Title: Adams v. Little Missouri Minerals Association
Citation: 143 N.W.2d 659
Docket Number: 8258
State: north-dakota
Issuer: north-dakota Supreme Court
Date: April 20, 1966

143 N.W.2d 659 (1966) Lyle H. ADAMS et al., Plaintiffs and Respondents, v. LITTLE MISSOURI MINERALS ASSOCIATION, Inc., a corporation, and Kye Trout, Jr., Defendants, Little Missouri Minerals Association, Inc., a corporation, Defendant and Appellant. No. 8258. Supreme Court of North Dakota. April 20, 1966. Rehearing Denied July 1, 1966. *663 Conmy, Conmy, Rosenberg &amp; Lucas, Bismarck, for defendant and appellant. William S. Murray, Bismarck, of counsel. Mackoff, Kellogg, Kirby &amp; Kloster, Dickinson, for plaintiffs and respondents. ERICKSTAD, Judge. This is an appeal from a judgment entered in October 1964 by the District Court of Golden Valley County in favor of Lyle H. Adams and 40 other plaintiffs against Little Missouri Minerals Association, Inc., a corporation. The appeal "is taken from the whole of said judgment, except insofar as the judgment in said action dismissed the plaintiffs' complaint against the defendant Kye Trout, Jr., individually." A trial de novo is demanded. The plaintiffs' complaint consists of five separate counts. Count 1 asked that title to certain real estate be quieted. Count 2 alleged that the defendants entered into transactions with the plaintiffs whereby the plaintiffs conveyed certain interests in minerals to the corporate defendant in consideration of the issuance of Class A common stock and promissory notes of the corporate defendant, and that said conveyances were obtained by fraud and misrepresentation made by the defendants to the plaintiffs. Count 3 alleged that prior to the commencement of the action and at various times the plaintiffs entered into agreements and transactions with the defendants wherein certain mineral interests were conveyed to the corporate defendant in exchange for certain shares of Class "A" common stock of the corporate defendants and of its promissory notes, and upon the promise and agreement of the defendants that in the event the corporate defendant had not acquired 30,000 acres of minerals on or before January 1, 1958, the said minerals so obtained from the plaintiffs would be reconveyed to them; that such reconveyance would be made without costs or expense to the plaintiffs; and that said 30,000 acres of minerals were not acquired by the corporate defendant on or before the aforesaid date. It further alleged that plaintiffs complied with all of the things required to be done *664 by them under said agreement, and demanded the reconveyance to them of said minerals, but that the defendants failed and refused and still fail and refuse to convey the same; and that, although not required to do so by said agreement, the plaintiffs tendered and offered to return and restore everything of value received by them from the defendants in connection with such transactions, and still offer to deliver and pay into court for the defendants everything of value received by the plaintiffs in connection with such transactions. Count 4 alleged that the defendants have received income from the property in issue, that this income is properly the property and income of the plaintiffs, that the defendants have failed to render an accounting thereof, and that the plaintiffs are entitled to an accounting thereof. Count 5 alleged "that the notes given in part payment of the aforedescribed mineral interests are unpaid and that if rescission or specific performance of the agreements aforesaid is not decreed by the Court, or if it is not decreed that the defendants have no right, title or interest in said premises; that Plaintiffs are then entitled to a lien upon their individual minerals conveyed to corporate defendant for the amount of their individual notes and interest and are entitled to foreclosure thereof and do hereby claim such lien." The plaintiffs concluded their complaint as follows: The defendants interposed separate answers, each alleging a general denial and the statute of limitations which they believed applicable. The defendant corporation alleged an additional defense of laches and a counterclaim that it has an interest in the properties and prays that such titles be quieted in it. The plaintiffs generally denied the counterclaims. The trial court found in favor of the plaintiffs and against the corporate defendant on Count 3. In connection with this point, the trial court in its memorandum opinion said: The court accordingly decreed that the corporate defendant reconvey to the plaintiffs the minerals which they had conveyed to the corporate defendant in exchange for the latter's securities. Finding no fraud on the part of Kye Trout, Jr., individually, the court dismissed with prejudice the action against him. The action on the part of plaintiff Guy W. Curl was dismissed without prejudice on Mr. Curl's motion. The pertinent facts will become apparent as the issues are discussed. The defendant corporation will hereafter be referred to as Little Missouri Minerals or as the corporation, and the plaintiffs will be referred to as the landowners. In addition to demanding a trial de novo, Little Missouri Minerals has asserted eight specifications of error. They will be discussed in the order in which they are contained in the defendants' brief. The first reads as follows: This action was initiated June 12, 1963, approximately 5 years and 5 months after January 1, 1958, which was the date Little Missouri Minerals was to have acquired 30,000 mineral acres. Little Missouri Minerals states that, relying on its ownership of the mineral acres, it incurred indebtedness and issued debentures. Mr. Trout testified as follows: This self-serving statement is insufficient proof that the corporation changed its position and incurred indebtedness in reliance on the assumption that it owned the mineral acres now in dispute. Reference in the record to the issuance of debentures is even more sketchy. It reads as follows: The law of laches applicable to this case was set out in Larson v. Quanrud, Brink &amp; Reibold, 78 N.D. 70, 47 N.W.2d 743, 29 A.L.R.2d 230: This rule has since been followed in Alfson v. Anderson, 78 N.W.2d 693 (N.D. 1956); Wittrock v. Weisz, 73 N.W.2d 355 (N.D.1955); and Grandin v. Gardiner, 63 N.W.2d 128 (N.D.1954). These requirements are not met in this case. The alleged fraud was not discovered until the landowners employed counsel, who investigated by checking into the activities and records of and pertaining to the corporation. Little Missouri Minerals argues that long delay in the disaffirmance of a contract tends to prove ratification. It alleges that, in addition to long delay, there was also direct ratification by thirteen of the plaintiffs who accepted payment of their notes. Our view of this argument is that the acceptance of payment of the notes is not a ratification or waiver of the landowners' rights if they were not aware of the alleged fraud at the time they accepted payment of the notes. The evidence does not disclose that they were aware of the alleged fraud or of their right to rescind at the time. Little Missouri Minerals specifically directs our attention to the case of Fedorenko v. Rudman, 71 N.W.2d 332 (N.D.1955), which quoted Bauer v. National Union Fire Ins. Co., 51 N.D. 1, 198 N.W. 546, 549, as follows: We think it is important to point out that the court in Fedorenko said: In finding that the plaintiffs in Fedorenko failed to act promptly to rescind, the court emphasized that on conferring with an attorney in Minot who advised them to see their State's Attorney, they delayed in seeing him for nine months, and that after conferring with him they made no attempt to rescind by any formal action for at least one year and four months. In the instant case, upon employment of counsel by the landowners, an investigation of the activities and records of the corporation was made by him. Upon his advising *668 the landowners of their rights, the landowners made a written demand for a reconveyance of their deeds, offering to restore the stock certificates and notes received, as well as money received on notes paid with interest. The landowners requested a reply to this demand within 10 days. When no reply was received, the action was commenced. These facts are considerably different from the facts in Fedorenko. Under the facts in this case we conclude that the landowners acted promptly to rescind when they became aware of their rights. Therefore, the landowners are not barred by laches from maintaining their action. As Little Missouri Minerals has grouped its assignments of error Nos. 2, 3, and 6 together for purposes of discussion, we shall do the same. Little Missouri Minerals contends that if the landowners' action is not barred by laches, waiver, and ratification, it is barred by the 3-year statute of limitations contained in the Securities Act. Specific reference is made to § 10-04-17, N.D.C.C., part of which is quoted as follows: Little Missouri Minerals also refers us to § 10-04-15, N.D.C.C., which reads in part as follows: *669 In disposing of this question in its memorandum opinion the court said: Little Missouri Minerals contends that the trial court was mistaken in reaching that conclusion. It argues that the offer to sell or to trade corporate stock in exchange for mineral acres was incorporated in the "stock offering" approved by the Securities Commissioner, and that the offer to reconvey the acquired minerals in the event 30,000 mineral acres were not owned by January 1, 1958, was a part of this offer so registered and approved by the Securities Commissioner. Little Missouri Minerals argues that if there was a violation or breach of contract (as the trial court held in its conclusion that the corporation had not acquired 30,000 mineral acres by January 1, 1958), it was a violation of that part of the transaction which was a securities transaction. It argues that if it was not true, as Little Missouri Minerals stated at a March 1958 meeting of stockholders, that the 30,000 mineral acre requirement had been more than fulfilled, the corporate defendant made an untrue statement of a material fact in connection with the offer and sale of securities, and, in so doing, came within the provisions of Subsection 3 of § 10-04-15, N.D.C.C. That being the case, it maintains, the landowners' action was subject to the 3-year statute of limitations. We find that Little Missouri Minerals sent a letter to landowners urging them to exchange their mineral acres for Class A stock in the corporation. In the letter it said: "* * * if the corporation does not own on January 1, 1958, 30,000 net mineral acres, all mineral interests will be returned to the owners at the sole expense of the Corporation." A resolution of similar intent was adopted by the Board of Directors on November 3, 1955, and a similar statement was made in a printed brochure which was circulated by the company. These statements were made to induce the landowners to exchange their mineral interests for stock in Little Missouri Minerals. We believe the evidence supports the conclusion that the landowners exchanged their mineral acres for stock in the interval between the making of these assertions and the deadline of January 1, 1958. The statement by Little Missouri Minerals in March 1958 that it owned, as of January 1, 1958, in excess of 30,000 mineral acres, if false, was misleading and a statement in which the Securities Commissioner would have been interested had he known it to have been false. As this matter was apparently not brought to the attention of the Securities Commissioner, or, in any event, as the three years expired without any action being taken under the Securities Act, the remedy to the landowners in this action cannot be under the securities laws but must be separate and apart therefrom. The landowners agree that their remedy is not under the securities laws but is based on contract and fraud, and thus that the statute of limitations contained in the Securities Act does not apply. Although it has been very difficult to find decisions construing the meaning of the saving clauses of state securities acts (and we have found no decision of this court construing that part of our Securities Act), it is our opinion that Subsection 3 of § 10-04-17, N.D.C.C., permits the landowners in the instant case to bring their action upon either fraud or contract or both. If the action is on contract, § 28-01-16(1), N.D.C.C., which requires that an action upon a contract be commenced within 6 years after the cause of action has accrued, could apply, if pleaded. If the action is based on fraud, § 28-01-16(6), N.D.C.C., if *670 pleaded, could apply. This subsection reads as follows: North Dakota Century Code. In 1936, before Minnesota had a specific statute of limitations incorporated within its Securities Act but while the act contained a saving of existing remedies section, a federal district court, construing Minnesota law, held that purchasers of securities could bring an action in fraud apart from the remedies under the Securities Act. The civil remedies part of their Securities Act at that time read as follows: Minn.Sess.Laws 1925, ch. 192. The court said: In supporting its conclusion the court said: See also: Errion v. Connell, 236 F.2d 447 (9th Cir.1956). Generally, if there is a question which statute of limitations applies, the longer term applies. See also: Keen v. Mid-Continent Petroleum Corporation, 63 F. Supp. 120 (N.D. Iowa 1945). Whether the landowners have established a cause of action based on fraud or contract or both will be discussed later in this opinion. Specifications of error Nos. 4 and 5 are considered together by the appellant in its brief: Before or at the time the landowners executed their mineral deeds, they entered into an agreement with Little Missouri Minerals as follows: In regard to this matter the trial court said: This we believe to be an accurate statement of the facts pertinent to this issue, except for the statement that the promise to reconvey was contained in the prospectus which was filed with the Securities Commissioner. Although we do not find this statement in the prospectus, it was contained in a printed brochure which was used by the company to promote the exchange of minerals for stock. Concerning the promise of Little Missouri Minerals to reconvey, the court in its memorandum opinion said: The trial court in effect found that delivery of the mineral deeds in law, as distinguished from manual delivery of the deeds, took place at the time the corporation issued its stock to each of the landowners, rather than at the time of the manual delivery of the deed to the corporation. It based its holding on the written agreement entered into by the corporation and the landowners simultaneously with the execution of the mineral deeds by the landowners or which preceded the execution and delivery of the deeds, wherein the corporation in effect stated that it would accept the deed if the title were acceptable to the corporation and that it would not claim ownership of the mineral interests deeded until the stock certificate representing the purchase price of the mineral interests had been issued to the landowner. Little Missouri Minerals contends that this agreement constitutes an attempt to make a conditional delivery of a grant and that this is prohibited by law. It cites § 47-09-07, N.D.C.C., in support thereof. In tracing the history of this statute, our court in a 1939 decision said: The court concluded: It is interesting to note that a few other states have reached a different conclusion. In 1931 the District Court of Appeal for the Third District of California quoted the following with approval: In a more recent decision, rendered by the Supreme Court of Texas in 1947, that court said: See also: Redmond v. Gillis, 346 Ill. 223, 178 N.E. 504; Chillemi v. Chillemi, 197 Md. 257, 78 A.2d 750. In light of the decisions of this court applying and construing our statute, which makes a delivery of a grant to a grantee absolute and effective as of the delivery and discharges any condition on which the delivery was made, and finding no reasonable basis for distinguishing the cases and no rational basis for holding the statute inapplicable in the case at bar, we are constrained to hold that the title to the minerals was transferred to the grantee as of the date of the manual delivery by the grantor and manual acceptance by the grantee of the mineral deeds. Whether waiver applies will be discussed later in this opinion. Deeds which were used in the compilation of the acreage as of January 1, 1958, were dated on or before January 1, 1958, but some were acknowledged thereafter. The question thus arises as to what date the deeds were actually delivered. A grant is presumed to have been delivered at its date. § 47-09-06, N.D.C.C. In construing our statute we have said: We have held that the evidence to overcome the presumption that a deed in the possession of a grantee was delivered to and accepted by the grantee must be clear and convincing. Cox v. McLean, 66 N.D. 696, 268 N.W. 686. We are of the opinion that the evidence to overcome the presumption that a mineral deed was delivered on the date it bears, rather than on the date it was acknowledged, must also be clear and convincing. The court has said that a deed need not be acknowledged to effectively transfer real property from a grantor to a grantee. The mere fact that a deed was acknowledged on a date subsequent to the date of the deed does not rebut the presumption that the deed was delivered on its date. There is additional evidence to the effect that some of the deeds were not delivered on the dates they bear, but the evidence is insufficient to prove that the corporation did not have title to 30,000 mineral acres by January 1, 1958. The landowners contend that if, under § 47-09-07, N.D.C.C., the corporation did have a right to immediate passage of title before acceptance thereof, the right or benefit of such law was waived by the agreement not to claim ownership of the mineral interests until the stock certificates had been issued. They refer us to the following section of our Code: Their contention is that no rights of innocent third parties nor considerations of public policy are involved that would be affected by this waiver. In view of the language of § 47-09-07, N.D.C.C., which provides that the instrument takes effect on delivery to the grantee discharged of any condition on which the delivery was made, no condition remains. Waiver cannot apply to restore that which has been discharged. It appears, therefore, that the part of the judgment dependent upon the corporation's failure to acquire 30,000 mineral acres by January 1, 1958, must be set aside unless the landowners have established another basis on which they may prevail. The landowners claim that the unconscionable character of the transaction warrants a rescission for fraud. In contending implied fraud, the landowners make the following argument in their brief: The ratio of investment in the two stocks is: Examination of the features of the stock reveals no other differences between the two classes of stock. The Class B stock is not charged with any obligations. There are no priorities or preferences in favor of the Class A stock. We believe that this extreme disparity between voting powers (1200 to 1) and earning and liquidation rights (18 to 1 or more) between equivalent investments and risks is sufficient to imply fraud without more proof. See 17A C.J.S. P. 1234 (Contracts § 614); and 17 C.J.S. P. 982 (Contracts § 190); 24 Am.Jur. P. 93 (Fraud and Deceit § 260); and 24 Am. Jur. P. 129 (Fraud and Deceit § 284). In the last mentioned citation the text states: And in 24 Am.Jur. P. 93, the following: It is true as stated by the Court in its Opinion that this discrepancy in voting rights was disclosed in the small print on the back of the stock certificate, but this instrument was not sent to landowners *679 until close of the transaction, and there was no disclosure to landowners of the low price (25¢ per share) paid by the promoters for the Class B stock which was given 100 votes per share and 15% of the earnings. It is interesting to note that, had the corporation exchanged all of its Class A stock for minerals at the rate of $15 per mineral acre, the Class A stockholders would have contributed to the corporation $9,000,000 worth of minerals, while the Class B stockholders would have contributed the sum of $5,000. This is an investment ratio of 1,800 to 1. Thus, while the Class A stockholders would have contributed on the basis of 1,800 to 1, they would have shared in the dividends and the property on liquidation only on a 5.7 to 1 basis. The prospectus filed with the Securities Commissioner contained the following information concerning the capitalization of the corporation: In addition to this information, the prospectus contained the following information: There is no evidence to indicate that this prospectus was given to any of the prospective purchasers of the stock, nor is it so contended. The company did, however, distribute through the mails and at public meetings in its solicitation of the exchange of minerals for stock a brochure entitled "17 Questions About Little Missouri Minerals." Question No. 6 of this brochure contains the following: In this brochure there is no reference to the fact that Class B stock exists, nor is there any indication that all of the Class B stock had been purchased by the promoters for much less value than the Class A stock was being exchanged for minerals, and that the Class B stockholders were then in control of the corporation and could continue to control the corporation, even though the great bulk of the assets of the corporation were to be contributed by the Class A stockholders. In the letter which was sent to landowners soliciting the exchange of their minerals for stock, we note the following with reference to the structure of the corporation: Although this letter does indicate that Class B stock exists and that it has been subscribed by the organizers-management group, there is no disclosure in this letter of the pertinent facts indicating that the promotors by buying all of the Class B stock have acquired control of the corporation for the nominal sum of $5,000. The landowners contend that the statement made as to the voting rights contained in the letter soliciting the exchange of mineral acres for stock constituted actual fraud. The following is the argument made by the landowners relative thereto: See also 18 C.J.S. [Corporations § 327], Pages 851 and 852, and the following language on Page 852: and at Page 833 of this text the rule is cited as follows: The general principle of liability for fraud by silence is set out in 23 Am.Jur. 851 (Fraud and Deceit, § 76) as follows: *682 The landowners contend that the corporation thus employed half truth, which, when coupled with the extremely disadvantageous situation from the investment and voting standpoint, is sufficient to warrant the setting aside of these transactions for fraud. Under a 1959 amendment to our Securities law the sale of the stock in the instant case would today be prohibited. § 10-04-08.1, N.D.C.C. In our view the sale of the securities in the instant case worked a fraud or deception on the purchasers. The disposal of the securities was on unfair terms. The same session of the Legislature also amended our Securities Law to give the Securities Commissioner control over advertising matter. Said section reads as follows: We are convinced that both the letter and the brochure used by the corporation in the instant case to solicit the exchange of minerals for stock are in conflict with the purposes of our Securities Law as now written and thus clearly could have been prohibited by the Securities Commissioner had these laws been in effect at the time this stock was being exchanged for minerals. The mere fact that these statutes were nonexistent at the time of the registration of this stock will not prevent this court from granting relief to the landowners in the instant case if the corporation has committed constructive or actual fraud as encompassed by the statute then prevailing. Fraud under our statutes is either actual or constructive. § 9-03-07, N.D.C.C. Meritorious as the argument appears that the unconscionable arrangement and classification of the stock in itself constituted constructive fraud, we need not determine this question in the instant case, as we are convinced that actual fraud has been committed by the corporation. Our statute on actual fraud reads as follows: Our view is that the corporation with knowledge suppressed the truth when it used in its solicitation of the exchange of minerals for stock its brochure which contained the words "The Class A common stock owns 85% of the company and receives 85% of all dividends," and when it used its letter for the same purpose which contained the following: The corporation made these statements with knowledge that all of the Class B stock had been subscribed and that at that time control of the corporation was in the Class B stockholders, who could and did prevent the Class A stockholders from ever acquiring the sixty per cent vote ascribed to them in the statement. The suppression of these facts with knowledge of their truth constituted actual fraud. Liland v. Tweto, 19 N.D. 551, 125 N.W. 1032. See also: Equitable Life Ins. Co. of Iowa v. Halsey, Stuart &amp; Co., 312 U.S. 410, 61 S. Ct. 623, 85 L. Ed. 920; Loghry v. Capel, 132 N.W.2d 417 (Iowa 1965); Bean v. Bickley, 187 Iowa 689, 174 N.W. 675; People v. National Cancer Hospital of America, 200 Misc. 363, 102 N.Y.S.2d 103; Noved Realty Corporation v. A. A. P. Co., 250 App.Div. 1, 293 N.Y.S. 336; North Star Lumber Co. v. Rosenquist, 29 N.D. 566, 151 N.W. 289. Had the landowners known that they were to contribute their minerals, which were by far the greatest part of the assets of the corporation, without in reality having any opportunity to control the corporation, it is highly unlikely that they would have exchanged the minerals for stock in the corporation. The information known to the corporation but designedly suppressed was of such relevant and crucial nature that it should have been disclosed. In failing to disclose this information, fraud was perpetrated upon the landowners. When there is nondisclosure of a material fact, or, as stated by the Iowa Supreme Court, when the representation made by the nondisclosure is material, courts permit inferences of inducement and reliance. Loghry v. Capel, supra. See also: Jones v. West Side Buick Auto Co., 231 Mo.App. 187, 93 S.W.2d 1083. California, with a statute identical to ours, has inferred reliance on fraudulent representations from circumstances. *684 See also: Gormly v. Dickinson, 178 Cal. App. 2d 92, 2 Cal. Rptr. 650; Curran v. Heslop, 115 Cal. App. 2d 476, 252 P.2d 378; Thomas v. Hawkins, 96 Cal. App. 2d 377, 215 P.2d 495; Mathewson v. Naylor, 18 Cal. App. 2d 741, 64 P.2d 979. As the facts suppressed in the instant case were material, inducement and reliance are inferred from the circumstances. It is our view that the landowners would not have exchanged their minerals for stock in the corporation had the suppressed facts been given to them. Having found that the corporation has committed actual fraud, we must proceed to a further determination of the issues rasied by the appellant corporation before we may ascertain whether the trial court's judgment should be affirmed. Specification of error No. 7 reads as follows: Specification 7 is now moot in light of the fact that our affirmance of the judgment, as this opinion is now written, is on a basis other than that given by the trial court or that asserted in Specification 7. Specification 8 reads as follows: The corporation cites §§ 32-17-03 and 28-04-01, N.D.C.C., which relate to actions to quiet title. These statutes do not apply to actions for specific performance or rescission, which are governed by Rules 20 and 21, N.D.R.Civ.P. The pertinent part of Rule 20 reads as follows: If the corporation believed that there was a misjoinder of parties plaintiff, it should have made its motion under Rule 21, N.D. R.Civ.P. As the corporation failed to make such a motion, we need consider this specification no further. Having determined that the landowners are entitled to a reconveyance of their mineral interests on the basis of fraud and, as it is necessary in effecting rescission that the landowners return to the corporation the stock certificates, notes, and moneys received on the payment of notes and interest thereon pursuant to the offers and deposits made in court, it follows that the landowners are entitled, not only to a reconveyance of the minerals, but also to a recovery of the rentals paid the corporation for the leasing of the mineral interests while the minerals were in the corporation's name, plus interest thereon at 4 per cent per annum. The case is therefore remanded to the trial court with instructions that the trial court modify the judgment to provide for the recovery of the rentals plus interest. For the reasons stated herein, the judgment is in other respects affirmed. TEIGEN, C. J., and STRUTZ and KNUDSON, JJ., concur. MURRAY, J., not being a member of this Court at the time of submission of the case, did not participate. ERICKSTAD, Judge. A 24-page petition for rehearing, accompanied by a 6-page affidavit signed by Mr. Kye Trout, president of Little Missouri Minerals Association, Inc., and a document entitled "Balance Sheet" and dated May 1, 1963, has been filed by the defendant, Little Missouri Minerals Association, Inc. Little Missouri Minerals asserts that it bases its petition upon (1) mistakes of fact contained in the Supreme Court opinion; and (2) error in the decision with respect to the statutory provisions of law and controlling principles of law overlooked or not called to the attention of the court. We shall discuss the points raised by the Corporation which we consider pertinent. The Corporation contends that the evidence does not warrant a finding of fraud. In support of this contention the Corporation has cited several North Dakota cases to the effect that fraud, including its element of reliance, may not be presumed. Among the cases cited are Steinbach v. Bauclair, 38 N.D. 223, 164 N.W. 672; and Grabow v. Bergeth, 59 N.D. 214, 229 N.W. 282. The contention of the Corporation is that this court, on the basis of the evidence presented, has presumed fraud and reliance, contrary to the rule stated in the aforesaid cases. This contention fails to recognize the distinction between a presumption and an inference. In Grabow our court held that it was error for the trial court to instruct the jury that reliance on fraud could be presumed, stating: "There is no presumption which obviates the necessity of proving this fact." Grabow v. Bergeth, supra, at 291. This case is the subject of a case note and text discussion in 37 C.J.S. Fraud § 102, p. 408, which sets out the distinction between presumption and inference as follows: The statement relied on by the Corporation, that fraud is not to be presumed, was *686 contained in a quotation cited with approval in Steinbach, which contained the following: This statement was incorporated by this court in Syllabus 1 of Steinbach. In the instant case fraud was not presumed; it was, however, inferred from the facts and circumstances. The employment of inference from established facts to reach a judicial determination is a common and necessary process. This is especially true in fraud cases. See 25 Modern Federal Practice Digest, p. 699, key No. 58 (3): We accordingly adhere to that part of our opinion which held that fraud was inferable from the facts and circumstances. Another contention of the Corporation is that the quoted argument of counsel for the landowners relating to the alleged unconscionable character of the transaction contained statements of fact and data not included in the record. We have reviewed these arguments of counsel and find that they are substantially supported by the record and that this contention of the Corporation is further without merit for the reason that we did not base our opinion upon the said arguments, as evidenced by the following language from our opinion: The next point we shall consider is the Corporation's contention that this court made a mistake in fact leading to its ultimate conclusions of law when it said: The Corporation alleges that this assumes without proof that this letter was sent or delivered to all of the plaintiffs and that the record is to the contrary, because only one stockholder, Robert Still, testified that he received it. In respect to this contention, it is our view that under the circumstances of this case, the president of the corporation having acknowledged that in connection with the solicitation of the exchange of minerals for stock the corporation circulated various materials and literature, including the letter and the brochure, partly through the mail and partly by distributing them generally at solicitation meetings, testimony of their receipt by each plaintiff is unnecessary. The Corporation cannot escape the practical consequences of the distribution of this fraudulent material by asserting that each plaintiff must testify as a precedent to his recovery that he received *687 the material, which was admittedly used and distributed by the Corporation, and which was intended for receipt by him as a prospective purchaser of the stock. It is also significant to note that when Mr. Trout, president of the Corporation, was asked: "Did you say that the Class `A' stockholders would have sixty per cent of the voting rights?" his counsel replied: "We concede that revelation was made in the prospectus and other literature in connection with the securities issue." Mr. Trout on cross-examination admitted that he said in a deposition taken before trial that the letter and brochure were parts of the publicity material the corporation instructed its representatives to use in soliciting exchanges of minerals for stock from the plaintiffs and that pursuant to these instructions this material was generally taken out in the field by the solicitors for this purpose. Another alleged error on the part of this court is the statement contained in the opinion as follows: "Under a 1959 amendment to our Securities law, the sale of the stock in the instant case would today be prohibited." As the amendments were made to the securities law subsequent to the original registration of the stock issued by the corporation in the instant case, they are not controlling and were not intended to be controlling. The statement was made to draw attention to the change in the statute which authorized the Securities Commissioner to refuse to register stock that proposed disposal of securities on unfair terms. It was intended that this would discourage the offering of stock on unfair terms in the future by others. The record before us convinces us that the disposal of the securities in the instant case was on unfair terms. The Corporation alleges that these securities were later reregistered in 1961, 1962, and 1963, and that this refutes our statement that under the amended statute the sale of the stock in the instant case would be prohibited. We have not been able to find the proof of this allegation in the record. It is our view, however, that mere reregistration, if it were accomplished, would not establish that the reregistration was legally proper. The next contention of the Corporation is that the plaintiffs Charles Davidson, A. J. Gilman, Alfred G. Fasching, Edward H. Meyer, and Donald F. Wischow, all being members of the "Advisory Board of Directors," had full knowledge of the corporate affairs, voting rights, total investments of Class B stockholders, and other matters, all contrary to the Court's holding of concealment of facts. Our search of the record, however, does not disclose that the "Advisory Board of Directors" had knowledge of the fact that the Class A stockholders would have 60 per cent of the voting rights only if all of the Class A stock were issued. A reference to the transcript reveals that Mr. Davidson talked to Mr. Trout about voting rights and that Mr. Trout explained the voting rights to Mr. Davidson, but there is no indication that he explained the voting rights to Mr. Davidson any more fully or any differently than he explained them in his letter or brochure to the prospective purchasers. A study of the corporate minute book discloses that names were suggested as proposed members of the "Advisory Board of Directors" at a stockholders' meeting held March 29, 1958. The minutes of the meeting do not indicate that these names were selected because these persons had special knowledge of the corporate affairs, but, on the contrary, it appears that they were chosen because of the areas they represented. The minute book does not disclose that the "Advisory Board of Directors" had any special authority which would permit its members access to records and information *688 not otherwise available to the other stockholders. In fact, the minutes of that meeting state that Mr. Trout presented the matter of the establishment of this board as an item of business entitled "Creation of Advisory Board of Directors." Mr. Trout asked for the creation of this board "to assist with `advising and counciling' [sic] in the operation of the company." This does not in any way indicate that the members of the "Advisory Board of Directors" were given or were intended to receive any information other than that given to the other stockholders. The Corporation urges that the fact that the stock sale proposals were not unconscionable is proved by the actions of Mr. Abernethy, one of the organizers of the Corporation, and members of the "Advisory Board of Directors" in exchanging minerals for stock. In light of what we have previously stated, we do not believe that this point deserves a further comment. It is sufficient to say that we find it difficult to see the relevance of Mr. Abernethy's exchange of minerals for stock. Mr. Abernethy is not a party plaintiff. He could very easily have exchanged his minerals for stock to aid in the promotion of the sale of Class A stock, for as a promoter and an owner of Class B stock, he was part of the group that benefited most from the successful sale of Class A stock. The significance of the actions of the members of the "Advisory Board of Directors" has been previously discussed. The last point which we shall consider is the contention of the Corporation that: "The Court's opinion overlooks the facts that upon trial, the trial court continually excluded and prevented, and foreclosed the defendants' attempts to examine and cross-examine regarding knowledge that plaintiffs and plaintiffs' witnesses had about their voting rights, and other matters being claimed. In other words, the trial court repeatedly took the position that fraud was not an issue and that no fraud was committed. (Transcript, pages 458, 459, and 468 through 470) * * *" Our study of the transcript pages cited in support of the first part of that contention discloses that plaintiffs' counsel objected to a question which was asked to determine what action the witness took subsequent to the conveyance of the minerals to the Corporation and following the receipt of the stock certificates therefor. It did not relate to the witness's knowledge of the corporate structure prior to the consummation of the transaction. It therefore was a matter which, if relative at all, was relative to the question of laches rather than the question of fraud. The fact that the trial court may have repeatedly taken the position that fraud was not committed resulted more in favor of the defendant corporation than it did in favor of the plaintiffs, for, in most instances, the court's position prevented inquiry on the part of the plaintiffs or prevented presentation on the part of the plaintiffs of testimony or evidence designed to prove fraud. Although the trial court's findings of fact are entitled to appreciable weight, on trial de novo we are not bound thereby. We are certainly not bound by such findings when they are based on an erroneous conception of law. We have reviewed the entire case and all of the evidence and have found actual fraud. We therefore adhere to our original opinion. TEIGEN, C. J., and STRUTZ and KNUDSON, JJ., concur. MURRAY, J., not being a member of the Court at the time of submission of the case, did not participate.