92 P. 1011 | Cal. | 1907
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *385 This is an action to recover money alleged to have been paid by the plaintiff to the defendant as the price of certain corporate stock. The plaintiff appeals from the judgment and from an order denying his motion for a new trial.
The complaint alleges that Gorrill was the manager of a corporation known as the Pacific Car Equipment Company; that on the fifteenth day of April, 1899, he offered to sell to Spreckels three hundred shares of the stock of said company at the price of twenty-two thousand five hundred dollars; that for the purpose of inducing Spreckels to buy said stock Gorrill at that time falsely and fradulently represented to Spreckels that said company was the owner of a certain United States patent for a metal cap or thimble, for use on the journals of car axles, that said patent also covered the manner of affixing the same to the journal, that said device and the manner of attaching it was new and theretofore unused, and that said patent gave the company the exclusive right to make, use, and sell said contrivance; that Spreckels was without knowledge and information on the subject and relied wholly on the said statements of Gorrill, as Gorrill well knew; that Spreckels believed said statements and relied thereon and was thereby induced to, and thereupon did, buy from Gorrill the said stock and pay him therefor the said sum of money; that in December, *386 1899, Spreckels discovered that in fact no patent for such cap or thimble, or for the manner of attaching the same to the journals, ever belonged to said company, that the said contrivance was not new, but, on the contrary, that the same had been in use for months and was not, and could not be, the subject of a United States patent; that Spreckels, promptly upon such discovery, gave notice to Gorrill that he rescinded said contract of purchase and tendered and offered to restore the said stock to Gorrill upon the condition that Gorrill would restore to Spreckels the money paid therefor; that Gorrill refused to accept the stock or restore the money, and that Spreckels was still ready and willing to restore said stock and offered to do so upon the payment of the money. The prayer of the complaint was for judgment against Gorrill for twenty-two thousand five hundred dollars and for such other, further, different, or additional relief as should be found proper.
The respondent contends that the complaint is deficient in its statement of facts. It is claimed that it fails to allege that Gorrill knew the statements he had made were false, or that he did not believe them to be true and intended to deceive Spreckels, or that the statements were not true. There is no direct averment that the alleged representations by which Spreckels was induced to buy this stock were not true. The allegation is that in December, 1899, Spreckels discovered that no such patent belonged to the company and that the device described was not new or patentable. This allegation, however, necessarily implies that the statements of Gorrill were untrue. Spreckels could not "discover" that the company did not own the patent or that the device had been in previous use and was not patentable, if, in fact, it did own the patent, or if the device was new and patentable. He could not discover facts that did not exist. Furthermore, it is alleged that the statements were made "falsely and fraudulently," and this also implies that they were not true. If the objection had been raised by a special demurrer for uncertainty, perhaps it might have been held fatal, but no demurrer was filed to the complaint. The defendant answered denying practically all the substantial allegations of the complaint, the case was tried apparently upon the theory that the complaint was sufficiently direct and positive in this respect, and findings were made by the court stating directly that said statements were made by *387
Gorrill to Spreckels and that they were not true and were made in a manner not warranted by the information possessed by Gorrill. The lack of a direct allegation that the statements were untrue, conceding it to be a defect, is one of that character which, in the absence of a special demurrer, is cured by the verdict of the jury or the finding of the court, and which cannot be taken advantage of when urged for the first time on appeal. (Sakeforth
v. Lord,
The same rule applies to the defective allegation of fraudulent intent on the part of Gorrill. While the allegation that he made the statements "falsely and fraudulently" to induce Spreckels to buy, might not in the face of a proper special demurrer, supply the place of a direct allegation that Gorrill knew them to be untrue or made them in a manner not warranted by his own information, although he believed them to be true, nevertheless, it implies all this, and, where no special demurrer is interposed, it will be held sufficient after the verdict or decision upon the merits.
The lack of a more definite averment of an intent to deceive is immaterial. If one makes material false statements to another, to induce that other to buy an article and which does induce him to buy to his injury, the defrauding party either knowing them to be untrue, or believing them to be true, but having no sufficient ground for such belief, he will not be protected from liability for his fraudulent conduct by the fact that he did not intend to deceive the other party. Having actually deceived such other party and having profited by such deceit, he cannot be allowed to retain the advantage, or defeat liability, on the ground that he acted in good faith without actual intent to deceive. Nor is such intent, in such a case, a necessary element of the fraud which forms the basis of the cause of action. The intent which is essential is the "intent to . . . induce another party to enter into the contract." (Civ. Code, sec.
It is also claimed that the complaint is insufficient because of the absence of any showing therein that any pecuniary damage was caused by the fraud alleged. It is true that there is *388
no express allegation that plaintiff suffered pecuniary damage therefrom, but in cases of this character this is not necessary. That fraud which has produced, and will produce, no injury will not justify a rescission, nor support an action either for rescission or damages, is an established principle of law and equity. But there is no rule that the injury must be of such a nature that it can be accurately measured in money. And we know of no rule of pleading which, in an action based upon a rescission between the parties or seeking to enforce such rescission, requires a statement that the fraud complained of had caused or would cause a specific amount of damages. It may be conceded that it must be shown that the plaintiff, by reason of the fraud, suffered an injury of a pecuniary nature, that is, an injury to his property rights, as distinguished from a mere injury to his feelings, but it will be sufficient if the facts alleged show that material injury will necessarily ensue from the fraud, although the amount of the pecuniary loss is not stated. Such injury is shown by the facts alleged in the present case. Upon the contract as made plaintiff was entitled to that for which he bargained and which, by means of the representations made to him, he was led to believe he purchased by his bargain. This was three hundred shares of stock of a corporation which owned, as part of its capital stock, a patent for the device described, a patent which would secure to it the exclusive right to make and sell that device. If, by reason of the falsity of the statements, or in other words, by reason of the fact that the company did not own and could not obtain this patent, the plaintiff received shares of stock which did not represent any interest in such patent, and which, therefore, would be worth that much less than otherwise, he was injured and damaged to the extent of the difference between the value of his stock with the property of the corporation as it actually existed, and the value of his stock as it would have been had the corporation actually owned the patent. The value of such a patent is not stated, nor is the actual value of the stock averred. It is not contended, however, that the supposed patent would not have added materially to the value of the stock, and it is distinctly alleged and found that Spreckels would not have bought or paid for the stock if he had not believed that the company owned the patents. This sufficiently discloses the fact that the possession of these patents was, to *389
him, a material element in the bargain. It further appears that the device had been in common use for many years and from this it necessarily follows that the exclusive right to make and sell it would have been valuable and that the possession of such right by the corporation would have made the stock of greater value than it was without that right. Hence it follows that it is not true that the pleading does not show pecuniary injury. Mr. Pomeroy says: "If any pecuniary loss is shown to have resulted, the court will not inquire into the extent of the injury; it is sufficient if the party misled has been very slightly prejudiced, if the amount is at all appreciable." (2 Pomeroy's Equity Jurisprudence, sec. 898; Wainscott v. Occidental Assn.,
For example, in Murray v. Jennings,
At the conclusion of its findings the court below stated that, by reason of the facts previously found, the plaintiff did not restore, or offer to restore to the defendant everything of value which he had received from defendant under the contract, and that he could not do so, and that for said reason, only, the court finds that the plaintiff did not rescind the contract. This statement seems to have been the basis of the judgment in favor of the defendant. We think this statement is incorrect, and that the judgment is not supported by the facts found. The findings are much more elaborate than the pleadings and in order to make the complaint clear it will be necessary to state the additional facts referred to.
At the time of the sale of the stock to plaintiff it was understood and agreed by and between the plaintiff, the defendant and certain other persons who also bought shares of the stock, that a new corporation should be formed by them, that the assets of the Pacific Car Equipment Company should thereupon be transferred to such new corporation and that the shareholders of the Pacific Car Equipment Company should receive shares of the new corporation in lieu of their shares in the old company. This agreement was consummated in part. *392 A new corporation was formed called the National Car Equipment Company. The original company had two thousand five hundred shares of stock of the par value of one hundred dollars each. The new corporation had one hundred thousand shares of the par value of one hundred dollars each. All of the assets of the old company were transferred to the new corporation and it was agreed that each stockholder of the old company should receive shares in the new corporation in the proportion of twenty shares of the new stock in exchange for one share of the old stock. There the enterprise appears to have halted. No stock of the new corporation has ever been issued, nor have any of the certificates of stock in the old company ever been surrendered to be exchanged for the new stock. Among the assets of the old company transferred to the new corporation, was the sum of $8125.57 in money. At the time Spreckels offered to rescind the contract the new corporation had expended of this money, for advice of attorneys regarding the property transferred from the old company, the sum of $666.26, and had incurred debts to the amount of $2608.77, which remained unpaid.
It is claimed that by reason of these transactions the conditions had so materially changed that it was impossible for Spreckels to restore to Gorrill everything of value which he had received under the contract, in other words, that the delivery to Gorrill of the stock he sold to Spreckels would not have restored Gorrill to the position he was in immediately before the sale, which is the form in which defendant's counsel prefers to state the proposition. This latter, however, is not an accurate statement of the rule. Under the code it is only necessary that the rescinding party shall "restore to the other party everything of value which he has received from him under the contract." (Civ. Code, sec.
Furthermore, the complaint asks for a judgment for the money, or "for such other, further, different or additional relief as may be meet in the premises." Where an offer of rescission has been made and refused and the party is compelled to go into court to enforce his right to rescind, the principles of equity apply. The rule laid down in section 3408 of the Civil Code may be resorted to and if the court finds that the other party cannot be placed wholly in statu quo, it "may require the party to whom such relief is granted to make any compensation to the other which justice may require." In effect, this is a suit to enforce a rescission which has been offered and refused, and it is of equitable origin and nature. Under our form of procedure whereby the distinction between forms of action is abolished, the court could in this action administer equitable relief, regardless of the question whether, under former systems of jurisprudence, the action would be deemed an action in assumpsit for the money paid, or an action in equity to compel rescission and a return of the consideration. Therefore, even if it should appear that the value of the new stock had materially depreciated and that the circumstances were such that the defendant should not *395
in equity be made to suffer the loss, the court could do complete justice by abating a part of the consideration and giving judgment for such part thereof only as it should deem just.(Green v. Duvergey,
The findings state that one George H. Strong, an attorney in San Francisco, was acting in behalf of the Pacific Car Equipment Company in the matter of obtaining the patents mentioned; that before he bought the stock, Spreckels was informed by Gorrill that Strong was acting as such attorney for that purpose and that Spreckels made no inquiry of Strong as to the truth of the representations of Gorrill. This neglect, if it can be so called, would not preclude Spreckels from complaining of the fraud practiced upon him by Gorrill. It does not appear that Spreckels at the time had any cause or reason to doubt the veracity of Gorrill, or the truth of his statements, nor that he was referred to Strong for further information or confirmation of the statements. One who makes statements false in fact, and induces another to buy property, cannot defeat liability for the false statements by showing that if the other party had suspected him of falsehood or doubted the accuracy of the statements, such party, by ordinary diligence and by inquiry of persons whom he knew to be cognizant of the truth, could have learned of the accuracy or falsity of the statements. "Every contracting party has a right to rely on the express statement of an existing fact, the truth of which is known to the opposite party and unknown to him, as the basis of a mutual agreement; and he is under no obligation to investigate and verify the statements to the truth of which the other party to the contract, with full means of knowledge, has deliberately pledged his faith." (Mead v. Bunn,
There is no merit in the claim that the statements as to the ownership of the patent and the novelty of the device described were matters of opinion merely, upon which Spreckels had no right to rely. It is well settled that they constitute matters of facts. (Rose v. Hurley,
The judgment and order are reversed.
Angellotti, J., McFarland, J., Lorigan, J., and Henshaw, J., concurred.
Rehearing denied.