Case Name: INDUSTRIAL TRANSP. CO. v. RUSSELL
Court: Texas Courts of Civil Appeals
Jurisdiction: Texas
Decision Date: 1922-02-08
Citations: 238 S.W. 1030
Docket Number: No. 2451
Parties: INDUSTRIAL TRANSP. CO. v. RUSSELL.
Judges: 
Reporter: South Western Reporter
Volume: 238
Pages: 1030–1034

Head Matter:
INDUSTRIAL TRANSP. CO. v. RUSSELL.
(No. 2451.)
(Court of Civil Appeals of Texas. Texarkana.
Feb. 8, 1922.
Rehearing Denied March 16, 1922.)
1. Fraud <@=3l1 (I) — Generally representations must relate to existing fact.
As a general rule, false representations, to be actionable, must relate to a fact susceptible of knowledge, existing at or before the time they were made.
2. Corporations <©=380(5) — Positive statement of value of stock representation of fact, and not mere opinion.
Statement of a corporation’s agents to another, when inducing him to buy its stock, that it was then worth more than the price charged was a representation of fact, and not mere opinion, as regards right to rescission for fraud.
3. Corporations <@=380(12) — Finding that value was unknown not one of falsity of representation of value.
A finding that the value of the stock at time of purchase was “unknown” is not a finding of falsity of the representation of the corporation’s agents to the buyer that it was then worth more than the price charged, warranting a judgment in favor of buyer demanding rescission.
4. Corporations <@=380(5)— Representations as to the future worth of stock expressions of opinion not to be relied on. <
Representations that stock will in the future be worth a certain amount more than the price charged, and that it will pay certain dividends, and that if the buyer should become dissatisfied the corporation would return the money, are mere expressions of opinion, on which the buyer may not rely, and are not ground for rescission.
5. Corporations <@=380(12) — Relief to subscriber for fraud may not be based on guaranty.
If statements to subscriber for stock as to its future value and dividends be guaranties in a contractual sense, his action is on the contract, and not to rescind it for fraud.
On Appellee’s Motion for Rehearing.
6. Appeal and error <@=>930(3) — Finding warranted by evidence presumed made by court if with special findings of jury it would warrant the judgment.
tinder Vernon’s Sayles’ Ann. Oiv. St. 1914, art. 1985, a finding warranted by the evidence on an issue not submitted, nor requested to be submitted, to the jury is presumed on appeal to have been found by the court, if in connection with those made by the jury on the issues specially submitted to them it would support the judgment.
7. Corporations <@=>80(!) — Representation by agents as to refunding price of stock held not a promise constituting fraud'.
Representation by the agents of a corporation in selling its stock that it would refund the price paid if the buyer became dissatisfied, though an opinion not entertained, not being a promise that the agents would do anything, is not within the rule that a promise which the promisor does not intend to perform, made to induce, and inducing the promisee to act as he otherwise would not to his injury, is fraud warranting a rescission.
8. Corporations <@=380(1) — Representation of worth of stock after a certain date not false, warranting rescission if value is such any time thereafter.
Representation by sales agent that after a future date stock would be worth 25 per cent, inore than the sales price is not false, warranting rescission if at any time after such date it was worth such amount.
9. Corporations <@=>80(I) — Representation of future dividend not as to a fact susceptible of knowledge.
Representation that stock would pay an annual dividend of at least 8 per cent, is not as to a fact susceptible of knowledge so as to constitute actionable fraud warranting a rescission.
Appeal from District Court, Hopkins County; George B. Hall, Judge.
Aetion by T. J. Russell against Industrial Transportation Company. Judgment ior plaintiff and defendañt appeals.
Reversed and remanded for new trial.
July 5, 1920, appellee signed and delivered to L. M. Johns and W. H. Londergon, agents of appellant for the sale of its stock, an instrument in writing as follows:
“I hereby subscribe for 180 shares of the 8 per cent, cumulative preferred stock (par value $10 per share) and 20 shares of the common stock (par value $10 per share) of the Industrial Transportation, and agree' to pay ten dollars ($10.00) per share for the preferred stock and ten dollars ($10.00) per share for the common stock, payable as follows:
“Cash accompanying this subscription $1,000 one thousand and no/100 dollars, and one note for one thousand dollars due November 15, 1920.
“I understand that stock certificate for this subscription shall be issued to me as fully paid and nonassessable upon full payment therefor. I hereby agree in ease I desire to dispose of all or any part of my stock that I will give the company the first opportunity of purchasing same.
“No agreement other than what appears hereon is binding, and no agent or representative of the company or any other person has any power to change or alter the terms of this subscription. Preferred stock participates equally with the common in all dividends above 8 per cent. The common stock carries voting power of one vote for each share.
“Stock issued on basis of 9 shares of preferred to every one share of common.”
This suit, commenced December 22, 1920, was by appellee against appellant to cancel said instrument and the note referred to, and to recover back the $1,000 mentioned therein, which he paid at the time he executed the instrument. .
On issues made by the pleadings and testimony, the jury found substantially as follows : (1) That the transaction resulting in the execution by appellee of the stock subscription contract and note and payment by him. of $1,000 was between him and L. M. Johns and W. H. Londergon, who were appellant’s agents and acting within their authority as such “at the time they sold” the stock to appellee. (2) That said Johns and Londer-gon represented to appellee that they “had intimate knowledge of the value of the stock in controversy” and of appellant’s business, and that “the existing condition of the business at that time was such that they could arid did guarantee (a) that said stock would be worth on the market after August 1, 1920, 25 per cent, more than he was paying for same,” and (b) that he “would receive annual dividends of at least 8-per cent, on the amount he invested in said stock.” That the representations “in reference'to the con* dition of said business” were not true. That Johns and Londergon knew they were not true at the time they made them. That they made them “for the purpose of inducing the plaintiff (appellee) to purchase said stock,” and that appellee “relied on said representations, and was induced thereby to purchase the stock. (8) That said Johns and Londergon further represented to appellee that the stock was then worth “more than appellee was paying for same,” and that ap-pellee relied on the representation, and was induced thereby to purchase the stock. (4) That said'Johns and Londergon fraudulently “represented” and “guaranteed” to appellee, “in the event he should become dissatisfied with said stock, that said defendant company [appellant] would refund .to him the sum paid on said stock, and would cancel and return the note he executed in payment therefor.” That appellee “relied on said representations, and was induced thereby to purchase the stock.” (5) That the value of such stock at the time appellee purchased and on August 1, .1920, was “unknown.” That none of it was sold on the market after August 1, 1920. That its reasonable cash market value at the time of the trial was 55 cents on the dollar. (6) That appellee did not make “any inquiry as to the business of defendant company [appellant] before he signed the contract of purchase and note, of any other person, or make any investigation as to same outside of representations made to him by Johns and Londergon.”
On the findings specified the trial court rendered judgment in favor of appellee for the $1,000 he paid for the stock, and canceling the note he gave for part of the purchase price thereof. Whereupon appellant prosecuted this appeal.
W. M. Pierson, of Dallas, for appellant.
dark & Sweeton, of Greenville, for ap-pellee.
Writ o£ error granted May 17, 1S22.

Opinion:
WILLSON, C. J.
(after stating the facts as above). [1] Appellant insists that the representations made by its agents, as found by the jury, were not statements of fact, but of opinions merely, and therefore could not properly be made the basis of a judgment against it.
As the general rule is that false representations are not actionable unless they relate to a fact susceptible of knowledge which existed at the time the representations were made, or had existed before that time (12 R. O. L. 244), the contention must be sustained, if the representations should be construed to have been opinions, unless they were, and we think they were not, within some exception to the general rule.
Appellee insists that the statements were not mere opinion, and if they were that they nevertheless entitled him to the relief he obtained, because they were fraudulently made arid were based on knowledge appellee had a right to believe appellant's agents possessed of facts he was ignorant of.
We are inclined to think appellee's insistence is tenable so far as it bas reference to the representation as to the value of the stock at the time appellee purchased it, and, if the jury had, found that the representation was false, that the judgment should not be regarded as unwarranted by the findings. Barber v. Keeling (Tex. Civ. App.) 204 S. W. 139; McDonald v. Lastinger (Tex. Civ. App.) 214 S. W. 829. But the jury did not so find. What they did find was that the value of the stock at that time was "unknown." It is obvious, therefore, that the representation in question did not warrant the judgment in appellee's favor.
The other representations were: (1) That they [the agents] "had intimate knowledge of the value of the stock in controversy" and of appellant's business. (2) That "the existing condition of the business at" that time was such they could and did guaranty (a) that the stock would be worth on the market after August 1, 1920, 25 per cent, more than he was paying for same," and (b) that appellee "would receive annual dividends of at least 8 per cent, on the amount" he vested in it. (3) That in the event appellee became dissatisfied with the stock, appellant "would refund to him the sum paid on said stock, and would cancel and return the note he executed in payment therefor." In the nature of things, no matter how intimately appellant's agents were acquainted with its business and the value of its stock at the time they made the representations, they could not, and appellee reasonably must have known they could not, know what the stock would be worth after August 1, 1920, nor the annual dividends which would be paid on it; nor could they know that in the event appellee became dissatisfied with his purchase appellant would cancel his note and return money he paid for the stock. Therefore the representations, except the one as to knowledge the agents had of appellant's business, which could not alone be made the basis of a judgment, were clearly expressions of opinion merely, on which appellee had no
right to rely. 1 Black on Rescission and Cancellation, § 86, 89; Crosby v. Emerson, 142 Fed. 713, 74 C. C. A. 45; Bank v. Fulton, 156 Iowa, 734, 137 N. W. 1019; Weston v. Railway Co. v., 90 Ga. 289, 15 S. E. 773; Swan v. Mathre, 103 Iowa, 261, 72 N. W. 522. The law applicable is stated as follows in the cited section 86 in Black on Rescission and Cancellation:
"In order to effect a sale, induce the making of a contract, or place a proposed investment in a favorable light, it is quite common to make representations as to future value productiveness, efficiency, or economy or as to expected earnings or profits. But since that which lies in the future cannot be a matter of certain knowledge, it is held that all such representations must be taken and understood as mere expressions of opinion, and therefore their non-fulfillment cannot be treated as a fraud. Representations which are mere guesswork, it is said, are not a proper basis for a charge of fraud, and statements of forecast, opinion, or expectation, which are in substance mere matters of inference, cannot be considered false representations justifying the rescission of a contract.
"This rule is frequently applied in statements made to persons to induce them to subscribe for stock in a corporation or to purchase the shares of an existing company. All assertions in regard to the future earnings of the company or the successful conduct of its business, in regard to the dividends it will pay or the profits to be derived from it, or in regard to an expected or predicted increase in the market value of the stock, are merely matters of opinion, on which the subscriber or purchaser has no right to rely, and though they are not verified by the course of events, or prove- to have been false when made, ór even to have been made with no expectation of their ever being realized, still they furnish no ground for rescinding the contract." .
Appellee cites quite a number of cases as supporting his contention to the contrary of the conclusion we have reached. As we understand those cases, they are all so unlike this one in their facts as to render them of no value as authority in determining the question made by facts of this case.
It follows from what has been said that we think the judgment was unwarranted, unless it should be held that it was supported by the finding that appellant's agents "guaranteed" that the stock would be worth On the market after August 1, 1920, 25 per cent, more than he was paying for it, that he would receive annual dividends on it of not less than 8 per cent, on the sum he invested in it, and that if he should become dissatisfied with his * purchase appellant would cancel his note and pay back the part of the purchase price he paid in money. If the finding meant that the statements of appellant's agents were not mere "representations," but were "guaranties" in a contractual sense, it is plain it did not warrant the judgment; for appellee's suit was to annul and not to enforce the contract he entered into.
As we view the record, the judgment was not warranted by the findings, and should be reversed, and judgment should be rendered here that appellee take nothing by his suit. It will be so ordered.
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