Plаintiff bases her action for rescission of the executed contract for the exchange of her 300 shares of the common stock of the Flint Manufacturing Company for certаin shares of Textiles, Inc., upon the ground that her agreement to do so was dependent upon a condition precedent that Textiles, Inc., had (with plaintiff’s stock), or would at once acquire, a majority of the voting stock of Flint Manufacturing Company, and that but for the representation to this effect on the part of Textiles, Inc., she would not have made the exchange, and that upon breach of this condition precedent she is now entitled to rescind the contract and to have her 300 shares in Flint Manufacturing Company restored tо her.
Plaintiff’s counsel contend in their elaborate and well arranged brief that the representation as to ownership of a majority of the stock of Flint Manufacturing Company was material and important, and constituted an integral part of the transaction, and was a condition precedent, breach of which would entitle plaintiff to a rescission оf the contract to exchange the shares of stock. As illustrating and supporting this proposition, they cite the case of
Meinershagen v. Taylor,
In that case shares of stock were purchasеd on the express agreement that those who formerly controlled the company should not be connected with its reorganization, and upon breach of that condition rеstoration of the status quo was sought. The court, however, while recognizing the right to rescind under circumstances properly calling for the application of the principle, denied it to the plaintiff in that case because he had failed to promptly repudiate the contract after knowledge of the facts.
There is authority for the position that while a breach of a condition or covenant in a contract is ordinarily not sufficient reason for its rescission in equity in the absence of fraud, mistake, or some other independent ground of equitable relief, there is a distinction between dependent and independent covenants, a dependent covenant being one which goes to the whole consideration of the contract, breach of which would give the injured party the right to rescind. Black on Eeseission and Cancellation, sec. 212.
*318
And in
Huggins v. Daley,
48 L. R. A., 320, cited by plaintiff, we find the following language: “Where the undertaking on one side is, in terms, a condition to the stipulation on the other (that is, where the contract provides for the performance of some act оr the happening of some event, and the obligations of the contract are made to depend on such performance or happening), the conditions are conditions precedent. . . . The nonperformance on one side must go to the entire substance of the contract and to the whole consideration, so that it may safely bе inferred as the intent and just construction of the contract that, if the act to be performed on the one side is not done,, there is no consideration for the stipulation on the other side.” Citing
New Orleans v. Texas & P. R. Co.,
In Black on Rescission and Cancellation, sec. 213, it is stated: “The true rule appears to be that rescission or cancellation may properly be ordered where that which was undertaken to be performed in the future was so essential a part of the bargain that the failure of it must be considered as destroying or vitiating the entire considеration of the contract, or so indispensable a part of what the parties intended that the contract would not have been made with that condition omitted.”
However, as stated by
Mr. Justice Clarkson
in
Wade v. Lutterloh,
But we do not think the evidence in the instant case is such as to call for the application of these principles or to entitle the plaintiff to rescission.
The facts in the case are in no material respect controverted. The plaintiff’s evidence is uncontradicted. And from this it appears, as disclosed by the record before us, that plaintiff agreed to exchange and did exchange her 300 shares of stock in the Flint Company for certain shares of Textiles, Inc., and she did so upon the representation that with the acquisition of her shares, Textiles, Inc., would have 51 per cent of the voting stock of the Elint Company. She testified: “In conversation with Mr. Separk he told me that they had enough people signed up so that when they got my stock they would have 51 per cent. I understood, of course, that they would get this 51 per cent transferred. I knew that the stock was held by a number of people and that these consents to transfеr were signed by a number of people, and that it was necessary *319 to get mine in order to make a majority.” In her complaint she alleged that Textiles, Inc., represented if plaintiff would transfer her 300 shares of stock in the Flint Company, it would have already acquired or would at once acquire sufficient shares of the stock to amount to 51 per cent, “and thus enable Textiles, Inc., to control Flint Manufacturing Company.”
The record further discloses that plaintiff made the exchange of her shares of stock on 15 October, 1931, and that on 21 Octоber, 1931, Textiles, Inc., took control and management of Flint Manufacturing Company, and has since continued to exercise control thereof. It was in control, through its receiver, whеn this suit was instituted, and its control had not been at any time disturbed or threatened.
This control has now been made definitely legal and irrevocable by the actual transfer of the shares of stock which were represented by the agreements to transfer held by Textiles, Inc., at the time plaintiff exchanged her shares.
So that, it is apparent the plaintiff is in substantially the samе situation she would have been had Textiles, Inc., on 15 October, 1931, had a majority of the voting stock of Flint Manufacturing Company actually transferred on the stock books of that corporation to its name, instead of holding agreements to transfer, for the ultimate purpose contemplated, to wit, the control of Flint Manufacturing Company by Textiles, Inc., became an accomplished fact on 21 October, 1931. And this was followed by subsequent actual transfer of the stock represented by the agreements to Textiles, Inc.
While the possession by Textiles, Inc., of agreements to transfer the stock when called for might not be held to constitute a strict compliance with the representation that it had “acquired” the stock, as these were but executory contracts to exchange the shares, and might not have been good against the
prima facie
title of an assignee of the certificate, or against a subsequent purchaser for value, without notice, who received transfer of stock by delivery of certificate with assignment properly endorsed thereon
(Costelloe v. Jenkins,
“The general rule is that rescission will not be permitted for slight or incidental breaches of the contract, but only for such as are material or substantial.
Highway Commission v. Rand,
*320 Though, it be conceded the representation as to the acquisition of a majority of the capital stock of Flint Manufacturing Company was a condition precedent to plaintiffs agreement to exchange her shares of stock, and that this was a material and integral part of the consideration, uрon the record before us, we reach the conclusion that there has been a substantial compliance with the representation on the part of Textiles, Inc., and that plaintiff has not been disadvantaged or injured by the asserted breach of such covenant.
It does not affirmatively appear in the evidence that plaintiff has suffered loss by thе exchange of her 300 shares of Flint Manufacturing Company stock, but presuming that she has, she is in the same case with a majority of the Flint Company stockholders whose action in making the еxchange may have been proven by later events to have been unwise, and for a situation thus caused the courts can afford no legal redress.
For the reasons stated, the defendant was entitled to have his motion for nonsuit allowed.
Reversed.