Foley v. Holtry

• Court: Nebraska Supreme Court
• Writing for the Court: IRVINE, C.
• Citation: Foley v. Holtry, 43 Neb. 133, 61 N.W. 120 (Neb. 1894)
• Decision Date: 05 December 1894
• Docket Number: 5446
• Parties: THADDEUS J. FOLEY, APPELLEE, v. WILLIAM M. HOLTRY, APPELLANT

61 N.W. 120

43 Neb. 133

THADDEUS J. FOLEY, APPELLEE, v. WILLIAM M. HOLTRY, APPELLANT

No. 5446

Supreme Court of Nebraska

December 5, 1894

REHEARING of case reported in 41 Neb. 563.

AFFIRMED.

Grimes & Wilcox, and E. C. Calkins, for appellant, in arguing that the evidence submitted was not sufficient to sustain a finding in favor of the plaintiff upon the merits either in an action at law or in equity, cited: Emery v Johnson, 37 Neb. 53; McClanahan v. McKinley, 52 Iowa 222; Dickson v. Knox, 71 Iowa 728; Poland v. Brownell, 131 Mass. 138; Salem India Rubber Co v. Adams, 40 Mass. 256; Brown v. Leach, 107 Mass. 364; Ely v. Stewart, 2 Md., 408; Whiting v. Hill, 23 Mich. 399; Hobbs v. Parker, 31 Me. 143; Slaughter v. Gerson, 13 Wall. [U. S.], 379; Long v. Warren, 68 N.Y. 426; Tallman v. Green, 3 Sandf. [N. Y.], 437; Vincent v. Berry, 46 Iowa 571; Columbia Electric Co. v. Dixon, 46 Minn. 463; Grymes v. Sanders, 93 U.S. 55; White v. Smith, 18 P. [Kan.], 931; Doran v. Eaton, 40 Minn. 35; Morgan v. Dinges, 23 Neb. 271; Reynolds v. Palmer, 21 F. 433.

The plaintiff, after he had sufficient notice or means of knowledge of his rights, delayed the election to rescind so as to estop him to seek his remedy in equity. (Knopp v. Kelsey, 102 Mo. 291; Hooper v. Wells, Fargo & Co., 27 Cal. 11; California Electrical Works v. Finck, 47 F. 583; Veazie v. Williams, 3 Story [U. S.], 612; Gillespie v. Sawyer, 15 Neb. 536; Forbes v. McCoy, 24 Neb. 702; Greenwood v. Finn, 136 Ill. 146.)

E. J. Hainer, B. I. Hinman, and T. Fulton Gantt, contra.

OPINION

IRVINE, C.

An opinion was filed in this case June 26, 1894 (41 Neb. 563). A short statement of the case will be found in that opinion. The judgment of the district court was then reversed upon the ground that the conduct of the plaintiff, subsequent to a time when the petition admitted he learned of the fraud, estopped him from rescinding the contract. A rehearing was allowed and the court is now convinced that in the former opinion an error was committed as to the effect which should be given to the averment in the petition referred to. The language of this averment, in the original petition, is as follows: "As soon as plaintiff discovered that said representations were false, to-wit, on or about the 30th of April, 1890, and at several times since, plaintiff applied to defendant, and tendered to him said two hundred shares of the capital stock aforesaid." In the amended petition, upon which the case was tried, the language is the same, except that in place of the word "discovered" the pleader uses the phrase "had reason to believe." Upon the rehearing there has been considerable argument addressed to the question as to whether these phrases are or are not equivalent. We do not, however, think this question material. In the former opinion it was held that there was no such delay in bringing the action as would of itself bar the plaintiff from relief, and relief was denied solely because, with admitted knowledge of the facts, the plaintiff had permitted the defendant to incur large expense in improving the property taken by him in exchange for the stock, and had continued to deal with the stock as his own, and take part in the management of the corporation. This was a matter of defense, and was not a fact which the plaintiff was called upon to anticipate and negative in his petition. Therefore, the averment in the petition that plaintiff had reason to believe that the representations were false on April 30, 1890, was not a necessary or even a material allegation in the petition; the time when plaintiff learned of the fraud only became material when the defendant by answer pleaded the facts constituting the estoppel. The defendant by answer pleaded the estoppel, and also pleaded that the plaintiff had full knowledge of the standing and condition of the company at the time of his purchase. The reply meets this by averring that plaintiff had no actual knowledge of the facts constituting his cause of action until after the improvements were made and immediately prior to the commencement of the action. Unless, therefore, the immaterial averment in the petition estops the plaintiff from afterwards asserting a contrary state of facts, the time when he learned of the fraud was properly placed in issue and left for determination upon the evidence. In Lee v. Rogers, 1 Lev. [Eng.] 110, the plaintiff counted on a promise made May 1, 3 Car. I, for money lent. The defendant pleaded that the writ was first brought February 4, 14 Car. II, and that he did not promise within six years before said 4th of February. The plaintiff replied that defendant assumed within six years before said 4th of February. It was moved in arrest of judgment that it appeared by the declaration that the cause of action arose more than six years before action brought, and that the replication was a departure; but it was held that the statute of limitations must be pleaded, and that, therefore, the replication was no departure, because the pleading of time in the declaration was immaterial. In Morgan v. Vaughan, T. Raym. [Eng.], 456, the plaintiff unnecessarily alleged his age at a particular time, and the defendant urged this as an estoppel from showing the fact; but it was held to constitute no estoppel, because plaintiff's infancy and not his precise age was the issue, and the averment was immaterial. In Gledstane v. Hewitt, 1 Tyr. [Eng.] 445, the action was detinue for a promissory note, the declaration counting on a general bailment. The defendant pleaded a special bailment and the replication confessed and avoided. It was held that this was no departure because the averment of the general bailment in the declaration was immaterial. The pleader can hardly be held to a stricter accountability under the Code than at common law, and we have concluded that whatever might be the effect of the averment in the amended petition, if offered as an admission, it was an averment not material in that stage of the pleadings, and that the plaintiff is not estopped thereby. This conclusion leads to an examination of the whole case.

The law governing the case is for the most part well settled, and the question presented is really not what principles of law control the case, but whether there was evidence to which the law of rescission is applicable. The elements necessary to sustain such an action have been recently summarized by this court as follows: (1) It must be alleged and proved what representation was made; (2) that it was false; (3) that plaintiff believed the representation to be true; (4) relied on and acted upon it; (5) and was thereby injured. (Stetson v. Riggs, 37 Neb. 797, 56 N.W. 628.) To these requirements the courts formerly added another, to-wit, that defendant must have known that the representations were false. A more accurate statement in view of the later decisions would be that the defendant must either know that the representations were false, or else they must be made without knowledge as positive statements of known fact. The rule as thus formulated practically charges the defendant with notice of the truth in all cases where he makes positive representations of existing facts. We shall examine the evidence with reference to the foregoing propositions.

False representations, in order to make a case for relief, must generally be positive statements in regard to existing facts and not mere expressions of opinion or promises as to future occurrences. The representations charged in the petition were that the elevator company stock was owned by well known, reliable business men of experience; that Mr. John Bratt was president of the company and had invested in the stock $ 2,500; that the corporation was solvent; that it had earned for the preceding six months two per cent per month on its paid-up capital stock, and that all of forty per cent of its capital stock was paid up. The evidence shows that the stock of the company was owned by the men who were represented to own it and that John Bratt was president. These representations may, therefore, be dismissed from further consideration. The evidence also shows that Mr. Bratt did hold capital stock to the amount of $ 2,500 par value, but that this was held under an agreement whereby Bratt had the option of retaining the stock or turning it in to Holtry and another stockholder and receiving therefor his investment back with ten per cent interest; an option which he finally exercised. It appears, however, by Foley's own testimony, that he had sufficient information as to the nature of this agreement to put him upon inquiry as to Bratt's investment, if he did not have complete knowledge of the fact. Nothing, therefore, can be counted on the falsity of this representation.

As to the representation in regard to the amount of capital stock paid up, Mr. Foley testified positively that Holtry represented to him that the capital stock was $ 75,000, and that forty per cent had been paid in; but he stated upon cross-examination that before the trade was consummated he learned that only thirty-seven and one-half per cent of the stock which he was buying had been paid, and he also testified when on the stand in rebuttal that he learned before the trade was made that all the stock had not been subscribed. Upon this point, therefore, the plaintiff can claim nothing.

As to the representation in regard to the solvency of the corporation, there is no proof of any direct representation on the subject. It appears that a report of the secretary prepared shortly before the trade was made showed that the corporation was solvent, but Foley testifies that he did not see this report until after the trade was made, although statements had before been made to him in regard to a portion of its contents. If...