Frost v. Arnaud

144 Ga. 26 | Ga. | 1915

Evans, P. J.

(After stating the foregoing facts.) According to the allegations of the petition the plaintiffs parted with their money through being fraudulently led into the purchase of -stock in a corporation which was never legally organized, and was but an instrumentality devised as a part of the defendants’ fraudulent scheme. The action is founded in the fraud of the defendants. Although the demurrer challenged the sufficiency of the petition as stating a cause of action, this ground of the demurrer was not argued in the brief, and will be treated as abandoned.

1. All actions for injuries to property, real or personal, shall be brought within four years after the right of action accrues. Civil Code (1910), §§ 4495, 4496. We .think that an action brought to recover damages sustained by the plaintiff in consequence of fraudulent representations and concealment by the defendant, whereby the former is induced to purchase worthless shares of stock in a corporation which was never legally organized, is governed by the statute of limitations appertaining to injuries to property. Crawford v. Crawford, 134 Ga. 114 (67 S. E. 673, 28 L. R. A. (N. S.) 353, 19 Ann. Cas. 932); Miller v. Wood, 41 Hun; 600. The action was commenced more than four years after the plaintiff had parted with his money, and is barred, unless the case as alleged falls within an exception to the general rule.

2. One of the statutory exceptions to the general rule is expressed in the Civil Code (1910), § 4380: “If the defendant or those under whom he claims has been guilty of a fraud by which the plaintiff has been debarred or deterred from his action, the period of limitation shall run only from the time of the discovery of the fraud.” The fraud referred to in this section as relieving the bar of the statute must be such as involves moral turpitude. Austin v. Raiford, 68 Ga. 201. The plaintiff’s allegations make a case of actual or moral fraud. Even in cases of moral fraud, there must be reasonable diligence on the part of the plaintiff, to detect or discover the fraud. “Ignorance of fraud which, by. the use of ordinary diligence, might have been discovered in due time, will not hinder the statute from running.” Freeman v. Craver, 56 Ga. 161; Marler v. Simmons, 81 Ga. 611 (8 S. E. 190). The defendants’ statements made to induce the purchase of stock in the corporation were so alluring that the natural cupidity of the most careless speculator would have raised an expectation of early and large returns from the investment, and would have prompted investigation as to the cause of the disappointment. The plaintiff anticipated that he reasonably might be called on to explain why he was in such laches in discovering the defendants’ fraud, and assigned, as a reason why he had not called upon the officers of the company for a statement of the corporation’s business, that the defendants had “often within four years next after the purchase of the stock” assured him that the company would soon be paying dividends, and that the stock was constantly enhancing in value. The time elapsing between the purchase and the filing of the suit was nearly six years. The pleader does not state that continuously during the four years after he bought his stock he applied to the defendant for information. If he had done so, he might have excused his negligence during this period. The allegation that often within four years next after the purchase of his stock he had approached the defendants for information about the corporation could be satisfied by proof that he had often made inquiries within twelve or eighteen months after his purchase, and still more than four years would have intervened before the bringing of the suit. As was well said by Judge Bleckley, in Sutton v. Dye, 60 Ga. 449: “Diligence to detect fraud is as much incumbent upon a party who labors under no disability as to do any other act in which his interest is involved. He must look about him, and see what villainies environ him. If he has been caught in a net, he must feel for the meshes.” This plaintiff does not allege that he resided remotely from the county of the principal office of the corporation. Beasonable diligence would have required him to inquire of the officers of the corporation the condition of its affairs. This would have been the natural thing for him to have done; and if he had done so with reasonable diligence, he would have sooner ascertained whether he was the victim of a financial swindle.

3. Another reason advanced by the plaintiff as an excuse for his laches is, that a confidential relation existed between him and the defendants, inasmuch as he entrusted the defendants with his money to be used in connection with that of other subscribers, whose aggregate subscriptions should amount to the capitalization required by the charter of the corporation, in developing and putting into complete operation the mining properties, and that four years was a reasonable time for this purpose. Promoters of a corporation have been held liable to account to the corporation for secret profits, on the theory of a trust relationship. While' promoters may stand in a fiduciary position to the corporation, they do not, as a rule, occupy that position toward the subscribers for shares. Alger on Promotion of Corporations, § 127. But even if it be conceded that a sort of trust relationship is alleged, it is not an express trust, but only such as may equitably result from the facts. Besulting or implied trusts are within the statute of limitations. 25 Cyc. 1155. The relation of an officer to a corporation has been held not to be such a technical trust relationship as came within section 3782 of the Civil Code, declaring that subsisting trusts, cognizable only in a court of equity, are not within the ordinary statutes of limitation. Knowles v. Rome Tribune Co., 127 Ga. 90 (56 S. E. 109). We think that the defendants and the plaintiff sustained the relation of vendor and vendee; and although the vendor was promoting a corporation in the sale of its stock, and made the representations alleged by the plaintiff, nevertheless the cause of action arising out of the transaction was barred after four years from the time it' accrued.

Judgment reversed.

All the Justices concur.