Montgomery Southern Railway Co. v. Matthews, 77 Ala. 357

Montgomery Southern Railway Co. v. Matthews

77 Ala. 357 | Ala. | 1884

STONE, C. J.

In Rives v. Montgomery South Plank Road Co., 30 Ala. 92, the suit was on a subscription to the capital stock of the plank-road company. The defense was fraud in procuring the subscription. On the trial, “ the defendant offered to prove that, before he -subscribed for any stock in said company, and before its organization under its charter, two of its subscribers for stock, one of whom was after-wards elected president, and the other secretary of the corporation, represented to him that the road would be so located as to pass through his plantation, thereby greatly enhancing the value of his lands ; that these representations were repeated by them after their election to their respective offices; and thereupon defendant subscribed for five shares of the capital stock of said company ; and that said road, as afterwards located, did not pass within five miles of defendant’s plantation.” This testimony was rejected by the court, on plaintiff’s motion; and the propriety of that ruling was the the sole question presented in this court. In passing on that question, the majority of this court said: “We can not doubt that the declarations of those officers, as offered by the defendant, were relevant and admissible. Those declarations certainly throw some light upon one of the material questions in the case; and to exclude them is to deny, practically, to the defendant the right to prove the very basis on which he rests his defense. Until these declarations are proved, it is impossible to show that they were false, or that they formed an inducement to the defendant to subscribe.” It will be observed that, in the case above, we did not decide that the representation, even if not kept and conformed to as a promise, was in itself sufficient to avoid the subscription. That question was not before us. We simply held that it was legal evidence — a predicate for further testimony.

An opinion expressed, even if not realized, can not, without more, become a fraudulent representation. — 2 Brick. Dig. 14, §§ 16, 21; Lake v. Security Loan Asso., 72 Ala. 207. If, however, such opinion is falsely expressed,, with intent to deceive, and does deceive, this constitutes such opinion or representation a false statement of fact, and vitiates a contract *365thereby procured, unless the representation relates to a matter equally open to both parties. This could not deceive.

In Pierce on Railroads, 61, it is said : “This defense [fraud in procuring a subscription] is usually founded in statements known to be false by its official managers, and made by them, or by agents in their behalf, concerning the financial condition and earnings of the company, the amount subscribed, or other material facts calculated to tempt subscribers. They may be made by officers and agents directly to subscribers, or through a prospectus issued by the company to the public, for the purpose of obtaining subscriptions. . . Equity will set aside a subscription when procured by fraud.” And on page 62 it is said : “The subscriber can not defend on the ground of fraud,

. . where it declared only opinions instead of facts, or where it declared facts of which the subscriber had means of knowledge.” The same doctrine is expressed in Morawetz on Corp. § 309, and in 1 Redf. on Railways, 5th ed. 172-3. See, also, 14 Amer. Law Review, 192-3; Franklin Glass Co. v. Alexander, 9 Amer. Dec. 92, Note, 102; Miss., Ouachita & Red River R. R. Co. v. Gross, 20 Ark. 443 ; Evansville, Ind. & Cl. S. L. R. R. Co. v. Posey, 12 Ind. 363; Smith v. R. River Co., 2 L. R. Eq. Cas. 262; Water Valley Mian. Co. v. Seaman, 53 Miss. 655 ; Hanover Junction R. R. Co. v. Holdman, 82 Penn. St. 36 ; Crump v. U. S. Min. Co., 7 Grrat. 352.

In Pennsylvania, the rule that parol testimony can not be received to vary the terms of a written contract does not prevail ; and, hence, in that State the rulings are somewhat different.— Caley v. Phil. & Chester. Co. R. R. Co., 80 Penn. St. 363 ; Kostenbader v. Peters, Ib. 438; Lippincott v. Whitman, 83 Penn. St. 244. That rule does not prevail with ns. Henderson v. Railroad Co., 17 Tex. 560, is, perhaps, the strongest authority that can be found in favor of appellee’s views. We are not inclined to go so far.

There can be no question, that if the stock subscription in this case was procured by the fraud of Kirkpatrick, the soliciting agent, the railroad corporation, claiming the benefit of the subscription, must take it tainted with Kirkpatrick’s fraud. Story on Agency, § 253 ; Corning v. Southland, 3 Hill, N. Y. 552; Mead v. Bunn, 32 N. Y. 275; Harris v. Delamar, 3 Ired. Eq. 219 ; Meadows v. Smith, 7 Ired. Eq. 7.

There are cases of fraud, and other unlawful acts, particularly when acts of the same general character are continuous in their nature, where it is permissible to prove other similar transactions occurring about the same time, as shedding some light on the transaction in controversy. — Bigelow on Fraud, 478 ; Benham v. Cary, 11 Wend. 83; Aldrich v. Warren, 16 Me. 465; Lovell v. Briggs, 2 N. H. 218; Whittier v. Varney, 10 N. H. *366291; Blodgett v. Morrill, 20 Verm. 509. The present case does not fall within this rule.

There is another class of cases, where a statement is made as of fact, and, relying on its truth, a purchase is made on the strength of it, but it turns out to be untrue. Now, if the erroneous statement was as to a matter of substance, and operated as an inducement to the purchase, then it furnishes ground for defending against tire purchase, even though the seller honestly believed the facts existed as he represented them to be. This principle rests, not on the doctrine of fraud, but on the ground that the purchaser failed to get what he bargained for, and failed because of the erroneous statement of fact made by the vendor, which lie trusted, and had a right to trust. Munroe v. Pritchett, 16 Ala. 785, and, to some extent, Atwood v. Wright, 29 Ala. 346, illustrate this principle. It can not apply, however, where the representation consists in opinion. That, to be the basis of a legal right, in any case, must be knowingly false, and uttered with intent to deceive. A positive statement, made in the sale of a tract of land, that the line runs at a designated place, if acted on, and turns out to be untrue, misleads the purchaser. If the lands obtained are less valuable than the lands pointed out, he is deceived, and consequently is armed with an appropriate remedy to secure his indemnification. If, however, the representation be made as matter of opinion only, then, to obtain any relief, the purchaser must show that the representation was made knowing its falsehood. Less than an intentional deception, in such conditions, gives no right of action.

One of the grounds of demurrer to all the special pleas is, “that the representations set up as a bar to plaintiff’s right to recover were mere matters of opinion of said agent.” There are many other grounds, questioning the sufficiency of the pleas in almost every particular. The representations set forth in each of the special pleas relate to matters afterwards to be performed, and could be nothing but opinion. These pleas are fatally bad, because they do not aver that Kirkpatrick did not honestly entertain the opinions he expressed, and the proof on this question is no better than the pleading. The demurrers to the special pleas ought to have been sustained.

Under the principles declared above, many rulings of the court in admitting testimony, and in charges given, were erroneous. We will not particularize, believing, as we do, that what is stated above will furnish a sufficient guide on another trial.

There is a possible phase of this case not covered by what is said above, nor sufficiently averred in the pleadings. Kirkpatrick testified, that he was authorized by the directors to *367agree with the subscribers to stock living in Crenshaw county, that their money should be refunded to them, if the railroad was not built to a point at or near Rutledge. lie did not in terms say he gave such promise. lie also testified, that the money was exhausted, and work on the road had progressed only to “Bell’s Store,” and had long been discontinued. The record fails to show what is the present status of the corporation, whether or not it is insolvent, or in active existence, and whether or not it has the means of carrying .the road to Rutledge. If the corporation is bankrupt, or has no means of ever constructing the road to Rutledge, it would seem to be a bootless performance, to force the Crenshaw stockholders to pay their subscriptions, to be immediately refunded to them ; and if the corporation be insolvent, without power or purpose to complete the road to Rutledge, perhaps it may be defeated and restrained in its attempt to coerce collections, at an expense that might be appalling. We merely throw out these suggestions in the interest of justice and economy. The law takes no pleasure in useless litigation.

Reversed and remanded.