U.S. Supreme Court
Tyler v. Savage, 143 U.S. 79 (1892)
Tyler v. Savage
Argued January 18, 1892
Decided February 1, 1892
143 U.S. 79
A decree in a suit in equity found that T., an individual defendant, and the remaining assets of a corporation defendant, were liable to the plaintiff for the sum of $10,000 paid by him into the treasury of the company at the instance of T., for a certificate of stock therein, which company was represented to him by T., who was its president, to be in a flourishing condition, when in fact it was insolvent, and distributed $176.24 as the remaining assets of the company, of which $13.24 went to the plaintiff as a credit on his claim for $10,000, and decreed that T. pay to the plaintiff $10,000, subject to a credit of the $13.24. There was no demurrer chanroblesvirtualawlibrary
to the bill for multifariousness, and no objection taken in the court below for want of equity. The bill set out fraud in T., and that the $10,000 was due to the plaintiff by T. and the company, and required answers to interrogatories, which answers referred to the books of the company for information.
(1) To support jurisdiction in equity, there were in the case discovery, account, fraud, misrepresentation and concealment; the objection to the jurisdiction was not taken in the court below, and the case was not one of a plain defect of equity jurisdiction, under § 723 of the Revised Statutes.
(2) The decree was not outside of the case made by the bill, but gave relief agreeable to it, under the prayer for general relief.
(3) The evidence sustained the decree, and the report of a master, finding in favor of the plaintiff the facts on which the decree was based, was not excepted to by T.
The Court stated the case as follows:
This is a suit in equity, brought in the Circuit Court of the United States for the Eastern District of Virginia by Sarah C. Savage, a citizen of Pennsylvania who sues for herself "and all others, creditors of the Virginia Oil Company, who will make themselves parties to this suit on the usual terms," against the Virginia Oil Company, a Virginia corporation; John Tyler, president of said company, and in his own right; John W. Otley, C. W. Tanner, Isaac Davenport, Jr., J. H. Montague, C. E. Belvin, late directors in said company, and citizens of Virginia, and Joseph D. Evans and J. F. Crane, citizens of New York.
The bill, which was filed December 11, 1885, so far as it is material to give its contents, set forth that the plaintiff, being anxious to secure a business position for her son, H. C. Savage, was referred by William E. Tanner, of Richmond, Virginia, with whom she had business transactions, to John Tyler, president of the Virginia Oil Company, of which company C. W. Tanner, a son of William E. Tanner, was a member; that through William E. Tanner, she opened negotiations with Tyler and was informed that she could secure for her son a position equivalent to that of assistant secretary in the company, by the investment of $10,000; that she was willing to make that investment in the shape of a loan well secured, but chanroblesvirtualawlibrary
Tyler declined to take the sum as a loan, and required that she should purchase of the company that amount of its capital stock at its par value; that, to induce her to purchase the stock, Tyler, as president of the company, sent to her the following letter:
"Virginia Oil Company"
"Richmond, Va. April 10th, 1884"
"Mrs. S.C. Savage:"
"My Dear Madam: Your favor of the 9th is rec'd. During the short interview I had with your son, I concluded that he could easily undertake the duties that would be required of him in the employ of this company. With regard to the nature of the investment conveyed in the proposition thro' Col. Tanner, I would say that we have no trouble in borrowing all the money necessary for the conduct of the business upon its present basis, but the proposition to you embraced the idea (which we had been considering) of permanently enlarging the scope of our business by increasing our capital stock and getting additional office help. You will readily appreciate the difference to a man'f'g business between borrowing money, which may be called for at the pleasure of the lender, and having the same am't in the shape of a permanent investment; so we concluded that whatever arrangement was made in this direction must be upon a stock basis."
"As to the condition of our Co., the capital stock is at present $18,300 with authority from the stockholders to increase it to $30,000. The last dividend that was declared was a 7% semiannual. The fiscal year ends on the first of June."
"The prospects of our Co. I consider flattering. We have in the past few months decreased our expenses, and the outlook for business is better than ever before. Our products are sold north, south & west, and the field we are working is so wide that we could without much risk double our business by adding moderately to our capital. Our manufactures pay a large profit, and are favorably known throughout the territory we have traveled. As to your chances of selling your stock at par whenever you might wish, I can only say that a gentleman of New York has bought 30
shares at par within the last ten days, but a sale of stock in any m'f'g Co. would depend on its profitableness at the time the sale was made. Should our negotiations result in your son's coming with us, I shall personally try to make his position a pleasant one."
"Very resp'y, JOHN TYLER, Pres't"
That the plaintiff relied upon the statements made in the letter, and had a right to rely on them, as a basis for the investment of her money, and that the important statements made therein were as follows: (1) the then capital stock of the company was $18,300, with authority from the stockholders to increase it to $30,000; (2) the last dividend declared was seven percent semiannual, and the current fiscal year would end June 1; (3) the manufactures of the company were paying a large profit, and were favorably known throughout a wide territory, north, south, and west; (4) there had been a late decrease of expenses, and the outlook for business was better than ever before; (5) by adding moderately to their capital, they could, without much risk, double their business, and (6) a gentleman of New York had bought thirty shares of the stock at par within the last ten days.
The bill further averred that, with those statements from the president of the company, she concluded that its stock was a safe investment, and consented to take the stock instead of loaning the money, which was her preference, but which the letter assured her would not suit the company; that thereupon, on May 19, 1884, she paid into the treasury of the company $10,000, and received a certificate for one hundred shares of stock, which she still holds; that in accordance with her understanding with Tyler, her son was given a position at a salary of $800 per annum, and performed the duties assigned to him until the suspension of the office work; that when the 1st of December, 1884, arrived, she was not informed of the declaration of the semiannual dividend she had been led to expect, and on the 5th of that month she wrote to Tyler a letter of inquiry concerning it; that in reply she received a letter from him, as follows: