Acetylene Light, Heat & Power Co. v. Smith

10 Pa. Super. 61 | Pa. Super. Ct. | 1899

Opinion by

W. D. Porter, J.,

The defendant, by agreement in writing dated October 5, 1895, subscribed for 100 shares of the stock of the plaintiff corporation, at the rate of $50.00 per share, and in accordance with the terms and at the date of the agreement paid fifty per centum of the amount in cash, and undertook to pay the balance as it should be called by the board of directors of the corporation. Upon calls duly made by the board of directors he paid, on April 20, 1896, $5.00 per share, and, on October 1,1896, a second payment of $5.00 per share.

Two calls, each for $3.00 per share, were subsequently duly made, payable, respectively, on May 7 and June 25,1897, which defendant failed to pay. The corporation brought this action to recover the amounts due upon these calls, aggregating $600, and the defendant filed an affidavit of defense. The court made absolute a rule for judgment for want of' a sufficient affidavit of defense, from which judgment the defendant appeals.

The written agreement of defendant to pay for the stock was absolute upon its face; but he now alleges in his affidavit that this subscription was induced by means of false and fraudulent representations made to him by the officers of the plaintiff corporation. There is no doubt that, where one is induced to make a subscription to the capital stock of a company by fraudulent representations or false statements of material facts by an agent of the company, appointed to obtain subscriptions, the contract may be avoided by the subscriber: Crossman v. Bridge Company, 26 Pa. 69. When, however, the contract to pay is absolute, as in this case, a defendant must, in order to prevent judgment, do more than simply state in his affidavit, in general terms, that false and fraudulent representations were made. He must set forth what the false representations were and state wherein they were false and. that he was deceived. In the present case the affidavit of defense sets forth a number of representations, alleged to have been made by plaintiff’s agents, and then alleges that each and all of said statements were false and misleading and calculated to deceive, and that deponent was deceived to his great injury. But there is no attempt made to set forth wherein the representations were false; nor does the defendant venture upon any positive ground as to what the facts really were touching the matters to which the representations related. In such a case the affidavit of defense should set forth the false representations and, also, what the defendant alleges to be the truth, with regard to the matters as to which he claims to have been deceived, in order that the court may pass upon the materiality of the alleged variance of the representations from the truth. This the defendant has failed to do; his affidavits are vague, indefinite and insufficient : Blanton v. Craven, 173 Pa. 374; Acetylene Light Co. v. Beck, 6 Pa. Superior Ct. 584.

But even if false and fraudulent representations were made by plaintiff’s agents and properly set forth and duly negatived by defendant in his affidavit, yet must the plaintiff have judgment, upon defendant’s own showing. The defendant alleges that the false representations, upon which he seeks to avoid his contract, were made prior to his subscription for the stock which bears date October 5, 1895, and he admits in his affidavit that he learned, in September, 1896, “that said statements, announcements and assurances were false and misleading, and that he had been deceived thereby.” The fraud alleged was not of such a character as to involve a crime, in which case ratification of the contract would have been contrary to public policy and could not have been permitted; but the transaction was merely contrary to good faith and fair dealing, it affected individual interests only, and upon discovery of the fraud, it was within the power of the defendant to either ratify or rescind the contract. The contract was not void,' but voidable only at the option of the party defrauded. If plaintiff was guilty of the alleged fraud, the defendant, upon discovering it, had an undoubted right to rescind the contract, and upon tender of the stock to demand the return of the price paid for it; but it was his duty to act promptly and, in case he elected to rescind, notify the plaintiff without delay. Omission to repudiate within a reasonable time is evidence, and may be conclusive evidence of an election to affirm the contract: Shisler v. Vandike, 92 Pa. 447; Learning v. Wise, 73 Pa. 173; Bispham’s Equity, secs. 260, 472. What is a reasonable time within which to exercise the right of rescission is, when the facts are undisputed, a question of law to be determined by the court: Leaming v. Wise, supra; Howard v. Turner, 155 Pa. 349.

The defendant had full knowledge of the alleged fraud in September, 1896, and gave ho notice of an election.to rescind until one full year later, when he filed his affidavit of defense ; but in the mean time he had, in October, 1896, paid without question an instalment upon the stock. There was not only unreasonable delay to repudiate^ but a payment in affirmance of the contract after full knowledge of the alleged fraud. The defendant, having taken the chances of an advance in the market price of stock, highly speculative in character, for the period of a year, must abide by his own election. The allegations of the affidavit as to mismanagement of the affairs of the corporation, and change of its methods of business constitute no defense to this action: Acetylene Company v. Beck, 6 Pa. Superior Ct. 584; Bristol Iron & Steel Co. v. Selliez, 175 Pa. 18.

The affidavits of defense are not sufficient to entitle the defendant to a jury trial and the court below was clearly right in entering judgment, but the plaintiff was not entitled to interest upon the amounts due down to the date of judgment. The amount which the defendant shall be liable to pay for delay in payment of the instalments called upon his stock is fixed, by the Act of May 9,1889, P. L. 180, at one half of one per centum per month. This is equal to the legal interests on the amounts due, but it is not in addition to interest; for the act limits the amount for which suit may be brought to the amount called for. and unpaid and, in addition, one half of one per centum per month upon said amount for delay. The plaintiff here claimed both interest and the allowance under the act for delay, which the court, no doubt inadvertently, allowed.

The record is remitted to the court below, with direction that the judgment be modified, by striking out from the computation the amount included as interest prior to the entry of judgment, and that judgment be entered for amount of the instalments called for and unpaid and one half of one per centum per month, on said instalments from the time they, severally, were payable. And it is ordered that the costs of this appeal be paid by the appellee.