Highland v. Davis

This suit, instituted by Cecil B. Highland, executor and trustee of the last will of Virgil L. Highland, deceased, plaintiff, against J. Hornor Davis, The Exponent Company, a corporation, J. Horner Davis and Anthony F. McCue, trustees, and Clarksburg Publishing Company, a corporation, defendants, has for its purpose the cancellation of a sale February 17, 1935, by Davis to The Exponent Company of a block of 568 shares of the common stock of the Publishing Company, which stock had been pledged by Virgil L. Highland in his lifetime to secure a note executed by him, and which stock was re-pledged by his executors at a later time to secure a note for the unpaid portion of the original debt.

On the first review hereof (Highland v. Davis, 119 W. Va. 501,195 S.E. 604) this court reversed the trial chancellor's decree cancelling the sale, and remanded the case for further proceedings. On the remand the sole question left open by this court for the trial chancellor's decision was whether the price for which the stock was sold was so grossly inadequate as to indicate bad faith. Specifically, we said: "Unless, on the remand, the trial chancellor should arrive at the conclusion that the price was so grossly inadequate as to indicate bad faith, the sale should not be set aside and the plaintiff should not be entitled to redeem." Our opinion concluded: "* * * we reverse the decree of the circuit court and remand this case to be dealt with in accordance with the principles herein contained."

After the case had been recommitted, the circuit court gave further attention thereto, on the record as it had been developed prior to the first appeal; considered only the question of value; ascertained that there was no gross inadequacy in the price for which the stock had been sold, and dismissed the plaintiff's bill by decree entered January 9, 1939. From that decree the plaintiff was awarded this appeal.

Soon after the case had been returned to the circuit court the plaintiff entered, under date of April 18, 1938, several motions, among which were the following: (1) That the court set aside and vacate the order of submission which had been entered July 14, 1936; (2) that if that motion be overruled the court set aside so much of the submission order as is inclusive of the question of adequacy or inadequacy of price; and (3) "that the plaintiff and defendants be granted leave to adduce, take and file further evidence, by depositions and documentary evidence, or either of them, in respect of the gross inadequacy, or the contrary, of the price at or for which said The Exponent Company acquired, or purported to acquire, said voting trust certificate."

The trial court overruled all of these motions and others made by the plaintiff on the same date. Later, after full argument, the court took the case under advisement and subsequently entered final decree as above stated.

The appellant assigns as error the court's adverse ruling on the motions of April 18, 1938, also the finding of the court in its final decree of January 9, 1939, that the price paid for the stock was not grossly inadequate, and its dismissal of the plaintiff's bill.

The trial court's declination to open for reconsideration the questions other than price and value of the stock was in entire accord with this court's opinion and mandate on the former review. This court, having specifically ascertained that there was no fraud independent of price, referred that sole matter back to the trial court, and that court correctly interpreted our action in that particular.

On the present appeal it is vigorously and ably urged on behalf of appellant that the appellate court's original decision herein was erroneous and should now be corrected; that the rule known as "law of the case" is not absolute but yields to the ends of justice where on a later review of a case the court ascertains that it initially committed error. We recognize that, within defined limitations, this court may alter or depart from its prior decision in the same case. Wiggin v. Marsh Lumber Co., 79 W. Va. 651,91 S.E. 532; Pennington v. Gillaspie, 66 W. Va. 643, 66 S.E. 1009. But the "law of the case" will not be departed from except where the court has become convinced that in the first instance it erred, and that a different course must be pursued in order that justice may be done. Atwater Co. v. Fall RiverPocahontas Collieries Co., 119 W. Va. 549, 195 S.E. 99; Shipper v. Downey, 119 W. Va. 591, 197 S.E. 355, and cases cited.

For the reasons set forth for the court by Judge Riley in our first decision, the majority of the court are of opinion that the case, to the extent of the disposition thereof by that decision, was correctly decided and should remain closed.

Passing reference is here made, however, to the position repeatedly urged on behalf of the plaintiff that he was lulled into a sense of security by a representation which was made to him in February or March, 1934, by John Sabotka, a field agent of the Reconstruction Finance Corporation, Richmond, Virginia. With reference thereto Highland testified that "he (Sabotka) assured me that he would not embarrass the Highland estate. That all they desired was to pay the interest and let the principal ride until conditions get better." Some months later, however, under date of August 29, 1934, Highland received from H. G. Gilmer, Manager for the Loan Agency of the Richmond office of the Finance Corporation, a letter as follows:

"In February of this year we advised you that the Reconstruction Finance Corporation is the lawful holder of a note signed by you as maker or endorser in the sum of $45,000., dated 9/24/33, due 1/22/34 in favor of the West Virginia Bank, Clarksburg, West Virginia. Our letter requested that payment be made either to this Agency of the Reconstruction Finance Corporation or to our field representative, Mr. John A. Sobotka. (Elsewhere in the record "Sabotka".)

"We are now writing to advise that it will be satisfactory for you to make payment as indicated above, or to the Receiver of the above bank."

This letter reminded the plaintiff of the request which had been made the preceding February that payment be made either to the Richmond agency or to Sabotka. Further, the letter advised that payment might be made to the Receiver of the West Virginia Bank, as well as in the manner theretofore indicated. The basic thought of this letter was "payment", and there was no intimation therein that the matter was being held in abeyance until conditions improved, or that extended delay was anticipated with reference to this long-overdue note. Though the letter contained no demand for immediate payment its tenor was such as to put on Highland the responsibility of ascertaining with definiteness the limitations, if any, that were to be placed by the Richmond agency on the Sabotka representation which had been made five or six months previously, and whether, in fact, the Richmond agency had been informed of and was in accord with the assurance which Sabotka had given verbally to Highland. It would seem that the receipt of that letter by Highland might very well have disturbed his feeling of security which had been occasioned by the Sabotka statement. So, we have been and are unable to ascribe to the oral representation made by Sabotka the dominating and controlling effect sought to be accorded it by the able counsel representing Highland.

Recurring, however, to the matter immediately before us on the instant appeal, we are confronted with the query whether there was prejudicial error in the trial court's refusal to permit the taking of further evidence on the question of price. Plaintiff's motion (designated number three hereinabove) of April 18, 1938, pointedly requested that such course be taken, and motion number two was in accord. We are of opinion that these two motions should have been sustained, and that there was prejudicial error in the court's refusal thereof.

When the evidence in this case was being developed the question of adequacy of price, though given extended consideration, was, in fact, within the contemplation and belief of the parties to the suit and their counsel, simply a non-paramount element of the controversy whether there was fraud or inequitable conduct in the stock sale under attack. But this court, on the first appeal, after having disposed of all other elements of the case, set off to itself and isolated the question of price, and made the whole case to turn ultimately on that point. The importance of the adequacy-of-price problem having been thus emphatically accentuated, we are impressed that proper and orderly administration of justice requires that there be granted leave to take further testimony pertaining solely to that problem. Otherwise, it would appear, that this court, after having restricted the ultimate issue in a manner which the parties were not under the duty of anticipating, had later foreclosed the right of full development of the case in the light of the restricted issue imposed by the court.

Opportunity should be afforded the parties to adduce and submit, and have considered by the trial court, on the question of adequacy or inadequacy of price, together with the competent evidence now in the record, such further, legal and pertinent evidence as they may be advised is proper.

In consequence of all which we reverse the trial court's decree of January 9, 1939, and remand the case for further proceedings not at variance herewith.

Reversed and remanded.