as et al.

• Decision Date: 15 December 1922
• Citation: 92 W.Va. 596
• Court: West Virginia Supreme Court
• Parties: as et al.

92 W.Va. 596

as et al.

Supreme Court of Appeals of West Virginia.

Submitted November 21, 1922.

Decided December 15, 1922.

1. Coiu'oratioisis Burden on Purchaser to Establish Fraud in Suit to Rescind and Cancel Sale of Stock.

In a suit to rescind and cancel a sale and purchase of shares of stock in a coal corporation on the ground that the purchaser was induced thereto by the false and fraudulent representations of the other as to the acreage, kind, quality and thickness of the seam of coal owned and operated by the corporation, the burden is upon the purchaser to establish the fact of such false and fraudulent representations, and that when the seller made them he knew them to be false, or made them recklessly and as positive assertions, and not as mere expressions of opinion;-that he made them with the intention that they should he acted upon by the purchaser; and that the purchaser believed them and acted and relied upon them, and that he thereby suffered injury, (p. 603).

2. Same Plaintiff Suing to Rescind and Cancel Sale of Stock for Fraud Must Make Out His Case by Preponderance of Evidence.

In such a case, so long as the evidence leaves the scales evenly balanced, the defendant against whom the fraud is alleged must prevail, for the burden is upon the plaintiff to make out his case by a preponderance of the evidence, (p. 603).

3. Contracts False Representations Must be Susceptible of Approximately Accurate Knowledge.

And always in cases seeking rescission and cancellation based upon alleged false and fraudulent representations of the defendant, it must appear that the representations were matters susceptible of approximately accurate knowledge on the part of the defendant, otherwise they should be regarded as expressions of opinion merely, which do not constitute proper bases for recission. (p. 603).

4. Same Things That Could Not be Expected to be Known Mere Expressions of Opinion, and Not Ground for Recission.

Things a defendant could not be expected to know, should be regarded as mere expressions of opinion, and can not be regarded as the bases for recission of a contract, (p. 603).

5. Sates Purchaser, Informing Himself from Other Sources, Deemed to Rely on Own Investigation.

Though a purchaser may rely upon particular and positive representations of a seller, yet if he undertakes to inform himself from other sources as to matters easily ascertainable, by personal investigation, and the defendant has done nothing to prevent full inquiry, he will be deemed to have relied upon his own investigation and not upon the representations of the seller. (p. 610).

6. Contracts Parties to Contract with Equal Opportunities for Information Presumed to Rely on Own Judgment.

And where both parties to a contract have equal means and opportunity to acquire information, so that by ordinary diligence either may rely on his own judgment, they will be presumed to have done so, and if not, they must abide by the consequences of their own folly or carelessness, (p. 610).

Appeal from Circuit Court, Kanawha County.

Suit by II. C. Jones against F. S. McComas and others. From a decree for defendant, plaintiff appeals.

Affirmed.

8. B. Avis, and I. C. Jordan, for appellant. Price, Smith, Spilman & Clay, for appellees.

Miller, Judge:

The plaintiff, a coal operator of eighteen or more years experience, for grounds alleged in an original and an amended and supplemental bill sought, but by the decree appealed from was denied, rescission and cancellation of the sale by and purchase from the defendant F. S. McComas and others represented by him, in November 1920, of 466-2/3 shares of the stock of the Cap Run Coal Company, a corporation organized by McComas and others to take over and operate a coal property in Lewis County, consisting of a tract of 196 1/2 acres owned in fee, known as the Reger tract, and of two other tracts, one containing 155 acres, known as the Crawford tract, and the other containing as alleged 426 acres, known as the Bennett tract, on which two tracts the said company had acquired operating leases.

The defendant McComas was a coal salesman with no experience in the ownership or operation of coal mines, but who in 1920, prior to the alleged sale to plaintiff, knowing of the many opportunities then being offered for fortune in the production and sale of coal, purchased the property in question and organized said company. Having offices in the same building and frequently having business transactions with plaintiff and his various coal companies, the subject of the acquisition by plaintiff of an interest in McComas's company was taken up between them, resulting in the purchase of the shares aforesaid. At the time of the contract the stock sold by McComas was held as follows: By F. S. McComas, 101-2/3 shares; by Minnie Lee McComas, 15 shares; by F. D. Barron, 172 shares; by W. E. Wright, 89 shares; and by S. G. Smith 89 shares. There were at the same time other shares outstanding, which McComas also represented, as follows: By M. C. Jennings, 130 shares; by Bartlett Conley, 10 shares; and by E. L. Eitel. 60 shares. After Jones had personally inspected the property and agreed with McComas to buy the 466-2/3 shares, he sought out Jennings privately and purchased through him these 200 shares, giving him. 666-2/3 shares in all, and absolute control of the company and its property.

The grounds for rescission and cancellation alleged in the original bill were that in order to induce plaintiff to purchase the 466-2/3 shares and to defraud him McComas knowingly and falsely represented to him:

First; that the said company owned in fee 1961/2 acres of the Pittsburgh No. 8 seam of coal, of the thickness of five feet and ten inches of clean coal; whereas said company owned not to exceed 20 acres of said Pittsburgh No. 8 seam, and that this acreage did not contain five feet and ten inches of clean coal with only one parting a quarter of an inch in thickness near the bottom, as represented, but in fact had two separate partings, containing four and six inches of bone coal respectively, all of which would have to be removed from the coal to make it merchantable and ready for shipment, and that in the greater part of said tract there was practically none of the Pittsburgh No. 8 seam, the same thinning down, to as low as four inches.

Second; that said McComas, during said negotiations, had likewise knowingly and falsely represented that his company had spent in the neighborhood of $60,000.00 upon its operation, Avhen in fact it had not spent one-third of that amountThird; that in consideration of the $70,000.00 which plaintiff undertook to pay for said stock, McComas as agent and trustee covenanted to forthwith pay all bills, notes and accounts payable and other indebtedness of said company, as shown by the contract entered into on November.., 1920, exhibit No. 1 with the bill, and had not done so as evidenced by the following: (a) that a suit had been instituted by C. C. Reger, Trustee, against said company to enforce payment of approximately $5,000.00, purchase money on the 196 1/2 acres; (b) that as advised, the said Cap Run Coal Company, prior to plaintiff's purchase of said stock, had ex- ecuted a deed of trust upon all of its property to secure the Indian Run Coal Company the payment of $40,000.00, of which plaintiff was ignorant; and as further advised, plaintiff alleged that said McComas had not paid off said indebtedness. And finally it was alleged that but for the false and fraudulent representations respecting the amount, character and value of said property, plaintiff would not have purchased the stock.

Defendants McComas and others answere dthe bill, McComas in his answer, among other things denying ignorance on the part of plaintiff of said purchase money lien, and denying that any suit was begun or threatened, and denying also ignorance on the part of plaintiff of said lien in favor of the Indian Run Coal Company, and tendered and filed releases of both liens showing full payment and discharge thereof.

In plaintiff's amended and supplemental bill, presented immediately on the filing of defendants' answers, and pending their motion to dissolve the preliminary injunction awarded him on his original bill, he makes the original bill a part thereof, but greatly modifies the material charges of false and fraudulent representations of McComas respecting the character, quantity and quality of the coal and other property of said company:

First; respecting the acreage of the coal, it is alleged that McComas not only falsely and fraudulently represented to plaintiff that said company owned in fee 196 1/2 acres of the Pittsburgh No. 8 seam of coal, as alleged in the original bill, but that in addition thereto owned leases on two other tracts, the Bennett tract of 426 acres, and the Crawford tract of 155 acres, and that each of said tracts had thereon the same seam of coal as the 196 1/2 acres, namely the Pittsburgh No. 8 seam, and of the same thickness, quality and character as that represented by him to exist on the 196 1/2 acres, all of which representations were wholly false and untrue, and known to said McComas to be so; and furthermore that said property does not contain in fact a single acre of the Pittsburgh No. 8 seam of coal, but that the coal therein is what is known as the "Elk Lick Coal," a coal of entirely different character and quality from the Pittsburgh No. 8 seam, and which is of poor quality, very dirty and with two partings of bone aggregating from seven to eight inches.

Second; that during said negotiations McComas furnished plaintiff with what he claimed was an analysis of the coal upon the Reger tract, showing among other contents, 5.82% of ash and 2.74% of sulphur, when in fact upon a proper analysis said coal was found to contain over 16% of ash and over.... of sulphur, which facts were known to McComas and were unknown to plaintiff.

Third; that pending said negotiations said coal company acting through...