Kussmaul v. Duplex Motion Picture Industries, Inc.

Adkins, J., delivered the opinion of the Court. This is an action of deceit, and grew out of the sale of shares of stock by the Duplex Motion Picture Industries, Inc.,appellee, the defendant below, to Blanche A. Kussmaul, appellant, the plaintiff below. The narr. alleges that in the spring of 1923, the defendant, through its agents and servants by divers misrepresentations and statements induced ²⁷⁴ the plaintiff to believe that the corporate stock of defendant was a sound, attractive, investment, and paid a return of twelve per centum thereon to the holders thereof; that, in reliance upon said representations, the plaintiff purchased from the defendant 1,800 shares of said stock and paid therefor the sum of $5,050, and agreed to purchase, in addition, 800 shares and paid on account thereof the sum of $1,800; that the said shares were of no value and the worth thereof was not as represented, and that said stock did not and does not pay a return of twelve per centum, and was and is a highly speculative and undesirable investment; that plaintiff, upon the discovery of the worthless character of said stock, made demand upon defendant0to return the money so paid to it, rescinded the contract for the additional shares subscribed for, and offered to return the certificate for the original 1,800 shares, but the defendant refused to accept the same and to return the money paid. Issue was joined on the general issue plea, and at the conclusion of testimony on both sides the court directed a verdict for the defendant.

This appeal is from the judgment entered on that verdict. The only exception is to the prayer withdrawing the case from the jury. The plaintiff testified that she was unmarried, had little education, was fifty-two years old and had always worked as a cook; that a salesman of defendant saw her at the home of a Miss Grace Young, her cousin, where he was demonstrating moving pictures, and dozens of times after that in the kitchen where plaintiff was working; that he told her the stock was a good investment, she would not be a penny out on it, that she would be independent, wouldn’t have to work all her life; that “I would — Oh, have it good, and he said that New York, the Governor of New York was in back of it, and the Sherman Bank of Brooklyn was back of it, and he said they were in business for eighteen years and he said if we weren’t satisfied with our stock we could get it back, and then when we wrote for the money we couldn’t get it back”; that he told her the stock was paying twelve per cent, “and probably they will pay more”; that plaintiff had received no dividend on the stock. ²⁷⁵ Grace B. Young testified that the salesman told her they had been paying twelve per cent, for the last eighteen years, .and that Mr. John B. Baer (chairman of the Blue Sky Committee) had given them “the whole full right to sell it in Maryland under the Blue Sky Law and he also said that Mr. Baer backed this stock very highly, and said it wras a ■clean little stock for anybody, to put their money in for an investment”; that the salesman also told her that duPont wanted to buy the controlling interest in the concern and they would not let him have it. It does not appear however, that Miss Young communicated any of these representations to plaintiff, or that she ever heard of them.

Mr. Baer testified that he doesn’t remember ever having seen defendant’s salesman; that he certainly never personally recommended the .stock. Plaintiff testified that the representation as to Mr. Baer was not made to her. The defendant offered testimony tending to prove that the company owned several lots on Long Island, and that their present factory, a six story building, was bought in 1924 and ■cost $250,000, subject to a mortgage of $197,000, and that the mortgage at the time of the trial was $164,000; that the .authorized capital stock of the company was 1,000,000 shares, par value $1 per share; that defendant began the sale of stock in the spring of 1923, and when the company came to Baltimore in June, 1925, and offered stock there, about 750,000 shares of the stock had been sold; that at different periods the stock had been offered at varying prices from $1 per share to $5, none for less than $1; that the board of directors fixed the price at which the stock was to be sold at a given period .and during that period none was sold by the company except at that price; sometimes agents of the company or others might during that period be selling stock purchased for their own account at a higher price; that the proceeds of sales had been used to pay for buildings, machinery and equipment, and for fourteen patents which the company, when it was organized in May, 1923, took over from its predecessor, the Duplex Machine Company, which then occupied a two and a half story building; that at the present time defendant is ²⁷⁶ doing business, making and selling all its various products and occupying all but one floor of its six story building; that in January, 1924, the company paid a dividend of 4% per cent, on a semi-annual basis; a six per cent, dividend was paid in July of that year, in January, 1925, 6 per cent., and in July, 1925, a stock dividend of 6 per cent.; that the company was still making all tbe machines represented in their book and others since designed; that the company sold its machines to all the large moving picture producers; they also sold to the Eord Motor