out was not very clearly pointed out, but the motion was so broad that it must be taken to include nearly all of the evidence which Mr. Brockway gave on this subject. We regard this ruling as fatal to the judgment. It must be borne in mind that the only real defense which the company attempted to make out by the cross-examination of this witness, or by the witness which they produced, Mr. Bradbury, was based on the illegality of the consideration, and the theory that it was really entered into to procure O. H. Henry's aid in engineering the deal through the land board, rather than to compensate him for services. At first blush, it would not be evident that this testimony bore on that question, but mature reflection convinces us that the trouble lies deeper than the surface. To strike out what Brockway had given as his knowledge of the matter, because it came from T. C. Henry, might not, perhaps, be so harmful as to compel us to reverse the judgment; but, in another view of it, it must be. When we remember that the point of attack was the consideration of the contract, and when we likewise remember that T. C. Henry was crossexamined hours on the reasons which he had for omitting to enter that contract on the books of the company, and why there was no scrap of paper or entry among the company's records to show that the contract had been entered into, and when he was examined at great length respecting his silence as to the unpaid portion of the consideration of the contract in the settlement with Bradbury and his counsel, the importance of this testimony is made evident. If the jury believed that this witness, who was wholly disinterested, and whose character and status were unquestioned, told the truth respecting his information concerning the contract, and the time when it was a matter of discussion, and the source from which he got his information, it would probably have had great weight with them, to overcome the inferences which were sought to be drawn from the omission to put the contract on the books, or to state anything to Bradbury about it. Evidently about the time the contract was entered into it was a matter of general and frequent conference and communication between the president of the company, who had executed it, and the various members of the directory, who were its governing body. It must have had some weight, at least, with the jury, in the settlement of the inquiry whether the contract was legitimate or illegitimate, and in determining the importance which should be given to the failure to enter the contract on the books. The rule respecting the admission or rejection of testimony is exceedingly clear. A case must be reversed if testimony has been wrongfully admitted, or if it has been wrongfully refused, unless it clearly appears that the testimony admitted could not have been prejudicial, or that that which was re jected was of no importance to the party against whom the ruling was made. As the supreme court of the United States has frequently put it, it must appear so clear as to be beyond doubt that the error did not and could not have prejudiced the parties' rights. Deery v. Cray, 5 Wall. 795; Smiths v. Shoemaker, 17 Wall. 630; Gilmer v. Higley, 110 U. S. 47, 3 Sup. Ct. 471; Railway Co. v. O'Brien, 119 U. S. 99, 7 Sup. Ct. 118; Mexia V. Oliver, 148 U. S. 664, 13 Sup. Ct. 754; Railway Co. v. O'Reilly, 158 U. S. 334, 15 Sup. Ct. 830. It is impossible for us to concede that the striking out of this testimony may not have had great influence with the jury. There was an entire absence of an exact limitation on what was stricken out, and both the motion and ruling were so broad and so general as to apparently eliminate from the consideration of the jury all of Brockway's testimony which covered his knowledge respecting O. H. Henry's employment to sell the land. This was the point of the controversy, the thing to be established, the basis of the plaintiff's case, and the object of attack. To strike out the testimony of a disinterested witness who was able to state fully his knowledge about it, and the knowledge of the other directors concerning it, and the source of his information, which turned out to be T. C. Henry, excluded from the consideration of the jury matter which might have been the turning point of the case. We are not prepared to admit that T. C. Henry's declarations on this subject were not legitimate as original testimony. The testimony was certainly legitimate for the purpose of proving the knowledge of the directors, and therefore a ratification by the company. We cannot assent to the authorities which are cited by counsel, in the petition for rehearing, to the effect that the knowledge brought home to the directors of the company is not legitimate for the purpose of establishing ratification, even though that knowledge be brought home to them individually, and not while sitting as a board, There are many authorities to the effect that notice to individual directors is not enough. But this is neither notice nor information conveyed to an individual director, nor to the members of the directory by a stranger. It must be remembered that T. C. Henry was the president of the company. He was then engaged in the active management of all of the business affairs of the corporation, and charged with the duty, not only of conserving its interests, but of advising the members of the directory of his acts, that he might have the benefit both of their advice and their approval. We think it quite within the range of legitimate testimony to prove that the president, who did the act, and had apparent authority to do it, told the members of the directory what he had done, and that those directors, when thus informed of it by the president, approved of his acts. If, with this knowledge, no action whatever was taken to interfere with the contract, and the parties proceeded to its execution, and completed it, it brings the case, so far as we are able to see, entirely within the range of the law of ratification. As we before intimated, what T. C. Henry may have told the directors was not hearsay at all. It was exactly like the communication of an agent to his principal, or a principal to his agent, or a communication from one partner to another. They are declarations made by a party charged with certain duties, clothed with certain powers, and responsible to the governing body of the corporation, to wit, the directors. Under such circumstances, what the president said was entirely competent, it bore on a legal issue in the case, and it is not clear to us that its striking out was not prejudicial. The ruling of the court thereon is error, for which the cause must be reversed. There is one other matter to which our attention must be directed before we dispose of the case. That portion of the original opinion, in which the present writer did not concur, which adjudged the testimony offered in support of the affirmative defense, to wit, the illegality of the consideration, insufficient to support it, or to warrant the submission of the matter to the jury, still remains to be disposed of. It is a matter which must be very cautiously discussed. This is on the hypothesis that the reversal on the other grounds will still leave it for disposition on the new trial. We are not inclined to withdraw the consideration of that issue from the jury. We may very safely say the company offered little testimony to support it. In this respect the case rested much on the inferences which might be drawn from what was said by T. C. Henry and O. H. Henry in the course of their cross-examination. It is true, Mr. Bradbury gave direct testimony respecting the statements of both of them on the subject of the real consideration, but whether evidence of such declarations, in the face of positive testimony to the contrary, would be sufficient to justify a verdict, we do not propose to decide, nor, in this opinion, hold that the issue may not be again submitted. We think the court erred in giving the ninth instruction, because, although it may contain the germ of a correct legal principle, yet, without some limitation, and the expression of the true doctrine in such matters, this abstract statement must have been prejudicial to the plaintiff. When a court undertakes to say that in determining what facts are true the jury may consider, not only all the evidence and all the circumstances of the transaction under investigation, but may also find any fact proven which they may think rightfully and reasonably inferable from the evidence, it puts a dangerous weapon in the jury's hands. There are some inferences which may be legitimately drawn, and there are some presumptions, both of law and of fact, of which courts and juries are bound to take notice. Whatever usually happens in the course of business, whether of public office or of private affairs, may be presumed to happen on proof of facts out of which the presumption can legitimately arise. The deposit of a letter in the mail, duly addressed and stamped, will undoubtedly raise a presumption that it reached its destination in the due course of the mails. There are many like instances in the course of business affairs which would serve to illustrate the same proposition. To state generally that, whenever evidence is given, the jury may infer therefrom any fact which they think reasonable, is an inaccurate expression of the rule. The inference must of necessity flow from the fact, and be a legitimate inference, under the principles which govern the introduction of testimony. It is not every inference which the jury may think deducible from the facts which they have a right to take as a basis for their verdict. This would leave the determination of causes too much to conjecture, and relieve them from the yokes of the law which they are only too willing to shake off, and act on their own notions of what is right and wrong, regardless of the proof. This somewhat lengthy résumé of the case indicates the mature convictions of this court respecting the present record, and indicates the lines along which, according to this opinion, the case should be subsequently tried. What has been said will enable the trial court to avoid the difficulties into which it fell, and eliminate the errors which have compelled us to reverse the case. The judg ment of reversal will be adhered to, though with such modifications of opinion on specific propositions as are apparent from this decision. Reversed. WILSON, J., not sitting. (10 Colo. App. 295) MOYNAHAN v. PRENTISS.1 (Court of Appeals of Colorado. Nov. 8, 1897.) STOCKS-CONVERSION-DAMAGES-TROVER DECEIT PARTNERSHIP. 1. To support trover, proof of demand is necessary where defendant had an interest in the property, and came into lawful possession of it. 2. Where one of two persons owning a certificate of stock sold and indorsed it to a third person on his false representations as to its value, the other denying and proving want of authority in the first person to sell his interest, and not affirming the transaction, but asserting the title in himself, cannot maintain an action of deceit against the third person on account thereof. 3. A member of a law firm cannot, in the absence of express authority, sell the interest of a partner in a certificate of stock issued to the members of the firm. 4. To prove the measure of damages for conversion of stock in an undeveloped mine which has not a market value because not dealt in except in particular instances, transactions in the particular stock, and the prices at which the stock has been sold or optioned, may be shown. 1 Rehearing denied December 13, 1897. Appeal from district court, El Paso county. Action by Owen Prentiss against T. J. Moynahan. Judgment for plaintiff. Defendant appeals. Reversed. Carpenter & McBird, for appellant. Brooks & Armit, for appellee. BISSELL, J. The peculiar tenure by which Prentiss held title to an interest in a certificate of stock of the Phil Sheridan Mining & Milling Company, and the opportunity which Moynahan had to make a little money by the sale of it, gave rise to this suit. The judgment which was entered may be an equitable adjustment of the controversy, but it is sustained by neither the pleadings nor the proof. On the 1st of January, 1894, Owen Prentiss and J. P. Dunleavy were doing business as lawyers in Cripple Creek. They did business together, but whether the terms and conditions of their connection and the agreement between them resulted in the formation of a law partnership is undeterminable, but, as we look at it, quite immaterial. One or the other or both of them seem to have been employed by the company, and, as the result of services rendered, received a certificate for 25,000 shares of stock of the company, which was issued in terms and form to Owen Prentiss and J. P. Dunleavy. The interest of neither was expressed, and presumptively, and without proof, they would be the owers each of one-half. The evidence, however, shows that under the agreement between them the interest of whatever might be earned or received was divided into thirds, and that Prentiss was the owner of two-thirds of the certificate. This is conceded by Dunleavy, and was testified to by both of them. When this stock was issued, it was either delivered to Prentiss, and by him turned over to Dunleavy to hold, or he got it at the time, and thereafter retained it. There is some little evidence to the point that the accounts between the parties were not entirely settled, and that Prentiss was indebted to Dunleavy, and that this was the real reason why the stock was given to him. Whether he held it as security or for any other reason in no manner bears on the question at issue, but these facts show the situation. Whatever connection they had was severed shortly afterwards, and in May, 1894. Later, and in 1895, there was some little movement in the stock because of an effort on the part of some parties to obtain control of the whole, or of the majority, of it. This movement resulted in the sale of several blocks, and the procurement of options on others. Proof was offered of what was paid by those who bought, and of the price at which the stock was optioned, and the figure at which Moynahan sold his. At this time Moynahan was the secretary of the company, and interested in these negotiations and sales. Having knowledge of this outstanding certificate, he corresponded with Dunleavy with reference to its purchase. In this connection it may be stated that Moynahan, prior to this time, knew that Prentiss had an interest in the stock to the extent of two-thirds of it, as appears from his letter of May 8th. At all events, he wrote to Dunleavy about selling it, stated the price which he got for his, which was put at three-fourths of a cent, and the price at which others sold their stock, which varied from three-fourths of a cent to one cent a share. In this letter he undertook to induce Dunleavy to transfer the certificate to O. R. Burchard, who would pay $200 for it. To induce Dunleavy to go into the scheme, and transfer it, he stated that Prentiss was in a deal whereby the certificate would be sold to other parties, or in some way disposed of, and Dunleavy left out in the cold. Dunleavy was advised to conceal the negotiations from Prentiss, in order to protect his own interest, to send the stock at once, and to wire him immediately as to what was done, as he was about to be removed from the office of secretary, and he would not then be able to transfer the stock on the books, and perfect the title in the purchaser. He was also told to see that the stock was properly indorsed to evidence title in the transferee. Acting on this suggestion, Dunleavy indorsed the stock with his own name and that of Prentiss, sent it to Burchard by express, C. O. D., and presumably got the money. When Prentiss learned that the stock had been indorsed and transferred, he started this suit. During the progress of the trial, evidence was offered to show the price at which the stock had been sold, in order to establish its value, and the measure of damages. Some was likewise offered which tended to show that Moynahan had received five cents per share for his stock, and that various amounts of it had been sold or optioned at that price. We have now stated all the matters which are requisite to the decision, although many details are omitted, and some matters are left untouched which are the subject of errors assigned. Our conclusions, however, render it unnecessary to state or suggest any other matters of fact, or any of those which were the subject-matter of objection during the progress of the trial. The suit which was begun seems to have been conceived as an action for false representations or deceit. The gravamen of the complaint is undoubtedly deceit. The pleader evidently intended to state such a cause of action, inserted allegations essential to the statement of it, and prayed a recovery based on it. In pursuit of this theory the representations and statements made by Moynahan to Dunleavy were fully amplified, and probably, if they afforded Prentiss a cause of action, are sufficiently set up. The pleader also averred matters which might, by a liberal construction, be taken to be the statement of a cause of action in trover. It was alleged that Moynahan fraudulently obtained possession of the stock; that the plaintiff had demanded possession of his interest in the certificate, and that both the possession and an admission of his rights were refused; that Moynahan claimed to own the whole of it, and had sold it, to the plaintiff's damage; and then laid the ad damnum. It may be the pleading is a little inartificial as one in trover, but we can spell out of it enough to maintain a suit of that description if the proof supported it. The trouble, however, is that, although the plaintiff alleged a demand, he did not prove one. This is evidently fatal, because Dunleavy had an interest in the certificate which he might lawfully and rightfully transfer to Moynahan, and by the transfer Moynahan came into the lawful possession of it; and to establish a right to the possession and maintain trover the plaintiff must allege and prove demand. We are not called on to determine whether trover will lie for an undivided interest in a certificate of stock under these circumstances, because the question is not raised by counsel. The case was tried on no such theory, nor was the evidence directed to that end. The pleading was not aptly drawn for the purpose, and our suggestions respecting it are more by way of analysis of the complaint than as a determination of what the rights of the parties on this basis might be. It is very evident the plaintiff could not maintain a suit for deceit, for none was practiced on him. No interview ever took place between Prentiss and Moynahan with reference to the sale or transfer of the stock, and Prentiss did nothing because of any statements or representations which Moynahan had made. We are quite unable to see how an action of deceit can be maintained by Prentiss because of the representations which were made to Dunleavy when the representations in no manner led to a transfer of Prentiss' interest by one having authority to act. Lindsey v. Lindsey, 34 Miss. 432; Dingle v. Trask, 7 Colo. App. 16, 42 Pac. 186. It is probably true, if a misrepresentation is made to one member of a firm, whereby the firm's interest in particular property is sold at an inadequate price, or under circumstances which result in injury to the firm, an action would lie for the deceit, although it was practiced on only one member of the partnership. Such is not this case. The plaintiff denied the transfer by the firm, denied the transfer of his interest, asserted the want of authority on the part of his partner to dispose of it, asserted the title was in himself, and that what his partner did, as a matter of law, was inoperative to transfer his title to Moynahan. Of course, he had the right to affirm the transaction, set up the sale by Moynahan, and hold Moynahan responsible for his acts, if he was able to sustain his case by proper proof. The testimony may be taken to establish want of authority in Dunleavy to transfer the certificate, and the legal insufficiency of the indorsement to convey Prentiss interest to Moynahan. Dunleavy had no direct authority to indorse it. There has been very considerable discussion by both counsel with respect to the power of a partner to deal with the property of the firm. We do not regard the question as determinative of the issue presented by the pleadings or the case made by the proofs, nor do we see how Dunleavy had authority to indorse the certificate when he did. In the first place, this was not a trading partnership. It was not organized for the purpose of dealing in stocks, but, if at all, for the transaction of law business. Such partnerships have been a matter of much consideration by the courts, and they are in harmony on the question that a member of a nontrading partnership must have express authority in order to sell the interest of the members of the firm. The liability of one partner for the acts and dealings of the co-partner, without consent or knowledge, is one purely of agency. If the authority is denied, and not established by proof, one who deals with the seller with knowledge of the firm interest does not thereby obtain a partnership obligation. If the party dealing with the firm has knowledge of the limitations of the agreement between the parties, he would, of course, be bound. If he is without knowledge, he must be able to establish the existence of the authority to do the act by proof of the nature of the business carried on by the firm, and the authority must, as a matter of law, be necessarily and reasonably implied from the nature of the business which the firm transacts. Irwin v. Williar, 110 U. S. 499, 4 Sup. Ct. 160; Smith v. Sloan, 37 Wis. 285; Blaker v. Sands, 29 Kan. 551; Halstead v. Shepard, 23 Ala. 558; Vance v. Campbell, 8 Humph. 524. The proof clearly demonstrates Moynahan's knowledge of the want of authority. He knew the firm, if it was a firm, was a law partnership, and engaged in the transaction of a law business, which did not carry with it the right to deal in certificates of stock issued to the individual members. It is evident from the tone and language of his letter of May 8th that he had specific knowledge that Prentiss had an interest in the stock, and his knowledge respecting Dunleavy's authority to transfer the certificate without Prentiss' indorsement appears from a suggestion in the letter to Dunleavy to see that it was properly indorsed. He had been theretofore advised by Prentiss, and as secretary of the company had knowledge, of the form of the certificate, and in the letter stated his exact knowledge of the extent of Prentiss' claim, and may not, therefore, be taken in this transaction to have been a bona fide purchaser without knowledge. Had he been entirely without this information, and simply known that Dunleavy held the certificate for 25,000 shares, and had sought to buy it at a named sum, and had received the certificate running to the two persons, but apparently bearing a joint indorsement, the question would have been somewhat different. In this connection we may be permitted to suggest that such inspection would have disclosed to any person familiar with business affairs that probably the certificate was indorsed by the same person at the same time, since the indorsements are evidently in the same handwriting. Disregarding these suggestions, the facts which were in Moynahan's possession take him entirely out of the category of a bona fide purchaser, and he is chargeable, not only with the knowledge which he had, but all legiti-. mate and legal presumptions must be resolved against him. In addition to all this, at the time Dunleavy attempted to transfer the stock the firm had been dissolved for more than a year. If it be true that during the continuance of the firm as a nontrading one no partner has, under the law of agency, the right to sell and dispose of securities which the firm may hold, a fortiori, after dissolution, whatever individual powers the partner may have possessed during the life of the firm cease to exist. On the conclusion of the trial the court rendered judgment that the plaintiff was entitled to recover 16,666 shares of the capital stock of the Phil Sheridan Mining & Milling Company, or, in lieu of it, the sum of $873 and costs. Manifestly, this judgment could not be rendered on the pleadings, or on any construction of them. The suit for false representations could not be maintained, and, if the complaint was held to be good in trover, no judgment could be entered on it for the want of proof. Neither the proof nor the pleadings warranted a judgment in that form. An alternative judgment might be entered in a suit in replevin. If Prentiss had filed his bill on proof that the stock had passed out of Moynahan's possession whereby he was unable to perform, the court, in order to settle the rights of the parties, might have entered judgment for the damages, to wit, for the value of the stock at the time of the conversion. Such was not the case made. A good deal of stress is laid on the objections made to the proof offered respecting the specific sales of stock, and the price at which it was optioned. This was produced to establish value. The question is not seriously presented, but it will remain an important inquiry on any subsequent trial. We are not inclined to agree with either counsel about the rule which must prevail. It has been over and over again determined that, in order to establish the measure of damages for the conversion of the stock of a company, proof must be offered of its market value. How that may be done, how the question is to be decided, and what testimony is legitimate to establish it, has been frequently the subject of adjudication. Most of the cases, however, concern stocks which have an actual or an apparent market value. About such stocks there is no difficulty, because they have an easily ascertainable value, and the knowledge of it is in the possession of many persons. Where it is the stock of a company which 51 P.-7 does not own a developed property, but yet is the holder of property of some future, if not immediate present, worth, there is no such thing as a market value, because the stock is nct dealt in either by brokers or by individuals except in particular instances. Under such circumstances, it is, of course, quite impossible to establish the market value in the way and by the means by which this matter is usually settled when the value of well-known stocks, like the stocks of railroads, surface transportation companies, lighting corporations, water carriers, or similar enterprises, is the subject of investigation. For this reason we are of the opinion that, in order to determine the market value, the ordinary means and methods may be resorted to, if practicable; but, if such proof cannot be made, the parties may show transactions in this particular stock, sales, options, and prices at which stocks have been sold or optioned, and therefrom either the court or the jury may determine its actual value. What has already been suggested, has demonstrated that the judgment may not stand. Under the peculiar circumstances we are impelled to direct a reversal, with an order to the court below to permit the plaintiff to amend his pleading to state a cause of action as he may be advised, and on the incoming of an answer and the framing of an issue the case may be again tried. The judgment will be reversed. Reversed. UNITED STATES NAT. BANK OF GUTH- This case is decided upon the principles announced in Gray v. Stiles (passed upon at this term) 49 Pac. 1083. (Syllabus by the Court.) Error from district court, Logan county; before Chief Justice Frank Dale. Motion by Logan county for an order requiring the receiver of the United States National Bank of Guthrie to pay all the taxes that had been assessed against the bank property. From the judgment, the bank brings error. Reversed and remanded. John F. Stone and Herod, Widmer & Overstreet, for plaintiff in error. Huston & Huston, for defendant in error. MCATEE, J. This proceeding arose out of an action brought by the United States National Bank of Guthrie, in which a receiver had been appointed to take charge of all the property of the defendant below. During the pendency of the suit a motion was filed by the county attorney of Logan county, asking that the court order the receiver to pay all of the taxes that had been assessed against the bank property. The case was presented upon an 1 Rehearing denied. |