Head v. Oglesby

• Decision Date: 15 May 1917
• Citation: 194 S.W. 793,175 Ky. 613
• Parties: HEAD ET AL. v. OGLESBY.
• Court: Kentucky Court of Appeals

194 S.W. 793

175 Ky. 613

HEAD ET AL. v. OGLESBY.

Court of Appeals of Kentucky.

May 15, 1917

Appeal from Circuit Court, Oldham County.

Suit by C. M. Oglesby against P. S. Head and others. Judgment for plaintiff, and defendants appeal. Affirmed.

Edwards Ogden & Peak, of Louisville, and D. H. French and J. T Yager, both of La Grange, for appellants.

Burnett Batson & Cary, John W. Ray, and H. J. McFarlan, all of Louisville, for appellee.

THOMAS J.

This suit in equity was brought by the appellee (plaintiff) against P. S. Head, P. E. Told, and S. C. Walker, appellants and defendants below, seeking to cancel two notes held by the defendant Head and executed by the plaintiff to S. C. Walker. One of the notes is for $3,500, and was executed on May 14, 1913, due 18 months thereafter, with interest after maturity, and the other is for $2,100, executed by plaintiff to Walker on May 21, 1913, running for the same length of time and drawing the same interest.

The general ground of complaint for the relief asked is that the defendants entered into a conspiracy among themselves for the purpose of cheating and defrauding the plaintiff by selling to him 400 shares of the capital stock of the Southern National Life Insurance Company, a Kentucky corporation, organized for the purpose of conducting a life insurance business, and that in pursuance to said conspiracy they did, by misrepresentation and fraud and wrongful schemes and contrivances, deceive and procure the plaintiff to purchase that number of shares, when they were wholly worthless at the time, and which fact the defendants knew and the plaintiff did not know.

A demurrer filed to the petition was overruled, to which exceptions were taken, and the defendants then filed a joint answer, the substance of which is a general denial of the averments of the petition. After the evidence had been taken, but before submission, the defendant Head, who was the owner of the notes, filed in the same court an ordinary petition against the plaintiff seeking to recover from him the amount of the notes, which petition was controverted of record, and that suit, by an order of court, was consolidated with appellee's equity suit, and upon submission of the consolidated cases the ordinary petition of the defendant Head was dismissed, but the court granted appellee (plaintiff in the equity case) the relief which he sought and canceled the notes, and to reverse the judgment in the consolidated cases the defendants in the equity suit prosecute this appeal.

Many objections are raised and urged upon us calling in question the correctness of the judgment appealed from, which may be classified thus: (1) Error in overruling the demurrer filed to the petition; (2) that the plaintiff is not entitled to the relief sought by him because (a) he was guilty of such laches as would deprive him of the equitable remedy of cancellation or rescission, and (b) that he had a complete and adequate remedy at law which he could use as a defense to a suit on the notes; (3) that the evidence fails to establish the averments of the petition so as to justify equity in canceling the notes or rescinding the contract under which they were executed.

Considering the points raised in the order named, the substance of the averments of the petition is that the defendants entered into a conspiracy for the purpose of cheating and defrauding the plaintiff by selling to him the stock, and that in pursuance thereto the defendants Told and Walker visited his house at which he was living upon a farm in Oldham county, and represented to him that Walker was the agent of the Southern National Life Insurance Company and then engaged in selling the treasury stock of that company for it; that they represented to him that the company was in a flourishing and prosperous condition, that the stock was worth $14 per share, its par value being $5 per share, and that there was but very little of it to be had at that price, and that, unless plaintiff purchased immediately, he would lose the opportunity of making a great bargain, that there was a movement on foot to consolidate that company with the Inter-Southern Life Insurance Company, which they stated that they knew would soon be accomplished, and that when done the stock which they were proposing to sell would greatly and immediately advance; that they referred the plaintiff to the defendant Head, who was a prominent banker at La Grange, Ky. and one of the most influential men financially in the county of Oldham, and requested plaintiff to call Head over the phone, which he did, and Head told him that the stock was worth that price and recommended that plaintiff buy it, that it was a bargain which plaintiff would lose if he did not purchase the stock; that plaintiff believed and relied upon the statements of all three defendants, which statements were at the time false, and known by the defendants to be false, but were not known to be false by the plaintiff, and, so believing and relying upon their truth, he signed the application for the stock and executed his notes therefor; that the truth was and is that there had been an agreement prior to that time between Head, Told, and Walker that they should sell stock to any of the solvent farmers throughout Oldham county whose names were upon a list, among which was that of plaintiff, and that Head would furnish the money to procure the stock by discounting the notes executed for it, and with a sufficiency of their proceeds the stock could be purchased to supply those to whom sales might be made, and that the three should share equally the profits of the venture; that plaintiff was thus induced to purchase the stock at $14 per share when it cost the defendants between $5 and $6 per share, and was not even worth that sum at the time. It was also alleged, in substance, that in furtherance of the conspiracy and agreement to defraud the plaintiff he was induced to agree and consent that the Southern National Life Insurance Company should consolidate with the Inter-Southern Life Insurance Company, and but for which he would not have so agreed, and that he did not discover the facts showing the fraudulent schemes and conspiracy of all of the defendants until within about 90 days before filing his suit.

Under these allegations it is difficult for us to see how it can be seriously insisted that the petition fails to state grounds for equitable relief. The strongest cases relied upon by counsel for appellants in support of their contention as to the insufficiency of the petition are Gray v. Gregory, 140 Ky. 266, 130 S.W. 1093; Pieratt v. Young, 49 S.W. 964, 20 Ky. Law Rep. 1815, and Central Life Insurance Co. v. Taylor, 164 Ky. 844, 176 S.W. 373, but only a cursory examination of those cases will show wherein they are not applicable here.

In the Pieratt Case the pleading adjudged to be insufficient was a petition against the directors of a bank seeking to recover from them money deposited in the bank by plaintiff upon the faith of a statement which the bank had issued. The petition failed to allege that the directors knew that the statement issued by the bank was false, or that the directors caused it to be made for the purpose of deceiving the public, including the plaintiff. There were other defective allegations as against the directors individually, and the court very properly sustained the demurrer filed to the petition.

In the Gregory Case the suit was brought to recover damages for the fraudulent interfering with and breaking off a trade for the sale of land. In the petition the wrong attempted to be charged was that defendant "wrongfully, wantonly, fraudulently, and without the solicitation of any one interfered in said trade," etc. It was not anywhere shown what particular or specific acts the defendant did which plaintiff claimed constituted the legal wrong sued for. Under the most elementary rules of pleading it was determined that the petition contained only the conclusions of the pleader and no facts from which a cause of action arose in his favor, and the court properly sustained the demurrer to the petition, which was affirmed by this court.

In the Taylor Case the suit was based on false statements and representations, but it was not alleged in what way such representations and statements were false, nor wherein the falsity of the statements existed. Clearly these cases can have no relevancy to the facts of the instant case, nor do the pleadings in those cases bear any resemblance to the one objected to in this case. All of the matters which the court adjudged to be essential in those cases, and which were wanting, are found to exist here. The court therefore properly overruled the demurrer to the petition.

In support of the objection embodied in (2), subdivision (a), urged for reversal, we are referred to the Taylor Case, supra, and to cases therein cited. The rule against laches and requiring prompt action on the part of plaintiff to entitle him to maintain suit for cancellation or rescission is thus stated in that case:

"Where one sues in equity to obtain the rescission of a contract, basing his claim to the relief sought upon the ground of fraud inducing the execution of the contract, he must act promptly in making his election of remedies; for, if he fails to act promptly upon the discovery of the fraud, he loses his right to rescission in equity, and his only remedy then is an

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