Bosher v. Richmond & H. L. Co

• Decision Date: 08 December 1892
• Citation: 89 Va. 455,16 S.E. 360
• Court: Virginia Supreme Court
• Parties: BOSHER et al. v. RICHMOND & H. L. CO. et al.

16 S.E. 360

89 Va. 455

BOSHER et al.

v.RICHMOND & H. L. CO. et al.

Supreme Court of Appeals of Virginia.

Dec. 8, 1892.

Stock Subscriptions — Action to Set Aside — Joinder of Plaintiffs.

Persons who have been induced by the same fraudulent representations, contained in a prospectus, to subscribe to the stock of a corporation, have a common interest, and may join in a bill, for the benefit of themselves and others similarly deceived, to set aside their subscriptions.

Appeal from circuit court, Rockingham county.

Bill by E. J. Bosher and others against the Richmond & Harrisonburg Land Company and others. Demurrer to the bill, which was sustained. Plaintiffs appeal. Reversed.

F. H. McGuire, for appellants.

W. W. & B. T. Crump, for appellees.

Lacy, J. This is an appeal from a decree of the circuit court of Rockingham county, rendered at the April term of the said court, 1892. The bill in this case was filed in the said court in July, 1891, by the appellants, E. J. Bosher, George W. Mayo, F. C. Christian, and John O'Toole, who sued for the benefit of themselves and all other stockholders of the Richmond & Harrisonburg Land Company having like interest with themselves, being those who subscribed for the stock of the said company, and were required to pay for the same at par, and being all the stockholders of the company except the promoters named in the bill, who would come in and contribute to the expense and share the benefits of the suit, against the said Richmond & Harrisonburg Land Company, Philip B. Shield, receiver, and the promoters named as defendants, and unknown partners, who are afterwards named and brought in by an amended bill, seeking to set aside their stock subscriptions, to rescind and annul their contracts of subscription, and to have repayment of the sums paid by them as subscriptions to their stock, and for general relief, upon the ground of fraud practiced upon them by the defendants in procuring their subscriptions to the stock of the company; and the bill further sets forth that upon the discovery by them of the fraud which had been practiced upon them the complainants had refused to pay any further sums upon their contracts of subscription, upon the ground of the fraud and deceit employed against them by the defendants, and demanded back the money already paid by them, whereupon the defendants had, among themselves, instituted a suit, without notice to the complainants, seeking to enforce the payment by the complainants of their stock subscription not yet paid, and had a receiver appointed by the court to collect from them the said unpaid sums; and it is prayed in the bill that this suit be heard with that, andthat the receiver in that suit and the other defendants be enjoined and restrained from collecting these unpaid subscriptions until the further order of the court. To this bill the defendants demurred, and the demurrer was sustained by the court, upon the expressed ground that this was a misjoinder of plaintiffs, and both the original and amended bills were dismissed; the court declining to pass upon any other question in the case. Whereupon the case was brought to this court by appeal.

The circumstances and all the details of the fraud and false and fraudulent misrepresentations are set forth with great minuteness and distinctness in the bill, — the false statements as to the locality of the property, and its eligibility, several times multiplying the true amount of the value and cost of the property, and from statements as to the amount of capital put in by the promoters, together with a false statement that there were no preferences in favor of the promoters, —and making out a case of fraud and deceit so gross that the counsel for the appellees, in the argument in this court, admitted that if they were true the appellees should be arraigned in a criminal court upon them. It is not deemed necessary, however, in considering the single question involved here, " whether the plaintiffs can bring this suit jointly, " to recite the charges of fraud herein. We are to consider the single question decided by the circuit court upon the demurrer for misjoinder of plaintiffs, which is, those charges, distinctly stated, being true, so far as were pleaded, then whether the plaintiffs can jointly maintain their suit.

The jurisdiction of a court of equity to rescind contracts fraudulently procured is undisputed. The appellants insist that one object to be attained by proceedings in chancery is to prevent a multiplicity of suits, and hence several persons who have a common interest, arising out of the same transaction, although their interest, strictly speaking, is not joint, may unite in one suit, and may even be compelled to do so by the defendant, (citing Bart. Ch. Pr. p. 253;) that it is a favorite object of equity to prevent a multiplicity of suits, (Sand, Eq. 13;) and that there is an exception allowed, founded on the mere fact of numerousness, when it may amount to a great inconvenience or positive obstruction of justice, (Story, Eq. Pl. §§ 96-98,)— and insist that in this case the petitioners, and those in whose behalf they sue, are about 200 in number; are a class well defined and distinct from the promoters, necessarily antagonistic in interest to them and to the company, which they organize and control. Upon a prospectus, and upon circulars, cards, statements, etc., supplementary thereto, in which the grossest material misrepresentations were made, all the petitioners' class were induced to make contracts, all exactly alike; all based upon said prospectus, circulars, cards, etc.; are made with the same party, the defendant company; and are fraudulent and void. That the company, by its agents, fraudulently, by the issue of a false prospectus and the circulation of false circulars, cards, statements, etc., in duced petitioners and all stockholders of their class to subscribe for its stock and pay in their money. And the prayer is that these contracts be rescinded and the money refunded to the defrauded stockholders. That the prospectus is referred to, and made a part of each certificate of stock.

On the other band, the appellees say that the demurrer was properly sustained to the bill by the circuit court on the ground that each one of the four plaintiffs had a separate and distinct claim against the defendants, and hence could not unite in one bill, and, such being the case, they could not, a fortiori, maintain a creditors' bill, and that the suit could not be properly defended by the defendants without filing a separate answer in each case, which would require probably 200 answers, and that the doctrine of the equitable jurisdiction of courts of equity to prevent a multiplicity of suits has no application to such a case as this, and that in this case the court is obliged to go back to the execution by each individual of his distinct and separate contract with the company, investigate the circumstances under which it was made, and determine upon its validity. Citing Campbell, C. J., as holding that in Winslow v. Jenness, 64 Mich. 84, 30 N. W. Rep. 905: "The general rule in equity is that several grievances must be redressed by several proceedings, the only recognized exceptions being when a single right is asserted on one side, which affects all the parties on the other side in the same way, or a single wrong is complained of, which falls on them all simultaneously and together. Familiar instances are rights in common which are resisted by the owner of the estate on which it is charged, tax rolls assessing all parties in an equal ratio, and fraud by trustees affecting all the beneficiaries. If there is any distinction in the proportion or character of the several grievances, there can be no joinder. " And citing Gray v. Rothschild, 112 N. Y. 668, 19 N. E. Rep. 847, as holding that parties claiming to have been defrauded by similar, but not the same, representations, could not unite, as each had a separate cause of action, and that the statement by Mr. Cook in section 156 of his book on Stockholders, that several stockholders defrauded in the same way may join in the bill as co-complainants, is only a conjecture by him, and incorrect, in the light of recent decisions, and that it was held by...