $150 per sham This proposition was accepted; one of the purchasers receiving twenty, one twenty-two and the other twenty-three shares. After the purchase, it was discovered that the stock was nbt worth the amount paid for it, on account of the financial condition of the bank, and thereupon the purchasers claimed the seller promised, in order to make good his representations concerning the value of the stock, to repay them fifty dollars per share. One of the purchasers brought suit on this promise against the executor of the seller, and offered, at the trial, one of the other purchasers as a witness to prove it, and objection was made by defendant to his competency as a witness, under section 6354, Revised Statutes 1909. On these facts, held, in the dissenting opinion, that the witness was a “party to the contract in issue,” was “testifying in his own favor,” and was, therefore, incompetent under the statute, since the sale of the stock was one entire transaction, made for the purpose of enabling decedent to adjust his financial obligations to the bank, and the alleged promise to refund was likewise made with the purchasers acting collectively.
2. TRIAL PRACTICE: Appeal from Probate Court: Binding Effect of Theory at Trial: Pleading. Although a demand, filed in the probate court against the estate of a decedent, should be sufficiently definite to inform the adverse party what he must defend against, yet where the statement is defective as to a certain issue but such issue has been contested and tried, without objection, as if it were made by the pleadings, it will be treated, on appeal, as within the pleadings.
3. FRAUD AND DECEIT: Misrepresentations: Reckless Statements. Where the Gashier of a bank, in selling stock owned by him, represented that the bank had sufficient surplus and undivided profits to make the stock worth $150 a share, when, in fact, it was worth only $100 a share, he was liable for the false representations, whether he knew they were false or not, since, where a person, making false representations as of his own knowldge and asserting them to be true, has. no knowledge whatever on the subject, or possesses special means of knowledge ■ and ought to know that the representations are false, the law implies scienter.
4. -: -: Subject-Matter Equally Known to Both Parties. Neither the 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 that are not calculated to impose upon a person of ordinary prudence, or neglects means of information within easy reach, he should suffer the consequences.
5. -: -: Duty to Investigate: Degree of Diligence Required. Where a director and vice president of a bank, having no actual knowledge of a shortage in its accounts, and no means of ascertaining such fact without an extended examination of its books, purchased from its cashier, who had complete charge of its deposits, books, and accounts, certain shares of its capital stock, owned by the latter, in reliance on his false representations as to its condition, he was not estopped from recovering from such cashier, in an action based upon the latter’s fraudulent misrepresentations, on the ground that he was negligent in not knowing the true condition of the bank’s affairs, since, although he could not, in reliance on such representations, neglect means of information within easy reach, he was not bound to exercise extraordinary diligence to obtain it.
Appeal from Cape Girardeau Circuit Court. — Hon. Henry G. Riley, Judge.
Affirmed, Certifed to Supreme Court.
Albert M. Spradling and T. D. Hines for appellant.
(1) When one of the original parties to the contract or cause of action in issue and on trial is dead, the other party to such contract or cause of action shall not be permitted to testify in his own favor o,r in favor of any one claiming under him. Angelí v. Hester^ 64 Mo. 142; Ring v. Jamison, 66 Mo. 424; Meier v. Thieman, 90 Mo. 433; Messimer v. McCray, 113 Mo. 382; Weiermueller v. Scullin, 203 Mo. 466; Griffin v. Nicholas, 224 Mo. 275. (2) The board of directors of a bank have a general superintendence over and management of all its business affairs and are bound to know all that is done, and what they ought to know as to the general course of the bank’s business, they will be presumed to know. Morse on Banks and Banking (3 Ed.), sec. 116 ; Bank v. Hill, 148 Mo. 380; Martin v. Webb, 110 U. S. 15; Hun v. Cary, 82 N. T. 71. (3) The law requires every man, in the possession of his intellectual faculties, to use them for his own protection and not to depend upon the courts to act as a standing guardian over his own carelessness, improvidence or credulity. Cahn v. Reid, 18 Mo. App. 127; Mires v. Summerville, 85 Mo. App. 183; Shearer & Martin v. Hill, 125 Mo. App. 375; Hendricks v. Vivion, 118 Mo. App. 417; Bradford v. Wright, 145 Mo. App. 623; Hines v. Boyce, 127 Mo. App. 718; Funding & Foundry Co. v. Heskett, 125 Mo. App. 516; Davis v. Ins. Co., 81 Mo. App. 264. (4) To be entitled to rescind a contract on the ground of fraudulent representation, the vendee must prove that false representations of material facts were made to him with the intent to deceive; that he believed them to be true; that his reliance on them was an act of ordinary prudence; and that they influenced his action. Wannell v. Kem, 57 Mo. 478; Lovelace v. Sutor, 93 Mo. Appv 429-; Funding Co. v. Heskett, 125 Mo. App/516; Phelps v. Jones, 141 Mo. App. 223. (5) A promise made subsequent to the main contract and without a new con sideration to support it is without consideration and cannot be enforced. Lamp Co. v. Mfg. Co., 64 Mo. App. 115; Wollman v. Loemen, 96 Mo. App. 299; Riley v. Stevenson, 118 Mo. App. 187; Lumber Co. v. Stoddard Co., 131 Mo. App. 15; Glenn v. Hill, 210 Mo. 291.
John A, Snider and Oliver & Oliver for respondent.
(1) Where one makes, as of his own knowledge, a false representation, not knowing whether it is true or false and it is relied upon, it is fraud as much as if he knew it to be false. It is the effect, not the corrupt motive, the law looks at and denounces as fraud. Leach v. Bond, 129 Mo. App. 315; Hamlin v. Abell, 120 Mo. App. 188; Nauman v. Oberle, 90 Mo..App. 666; Caldwell v. Henry, 76 Mo. App. 254; Walsh v. Morse, 80 Mo. App. 568. (2) Scienter was fully established in every one of the three ways in which it may arise: First, Quinn being cashier of the bank, made the false representation with the knowledge that it was false; second, where a party represents something to be true, as of his own knowledge, when he has no knowledge as to whether it is true or false, 'and it is in fact untrue; third, where the party by reason of his peculiar position has “special means of knowledge” and makes representations which he ought to have known to be false, if he did not. Serrano v. Commission .Co., 117 Mo. App. 194; Bank v. Byers, 139 Mo. 627; Hamlin v. Abell, 120 Mo. 188, Raley v. Williams, 73 Mo. 310. (3) A plaintiff in an action to recover a claim against an estate is a competent witness in reference to conversations with him in regard to the matter in controversy after the death of the deceased. More v. Renick, 95 Mo. App. 202. The statute relating to one party testifying when the other is dead, limits its prohibition to the liv ing party testifying in Ms own favor or the favor of his assignee, nor does the statute disqualify the living party as a witness concerning things about which he has no interest even though the other party is dead. Thompson & Thompson v. Brown, 121 Mo. App. 524. (4) The natural presumption is, that one not a party to the suit is not a party in interest, and where there is direct testimony supporting that presumption and only inferential testimony hinting at a different state of facts, the presumption so supported must obtain. On the assumption that the witness Sperling was interested in this suit of John A. Snider v. Estate of Quinn, the law is that an interest in the result does not exclude the witness o.r affect his competency. It may affect his credibility. R. S. 1899, sec. 4652; Looker v. Davis, 47 Mo. 140; Poe v. Domieh, 54 Mo. 119; Klosterman v. Loos, 58 Mo. 290; Angelí v. Hester, 64 Mo. 142; Reed v. Painter, 145 Mo. 358; Jackson v. Smith, 139 Mo. App. 691. (5) Interest as a disqualification is totally abolished by the first clause of section 4652, Revised Statutes 1899, and it is not restored by the proviso. Jackson v. Smith, 139 Mo. App. 691; Weiermueller v. Scullin, 203 Mo. 466. (6) A declaration against one’s interest or admissions of the existence of an obligation are admissible, even though declarant be since deceased, is elementary.. 2 Wigmore on Evidence, sec. 1456; Wynn v. Corey, 48 Mo. 346; Moore v. Rennick, 95 Mo. App. 202; Jones v. Thomas, 218 Mo. 543.

Opinion:
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 plain tiff 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.