5 S.D. 99 | S.D. | 1894
This was an action by respondent upon notes made and given to it by appellant. The defense was: That the notes were given in partial payment of 90 shares of the capital stock of the respondent bank, sold by D. L. Stick, the president and general manager of the bank, to the appellant, Taylor. That such purchase of such stock was induced and accomplished by false and fraudulent representations by said Stick to appellant as to the condition of the bank and its business and assets, and the value of said stock. The representations thus generally referred to, their falsity, and the knowledge thereof by Stick, are set out in detail in the answer. That the notes so given were made to run directly to the bank, by the consent of the directors, and with full knowledge on their part of the representations so made by Stick to appellant, and, further, that, as soon as appellant discovered that such representations were false, he notified said Stick of his rescission of the contract of purchase, and offered to return all that he received under it. The trial resulted in the direction by the court of a verdict for the plaintiff (now respondent). Upon-this verdict, judgment was entered. From such judgment, and an order refusing a new trial, defendant has appealed.
As we understand the theory of the trial, and of the position of the parties, it was not, and is not, denied by plaintiff and respondent that, to induce and accomplish this sale of the stock
The facts principally relied upon to work such estoppel are these: Soon after the purchase of the stock Taylor was made cashier of the bank, Stick still retaining the presidency. He was cashier from October 1,. 1889, until January 13, 1891. During this time he, as such cashier, signed a number of statements required by the national banking act, exhibiting tire condition of the bank. That, at the meeting of January 13th, a.t which his resignation as cashier took effect, he was re-elected
It would seem strange law that a party may safely accept and rely upon the statements of him with whom he is dealing without investigation, and make and complete the contract
It is also claimed that Taylor is bound by, and estopped from setting up facts inconsistent with, the statements intended to exhibit the condition of the bank, and signed by him as cashier. These statements are not in the abstract, but we suppose them to be the ordinary statements made in response to the call of the comptroller. The purpose of these statements is to inform the comptroller and other supervisory authorities, and the public generally, of the financial condition of the bank. The duty of making and issuing such statements should be intelligently and conscientiously discharged, and if an official is called to account for making an untrue statement, either by the government criminally, or by an injured party civilly, he cannot evade responsibility by showing that he made the statement without personal knowledge; but, as between the bank itself and its official agent who makes the statement, there can be no such unyielding rule. Suppose, immediately after his installment as cashier, and before it could be claimed that he had opportunity to inform himself as to the condition of the bank, he had signed such statement. In a criminal prosecution he probably could not shield himself behind his inexperience
On the evening of January 13, 1891, when his resignation as cashier took effect, and after he knew of the alleged fraud which had been perpetrated upon him in the sale of the stock, he was re-elected as a director of the bank, and then and there qualified, and at that meeting, but never afterwards, he voted his stock. We think there is nothing about either of these facts of themselves, and with attending circumstances, to conclude his rights, as matter of law. It is affirmatively shown that, after this evening, Taylor did not attend or participate in any meeting, either of directors or stockholders. It does not appear for or against what measures or motions he voted. He may have been there to see that his resignation was finally effective, and simply voted on a motion to adjourn. It is true that Morawetz, in his work on Corporations. (Section 208) lays down the broad rule, as cited by respondent, “that a person who was induced by fraud to purchase shares in a corporation cannot avoid his contract if, after having acquired notice of the fraud, he has received any benefit from his shares, or in any manner has acted as a stockholder.” But the reason for a rule is the life of the rule, and the reason for such rule is given in the many cases cited by the author to support the text: and it is that a person who, with knowledge of such fraud, continues to act with and hold himself out to others as a part of, such corporation, inviting them to do business with it on the strength of his credit, ought not then to be allowed then to withdraw, to their injury. This is the principle upon which the rule rests, and the learned author just quoted does not mean that a single act of a stockholder or director, without regard to its character, or the reason for, or the circumstances under,
Without following this discussion further, we will say that, while the questions are not entirely free from doubt, we believe that in this action, where the parties stand as the original actors, and it not appearing that the interests or rights of inno