Court Opinion

ID: 7119009
Source: CourtListenerOpinion
Date Created: 2022-07-24 12:36:02.761351+00
Date Added: 2024-06-11T16:14:02.327564
License: Public Domain

Salinger, J.
(dissenting). Like the majority, I find it conducive to clarity to deal separately with the several claims of the plaintiff.
In pleading false representations and scienter, plaintiff has assumed an unnecessary burden. A fiduciary relation existed between her and the defendant at the time he bought her stock, and therefore the burden is on him to show that he dealt fairly with plaintiff, and neither misrepresented any material fact nor failed in any duty to make full and fair disclosure.
The representations and failure to make disclosure charged in connection with the purchase of the stock are three: (a) The writing of an offer to purchase the stock; (b) deductions demanded on account of depreciation and other matters; (c) representations charged to have been made as to the condition of the corporation at and immediately before the time the stock was purchased. • «
There is further complaint that defendant dealt unfairly with the plaintiff in connection with the transfer of patents owned by the late husband of plaintiff, and in obtaining release from royalties due.
The reasons that impel me to make emphatic protest against the conclusions reached by the majority, I shall state first by way of propositions. Some of these will need no elaboration, and be self-proving. Others will be followed up by such amplification as will present the reasons for stating the proposition.
I. A naked offer to purchase at a stated price, with declaration that no more will be paid, which offer is made after values are fixed by an agent of the seller’s own selections, is neither an actionable representation nor a breach of duty to make disclosure.
*131II. Where deductions for depreciation and the like are made in a written offer to buy, confessedly made and understood to be arbitrary, such deductions are not more than another way of stating what the highest price is the buyer will-pay, and are neither an actionable representation nor a failure of duty to make full disclosure.
III. A statement by the agent of the seller, after the sale is concluded, that the property is worth more then than the seller paid for it, is, in the first place, not binding on the defendant, because not made by his agent, and can, at any rate, add nothing to the written offer, nor put a representation into it that is not found in it.
IV. The fact that one who is not the agent of the defendant declared, some 40 days after defendant offered to buy, that the property, when bought, was worth substantially more than at the earlier time, does not prove against defendant, if it be evidence at all, what the value was at the earlier time.
V. That a buyer, some 18 months after buying stock, -states to the executive council that the property is worth much more than he said it was worth at the time he bought it, 18 months earlier, is no evidence of what it was worth at the earlier time, — especially where it is explained that the enlarged value was fictitious, in order to obtain favorable action from the council.
VI. An alleged representation as to the condition of the corporation in which plaintiff sold stock is not proved to have been made. If made, it appears affirmatively that it was true.
a. The majority concedes that said representation was true when made, but holds the defendant responsible as for a false representation or failure to disclose, because unanticipated conditions made the business better in future than it was at the time when defendant purchased the stock.
b. There is no liability for false representations or breach of duty to make disclosures, merely because a buyer of stock is not a prophet.
VII. Since Voss was the agent of plaintiff’s own selection, and conducted all the negotiations, his knowledge is the knowledge of plaintiff. And as there is no claim that he himself was overreached, and as the evidence shows he himself *132had full knowledge, there was no duty on defendant to make disclosure to plaintiff. His duty to disclose was limited to disclosing to Voss, and Voss needed no disclosure, because he was already fully -informed. This is the holding of Birks v. McNeill, 185 Iowa 1123. That ease disposes of Dawson v. National Life Ins. C o., 176 Iowa 362. The Dawson case is cited by the majority, but the Birles case is not so much as mentioned.
VIII. Where one refuses to deal, or to fix values for property, except by having an agent of the seller’s own choosing fix the valuation, it cannot be said that she relied upon a fiduciary relation, existing between the seller and the proposed buyer. The very choosing of such agent is a refusal to rely on the fiduciary relation.
IX. For, whatever it comes to, the majority is mistaken in saying that plaintiff relied as much, if not more, on defendant than on the advice of Voss.
a. Assuming that Voss is not a competent, impartial, and independent adviser, and it takes certain defenses away from defendant. But it does not take away the right to say that one who refused to fix valuations and appointed an agent to fix them therefore relied on the agent, and not on1 the buyer. There was no reliance on the alleged representation as to the condition of the business, because plaintiff testified that the same did not influence her “any.”
X. Whether an agent fall within the independent adviser rule or not, one who buys through him from his principal is not responsible for any negligence or misconduct on the part of such agent. The majority deals with this case as though it were a suit against Voss for having broken his duty as an agent. It is not such suit, and nowhere, except in the majority opinion, is the competency or good faith of Voss challenged. At no point is it claimed that he and defendant were in collusion.
XI. Plaintiff had reasons of her own that induced her to sell, and retire from the corporation; therefore, she did not rely on defendant, or on the fiduciary relation between them.
XII. No inadequacy is shown, because the property sold was highly speculative. As to such property, adequacy is determined by what it could have been sold for to others for cash.
XIII. There was no inadequacy, because the only wrong *133complained of is with reference to obtaining “common stock.” As there were four shares of preferred stock to one of common, each share of the latter transferred only one fifth of a share in the property of the corporation. A price that may be inadequate where paid for a given thing is not inadequate if it buys only one fifth of that thing.
XIV. Where one believes he has been defrauded in making a sale, and seeks to employ counsel, refrains from proceeding to follow up the knowledge and belief, and to ascertain how much injury has been done by the alleged fraud, and accepts a substantial sum for a release, such settlement is binding though it was made in ignorance of how injurious the fraud had been. If it were otherwise, the statute of limitations would never begin to run until the wronged party had seen fit to ascertain finally the extent of his injury.
XV. There was no fiduciary relation when the settlement was made.
XVI. The settlement included all claims, and not merely the one item of $110,000, deducted for possible patent litigation.
XVII. This is not a case of mere suspicion that does not put on inquiry, but is an accepting money after being told to •assert all claims once for all, and after believing that plaintiff had been overreached. It is not a ease of mere suspicion, but of deliberate refusal to proceed to the end with knowledge obtained, taking the money of the other party, and then claiming more, because plaintiff concluded later to ascertain what she could as well have ascertained before consenting to settle.
XVIII. This is not a case of laches in delaying suit. It is a case .where the suit, no matter how timely brought, cannot be maintained, because, with means of knowledge at hand, and in the belief that she had been wronged, plaintiff released all damages, for a substantial consideration. It is not a case of delaying suit, but of trying to collect damages in piecemeal, and for an additional payment every time the claimant sees fit to make further investigation and claim more on the alleged discovery of more damage.
XIX.Granting there may be cases in other jurisdictions that held otherwise, in my opinion it is settled by Allen v. Pe*134gram, 16 Iowa 163, that the court may not, even in a suit in equity, permit a party to rescind in part and then sue for damages.
XX. Releasing royalty claims due the late W. P. Bettendorf worked no fraud on the plaintiff; and the release was, at all events, wholly at the instance of Voss, without interference by defendant; and Voss was never the agent of defendant; and the advice given was sound.
I shall now proceed to such amplification as I deem demanded.
1. Defendant had no negotiations with plaintiff, except to inquire of her whether she cared to sell her stock. To carry on the negotiations, and to ascertain values, plaintiff, of her own volition, selected Voss. No attack is made either on his integrity, diligence, or competency, except such as is made in the majority opinion. And let me say, in passing, that the trial judge, who is a member of the community in which Mr. Voss has made his enviable standing in life, makes a finding that Mr. Voss is a man of unimpeachable integrity. Be all that as it may, there is no warrant for dealing with this suit as though it were brought against Voss, asserting misconduct, or brought against Voss and defendant, asserting collusion. There is no such suit, and, as said, there is no such claim, so far as the record is. concerned.
After Voss was made agent, he did negotiate; he did reach a conclusion as to values; and finally, the defendant wrote a proposal to buy, which makes reference to the former conversation, in which inquiry had been made of plaintiff - as to her willingness to sell, and in which she had expressed a willingness. Aside from this reference, the letter was this:
“I make the following statement and proposition:
.The surplus and common stock, as of date of January 1, 1911, of the Bettendorf Axle Company, being .......................$2,381,570
Deductions account depreciation, etc....... 536,305
Net surplus and common stock............$1,845,265
*135Tour equity in the above as owner of 321 y2 shares of stock being....................$ 593,252
Less y2 the amount the estate owes the Bettendorf Axle Company and which I will assume and agree to pay, approximately.... 52,000
$ 541,252
Deductions account of patent suits, part of your portion of the contingent liability.. 110,000
Net amount I offer to pay ..............$ 431,252
* ‘ I propose to pay you as follows:
In cash ........................$150,000
By Shaw Land & Timber Company note.......................... 50,000
By Allen & Watkins note........ 60,000”
This letter is merely an enumeration of what the offerant is considering in making the offer, plus true statements of what was on hand in the way of capital stock and surplus, plus the steps in computation, and its close is the statement, “net amount I offer to pay.” It should not be said to be either a representation or a breach of duty to make disclosure, and the plaintiff herself pleads that the letter in question was merely a declaration that the price named in the written proposal was the largest price that defendant would pay.
No matter how reasonable or unreasonable such an offer is, it is nothing actionable to make it.
The receipt of the Yoss letter is not denied by the plaintiff, but by her attorney, and the majority is mistaken in treating the receipt as denied, and so the presumption of due delivery overcome. All the plaintiff does is to say she has no recollection of having received this letter. (Abstract 1012.)
Though the written offer does not mention good will, neither does it mention that the corporation had a manufacturing plant. And when Yoss, the agent of plaintiff, advised her to accept the offer, he knew that good will was not mentioned in said letter, and what the true values were.
Whether Yoss was or was not within the rule governing in*136dependent advisers, whatsoever he communicated to plaintiff against the offer of defendant certainly is to be considered on how' the offer was understood by plaintiff. She must have understood it was an arbitrary offer, for Voss had written her, advising acceptance, in connection with which he said:
“The price offered may be low and the deductions from book value insisted upon by Mr. B. may be excessive, in fact future results may, and it is to be hoped will, demonstrate that it might have been better for you not to have sold.”
Having been advised that the offer was too low, and that the deductions were excessive (although it happens to be the fact that the charge off made in the lifetime of plaintiff’s husband was larger), no relief may be had because the offer was unjustifiably inadequate. Colton v. Stanford, 82 Cal. 351 (23 Pac. 16, at 20).
As to the $110,000 for the item of possible patent litigation expense, it is but necessary to say that this item was an arbitrary demand for deduction, made in the offer to buy.
The fact that, 11 days after the date of the written offer, Voss declared, at a meeting of the board of directors, that the surplus and common stock were worth $140,715.35 more than the figures found in the written offer, is an immaterial fact: First, because nothing said by Voss after the letter was written can add a word to that letter, or put a representation into it that is not there; second, Voss, being the agent of plaintiff, and not of defendant, cannot bind the defendant with this or any other statement.
It is immaterial that Voss, 41 days after defendant made his offer, and 34 days after his acceptance, offered a resolution at a directors’ meeting, presided over by defendant, wherein he asserted that a large surplus had been accumulated, and that, therefore, a large dividend should be declared. If Voss misconducted himself in advising plaintiff, the remedy lies in a suit against him, or one against him and defendant; and plaintiff does not charge Voss with any wrongdoing, nor claim that he acted in collusion with defendant. Second, as to this assertion by Voss, it must be repeated that he was never the agent of defendant.
*137If defendant is to be affected, it must be because he accepted the dividend declared. But, as there is no evidence that when, at the earlier time, he offered to buy, or bought, he knew what Voss asserted in the later meeting, the acceptance by defendant is no evidence that, when he bought, the stock was, or that he knew it was, worth more than he paid for it.
To hold that the application to the executive council involved-no padding is proving too much. If the majority rejects the explanation of defendant, then it is confronted with being compelled to hold that, 18 months earlier, the property was worth substantially what the council found it to be. It found it to be of the value of $8,689,603. It deducted indebtedness which the new company had assumed, in $1,108,603, and then authorized issuance of stock to the amount of $7,500,000. Is it possible that what was valued at a little over $2,000,000 at the time the stock was sold was, instead, worth $8,000,000? So to hold, overlooks that other statement of the majority opinion that, ■when Voss moved the declaration of a dividend, only 41 days after the offer was made by defendant, the enhancement then was but $140,715.35.
It seems fairly plain that the verification of the application made to the council, while it weakens the credibility of defendant, if there- were need to make a test, is no evidence whatever that, even if he had not dealt with the agent rather than the plaintiff, he did anything actionable when he bought.
' 2. Under the rule of Birks v. McNeill, 185 Iowa 1123, the plaintiff should not be allowed to recover anything, because she dealt through, an agent who had full information, or the means of getting it, as to the value of the property sold. This case the opinion does not as much as mention. The headnote (in the Northwestern Reporter) in the case is:
“Where plaintiff made an officer of the corporation in which she owned stock her attorney in fact, held that the president of the corporation, though he was the brother of plaintiff’s husband and the executor of his will, was under no duty to explain to plaintiff the value of the stock before purchasing it on a proposal submitted by her attorney in fact.”
It appeared that the attorney in fact had been a director in the corporation, and had, at one time, been secretary and mana*138ger. We point out that this agent “seems to have placed much reliance upon the reports coming in to McNeill Brothers Incorporated, and upon its books, and he testified therefrom in connection with his inspection of the several properties.” We say, that, without reference to what the agent may, in fact, have known:
“The books were open to his inspection quite as freely as to the president of the corporation. * * * He either knew or had quite as good an opportunity for ascertaining the value of these several properties as did the president. * * * We are not saying that he actually knew what the several properties were worth. * * * We are inclined to the view that she is in no better situation and cannot be heard to complain of the omission of McNeill to advise her agent concerning the condition of the company.”
Dawson v. National Life Ins. Co., 176 Iowa 362, now relied on by the majority, was urged in the Birks case, but that did not seem to affect the result reached.
This case is fairly within the holding of the Birks case. Though the opinion, in a way, challenges the fact, the record demonstrates overwhelmingly that Voss had as much knowledge, or means of obtaining knowledge, as had the agent in the Birks case. Beyond question, Voss had full knowledge of what the condition and assets of the corporation were, and what the stock was worth; and he knew what the offer omitted in, say, stating good will. If he and his knowledge bind plaintiff, there is no breach of duty to make disclosure. The disclosure was due the agent alone, and the principal can gain nothing on the ground that there was a failure to disclose to the agent what he already knew. Voss got his knowledge first through the late husband of the plaintiff, and from statements made by the decedent. He got further knowledge because his bank was financing the corporation, and he had to investigate its standing constantly, and compare its development and success with that of other like institutions, in order to determine what credit should be extended, and he obtained knowledge by becoming a director, attending meetings of the board. He sums it all up that his knowledge “became practically full and complete.”
*139What all this comes to is that plaintiff should not prevail, if her agent had knowledge or means of knowledge of the value of the stock offered for sale. Colton v. Stanford, 82 Cal. 351 (23 Pac. 16, at 20, 21); Cardoner v. Day, 253 Fed. 572, at 585.
What would have to be said if there were claim or evidence that defendant overreached Yoss, or that the two were in collusion, is not important, where there is no such plea and no such evidence. In their absence, the cestui is bound by the knowledge of her agent; and as to him, there was no duty to make disclosures, because, following the Birks case, he already knew everything that defendant would have been able to disclose to him. See Korn v. Becker, 40 N. J. Eq. 408 (4 Atl. 434); Bigelow on Fraud, 263, 264; Moxon v. Payne, L. R. 8 Ch. 881.
3. It is charged that defendant fraudulently (Paragraph 33) represented that the affairs of the company were in poor condition, and its business unprofitable; and that he grossly misrepresented the condition of the company at all times subsequent to the death of plaintiff’s husband, and up to May 25, 1911. (Paragraph 20.) The plaintiff herself does not support this in her testimony, and defendant denied it, while a witness for plaintiff. She vouched for his credibility by making him a witness, and there is much to impeach her' credibility. I have already pointed out how she conflicts on what time she first thought she had been wronged.
Be all that as it may, the alleged representation was true. Defendant, as a witness for plaintiff, testified, without contradiction, that, at the time the stock was sold to him, and in all the early part of 1911, the market for railroad cars was poor and very stagnant; that, from then to June 7, 1911, the date of the purchase, the volume of business in the territory from which orders might be anticipated was constantly decreasing; and that, from all indications, he, at the time he bought, “honestly believed that the business would show a loss for the year 1911.” It appears that, while the last seven months of 1910 yielded $850,144.30 in net earnings, the first five months of 191Í yielded but $149,366.67. The majority .opinion itself discloses that the statement made was true, for it is said the business had not been good during the early part of 1911, as compared with the previous year, and that the company, during the first five *140months, had earned a net profit of only $150,000. The majority opinion concedes that the business of furnishing supplies for railroads is shown to be subject to changing conditions of the companies, and varies greatly from year to year, and that the year 1911 was concededly bad until after July (after the offer had been accepted), and that this may have affected “the outlook of the enterprise.” It is pointed out that, as one of the witnesses puts it, “the railroad world was at a low ebb” early in 1911. How much the future is considered important by the court is made plain by adding to this that the same witness testified that, later on, “more of the company’s share of orders” was obtained. ^
The way the majority avoids this situation is by injecting prophecy into scienter, by holding that, though the statement as to business conditions was true when made, it was actionable because the defendant ought to have taken a rosier view of future possibilities of improvement, — was actionable if, later, through unanticipated events, it transpired that the view of the offerant was more gloomy than the future justified. Yoss said, without contradiction, that the subsequent enhancement was due to great and unexpected profits, to wit, the receipt of $15,000,-000 in war orders, after the sale of the stock. (Abstract 909.) Defendant, as a witness for plaintiff, testified to the effect that the betterment evidenced by the recapitalization was due to orders which neither party knew of or anticipated when the stock was bought. (Abstract 147 et seq.)
Great profits accruing from the unanticipated world’s war cannot be considered on whether the price paid without such anticipation is adequate. Colton v. Stanford, 82 Cal. 351 (23 Pac. 16, 29, 32). It may not be availed of that a gloomy outlook was unjustified, because later there was an active boom in the railroad business; because there came a most unprecedented demand for railroad securities, “owing to which the defendants found themselves in a most prosperous condition.” Colton v. Stanford, 82 Cal. 351 (23 Pac. 16, at 29). To like effect is Nicholson v. Janeway, 16 N. J. Eq. 285; Murray v. Elston, 24 N. J. Eq. 310; Twin Lick Oil Co. v. Marbury, 91 U. S. 587; Kitchen v. St. Louis, K. C. & N. R. Co., 69 Mo. 224.
There can be no question that, in the opinion of the major*141ity, the gravamen of the ease against the defendant is that he refused to be prophetic and optimistic. We find it said in the opinion:
“But, while it appears there was local uncertainty of the future of the company, it had no local dealings except with the banks, and there its credit seems to have been unimpaired. There seems to have been no occasion for pessimism as to the future of this company, though some local capitalists of ripe judgment seem to have shaken their heads.”
Again:
“If the business during 1911 was not good, this was due to a temporary situation, i. e., the fact that the railway companies were not purchasing' cars and. other materials in any considerable quantities, owing to attempts to reduce the rates fixed by the Interstate Commerce Commission. But this paved the way for larger orders in the future, and furnished no grounds for expectation of permanent cessation in the output of cars, as subsequently appeared. For all that appears the company would be unable to obtain and take care of its share of business in the future. Surely, there was every reason to believe that, in the future development of this enterprise, a fair income would , be realized on the tangible property of the company.”
Could there well be a balder pronouncement that, if a trustee truthfully states existing conditions, he will still be liable because he refuses to indulge in a sufficiently hopeful view of the future? The ultimate deduction of the court is that, because of an omission to deal on the basis of a true outlook on the future, the defendant failed in a duty “to truthfully and fully disclose the financial condition of the company,” and that his failure to be an optimist resulted in his obtaining the stock for at least $560,000 less than the future proved its value to be.
If failure to be sufficiently optimistic makes the buyer liable, why should not the seller be liable if the view taken was too rosy, and it turns out, in future, that the price paid was too high?
What has been said as to the knowledge which Voss had is equally applicable at this point. He was informed, and was not deceived as to the condition of the business.
*1424. The majority repeats over and again that plaintiff relied-on defendant “quite as much, if not more, implicitly than she did on the advice of Voss,” and that the evidence (quoted in the opinion) as a whole “indicates very satisfactorily that the plaintiff, throughout the transaction, reposed quite as much, if not more, confidence in the defendant than she did in Mr. Voss.” The evidence quoted in the opinion falls into two classes: (a) Testimony which is utterly irrelevant on whether or not plaintiff placed any reliance on anyone, (b) Testimony which demonstrates that she did not rely on defendant, but did rely on Voss. As a sample, plaintiff testified that she would not have objected to having the defendant attend, but that Voss, though it was not expected by her, assumed all of it, and:
“I knew Mr. Voss was a gentleman whom I could,talk with, and I needed someone to talk with. I know that I used Mr. Voss as a personal friend to talk matters with. Q. If you knew that Mr. Voss was director, would you regard him as a person who would look after it, and upon whom you relied to look after your interest? A. From a decidedly friendly standpoint. I supposed Mr. Voss was the only man whom I could talk with. ’1
As said, every line of what is relevant in the testimony quoted in the opinion, instead of showing that there was more reliance on defendant than on Voss, shows that the sole reliance was on Voss. Add to this the fact that, when the parties thought of having a set of arbitrators, she selected Voss, and when they concluded that no set of arbitrators was needed, she made Voss her agent, to represent her.
It is absolutely established that something other than the relationship to defendant induced the sale, and that the plaintiff had no confidence in defendant. (Abstract 167, 168, 203, 225, 237, 810, 811, 812.) Plaintiff admits she knew the future was problematical, because the defendant was not the genius that her late husband had been. (Abstract 197, 198.) And Voss testified, without dispute, that plaintiff “had not any too much confidence in J. W. Bettendorf and in the continuance of the business, and knew the ups and downs of it.” Plaintiff testifies, “I wanted to get free from the business.” (Abstract 196, 197.) When asked what she thought the defendant meant by his inquiry if she had ever thought of selling her stock, she *143answered, “Yes, I was anxious to get rid — to get out of the business; that is all.” (Abstract 194.) It is important that there are personal reasons for retiring; that the sale “avoids the risk of the enterprise.” Banks v. Judah, 8 Conn. 145; Colton v. Stanford, 82 Cal. 351 (23 Pac. 16, at 21.)
Be all that as it may, one who declines to deal with the fiduciary, but insists upon having the dealing done through an agent of her selection, and that the valuation be settled by him, cannot claim that she relied upon the fiduciary relation. Such conduct is a conclusive negation of such reliance. This is so though the agent does not fall within the independent adviser rule. The fact of insisting upon such an agent as the intermediary is precisely as conclusive against the claim of reliance as though an impartial, competent, independent adviser had been selected. The only difference is that, as against the honest adviser, there could be no claim, no matter how much he erred in judgment; while, as to the mere agent, if he was negligent or incompetent, or misconducted himself, there would be a remedy against him or any who colluded with him.
If the party to whom the representations were made, himself resort to means of verification, before entering into the contract, it is made to appear that he relied on his own investigations, and not on the representations. No claim of reliance on the relationship can in reason be made, where the complainant has undertaken to investigate for himself, called in experts, and acted upon his own judgment and the advice of friends. Kerr on Fraud & Mistake, 75 to 78. The burden to make full disclosure ceases to exist where the beneficiary acts exclusively on the advice of the professional friends selected to investigate and counsel, and selected “because of their ability and their knowledge of affairs of the trustees with whom he is dealing.” Colton v. Stanford, 82 Cal. 351 (23 Pac. 16, at 22); Blanc v. Connor, 167 Cal. 719 (141 Pac. 217, at 220).
That one may not employ an agent to act for her, and then claim reliance upon the relation to the fiduciary, is true even between trustee and cestui. Hoyt v. Latham, 143 U. S. 553; Ashcom v. Smith, 2 P. & W. (Pa.) 211. The cestui may not give notice in advance that he should rely upon the investiga*144tion and advice of an agent of Ms selection, would rely on Ms trusted agents, and then say:
“You owe me reparation; your representations were incorrect. It was your' duty to make them full, fair, and accurate. I claim a rescission upon the representations you made, although I did not deal with you.”
See Colton v. Stanford, 82 Cal. 351 (23 Pac. 16, at 21).
5. There was no inadequacy, because plaintiff claims nothing except that she was defrauded as to her ‘ ‘ common stock. ’ ’ It is conceded that the capitalization was one share common and four shares preferred stock. The court finds inadequacy on the theory that the shares of common stock sold transferred roughly a third interest in the property. But this is true only if there were no preferred stock, as aforesaid. Once show that there was such preferred stock, and make no showing that it has been retired or transferred by plaintiff to defendant, and it becomes plain that, instead of selling one third of the property, the common stock sold transferred but one fifteenth of that property. Manifestly, What may be inadequate if paid for a third can hardly be said to be inadequate when paid for a fifteenth. The preferred stock conveys as much of the corporate assets as the common. 1 Cook on Corporations (7th Ed.), Section 278; Birch v. Cropper, 14 App. Cas. 525 (1889).
The preferred stock should be considered, though appellant did not, in terms, urge, either in propositions or in argument, that the existence of that stock destroyed the claim of inadequacy. Appellant does raise that there was inadequacy. The record shows, without conflict, that nothing but common stock was sold, and that nothing but being overreached in the sale of common stock is complained of. The record shows, without dispute, that the preferred stock once existed, and it is presumed that this situation continued to exist. It appears without dispute that for one share of common stock there were four shares of preferred. This situation demands considering whether the existence of the preferred stock does not destroy all claim of inadequacy. It was not necessary to say as much in so many words. Argument in extenso is not necessary, to obtain appellate review.
*145Suppose the record showed without dispute that the parties had never met, and had never had a negotiation, and appellant asserted that the evidence did not show defendant had defrauded plaintiff. Would appellate review be denied merely because the appellant did not add an argument that he could n'ot have overreached the plaintiff, “because he had never met with her, seen her, or had had anything to do with her ? ’ ’
I confess that our treatment of our rules is not easy for me to understand. In this one instance, we adhere to them. In case after case where there is no attempt at rule presentation, we ignore that fact. Be that as it may, in my opinion inadequacy is properly presented.
The allowance of $142,415.35 for alleged enhancement of the assets of defendant by release of the claims for royalties is, at any rate, four fifths too large, because here, too, the existence of preferred stock is overlooked.
The opinion itself points out how fluctuating and uncertain the operations of such a corporation as this are. Where the property is uncertain, speculative, or dependent upon uncertain or fluctuating conditions, the test of value is not in what the party might have made out of it had he retained it, “but what it could have been sold for outright” (Cardoner v. Day, 253 Fed. 572, at 584; Appeal of Geddes, 80 Pa. 442, 462; Colton v. Stanford, 82 Cal. 351 [23 Pac. 16, 19]); and there is no evidence that anyone would have paid more.
6. Plaintiff effected a settlement with defendant, and solemnly released him in full, by duly executed writing. She obtained $50,000 thereby. She retains it, and has not tendered it. The majority permits her to avoid this settlement and to obtain a half million dollars more, despite that settlement. The law on what will impeach a settlement is, as will presently be shown, perfectly plain.
On what facts is this accord and satisfaction nullified? Plaintiff testifies she first learned that there was something wrong with the sale ‘ ‘ at the time when I read the notice in the papers; ’ ’ read that there had been a recapitalization in $7,500,000. (Abstract 177.) This was in December, 1913. The train of suspicion was fired then. She was asked whether she was not of *146opinion, when she saw this article and attempted to see Mr. Lane, that her rights had not been safeguarded, — whether read-, ing about this recapitalization did not make her think this, — . and she answered: “It certainly did.” (Abstract 204.) When asked why she began this suit, she answered:
“Because I didn’t think I was fairly treated, after I read the magnitude of that — that figure looked enormous — that $7,500,000.” (Abstract 201.) And: “When I saw this article in the paper about this $7,500,000 corporation, I immediately thought there was something wrong about my selling out and only getting a half a million dollars.”
To be sure, she also testified that she had not as much as a suspicion until long after she read that article, and that the first time she came to the conclusion she had been wronged was in the spring of 1914. Next, that not until she talked with her new attorney, Mr. Thomason, in the fall of 1914, did she learn in any way or believe there had been anything wrong with any of the transactions. This pushes the beginning of even suspicion from December, 1913, up to the fall of 1914. The final edition is that this time “was the first time that I suspected that there had been anything wrong with any of those proceedings.” (Abstract 178.)
Go back to her first statement, and we find that, when she read the newspaper article, about December 30, 1913, this happened: She acted as soon as she read the newspaper article, because she thereby became convinced that she had been overreached, and that she ought to ascertain the exact extent of her injury. She went to get satisfaction from someone (Abstract 237), some good lawyer, who, in her opinion, “would manage the matter.” She wanted to get “the best that could be had at any price.” It seemed to her she had to talk with someone, when she read this article (Abstract 172), and thereupon she attempted to see Mr. Lane for the purpose of retaining him “as my attorney to represent my interest to look into the matter of where that enormous amount of money had come from in so short a time, and to do that on my behalf” (Abstract 230, 239), to investigate the matter for her, to investigate “where that amount of money came from in such a short time” (Abstract 209). Before she settled, she learned that the litigation for *147the chances of which a deduction of $110,000 had been made had been disposed of favorably to the company, without the expenditure of that sum.
Surely, she went into settlement in full belief that she had been wronged by the transaction of selling, as a whole. All that she did not know then and claims to know now is the extent of the injury she had suffered by selling. The settlement was not limited, as the majority suggests, to the $110,000 item originally deducted for possible patent litigation. This is so, first, because plaintiff, at this time, was asserting that she had been wronged,' not by this deduction, but by the sale in its entirety; second, because, as the opinion concedes, the attorney for defendant “insisted that, if she had any other claims, she must assert them at that time, so that everything could be finally settled;” third, the instrument signed by plaintiff “ratified and confirmed the certain sale of common stock” she had made to defendant (not only the having had $110,000 deducted for patent litigation).
There was no fiduciary relation when the settlement was had. She no longer sustained such relation to defendant, and she did not then trust him, and professes to have then believed that he wronged her. By clear inference, she declares that, as soon as she read this newspaper article, she became distrustful of the defendant; for she says that, until she read that article, “nothing had occurred to make me distrust Mr. Bettendorf.”
No one deceived her as to the extent of her injury, and she dealt with the lawyer of the man whom she was accusing of breach of trust and worse. He did not deceive her, and made clear that she was dealing at arm’s length. True, it is argued that this lawyer overreached plaintiff; that she was once more defrauded; that no full explanation was made to her of the papers she was signing to effectuate the settlement; and that she was not fully advised as to their legal effect. I shall spend little time with this absurd claim of fraud, resting upon faith in the representations of an attorney for an opponent, as to whom she believed that he had defrauded her.
She was not lulled by anything Voss said to her, because she persisted in remaining desperate, and in obtaining counsel who would get her her rights. There is nothing to the assertion of the majority that, somehow or other, Voss satisfied her, after *148she made her discovery. Despite what Voss said, she kept right on investigating, complaining, and employing counsel. The stubborn fact remains that she persisted in acting upon her suspicions and her desperation and excitement until she obtained additional money. This proves to a demonstration that M!r. Voss checked neither her suspicions, her excitement, her desperation, or her desire to employ counsel; proves to a demonstration that whatever Mr. Voss may have said did not affect her realization or her belief that the enormously enlarged capitalization indicated she had not been fairly dealt with in selling her stock.
The majority brushes aside this solemn settlement, made on large consideration, and permits a recovery of half a million dollars in addition, on two.grounds. The first is the utterly irrelevant one that plaintiff was not too slow in beginning her suit. The question is not whether her suit was timely, but whether, though timely, she has any right to maintain it.
The second ground is that she had nothing to go on beyond a mere suspicion, and, therefore, was not put to inquiry. This simply overlooks that plaintiff settled when she fully believed she had been wronged in the purchase of the stock, and had not obtained enough money, and when she had the clué that the $2,000,000 corporation in which she sold stock had all at once become a $7,500,000 corporation; settled' when she was assert- • ing that she “did not know where all this money came from;” settled while she complained that she had been paid “but a half million dollars.”
Here is no case of mere suspicion that a wrong had been perpetrated. Instead, it is a naked case of failure to ascertain the extent of injury from a wrong believed to have been committed, and the general nature of which was fully realized, and settling before making any attempt to ascertain the extent of the injury suffered. It is hornbook law that, where one believes he has been defrauded, the fact that he makes a settlement in ignorance of the extent of his injury will not avoid the settlement (Barnes v. Century Sav. Bank, 165 Iowa 141, 176), and is not fully informed as to his legal rights. And this is true even as to a cestui. In Re Hoffman’s Estate, 183 Mich. 67 (152 N. W. 952); 2 Pomeroy on Equity Jurisprudence (3d Ed.) See. 964. He can*149not amplify his damages by delaying to inform himself as to the facts. Nicholson v. Janeway, 16 N. J. Eq. 285; Murray v. Elston, 24 N. J. Eq. 310; Twin Lick Oil Co. v. Marbury, 91 U. S. 587; Kitchen v. St. Louis, K. C. & N. R. Co., 69 Mo. 224.
The means of obtaining knowledge makes the case equivalent to having knowledge. Norris v. Haggin, 28 Fed. 275, 280, approved in Barnes v. Century Sav. Bank, 165 Iowa 141; Hinkley v. Sac Oil & P. L. Co., 132 Iowa 396, 409; German Sav. Bank v. Des Moines Nat. Bank, 122 Iowa 737, 744. A “clue which, if followed up, would lead to discovery is, in law, equivalent to a discovery — equivalent to knowledge.” Norris v. Haggin, 28 Fed. 275, 280, quoted and approved in Barnes v. Century Sav. Bank, 165 Iowa 141; Hinkley v. Sac Oil & P. L. Co., 132 Iowa 396, 409; German Sav. Bank v. Des Moines Nat. Bank, 122 Iowa 737, 743, 744. It was said in Hinkley v. Sac Oil & P. L. Co., 132 Iowa 396, at 409, 410:
“He is not required to suspect the promoters and directors of disregarding their obligations to those whom it was their duty to protect. "Where all seems fair, he is not bound to inquire as though the contrary were true. Of course, where the means of knowledge are at hand, and by ordinary diligence he should have ascertained the facts constituting the fraud, he will be charged with such knowledge. For the means of knowledge are equivalent to knowledge, and a clue which, if followed up with ordinary diligence, would, lead to a discovery, in law is equivalent to a discovery — equivalent to knowledge.”
It is added that this does not apply where plaintiff is lulled into security, “and did not suspect nor have any reasons to suspect the fraud practiced upon him, until a few days before beginning the action.”
It is said in Wood v. Carpenter, 101 U. S. 135, 141:
“ ‘The presumption is that, if the party affected by any fraudulent transaction or management might, with ordinary care and attention, have seasonably detected it, he seasonably had actual knowledge of it. ’ ”
“ ‘"Whatever is notice enough to excite attention, and put the party on his guard and call for inquiry, is notice of everything to which such inquiry might have led. When a person has *150sufficient information to lead him to a fact, he shall be deemed conversant of it.’ ”
And if the defendant “should have known of the fraud by the use of reasonable care and diligence,” and obtains a benefit before obtaining such knowledge, he may not assert the fraud. State Bank v. Brown, 142 Iowa 190, 199.
In the last analysis, the question is whether one who thinks himself defrauded, and then makes a compromise, can thereafter add to the amount received in settlement, by merely showing that, when the settlement was made, he had not made the discoveries that his then knowledge suggested, but has since made them, and so has discovered that the fraud was more injurious than he believed it to be when he settled. Precisely that was involved in Korn v. Becker, 40 N. J. 408 (4 Atl. 434). There, a daughter claimed that her mother had defrauded her into accepting an inadequate price. The complainant was defeated, not because one may not receive damages after discovering a fraud, but because, believing she had been defrauded, she entered into an accord and satisfaction for her damages.
7. While Allen v. Pegram, 16 Iowa 163, is an action on the law side, it does not follow that it prohibits rescinding in part and suing for damages in a law action only. Nothing indicates that the rule announced is not to obtain in a suit of equity.
8. Yoss induced the plaintiff and her parents to relinquish a claim of some $600,000 that the late W. P. Bettendorf had against his corporation on account of royalties. It appears, without dispute, that he never intended to assert such claim as a debt. Indeed, to have done so would have been a mere matter of bookkeeping; for, as he owned two thirds of the stock, he would have had to pay two thirds of what he received on account of royalties, and his brother the other third. It is true the release gave one third of whatever benefit resulted to the stockholding of the defendant, while, at the same time, it gave the same benefit to the third held by the widow and the parents. But the plaintiff fully realized that the defendant’s stock was obtaining this “advantage.” It is undisputed that Yoss advised this release because statements issued in the past had revealed no such indebtedness on part of the company, and because revealing it now might be dangerous to the credit of the corporation, al*151ready in somewhat precarious condition, owing to the death of the master spirit.
It is undisputed that, for the reasons already stated, W. P. Bettendorf had declared that he would not assert this claim as a debt of the corporation. The way the court disposes of that is to say that Voss .also knew that the widow could take the fortune her husband had left her, and yet was under no obligation to heed his desire as to relinquishing said claim for royalties. All I care to say is that this is peculiar advice, coming from a court of conscience. Mr. Voss need not feel he was a bad agent or man, because he did not think along such lines as the majority suggest.