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Waddell v. White

Supreme Court of Arizona

December 23, 1940

D. W. WADDELL and ARIZONA CITRUS LAND CO., a Corporation, Appellants,
ELVIN E. WHITE, Appellee

Page 566

APPEAL from a judgment of the Superior Court of the County of Maricopa. Howard C. Speakman, Judge. Judgment reversed and cause remanded with instructions.

Messrs. Gust, Rosenfeld, Divelbess, Robinette & Coolidge, for Appellants.

Messrs. Woolf & Shute and Mr. W. T. Elsing, for Appellee.


Page 567

[56 Ariz. 422] LOCKWOOD, J.

This is an action by Elvin E. White, hereinafter called plaintiff, against D. W. Waddell, hereinafter called defendant, and Arizona Citrus Land Company, a corporation, hereinafter called the land company, for damages for unjust enrichment of defendants at the expense of plaintiff by means of false and fraudulent representations and deceit. The case was tried to an jury which returned a verdict in favor of plaintiff for 37,000, and defendants have brought the matter before us for review.

The complaint is thirty-seven pages in length, and we, therefore, summarize the picture presented thereby in factual form as follows. About October 29, 1932, the land company was the owner of a large acreage lying in what is known as the Beardsley Project, in Maricopa county, Arizona. At this time plaintiff, who had for years been an experienced citriculturist, was the owner of many thousands of budded nursery Marsh seedless grapefruit trees, and other thousands of seedling nursery grapefruit, together with several thousand dollars worth of equipment and machinery used [56 Ariz. 423] for planting and caring for such trees. Defendant was the owner of the majority of stock in the land company, and at all times was in full control of it. Most of the land owned by that company was raw and uncultivated desert which it had for some time endeavored to sell, but with little success. Its officers conceived the idea that if it were offered for sale as potential citrus land and they showed prospective purchasers that it had an expert citriculturist, ready to put in trees and care for the land until the trees were in bearing, sales might be promoted. For this reason it contacted plaintiff, and as a result of preliminary negotiations a contract was entered into between it and plaintiff on the date first mentioned. After reciting the inducements of the contract, it was agreed that the land would be offered for sale by the company at $250 per acre; that plaintiff would hold himself in readiness to enter into a nurseryman's contract with all prospective purchasers to plant the land purchased by them to grapefruit trees and to care for them for a period of three years, at the rate of $180 per acre for the first year, $75.24 per acre for the second year, and $75.72 per acre for the third year. The land company agreed that it would sell not less than 100 acres of land carrying this nurseryman's agreement prior to March 15, 1933, or, in case it could not make such sale, that it would enter into a contract with plaintiff, under the terms of the nurseryman's agreement, for the development of sufficient of its own lands to bring the total nurseryman's contracts outstanding at that date to 100 acres. Plaintiff further agreed that he would purchase 80 acres of land on the installment plan, plant 10 acres of it to grapefruit, and establish a nursery thereon for the purpose of supplying prospective purchasers with trees. He began performance under this contract, defendant advancing him the actual cost of his labor and some gasoline. [56 Ariz. 424] By the 15th of March, however, no lands had been sold, and the land company was, therefore, under an obligation to contract with plaintiff to plant and care for 100 acres of its land at the agreed price. On April 7, 1933, a supplemental contract was made. By its terms the land company agreed to advance not exceeding $6,000 to cover the actual expense of planting 200 acres, and to advance the actual cost of care and cultivation of the land, not exceeding $900 per month, until it was sold. In consideration thereof, plaintiff agreed to postpone the annual payments due him under the original contract until the land was sold or three years had elapsed, whichever event occurred first, and to assign any money due him by virtue of these nurseryman's contracts to the land company, until all advances made by it to him should be paid. The effect of this supplemental contract, construed together with the original one,

Page 568

was that plaintiff waived his right to the annual payments on the land planted as provided in the agreements for not exceeding three years, and the land company agreed to advance as against these deferred payments $6,000 for the planting of the 200 acres, and $900 per month for its maintenance until the land was sold, or three years had elapsed. Up to and including this time there is no contention the mutual dealings had not been fair and legal. Defendant then went east and endeavored to sell the land, but failed entirely. Knowing that the land company was bound by its contract to assume a gross liability to plaintiff of many thousand dollars, payable in not more than three years, and to finance plaintiff in his care of the 200 acres of the rate of $10,000 per year for three years, unless the land was sold sooner, defendant evolved a scheme for depriving plaintiff of his rights, as aforesaid. In pursuance of this scheme, on his return from New York in June, 1933, he suggested to plaintiff it would be well that he, [56 Ariz. 425] plaintiff and one Avon Brown, one of defendant's employees, should organize another corporation for the purpose of taking over plaintiff's contracts and assets, representing to the latter, among other things, that one of the many obstacles in selling the land was that purchasers did not desire to depend upon an individual, with whom they had no acquaintance, for the planting and care of their land, but would be satisfied to have this work undertaken by a corporation in which defendant, whom they knew and in whom they had confidence, was one of the active and principal stockholders, and that thus the three could make a great deal of money. Believing this and various other representations to which we shall allude as it is necessary from time to time, the Agua Fria Citrus Grove Development Company, hereinafter called the development company, was organized, and 55 per cent. of its stock was issued to defendant, 22 per cent. to Avon Brown, and 23 per cent. to plaintiff who thereupon transferred to the development company the land he had purchased and his nurseryman's contracts as aforesaid, all of his nursery supplies, trees, seedlings and the like, and the machinery and equipment for planting above referred to, which was valued by mutual agreement at $97,000. The development company had five directors, defendant, his daughter, his son-in-law and Brown being four, and plaintiff being the fifth. From that time on the development company took care of the citrus trees set out by plaintiff under his nurseryman's contract, and also farmed certain other lands under a lease from the land company, the latter furnishing all the necessary working funds for this purpose and taking demand notes from the development company which up to June, 1935, amounted to something over $60,000.

In that month defendant called plaintiff in and told him that the development company was insolvent; [56 Ariz. 426] that it had no money nor assets even to meet its current payroll, and urged plaintiff to surrender his stock, promising him a "bonus" of $1,500 therefor, but representing that even to pay that much he would have to borrow money from the bank. Plaintiff discussed the situation with the attorney for the development company, and believing from what he knew at the time that this was the best thing to do, accepted the "bonus," surrendered his stock, and all of the assets of the development company were transferred to the land company in cancellation of its notes for advances. Plaintiff then went to work for the land company at a salary of $200 per month. The ultimate result of the transaction was that the land company in return for its advances to the development company secured all of the assets of the latter, including the planted land, the nursery stock and the amounts due under the various nurseryman's contracts, for the payment of $1,500, while plaintiff had lost all of his original assets and his rights under his nurseryman's contracts.

In March, 1936, plaintiff for the first time discovered that these various manipulations had been carried on as a part of the scheme conceived by defendant in the spring of 1933, as above. He endeavored to secure a settlement of what he believed to be his rights from defendant and the land company, but was unable to do so and brought this action.

The action is based on fraud and deceit. We have set forth the necessary ingredients of a case of this kind in Moore v. Meyers, 31 Ariz. 347, 253 P. 626, 628, as follows:

"The elements of actionable fraud may be stated as follows: (1) A representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) his intent that it should be acted upon by the person and in the manner [56 Ariz. 427] reasonably contemplated; (6) the hearer's ignorance of ...

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