Court Opinion

ID: 6697028
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:55:09.737293+00
Date Added: 2024-06-11T16:01:17.114608
License: Public Domain

Clarkson, J.
Succinctly, tbe main material contentions of plaintiff and defendant, tbe Finance Company, are: On tbe part of plaintiff: That prior to 9 May, 1923, J. J. Quinby came to James L. McNair and represented that be was agent of Tom G. Taylor, who was tbe duly appointed agent of tbe Finance Company, to organize to sell its preferred and common stock. J ames L. McN air entered into tbe negotiations with Quinby and purchased tbe stock on 9 May, 1923, for bis father, tbe plaintiff. Tbe false and fraudulent representations which be relied on and which induced him to purchase tbe 4,000 shares of common stock of the company are: (1) That it was a new corporation then being organized by Tom G. Taylor & Co.; (2) that none of tbe common stock bad been sold or disposed of or would be sold or disposed of for less than $2.50 per share; (3) that all tbe provisions of law with reference to organization and sale of stock bad been complied with; (4) contracting and agreeing that in tbe event of bis failure to dispose of tbe stock at a large profit, within six months, plaintiff would be repaid tbe sum of $10,000 with interest from 13 May, 1923; (5) all of tbe representations made by Quinby, agent of Finance Company, were false, with knowledge of their falsity, with intent to deceive and actually did deceive plaintiff, and be was thereby induced to buy tbe stock; that plaintiff offered frequently to return tbe stock, as soon as be discovered tbe fraud, and demand tbe payment of tbe purchase price and interest. Plaintiff’s evidence abundantly tended to support these contentions.
On tbe part of defendant, Finance Company: (1) Tbe Finance Company admitted tbe contract for tbe' purchase of 4,000 shares of tbe common stock was executed on 9 May, 1923, by James L. McNair, for plaintiff; denied all allegations of fraud; that tbe books of tbe corporation show there was no fraud, and that any representation made was true; (2) that in tbe agreement of purchase of tbe stock by tbe plaintiff was tbe following: “It is understood and agreed that this contract contains tbe entire agreement between tbe purchaser, whose signature appears below, and Tom G. Taylor & Company, and no agent, representa-^ *715tive or any other person bas any power to change, modify or make any new conditions, statements, promises or agreements whatever.” (3) That J. J. Quinby was not the agent of the Finance Company or Tom G. Taylor, and was not authorized to make any representation or contract binding on Finance Company, and it had no knowledge of any alleged act or thing done or said by Quinby and is not liable thereon; (4) that plaintiff is bound by the terms of the written contract and estopped to deny them; “that J. L. McNair was induced to enter into this contract, for that he telephoned Jas. 0. Walker, president of the company, and Walker replied that he was going to give .the matter his personal attention, and at least one-half of his time. The defendant contends that that was one inducement to enter into the contract, and that another inducement was at the time he entered into the contract for the purchase of the stock and before he ever entered into it he had a contract and agreement with Tom G. Taylor & Company, that they would sell stock for him, for which he was paying ten thousand dollars, would sell it in six months for him for thirty thousand dollars, and upon failure to do that that they would refund him his money, the ten thousand dollars that he had paid for the stock with three hundred dollars, being the interest for six months, from 13 May,, making ten thousand and three hundred dollars.”
The defendant introduced no evidence, but relied, in part, on plaintiff’s evidence and cross-examination of plaintiff’s witnesses and the written evidence in the case, to establish its defense.
The record is voluminous, but from a thorough digest we think the only material assignments of error to be considered are to the allegations and proof as to actionable fraud and the agency of J. J. Quinby. These go to the very heart of the action and on which the defendant, Finance Company, predicates its motion, under C. S., 567, at the close of the plaintiff’s evidence for judgment as in case of nonsuit.
The issue as to fraud: “Was such subscription procured by means of misrepresentation and fraud as alleged in the complaint?”
' The court below charged as follows: “The burden of this issue, gentlemen, is upon the plaintiff to satisfy you by the greater weight of the evidence that such subscription was procured by means of misrepresentation and fraud. Fraud may be defined as ‘any trick or artifice where a person by means of false statements, concealments of material facts or deceptive conduct which is intended to and does create in the mind of another an erroneous impression concerning the subject-matter of a transaction whereby the latter is induced to take action or forbears from acting with reference to a property or legal right he has which results to his disadvantage and which he would not have consented to had the impression in his mind not been created and in accordance with the real *716facts.’ ” On this issue the court below states that the defendant asked for the following instructions, which in obedience to the request were given: “The burden is on the plaintiff to prove by the greater weight of the evidence that Quinby not only made such representations, but also made them with the knowledge of their falsity or recklessly and wilfully with intent to deceive and defraud the plaintiff, and unless the plaintiff has proved this by the greater weight of the evidence, you will answer the second issue No. That if the jury should find that the plaintiff was induced to subscribe for said stock by the representation that James 0. Walker was president of the company and would devote one-half of his time to the affairs of the company you are instructed to answer the second issue No.”
It has been hard for the courts to lay down any exact definition of fraud or rule to apply to the varying cases, but to fit the contested facts in the present controversy, we think the definition as laid down by the court below correct. In fact, the Finance Company made no exception to the rule as to fraud as charged by the court. Evans v. Davis, 186 N. C., 43; Machine Co. v. Feezer, 152 N. C., 516; Pate v. Blades, 163 N. C., 267; Massey v. Alston, 173 N. C., 215; Bank v. Yelverton, 185 N. C., 318; Sanders v. Mayo, 186 N. C., 109; Oil Co. v. Hunt, 187 N. C., 159; Indemnity Co. v. Tanning Co., ibid., 190; Wolf Co. v. Mercantile Co., 189 N. C., 322; Furst v. Merritt, 190 N. C., 397.
The defendant, Finance Company, relies on Pritchard v. Dailey, 168 N. C., p. 332. It is there said: “The material elements of fraud, a commission of which will justify the court in setting aside a contract or other transaction, are well settled. First, there must be a misrepresentation or concealment; second, an intention to deceive, or negligence in uttering falsehoods with the intent to influence the action of others; third, the misrepresentations must be calculated to deceive and must actually deceive; and, fourth, the party complaining must have actually relied upon the representations.” In that case the Court said the representations of the defendant seemed to be what are called “promissory representations” or “opinion representations” — not so in the present case. In the Pritchard case, the Court says the evidence fails to show that the plaintiff relied upon the representations of the defendant, but his own evidence showed he relied on the paper-writing he had written and mailed to defendant and demanded the execution of it or the return of his check. Defendant complied with the demand. The evidence showed also that plaintiff’s act was voluntary and in recognition of the contract.
Bispham’s Equity (9 ed.), sec. 211, says: “The representation must not be an expression of intention merely. A man has no right to rely upon what another says he intends to do, unless, indeed, the expression *717of intention, assumes sucb a shape that it amounts to a contract, when, of course, the party will be bound by Ms engagement and for the breach of which the other side has, ordinarily, an adequate remedy at law. But if a promise is made with no intent to perform it, and merely with a fraudulent design to induce action under an erroneous belief, or if a representation amounts to a statement of fact, although dependent upon future action, in either case there is ground for equitable relief." Massey v. Alston, supra, p. 219.
12 R. C. L., p. 240, states it thus: “The essential elements required to sustain an action for deceit are that the representation was made as a statement of fact, which was untrue and known to be untrue by the party making it, or else recklessly made; that, it was made with intent to deceive and for the purpose of inducing the other party to act upon it; and that he did in fact rely on it and was induced thereby to act to his injury or damage. All of these ingredients must be found to exist, and the absence of any one of them is fatal to recovery; though under the rulings of some courts the rule is generally relaxed as to knowledge and intent, where the relief sought is rescission. . . . Thus, fraudulent representations to avoid a contract need not be such as would sustain an indictment for false pretenses. So, if the original transaction is valid it cannot be rendered fraudulent by subsequent events, as by the nonperformance of a contract, unless there is a coexisting intention not to perform."
Under the facts and circumstances of this case, the court below was fully warranted in submitting the facts to the jury and the charge as to fraud was in accordance with the law.
The Finance Company contends: “That the real inducement for execution of subscription contract by plaintiff was the execution of contract with him by Tom G. Taylor & Company, and that if defendant has failed to observe any requirement of law the plaintiff is in pari delicto and is not entitled to equitable relief.”
The court below fully met the first part of contention and charged the jury: “That if the jury shall find from the evidence and by its greater weight that the plaintiff was induced to subscribe for said stock by the execution of the contract to resell entered into with Tom G. Taylor & Company, that you are instructed to answer the second issue No.”
The action here is for fraud and deceit. Plaintiff did not come under the provision of C. S., 6367, in the stock agreement with Tom G. Taylor & Company. That section provides organizers or promoters or thevr agents, should put in the contract of subscription or sale a certain provision. The principle of pari delicto does not apply here.
The next contention of the Finance Company is: “The plaintiff having received the stock on 13 May, 1923, and ‘slept’ until 2 December, *7181924, is guilty of laches and. is not entitled.- to equitable relief.” In answer to this contention, plaintiff says that the court below stated “In reply to this contention, gentlemen of the jury, the plaintiff contends, and Jas. L. McNair testified, that he did not discover that these representations were false until just a short time — the latter part of 1924— just a short time before the commencement of this action, and that he began suit immediately after discovering that fraud had been perpetrated upon him and that he was guilty of no laches; that he demanded that they cancel the contract and return his money, and they refused to do so, whereupon he brought the suit within a few days, or a very short time after the discovery by him that the representations made by Quinby to him were false.” In the charge of the court in regard to this aspect, the court below said: “Unless the plaintiff has failed to satisfy you, gentlemen of the jury, that he has not been guilty of laches or negligence in rescinding this contract, the court charges you, gentlemen of the jury, that it is the duty of the plaintiff, if he intended to rescind this contract, to give the defendant notice of such intention within a reasonable time after discovering the fraud that had been perpetrated upon him, if you find that there was fraud perpetrated upon him, and if he failed to do so within a reasonable time after the discovery of the fraud and was guilty of laches, then, gentlemen of the jury, the plaintiff cannot recover and you would answer this issue Nothing. The court instructs you that the plaintiff is not permitted by law to delay in the enforcement of any remedy he may have for the rescission of the contract, and if you find he has been guilty of unreasonable delay or laches in electing to rescind you will answer the seventh issue Nothing.” This was a question of fact on the evidence, and the court below fully complied with the law in the charge.
“No act of a party will amount to a confirmation of a fraudulent transaction, or acquiescence therein, unless done with full knowledge of the fraud and while he is free from its influence. Plaintiff’s ignorance of his rights also, as a general rule, negatives any laches on his part, especially where there has been no change in the situation of the parties in respect to the matter in which the relief is sought. It is sufficient that suit is brought without unreasonable delay after discovery of the grounds for rescission.” 9 C. J., p. 1205.
In May v. Loomis, 140 N. C., p. 359, the Court says: “In order to rescind, howeyer, the party injured must act promptly and within a reasonable time after the discovery of the fraud, or after he should have discovered it by due diligence; and he is not allowed to rescind in part and affirm in part; he must do one or the other. And as a general rule, a party is not allowed to rescind where he is not in a position to put the other in statu quo by restoring the consideration passed. Furthermore, *719if, after discovering tbe fraud, tbe injured party voluntarily does some act in recognition of tbe contract, bis power to rescind is tben at an end. These principles will be found in accord witb tbe authorities. Bishop on Contracts, secs. 679, 688; Beach on Contracts, sec. 812; Page on Contracts, secs. 137, 139; Clark on Contracts, pp. 236, 237; Trust Co. v. Auten, 68 Ark., 200; Parker v. Marquis, 64 Mo., 38.”
Tbe Finance Company contends: “That J. J. Quinby, tbe person alleged by plaintiff to have made tbe fraudulent misrepresentations was not tbe agent of defendant^ and if any such representations were made by Quinby they were unauthorized, without tbe knowledge or consent of defendant, and plaintiff was not entitled to rely on them, or prove them as'a basis of recovery from defendant.”
It is said in Waggoner v. Publishing Co., 190 N. C., p. 831: “Witb full knowledge of all the circumstances, tbe defendant has received and still holds the money fraudulently obtained by its agent from tbe plaintiff. Tbe defendant will not be permitted to repudiate tbe act of its agent as being beyond tbe scope of bis authority, and at the same time accept tbe benefits arising from what be has done while acting in its behalf. Starkweather v. Gravely, 187 N. C., 526. It is a rule too well established to admit of debate that if a principal, witb full knowledge of tbe material facts, takes and retains tbe benefits of an unauthorized act of bis agent, be thereby ratifies such act, and witb the benefits be must necessarily accept tbe burdens incident thereto or which naturally result therefrom. Tbe substance of ratification is confirmation after conduct. 2 C. J., 467. It is also a settled principle of ratification that tbe principal must ratify tbe whole of bis agent’s unauthorized act or not at all. He cannot accept its benefits and repudiate its burdens. Bank v. Justice, 157 N. C., p. 375.”
We said in Hunsucker v. Corbitt, 187 N. C., p. 503: “Admissions by agents, made while doing acts within tbe scope of tbe agency, and relating to tbe business in band, are admissible against tbe principal when such admissions may be deemed a part of tbe res gestee, but such admissions are not admissible to prove tbe agency; tbe agency must be shown aliunde before tbe agent’s admissions will be received.” Lockhart’s Handbook on Evidence, sec. 154, and numerous authorities.
Tbe evidence on this aspect, Jas. L. McNair testified: “Well, I don’t recall bis exact language; be said that Tom G. Taylor & Company, of which be was a partner, were organizing or were organizers of tbe Southern States Finance Company, and as soon as a certain amount of stock was sold, that tbe organization would begin business, and be told me who some of tbe officers of tbe organization would be. He said Mr-J. O. Walker would be president of tbe company, and I don’t remember all of tbe officers; be mentioned Rhyne and Dr. Ashcraft as directors. *720In consequence of what he told me I called Hr. Walker on the telephone. I know Mr. Walker’s voice. Q. What conversation took place between you and J. 0. Walker? A. I told Mr. Walker over the phone that Quinby was down hw'e wanting to sell some stock in the Southern States Finance Company, which he said they were getting up in Charlotte to do a financing business, and he represented to me that Mr. Walker would be active president, and I asked Mr. Walker if that was true, and Mr. Walker said he was at that time — that it happened that at that time he was right much busy with his campaign; 'that they were having an election in Charlotte and he had been right busy in the campaign, but that was practically over and he expected he would give it half of his time; one-half of the day to the mayor’s office, and half a day to the office of the Southern States Finance Company. I told him Quinby was there wanting to sell me the stock.”
Counsel for plaintiff read a number of entries from the stock book of deféndant, Finance Company, to the jury, one with the entry “John F. McNair, Laurinburg, N. C., 12 May, 1923, four thousand shares common certificate 1128, ten thousand, on the credit side 16 May, cash book four hundred, 16 May, cash book nine thousand and six hundred.” It was in evidence that Dr. Ashcraft became vice-president and in active charge of the company.
Dr. J. E. Ashcraft and Mr. Tolle, officers of the Finance Company, called on Jas. F. McNair, at Laurinburg, who testified: “At the time Ashcraft and Tolle were here I showed them this Tom G. Taylor contract. I told them who sold the stock to me, and the contract showed. I don’t recall how long we were conversing, one to three hours — they were in the office some time. I told them I had bought this stock from Mr. Quinby and the agreement, and told them the representations that Quinby made to me. I told them Mr. Quinby said that the company was being formed and the stock had not been sold to any one for less than two dollars and fifty cents, and they would be selling the stock .for ten dollars a share. When I told Dr. Ashcraft and Mr. Tolle the representations that Quinby had made to me they told me they would let me know about taking the stock up; they would let me know right away whether they would give the money back or not, and after they went back I got that letter. They didn’t disavow responsibility for Quinby’s statement; they didn’t say either way.”
The issue of agency: “Did the defendant, Tom G. Taylor, make the sale of said stock through his agent, J. J. Quinby ?”
The court below on this issue charged: “The burden of this issue, gentlemen, is upon the plaintiff to satisfy you by the greater weight of the evidence that this sale was made by Tom G. Taylor, through his agent, Quinby. The contract, gentlemen of the jury, has been introduced here *721before yon wherein the following language -is used: ‘I hereby purchase from Tom G. Taylor & Company four thousand shares of .the common stock of the company.’ The plaintiff insists that that should satisfy you that this sale was made by Tom G. Taylor through his agent, J. J. Quinby; plaintiff insists, gentlemen, that the evidence shows that Quinby was acting as the agent, and that it was known to the company he was acting as their agent, so, gentlemen of the jury, if you are satisfied from this evidence, and by its greater weight, that the sale was negotiated through Tom G. Taylor, by his agent, Quinby, why then you will answer the fifth issue Tes. If you are not so satisfied, you will answer it No.”
Dr. Ashcraft and Tolle, officers of the Finance Company, were informed by Jas. L. McNair of the fact that the stock was purchased through Quinby and the representations Quinby made to him. They told McNair that they would let him know about taking the stock up. They did not disavow responsibility.
1 R. C. L., p. 478, backed by a wealth of authorities, says: “Intimately connected with admissions that are implied by the acts or conduct of the party are admissions by silence or acquiescence. If a statement is made in the hearing of another, in regard to facts affecting his rights, and he makes no reply, it may be a tacit admission of the facts stated.” State v. Evans, 189 N. C., 235.
"We think there was sufficient evidence to be submitted to the jury aliunde of-Quinby being an agent of Tom G. Taylor and the Finance Company. (It is admitted that Taylor was.) The evidence of plaintiff : (1) The stock sold by Quinby to plaintiff was issued by the Finance Company and the money received by it; (2) the plaintiff through his agent, Jas. L. McNair, informed Jas. 0. Walker, acting president of the Finance Company, that Quinby was trying to sell him stock in the company; (3) the statement of Jas. L. McNair that he informed the two officers of the Finance Company in regard to facts affecting the rights of the company — the representations of Quinby. No reply from the officers. They remained silent. We think all these facts sufficient to justify the court below in its charge. The agency being established by evidence aliunde, the testimony of Jas. L. McNair that Quinby told him he was agent, etc., was competent. From the view we take of this action, as to the first, second and fifth issues, it is not necessary to discuss the interesting questions raised on the other issues.
The principle laid down in Ginsberg v. Leach, 111 N. C., p. 15, is as follows: “The Supreme Court will not consider exceptions arising upon the trial of other issues, when one issue, decisive of the appellant’s right to recover, has been found against him by the jury.” Hamilton v. Lamber Co., 160 N. C., 52; Beck v. Wilkins-Ricks Co., 186 N. C., 215; Sams v. Cochran, 188 N. C., 734.
*722Tbe court below tried tbe case witb care and caution.
Tbe other positions taken by tbe able counsel for defendant on tbe argument and in tbe brief, we do not tbink raises any novel or new proposition of law, and are not material for tbe determination of tbe case.
Tbe case is a simple action of actionable fraud. Tbe questions of fact constituting tbe fraud were for tbe jury to determine. Tbe charges of fraud were made and abundant evidence, if believed, to sustain them. Tbe probative force was for tbe jury — not us. Tbe issues were found for plaintiff. There was sufficient evidence to be submitted to tbe jury, and tbe overruling of tbe motion made by defendant, Finance Company, for judgment as in case of nonsuit, by tbe court below, was proper. Tbe Finance Company introduced no evidence. Tbe court below gave tbe contentions of both parties clearly and fairly. Tbe law was applied to tbe facts. We see no error in law to disturb tbe verdict.
No error.
Adams, J., not sitting.