Court Opinion

ID: 3682060
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:27:33.370418+00
Date Added: 2024-06-11T15:29:33.541216
License: Public Domain

The plaintiff made a very earnest petition for rehearing, and the court, after considering the petition granted a reargument, directed mainly to two propositions:
"First: What is there in the record to establish that there was any contract between the corporation and Shores? That is, what is there in the record to show that the agreement involved is other than an agreement regarding their interests in a company made by four persons who happen to be stockholders, and some of them officers, in the defendant corporation?
"Second: Where stockholders in a company made an agreement between themselves — primarily for their own benefit but which may incidentally be of benefit to the corporation — regarding the disposition of stock in the company held by them so that some of the stock is returned to the corporation, and it is claimed there is a breach of such agreement, may the aggrieved person recover from the corporation such benefits as the corporation incidentally received when the corporation is not a party to the agreement."
Although reargued, with these two points in view, we are still of the opinion that the record clearly shows there was no contract between the plaintiff and the corporation; that the contract made was an agreement between the plaintiff and some stockholders who happened to be officials of the corporation; and if breached, was breached by these stockholders.
Without reference to the issues specifically raised by the pleadings and whether the argument now presented is in accord with the theory, the position assumed by the plaintiff is this — assuming as true the evidence most favorable to the plaintiff — the plaintiff made a contract with other stockholders for the benefit of the corporation, by the terms of which each agreed to surrender to the corporation and cancel a certain number of shares of stock. Plaintiff says he was honest in entering *Page 83 
into this contract, intended to perform it, and did perform it; but that the other parties were dishonest in their intent, did not intend to perform, and thus by fraud induced him to surrender stock. Our statute, § 5841 says: "A contract made expressly for the benefit of a third person may be enforced by him at any time before the parties thereto rescind it." Had such contract been made but not performed by either party then under this statute the corporation would have had a right to enforce it against both parties to the contract at any time before the contract was rescinded; and in such an action against the parties to compel them to surrender the stock the plaintiff could not urge as a defense that he was induced to enter into the contract by fraud. Such fraud would have given him a right to rescind before the action was brought, but not having rescinded the contract before the action was brought it could be enforced as against him as well as against the other parties. In such an action it would be no defense that the other party had not yet complied. In the case at bar the plaintiff had surrendered his stock before the attempt to rescind the contract as against the other party. The corporation, under a contract made for its benefit, had received from the plaintiff just what it would have received if it had brought an action to enforce this contract for its benefit. It yet has its rights against the other parties to that contract. If, before the contract was rescinded, the third party for whose benefit the contract was made could enforce the contract and compel the plaintiff to surrender his stock it is clear the plaintiff thereafter could not have the stock returned to him even though the other parties to the contract failed to perform, and we cannot see how he can do it now simply because he complied with his contract without an action to compel him to do so.
The rescission referred to in § 5841 is rescission as against the other party to the contract. In this case the plaintiff is assuming a contract made with the corporation and seeks to rescind it on account of fraud. The theory of rescission is unavailing for there was no fraud on the part of the corporation — there being no contract with the corporation. Plaintiff claims the right to rescind; but fraud as a basis of rescission must be fraud "exercised by or with the connivance of the party as to whom he rescinds or of any other party to the contract jointly interested with such party;" or he may rescind "if through the fault of the *Page 84 
party to whom he rescinds the consideration for his obligation fails in whole or in part." Rev. Code, § 5934. Thus there can be no rescission of a contract that does not exist. Rescission of a contract with these other stockholders is another matter and we need not determine whether he can recover from them the property he gave or its value. We are of the opinion that the decision rendered is correct and therefore it is adhered to.
CHRISTIANSON, Ch. J., and NUESSLE, BURKE, and BIRDZELL, JJ., concur.