Harn v. Smith

• Decision Date: 13 September 1921
• Docket Number: Case Number: 9931
• Citation: 85 Okla. 137,204 P. 642,1921 OK 328
• Parties: HARN, Receiver, v. SMITH et al.
• Court: Oklahoma Supreme Court

1921 OK 328

204 P. 642

85 Okla. 137

HARN, Receiver, v. SMITH et al.

Case Number: 9931

Supreme Court of Oklahoma

Decided: September 13, 1921

Syllabus

¶0 1. Jury--Right to Jury Trial--Mortgage Foreclosure--Issue as to Amount Due. In an action for the recovery of money due on a promissory note executed by the defendants, and for the foreclosure of a mortgage given to secure the payment of said note, where issue is joined as to the indebtedness due, either party is entitled to a trial by jury as a matter of right.

2. Corporations--Subscriptions to Stock--Mortgage Note for Insurance Company Stock--Effect. A note of a subscriber to the corporate stock of an insurance company, secured by a first mortgage on real estate, accepted by the corporation in payment for stock is "property actually received" within the meaning of section 39, art. 9, of the Constitution, inasmuch as insurance companies are authorized by section 3444, Revised Laws of 1910, to invest their assets in loans upon improved and unincumbered real property.

3. Receivers--Title or Right Acquired by-- Defenses to Suits by. The receiver of an insolvent, nongoing corporation takes the property of the company for the creditors, subject to such equities liens, or incumbrances, whether created by operation of law or by act of the corporation, as existed against the property at the time of his appointment, and where a defrauded stockholder is sued by a receiver upon his stock subscription contracts procured by the fraudulent acts of the officers and agents of the corporation, such stockholder may plead such fraud as a defense, the same and with like effect as though the suit were by the corporation,.

4. Contracts--Fraud--Rescission--Laches. Where a contract is procured under such circumstances as to render it voidable for fraud, neither laches nor acquiescence can be based upon a failure of the injured party to move for its cancellation while the same conditions which caused its execution continue. To prevent one from rescinding a contract of purchase by which he has been defrauded upon the ground that he has acquiesced therein, the alleged act of acquiescence must be unequivocal and must show an election to retain the property after discovering the deceit. Plea of laches predicated merely upon delay, is not sufficient. It must be shown, in addition to delay, that injury has resulted from the delay.

5. Same--Ratification or Waiver of Fraud--Intent--Question for Jury. Where there is evidence tending to show that the defrauded party by his conduct has ratified a fraudulent contract or waived the fraud, the question of whether he intended such ratification and waiver is a necessary ingredient to constitute a ratification and waiver, and such intent is a question of fact for the jury.

6. Sales--Rescission for Fraud--Tender. No technical tender of property which a vendee was defrauded into buying, need be made to the fraudulent vendor before the commencement of an equity suit to compel a rescission on the grounds of fraud. It is sufficient if the vendee can show that he has preserved the property substantially in the condition in which he received it, without intentional or unnecessary change.

7. Appeal and Error--Questions of Fact--Review of Verdict. In a civil action, triable to the jury, where there is competent evidence reasonably tending to support the verdict of the jury, and no prejudicial errors of law are shown in the instructions of the court, or its ruling on the questions presented during the trial, the verdict of the jury will not be disturbed on appeal. McNeill and Nicholson, JJ., dissenting

Davidson & Williams, for plaintiff in error.

J. T. Dickerson, Paul Pinkerton, W. L. Spitler, Harris & Young, and Linn & Riddle, for defendants in error.

JOHNSON, J.

¶1 This action was instituted in the district court of Oklahoma county by A. B. Harn, as receiver of the Merchants & Planters Insurance Company, a corporation, againsts Simon Smith. Mary F. Smith, Salome Kate Mercer, O. E. Hayes, Mary G. Hayes, and Henry H. Englebright, to recover of the defendants Simon Smith and Mary F. Smith the sum of $ 10,000, alleged to be due upon a promissory note, and for foreclosure of a mortgage covering certain real estate in Oklahoma and Canadian counties, given to secure the payment of said note. After the appeal was lodged in this court the defendant Simon Smith died, and this case has been revived against Salome Kate Mercer and Mary G. Hayes as heirs at law of Simon Smith, and against all other defendants. The petition, after alleging the authority of the plaintiff in error, is in the usual form in foreclosure actions, prays judgment on the note for the sum of $ 10,000 against the defendants Simon Smith and Mary F. Smith, and for foreclosure of the mortgage against all the defendants. The amended answer, after denying the corporate existence of the Merchants & Planters Insurance Company, admits the execution of the note and mortgage sued on, and as an affirmative defense avers that Simon Smith and Mary F. Smith were induced to execute said note and mortgage by false and fraudulent representations of the officers and agents of the Merchants & Planters Insurance Company, and that said note was executed without consideration. It appears from the record that John A. Oliphant had been the attorney, and was at the time of this transaction agent for the sale of stock for the insurance company; that he talked with the defendants Simon Smith and Mary F. Smith on two or three occasions in regard to the sale of stock in the insurance company; that he stated to the Smiths that the company was in first-class financial condition in every particular, and had plenty of assets to do business; that John O. Mitchell, the vice president, was one of the wealthy men of Tulsa, and a very strong business man and capable of transacting and doing the business of the company successfully, and that he (Oliphant) was sure that Mitchell would manage correctly the business of the insurance company. He further stated that George T. Williamson was a banker, was man of large means and good business capacity; that he was treasurer of the company and a member of the board of directors, and that Mitchell and Williamson owned $ 78,000 of the stock of the company, fully paid. He further stated that the year previous to the time of the transaction with Smith (which was in 1909) the company had paid a dividend of 100 per cent., and that the year previous to that it had declared a dividend of 75 per cent. Oliphant testified that the representations so made by him were based upon information furnished him by the officers of the company. It further appears from the record that, relying upon the representations made, the defendants Simon Smith and Mary F. Smith executed the note sued on herein for the sum of $ 10,000, and also executed their mortgage securing the same, and that the Merchants & Planters Insurance Company issued and delivered to the defendant Simon Smith 266 2/3 shares of the stock of said company at the price of $ 37.50 per share, the par value of the stock being $ 25 per share. It is further disclosed by the record that the statements and representations so made and so relied upon by the Smiths were false in practically every particular; that the insurance company was in fact insolvent at the time of the execution of the note and mortgage by Smith and the delivery of the stock certificates by the company, and that Smith discovered this fact and learned of said false and fraudulent representations a short time after the receiver had been appointed, and When the receiver gave him notice to pay the interest on his note, that he conferred with his attorney and, acting upon advice of his attorney, paid the interest up to April 25, 1910, $ 698.64. Plaintiff in error complains of the action of the trial court in submitting the cause to the jury, basing his contention upon the fact that this action was equitable and that the court should have tried it without the intervention of a jury, except the court could have called in a jury to answer interrogatories and to act in an advisory capacity. It appears that the court submitted all the questions of fact to the jury. The jury returned a general verdict for the defendants; thereupon the plaintiff moved for a judgment non obstante veredicto, which motion was by the court overruled and judgment rendered in favor of the defendants. This court has repeatedly held that in actions for the recovery of money on promissory notes, although involving the foreclosure of a mortgage on real estate, issue being joined as to the amount due, the defendant is entitled to a trial by jury. Sherman v. Randolph, 13 Okla. 224, 74 P. 102; Maas v. Dunmyer, 21 Okla. 434, 96 P. 591; Brewer et al. v. Martin, 40 Okla. 350, 138 P. 166; Holmes v. Halstid et al., 76 Okla. 31, 183 P. 969; Choctaw Lumber Co. v. Waldock, 78 Okla. 232, 190 P. 866. The next question presented is whether or not an Oklahoma insurance corporation can issue its stock and accept the notes of its subscribers in payment therefor. Section 39 of article 9 of the Constitution of Oklahoma, in so far as it is germane, reads as follows:

"No corporation shall issue stock except for money, labor done, or property actually received to the amount of the par value thereof, and all fictitious increase of stock or indebtedness shall be void. * * *"

¶2 We cannot find that this court has ever construed this provision of the Constitution in so far as the question here involved is concerned. In Lee v. Cameron, 67 Okla. 80, 169 P. 17, wherein this section of the Constitution was under consideration, the court uses this language:

"This provision of our Constitution was intended by its framers and the people who adopted it to prevent the issuance by corporations of 'watered or fictitiously paid-up stock.' Since the primary object of interpretation is to ascertain the legislative intent, in a consideration of the provision under

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