82 Cal. 351, 11983, Colton v. Stanford

Docket Nº:11983
Citation:82 Cal. 351, 23 P. 16
Opinion Judge:PATERSON, Judge
Party Name:ELLEN M. COLTON, Appellant, v. LELAND STANFORD et al., Respondents
Attorney:G. Frank Smith, Stanly, Stoney & Hayes, and E. W. McKinstry, for Appellant. Garber & Bishop, for Respondents. L. D. McKissick, also for Respondents. Creed Haymond, also for Respondents, cited Bailey v. Fox , 78 Cal. 389.
Judge Panel:JUDGES: In Bank. Paterson, J. McFarland, J., Sharpstein, J., Works, J., and Beatty, C. J., concurred. Fox, J., not having heard the argument, and Thornton, J., deeming himself disqualified, did not participate in the decision.
Case Date:January 02, 1890
Court:Supreme Court of California
 
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Page 351

82 Cal. 351

23 P. 16

ELLEN M. COLTON, Appellant,

v.

LELAND STANFORD et al., Respondents

No. 11983

Supreme Court of California

January 2, 1890

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Appeal from a judgment of the Superior Court of Sonoma County, and from an order denying a new trial.

COUNSEL:

G. Frank Smith, Stanly, Stoney & Hayes, and E. W. McKinstry, for Appellant.

The findings show a case for rescission under sections 1565, 1566, 1572, 1573, and 1575 of the Civil Code. Plaintiff is entitled to rescind the contract on account of the incorrect and imperfect statements of assets and accounts submitted by defendant in the negotiations for a settlement after their promise to furnish a perfect statement, and for their misrepresentation of fact as to the ownership of the Rocky Mountain Coal and Iron Company's stock. (Rawlins v. Wickham, 3 De Gex & J. 310; Higgins v. Samuels, 2 Johns. & H. 466; Carpmeal v. Powis, 10 Beav. 43; Henderson v. Lacon, L. R. 5 Eq. Cas. 250; Ross v. Estates Investment Co ., L. R. 3 Eq. Cas. 137; Kerr on Fraud and Mistake, 68, 87, 92, 94, 97, 98; 2 Pomeroy's Eq. Jur., sec. 901; Lockwood v. Foster, 4 Scam. 573; Hart v. Swaine, L. R. 7 Ch. Div. 42; Redgrave v. Hurd, 45 L. T., N. S., 485; Reynell v. Sprye, 1 De Gex, M. & G. 708, 709; Doggett v. Emerson, 3 Story, 700; Baford v. Caldwell , 3 Mo. 336; Smith v. Babcock, 2 Wood. & M. 246; Haygarth v. Wearing, L. R. 12 Eq. Cas. 328; Grim v. Byrd, 32 Gratt. 300; Fisher v. Mellen , 103 Mass. 503; McClellan v. Scott , 24 Wis. 85.) It is not necessary that the false representation should have been the motive in the sense of the only motive, or the only inducement to the party who has acted to his prejudice so to act. It is all-sufficient if it is a material inducement to his act. (Peek v. Derry, L. R. 37 Ch. Div. 574.) That part of the twentieth finding, viz., "that said representation, however, was not made with any actual fraudulent intent, but through inadvertence and lack of due circumspection, and that said contract would have been executed by the plaintiff had she known the truth in regard to said stock, if the defendants, upon being made aware of the facts, had still insisted upon it," is an immaterial finding. (Pollock's Principles of Contracts, *499; In re Bank of Hindustan etc ., L. R. 5 Ch. App. 100; Kerr on Fraud and Mistake, 75; Traill v. Baring, 4 De Gex, J. & S. 330; Cabot v. Christie , 42 Vt. 127; 1 Am. Rep. 313; Mathews v. Bliss, 22 Pick. 53; James v. Hodsden , 47 Vt. 137; Payne's Case, L. R. 9 Eq. 225; Rawlins v. Wickham, 3 De Gex & J. 310; Reynell v. Sprye, 1 De Gex, M. & G. 708; Pritt v. Clay, 6 Beav. 503.) The contract was an entire contract, -- "a lumping settlement," -- with no particular value placed upon anything surrendered or given by either party. It was, in part at least, produced by defendants' false representations. In such case the rule is thoroughly established that the whole contract will be set aside. (Rawlins v. Wickham, 3 De Gex & J. 310; Reynell v. Sprye, 1 De Gex, M. & G. 708; Doggett v. Emerson, 3 Story, 733; Traill v. Baring, 4 De Gex, J. & S. 330; Payne's Case, L. R. 9 Eq. 225; Russell v. Winne , 37 N.Y. 596; 97 Am. Dec. 755; Niver v. Best, 10 Barb. 369; Goodrich v. Downs, 6 Hill, 440; Dana v. Lull , 17 Vt. 397; Valentine v. Stewart , 15 Cal. 404; Norris v. Harris , 15 Cal. 245; Erie R'y Co. v. U. L. & E. Co ., 35 N. J. L. 246.) The business associates were partners, and occupied a trust relation toward each other and toward the plaintiff. ( Civ. Code, secs. 2219, 2228- 2237, 2395, 2410, 2411; New Simbrew Phosphate Co. v. Erlanger, L. R. 5 Ch. Div. 75; Getty v. Devlin , 54 N.Y. 412; Simons v. Vulcan Oil Co ., 61 Pa. St. 220; 100 Am. Dec. 628, Shorb v. Beaudry , 56 Cal. 446; Cornell v. Corbin , 64 Cal. 200; Chater v. S. F. Sugar Co ., 19 Cal. 246, 247; Davis I. W. Iron Co. v. Davis W. Iron Co ., 20 F. 700, 701; Lintner v. Milliken , 47 Ill. 181; Nelson v. Hayner , 66 Ill. 490; Featherstonhaugh v. Fenwick, 17 Ves. 309; Crawshay v. Collins, 15 Ves. 226; Renfrow v. Pearce , 68 Ill. 126; Parsons on Partnership, 458, 459; Phillips v. Anderson, 2Brown Ch. 272; Burden v. Burden, 1 Ves. & B. 170; Flagg v. Mann, 2 Sum. 521-545; Short v. Stevenson , 63 Pa. St. 96; Maddeford v. Austwick, 1 Sim. 89; Blisset v. Daniel, 10 Hare, 488; Bently v. Craven, 18 Beav. 75.) Associated stockholders cannot manipulate the company's business to the injury of the company or of other stockholders, and are subject to the same rules of law as apply to trustees. (Meeker v. Winthrop Iron Co ., 17 F. 48; Ervin v. Oregon R'y & Navigation Co ., 27 F. 625.) The law of fiduciary relation is applicable to all persons who, being employed in or concerned with the affairs of another, have acquired a knowledge of his property. (Davoue v. Fanning, 2 Johns. Ch. 252; Lewin on Trusts, 463; Ex parte Lacey, 6 Ves. 625; Hatch v. Hatch, 9 Ves. 292; Ex parte James, 8 Ves. 345; Michoud v. Girod, 4 How. 566; Fox v. MacKreth, 1 Lead. Cas. Eq. 240, 267; Moore v. Moore, 4 Sand. Ch. 37; Boyd v. Hawkins, 2 Dev. Eq. 195-329; 2 Pomeroy's Eq. Jur., sec. 958; Tate v. Williamson, L. R. 2 Ch. App. 55; Rhodes v. Bate, L. R. 1 Ch. App. 256; Young v. Hughes , 32 N. J. Eq. 384; Butler v. Haskel, 4 Desaus. Ch. 702; Poillon v. Martin, 1 Sand. Ch. 569.) The trust relation existed between the parties by reason and as a consequence of the existence of the relation of pledgor and pledgee. (Dillon v. Burbacker , 52 Pa. St. 505; Sitgraves v. Bank , 49 Pa. St. 364; Edwards on Bailments, 213-228; Story on Bailments, sec. 324; Boynton v. Payrow , 67 Me. 587; Stokes v. Frazier , 72 Ill. 432; Brown v. Runals , 14 Wis. 696; Bennett v. Austin , 81 N.Y. 321; Wright v. Ross , 36 Cal. 441; Ponce v. McElvy , 47 Cal. 159.) The facts found show a legal fraud; and its existence is a question of law upon the facts. (Colman v. Burr , 93 N.Y. 17; 45 Am. Rep. 160; Pettibone v. Stevens , 15 Conn. 26; 38 Am. Dec. 57; Beers v. Botsford , 13 Conn. 154; St. John v. Camp , 17 Conn. 232; Story v. N. & W. R. R. Co ., 24 Conn. 113; Lavett v. Sage , 29 Conn. 589; Redfield v. Buck , 35 Conn. 338; 95 Am. Dec. 241.) There can be no compromise between a trustee and beneficiary as to the trust property. ( Civ. Code, sec. 2230.) At all events, it is essential to the validity of such compomise that there should be equal knowledge or means of knowledge; and it must be rescinded, if induced by superior knowledge, or upon mutual mistake, or by any influence or pressure, or if the compromise arrangement is unreasonable. (Perkins v. Gay, 3 Serg. & R. 331, 2 Pomeroy's Eq. Jur., sec. 850, p. 316; Kerr on Fraud and Mistake, 124, 433, 434; Stapilton v. Stapilton, 2 Lead. Cas. Eq., 4th ed., p. 1722, and American notes; Gibbons v. Caunt, 4 Ves. 848; Cook v. Greves, 30 Beav. 382; Gordon v. Gordon, 3 Swanst. 400-475; Groves v. Perkins, 6 Sim. 577; Broderick v. Broderick, 1 P Wms. 239; Pusey v. Desbourne , 3 P. Wms. 321; McCarthy v. De Caix, 2 Russ. & M. 623; Smith v. Pincombe, 3 Macn. & G. 658; Greenwood v. Greenwood, 2 De Gex, J. & S. 37; Sturge v. Sturge, 12 Beav. 244; Pritt v. Clay, 6 Beav. 503; Wheeler v. Smith, 9 How. 82; Stewart v. Ahrenfeldt , 4 Denio, 190; Baker v. Spencer , 47 N.Y. 565; Brooke v. Lord Mostyn, 2 De Gex, J. & S. 373-425; Barlow v. O. Ins. Co ., 4 Met. 270; Converse v. Blumrick , 14 Mich. 112; 90 Am. Dec. 230; Addison on Contracts, 130, 131; Maddeford v. Austwick, 1 Sim. 93; Mackellar v. Wallace, 36 Eng. L. & Eq. 64; Gilbert v. Endean, L. R. 9 Ch. Div. 259.)

Garber & Bishop, for Respondents.

The allegations of matters of evidence in the complaint cannot be considered in deciding the question of a trust relation, and the case must be decided as if allegations concerning trust relationship had been omitted. (Robins v. Hope , 57 Cal. 499; Cowee v. Cornell , 75 N.Y. 92; 31 Am. Rep. 212; Hunter v. Atkins, 3 Mylne & K. 113; Casey v. Casey , 14 Ill. 113; Korn v. Beckers , 40 N. J. Eq. 410; Falk v. Turner , 101 Mass. 495; Johnson v. Fesemeyer, 3 De Gex & J. 13.) All questions concerning values and adequacy of consideration are irrelevant. (1 Story's Eq. Jur., secs. 245, 246; 2 Pomeroy's Eq. Jur., secs. 926-948; Wald's Pollock on Contracts, 576; Austin v. Chambers, 6 Clark & F 1; Cowee v. Cornell , 75 N.Y. 92; 31 Am. Rep. 212; McLure v. Ripley, 2 Macn. & G. 280; Kirkwood v. Thompson, 2 De Gex, J. & S. 619; Eyre v. Potter, 15 How. 61; Mayo v. Carrington, 19 Gratt. 106; Davidson v. Little , 22 Pa. St. 251; 60 Am. Dec. 81; 1 Wharton on Contracts, 163-166, 517-519.) Inaccuracies in the exhibits are immaterial, because the parties were not settling on the basis of accuracy, and on the whole the errors were against the defendants. It was only the total result which would be material. (Parsons on Partnership, 513, note e; Bispham v. Price, 15 How., and cases cited.) There was no such acting upon the alleged representations of defendants as the law and the code call for as prerequisites of rescission. ( Civ. Code, sec. 1568; Hough v. Richardson, 3 Story, 691; Veasey v. Doton, 3 Allen, 380; Bowman v. Carithers , 40 Ind. 90; 2 Pomeroy's Eq. Jur., sec. 888; Marsh v. Falker , 40 N.Y. 566; Long v. Warren , 68 N.Y. 430; Smith v. Chadwick, L. R. 20 Ch. Div. 44; Jennings v. Broughton, 5 De Gex, M. & G. 129; Van...

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