Court Opinion

ID: 5218137
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:27:42.133704+00
Date Added: 2024-06-11T08:27:28.407001
License: Public Domain

Woodward, J.
(dissenting):
The plaintiff demands damages alleged to have resulted from certain fraudulent' representations made by the defendants which induced him to purchase certain bonds- issued bv the Newton and • Northwestern Railroad Company of the State of Iowa, of the par value of $250,000, for which the plaintiff paid the defendants the sum of $243,368.06. The facts as they appear from the evidence justified the jury in finding that the defendants placed a prospectus before the plaintiff for the purpose of inducing him to purchase the bonds, which prospectus was - made in 1903, but without date, iii which the affairs of the railroad company appeared to be in a very satisfactory condition, and one warranting the investment, while as a matter of fact the defendants were aware of the true conditions in 1904, at the time the prospectus was used, and they did not correspond in many of the essential details with the facts as stated in *749the prospectus. There was evidence in the case which tended to indicate that the prospectus was made and issued in good faith, and that there were no material misstatements of facts at the time it was made, but the evidence also shows that at the time the prospectus was made use of by the defendants it had been fully demonstrated that the anticipations of the railroad company were not to be realized, and these facts were brought home to the knowledge of the defendants ; at least, the evidence indicated that they had. the fullest possible opportunities for knowing the facts, and that they had been discussed among the members of the defendant’s banking concerns, of which he was a partner, both in New York and-in' Boston.
The principal questions arising on this appeal by the defendant Henry W. Poor relate to the charge of the court and the exclusion and reception of evidence. It is claimed, in the first point, that the court erred in admitting in evidence the reports of the Newton and Northwestern Railroad Company to the Railroad Commissioners of Iowa, and in refusing to charge the defendant’s request that “ the defendant Henry W. Poor is not chargeable with knowledge of the facts contained in said reports to the Railroad Commissioners by reason of being a director of said railroad company.” The court refused to charge “in any other manner than I have heretofore charged in that respect,” and to this the defendant excepted. The defendant Henry W. Poor was a director' of the Newton and Northwestern Railroad Company, and it was clearly competent, in establishing the fraudulent misrepresentations of the defendants, to show that the railroad company had made statements subsequent to the prospectus which went to show that the prospectus, at the time of its use in 1904, did not correctly represent the* known facts. The board of directors is the managing body of the corporation. It is called upon, in the case of railroad corporations in most of the States, to make a report of its condition at stated • intervals, and it would be strange if a report thus made under the requirements of the law could not be offered in evidence to show that one of the directors, in selling the securities of the railroad company, acted fraudulently. • It is very likely true that this is not the highest evidence, but it is clearly some evidence, and as fraud is generally established by a series of facts and, circumstances, rather than by direct evidence, .it is one of the eleménts which-it was *750proper for the jury to take into consideration. The court, I believe, had charged the law of the case upon this point-; it was not bound to charge the detailed requests of the defendant where it had already covered the point.
It is also suggested that the court erred in admitting in evidence the'so-ealled reports of business of the railroad company and of the coal earnings, and in denying the defendant’s motion to strike out such evidence from the record. I am unable to discover error in these rulings. The evidence disclosed that these reports were in the possession of one of defendant’s partners in the Boston firm; that some of them had been transmitted to the defendant :at his New York office, and that the Boston partner had dismissed these reports and the general condition of the railroad with the defendant Poor subsequent to the issuing of the prospectus' in question, and prior to its use in inducing the plaintiff to make the investment. Bringing directly home to the defendant Poor the knowledge of these reports and their discussion certainly had. a tendency to ■establish that he knew the representations of the prospectus to be false at the time they were made-use of to induce the .plaintiff to purchase.
It is likewise insisted that the court erred in refusing to withdraw the prospectus from the consideration of the jury, and in permitting the jury to base their verdict in any part upon a finding that any statement, contained in said .prospectus was false and untrue. It is doubtless true that the evidence did not disclose that there was any false statement in th.e prospectus as it was issued, but that did not make the prospectus incompetent evidence in this case, under the circumstances. The prospectus may not have contained any false statement of fact when made; it purported to be made up on the statements of others and upon estimates made by those who were in a position to know, but the element Of fraud entered into the transaction- when the defendant Poor, knowing that the estimates had not been realized and that the statements were not in harmony with .the then-known facts, made use of the same to induce the plaintiff to purchase the bonds. ' For instance, it was not, so far as we know, false to say that a certain engineer had estimated that there .was a.given amount of coal available in the mines owned by the.company, but.it would undoubtedly be a fraudulent misrepre*751sentation on the part of the defendant to make use of that statement at a time when he knew that no such amount of coal could be produced, and it was upon this basis that the whole transaction savored of fraud and justified the jury in finding for the plaintiff. It was not error to retain the prospectus in evidence, because it was a necessary part of the case; it showed what had been represented, and the testimony disclosed that, at the time this prospectus was made use of, it could not have been done in good faith, for the defendant knew that its statements were not to- be realized.
I do not find reversible error in this case, and 'the judgment and order appealed from should be affirmed, with costs.
■ Hibschbeeg, P. J., concurred.
Judgment and order reversed and new trial granted, costs to abide the event.