Court Opinion

ID: 6474110
Source: CourtListenerOpinion
Date Created: 2022-06-26 22:33:28.770222+00
Date Added: 2024-06-11T15:53:54.576987
License: Public Domain

FRANKLIN, C. J.
I concur. In the decision of this case it is important, as affecting the fiduciary relationship of the parties, to bear in mind the subject matter and character of the action. Its basis is a contract for the purchase of certain shares of stock in a corporation and an interest in certain mining claims. The contract was entered into by two stockholders of a corporation. At the time of the contract, Steinfeld was and had been a stockholder and a dominating influence in the affairs of the corporation. Nielsen was a stockholder and director, and had been, until a short time previous, very active in the conduct of the business of the corporation. The action is for rescission or undoing of the contract for the purchase of the stock. The action does not involve directly the conduct of either party with reference to the conduct of the business of the corporation, or the acquisition by either of them of any of the property of the corporation; in other words, it does not involve the relation of directors or officers of a corporation and the corporation itself and the stockholders; cases where such directors are, by virtue of a position of trust and confidence, prohibited from making contracts with themselves individually, from purchasing property *452from themselves, or selling to themselves, or from making a personal profit ont of their dealings with the corporate affairs and the like. Nor is it a case where a director or managing officer of a corporation, by virtue of fraudulent misrepresentations or concealments concerning the company’s affairs,, induces a person to purchase shares of the stock or enter into a contract for their purchase, and thereby sustain a loss. Neither does it involve the specific performance of a contract which, upon a review of the facts and the situation and condition of the parties, a court of equity in its discretion might refuse to lend its aid in the enforcement thereof. For a court of equity will very often refuse to decree specific performance under a state of facts, where, in a case under the same state of facts, it will refuse to order a rescission. This action is for the rescission of a contract fully performed, and in which contract the parties alone are concerned. The executrix of one of the parties, deceased, comes into a court of equity asking that the contract between Steinfeld and the deceased be set aside on the ground of fraud. The stress of the argument advanced is inadequacy of consideration. A court of equity looks upon inadequacy of consideration only as a mark of fraud or imposition, except, for instance, there be such inadequacy of price as that it must be impossible to state it to a man of common sense without an exclamation at its inequality. Only in such a case does a court of equity consider that a sufficient proof of fraud to set aside a conveyance. Cwynne v. Heaton, 1 Bro. Ch. 9.
The appellee dwells with emphasis upon the value of the stock and the conditions at the time the purchase price therefor was paid and the transfer made. But I think it .infinitely more important to a just view of the matter to consider the situation of the parties and the value of the stock at the time the contract for its purchase was made. When we take into consideration the situation of the parties, the condition of the property of the corporation, and the value of the Nielsen stock at the time of the contract for its purchase, and the relative capacities of Steinfeld and Nielsen to render the stock of any value, I cannot escape the conviction that, at the time of making the contract, Steinfeld offered a very fair price indeed for the stock. From a fair consideration of the evidence, I am unable but to conclude that the only means *453whereby the stock would become of any value was by a sale of the mines of the corporation consolidated with the adjoining mines acquired by Steinfeld with his own funds. The evidence discloses that the sale thereof, negotiated by Steinfeld some years afterward, was the means which gave value to the stock.
Steinfeld was sharp, shrewd and alert, if you please. ■ After purchasing the Nielsen stock he was on the lookout for a profitable deal. By his business ability and financial standing and connections, he was enabled to and did make a sale of the consolidated property at a handsome figure. By making the sale, the burdens of the corporation were lifted, and from straitened circumstances it emerged opulent and its stock thereby became valuable. This was due to the efforts of Steinfeld, and by his ingenuity, industry and financial ability it was brought about. That the stock was purchased at a low price and subsequently, by the efforts of Steinfeld, it was made very valuable does not seem to me grounds for undoing the purchase of the stock and give all the benefit of the deal to the estate of Nielsen. However much as a matter of sentiment it may be desired to subtract from the rich and give thereof to those less fortunate in the ability to acquire, justice is imperative, and it is the stern duty of the court to close its eyes to sentiment and proclaim and preserve the rights of all under the law with equality, and without consideration of the wealth or poverty of the parties to influence its judgment. For, as Epictetus observed, “If you wish to make your judgments just, regard not any of those who are parties to the suit, nor those who plead in it, but regard justice itself.”
Mr. Justice DANIEL in the case of Eyre v. Potter, 15 How. (U. S.), at page 59, 14 L. Ed. 592, in giving the opinion of the court, said: “The parties, if competent to contract and willing to contract, were the only proper judges of the motive or consideration operating upon them, and it would be productive of the worst consequences if under pretexts, however specious, interests or dispositions subsequently arising could be made to bear upon acts deliberately performed, and which had become the foundation of important rights in others. Mere inadequacy of price, or any other inequality in a bargain, we are told, is not to be understood as constituting per se a ground to avoid a bargain in equity, for courts of equity, *454as well as courts of law, act upon the ground that every person who is not, from his peculiar condition or circumstances, under disability is entitled to dispose of his property in such manner and upon such terms as he chooses; and whether his bargains are wise and discreet or otherwise, or profitable or unprofitable, are considerations not for courts of justice, but for the party himself to deliberate upon. Vide Story’s Equity, see. 244”—and cases cited.
Courts will refuse to order the rescission or undoing of a contract on the ground of fraud unless the proof of the fraud is clear and decisive, and the facts before us do not present such a case. The facts of this case, as a basis for the relief sought in this action, do not bring Steinfeld within the sphere of a fiduciary relation where equity would measure with jealous care his conduct as that of a trustee. Neither does the ease present those special or peculiar facts by reason of which equity would regard him as a trustee under a qualification, or, as the books have it, a quasi trustee, or a trustee sub modo. On consideration of the adjudicated cases, where a person under the special facts in the ease is characterized as a quasi trustee or trustee sub modo, it seems to me a distinction without a difference, more an expression of form than a matter of substance, for such a person, under the special facts, is held to all the duties and obligations which the relation of trustee enjoins. To decree a rescission of the contract, under the facts of this case, as we find them, would indeed be extending equity too far, and it is said in the legal maxim that nothing is so unjust as to extend equity too far. Nihil iniquius quam aequitatem nimis intendere. It would be regarding the parties to the suit and nqt the justice of the case.
The true perspective of this case is had by viewing the contract of the parties for the sale and purchase of the stock in the light of the circumstances and conditions which surrounded the making, and not in the light of subsequent developments. Though, in the light of subsequent developments, it must be admitted that appellee made an improvident deal and got a very poor bargain, nevertheless, under the facts presented, it cannot in equity and good conscience be held that appellant should suffer by reason thereof.