Case Name: Enoch Cunningham v. Edgefield and Kentucky Railroad Company
Court: Tennessee Supreme Court
Jurisdiction: Tennessee
Decision Date: 1858-12
Citations: 2 Head 23
Docket Number: 
Parties: Enoch Cunningham v. Edgefield and Kentucky Railroad Company.
Judges: 
Reporter: Tennessee Reports
Volume: 39
Pages: 23–29

Head Matter:
Enoch Cunningham v. Edgefield and Kentucky Railroad Company.
1. Railroad Company. Conditional subscription of stock. Notice. If •a party, who has subscribed stock to a. railroad company, can renounce and abandon his subscription, it can be only done by notice to the agent, or to the company, in proper time.
2. Same. Same. Fraud vitiates subscription, if notice is given in a reasonable time. If a subscription is fraudulently obtained from a person. and he is injured thereby, the contract of subscription would be void, although the name of the subscriber was accepted and entered upon the stock-book of the compam, unless, by his failure to notify them in a reasonable time, after the fraud was discovered, the company would be injured by its release.
3.. Same. Same. Effect of parol condition. A parol condition to the subscription of stock to a railroad company will not, if violated, invalidate the subscription, because it forms no part of the written contract of the parties.
4. Same. Same. Effect of an innocent mistake. Contract. If a party is induced to take stock in a railroad company by false representations which are not fraudulent, and which form no part of the contract of subscription, he is not entitled to be relieved from the payment of the amount of his subscription. But if he acts upon such representations to his injury, ho is entitled to relief, although they may have been innocently made.
Tried at the February Term, 1858, before Judge Baxtek. Defendant appealed.
FROM DAVIDSON.
A. L. Demoss, for the plaintiff 'in error.
Reid, for the plaintiff in error.
1. We contend that the subscription of Cartwright was a condition precedent to the taking of stock by Cunningham. That is clear. Cunningham avers in his plea that he would not take stock unless Cartwright did first, and then he would take the same number of shares.
Now it is clear that if the subscription of Cunningham was a verbal contract, not reduced to writing, he would not be bound. I understand the law to be, that “where the condition is precedent, it must be strictly-performed in every particular, in order to entitle the party, whose duty’ it is to perform it, to enforce the contract against the other party.” Story on Contracts, § 32. “Nor does it matter that such condition is difficult or foolish; for, if it be so, it is the fault of the party who engages to perform it, and he should suffer the consequences.” Ibid.
But I wish to say, that the condition imposed by Cunningham may not have been foolish or unreasonable. He and Cartwright were possessed of about the same wealth, and were pretty much the same character of men, and he might very well have said that I can bear as much as- he, and I would prefer to risk his judgment, as to the propriety or profit of taking the stock, than to trust my own. Or he may have been so situated (and such was the fact) that, because of their propinquity, if the road was a peculiar benefit to the one, it would be to the other. He might have been very unwilling to have trusted the judgment or will of Enoch P. Connell. Mr. Connell might • be, in his opinion, inconsiderate in his acts, or he might have possessed large real estate about Goodlettsville, and have been very willing and very able to take one thousand shares instead of twenty.
2. But the subscription was in writing. Does than preclude us from proving the condition upon which it was made? "We think not.
If Mr. Cunningham was induced by fraud to subscribe, it is clear that the fraud could be shown by parol, and the contract would be null.
Mr. Story, in his work on contracts, goes further.
In section 675, he lays down the law as follows: “Parol evidence will also be admitted to show that an instrument is void, and never had any legal existence or binding jorce.” In the conclusion of the same section he says: “ Whatever wrould vitiate the contract ah initio, may be given in evidence to invalidate a written contract.”
How, if the allegations of the plea, or the facts prored on the trial, be true, the road will have perpetrated a most wicked fraud on Mr. Cunningham, if he be held responsible on this subscription. It was well known he would not subscribe unless Cartwright did. The road, by its agent, pretends that it is authorized to subscribe Cartwnight’s name, and does do it. Cunningham, in the act of signing, asks if he may feel assured that his name is there in good' faith. He is told, yes. Cunningham signs his name, and the trap is let down upon him, and he is told you are ours. • If this is not fraud, what is ? Redfield on Railways, page 70, and note 2.
In conclusion, we doubt, if the subscription under any circumstances had been binding, whether it was not revoked before it was accepted. The persons who got his signature were mere volunteers, and did not hand in the names, or, if they did, they were not accepted until long after Mr. Cunningham had said he would not be bound by his subscription.
Ewing & COOPER, for the defendant in error.
The rejection of evidence as to the organization of the railroad company was certainly proper in the absence of a special plea, because this company was already organized when defendant subscribed. His subscription ' recognizes their proper organization, and is an estoppel on him. Redfield on Railways, 9, and 85; 5 Vermont.
The action Connell, as to Cartwright, ivas unguarded, but not fraudulent, and the jury found that it operated no injury to Cunningham. False representations, if not fraudulent and forming no part of the contract itself, are immaterial, (Chitty on Contracts, 682,) more especially as to written agreements. Chitty, 683; 10 M. & W., 147.
The jury are the judges as to materiality. Chitty, 684. Fraud and misrepresentation alone are not sufficient to invalidate a contract. There must also bo injury resulting to the person complaining. 1 Meigs’ Digest, ] 89; 2 Parsons on Contracts, 268.
It was necessary for Mr. Cunningham to give notice to the company, when he discovered the fraud, that he would avoid the contract. It was a conditional contract, and the company, in locating their route, were governed by these conditional subscriptions. They were, certainly, innocent and ignorant of any fraud on Cunningham. If he intended to avoid his obligation, he ought, certainly, to have notified the railroad company soon after he discovered the fraud, and his failure to do so was a waiver of his right. 2 Parsons, 278.
The failure to make payment in money of fifty cents on the share, at the time of the subscription, does not give defendant the power to avoid it. Redfield on Railways, § 37, note 3, § 51.

Opinion:
CaiujtiieRS, J.,
delivered the opinion of the Court.
This is an action of assumpsit for calls on stock subscribed by Cunningham in the Edgefield and Kentucky Railroad Company.
The main defence is, that at the time the stock was subscribed, there was fraud and deception practiced upon him by one Enoch P. Connell, who was acting as agent of the road in obtaining stock, in this: He refused to take stock unless one Cartwright, a son-in-law of Con-nell, would do so before him; .and Connell, without authority from Cartwright, entered his name for twenty shares under a pretended power from him, but, in fact, without authority, and the same was never sanctioned, hut positively repudiated by Cartwright.. The book of stock was returned by Connell to, and accepted by the company. No notice to the company, or to Connell, that the subscription was repudiated, was given; but proof was offered- to show, that, as soon as Cunningham ascertained that the subscription for Cartwright was without authority, he repudiated, and announced that he would not pay his. This evidence was rejected by the Court, and that was certainly right, because, if the power existed at all to renounce and abandon his subscription, it clearly could only be done by notice to the agent, or to the company, in proper time.
If that defence could be made available at all, which we need not decide in this case, the facts here presented are not such as to raise the question.
But, still, if the subscription was fraudulently obtained, and any injury resulted to him therefrom, he would have a good defence, though his name was accepted and entered upon the stock hook of the company, unless by his failure to notify them in a reasonable time after he discovered it, 'they would sustain an injury by its release. If he was deceived and defrauded, it would have been his duty to have notified the company, or its agent, of it, and his intention not to pay, before they incurred liabilities on account of it in the construction of the road. 2 Par. on Con., 278. Delay is evidence of a waiver.
It does not appear that there was any intentional wrong on the part of Connell, but that he had reasonable grounds to believe that his son-in-law, Cartwright, had made up his mind to take stock against his first determination. But, as it turned out, this was not so, and his name was entered without and against his consent, and he refused to ratify the act. But Connell made it good himself, and there was no injury on the score of the money, to the extent of those twenty shares. Yet Cunningham was deceived as to that fact, and so was Connell; and the latter sustained the injury by taking the stock upon himself. Still, it is true, that the condition upon which Cunningham subscribed failed-But, as a condition, it would not invalidate liis subscription, because it was not part of the writing signed by him. East Tennessee and Virginia Railroad v. Gammon, 5 Sneed, 567.
If it were an innocent mistake, on the part of Con- nell, upon which he acted, he would be entitled to relief; but only in case he were injured by it, and took advantage of it in proper time. This he did not do, and the misrepresentation has done him no harm. It could not be material to his interest, as a stockholder, whether the amount was paid by Cartwright or another.
False representations in general, if not fraudulent, and form no part of the contract itself, will not vacate it. Chitty on Contracts, 682. But even if innocent, if the party acts upon them to his injury, relief will be afforded. 2 Parsons, 268. But there can be no relief against fraud which is not operative, and in its effects produces no injury or loss to' the party seeking redress on account of it. 1 Meigs' Digest, § 33T; 2 Parsons on Contracts, 268.
The law and the facts are against the plaintiff in error, and he was, properly, subjected to the payment of his stock by the verdict and judgment below.
We affirm it.