Kimmel v. Eastern Coal & Mining Co.
| Decision Date | 16 September 1924 |
| Docket Number | C. C. 303. |
| Citation | 124 S.E. 661,97 W.Va. 154 |
| Parties | KIMMEL v. EASTERN COAL & MINING CO. |
| Court | West Virginia Supreme Court |
Submitted September 9, 1924.
Syllabus by the Court.
Fraud is a conclusion of law. In pleading it in a suit to set aside a contract, every act, fact, and intent which constituted the fraud must be plainly and specifically set out with such certainty and precision as will exclude any reasonable conclusion of fair dealing. If from the pleading it is doubtful whether the allegations of fact amount to the particular fraud charged, it is not well pleaded.
Representation by the officers of a newly formed commercial corporation that its stock would shortly become very valuable, and that a stated dividend would be paid to the stockholders, is not ordinarily such representation as will set aside a sale of its stock as fraudulent. Such representations are generally regarded as mere expressions of opinion. To render them fraudulent, facts must be pleaded and proved which were within, or ought to have been within, the knowledge of the officers of the corporation, which would not justify such representations, and would warrant the conclusion that they were falsely made in order to sell the stock.
Fraud cannot be presumed because a promise or obligation is not performed. To make it available, there must be some existing essential matter falsely misrepresented which induced the making of the contract.
Case certified from Circuit Court, Mineral County.
Suit by Edward G. Kimmel against the Eastern Coal & Mining Company. Demurrer to the bill overruled, and questions certified. Ruling reversed.
Wm MacDonald, of Keyser, for plaintiff.
Arthur Arnold, of Piedmont, and W. Elliott Nefflen, of Keyser, for defendant.
Having overruled the demurrer to the bill, the court certified its ruling for review. Is the bill sufficient? This is the question underlying and controlling the various queries and points certified.
The bill charges in substance: (1) That defendant is a foreign corporation with authorized capital stock of $1,000,000, of which from $250,000 to $300,000 has been sold including $2,500 to plaintiff, on which it guaranteed 8 per cent dividends, with the agreement that it would furnish its stockholders coal at cost of production plus 30 cents per ton, and would pay no salaries to its managing officers until all dividends were paid; (2) that plaintiff purchased 2,500 shares of stock of the par value of $2,500, and in payment therefor deeded to the corporation 2 valuable lots in the city of Keyser worth $2,500, being induced to do so by the express statements, representations, and agreements as to the then value of the stock and the assurance that it would soon become very valuable, and with the understanding that the lots would be utilized for coal tipple, coal yard, and offices in order to supply coal to its stockholders; (3) that the stock at that time did not have any real value, a fact which the corporation knew, and in selling the stock to plaintiff withheld from him the true facts as to its financial ability, the amount of its property, the kind and character of its investments, with intent to deceive, but assured plaintiff that it was financially able to carry out its agreements, that its income was increasing from coal sales, and that defendant knew, or had reason to know, that its financial ability was such that it could not carry out its promises, and relying upon said promises representations, and guaranties the stock was purchased by plaintiff, and because of defendant's failure to make good its promises, guaranties, and representations, the shares of stock are worthless, and the consideration for the lots deeded has failed; (4) that, as soon as plaintiff learned the real facts of the fraud perpetrated upon him, he demanded a rescission of the contract, and was refused, and from all the facts he has learned about the organization of defendant, the extent, character, and value of its investments, its failure to sell all its stock, and its failure to carry out its guaranties and agreements, he avers that the exchange of stock for his lots of land was in bad faith on the part of defendant and was for the purpose of defrauding him; (5) that he has received only $38.90 in dividends covering a period from October 10, 1921, to March, 1922, which is not what was promised in the way of dividends, and tenders the dividends so paid, together with the stock back to defendant, and that the corporation has had no meeting of its stockholders since its organization, and has given to its stockholders no statements or information relating to its standing and condition as required by law; (6) that defendant did not have coal mines sufficient to carry out its agreement to furnish coal to its stockholders, and was never able financially to carry out its agreements and representations, and its failure to do so is a fraud upon plaintiff, and that defendant's president stated under oath to the auditor of the state, in October, 1921, that all of its stock was sold to the Liberty Investment Company, of Cumberland, Md., which statement plaintiff says was not true, as the defendant sold stock direct to individuals and received payment therefor, and that, before plaintiff discovered the falsity of defendant's representations, he inquired of defendant why it was paying no dividends and why it did not erect its tipples and coal yard on plaintiff's lots, and why it was not carrying out its agreements, and was assured that the corporation was doing a large business, needed its moneys in the conduct of its business elsewhere, and that the value of its stock was increasing, which statements were false and made to prevent plaintiff from making investigations, and from proceeding to recover his lots. An averment is contained in the bill to the effect that defendant has executed a deed of trust on the lots to secure payment of a note to James E. Cross, which deed was made for the purpose of hindering and embarrassing plaintiff in the assertion of his rights, in which purpose all of the parties to the trust deed participated.
The prayer is for a rescission of the contract because of the alleged fraud, cancellation of the trust deed, and reconveyance of the title of the lots to plaintiff, and for general relief.
Fraud is a conclusion of law. The facts which warrant the conclusion must be, when taken together, sufficient to make out a case of fraud, and be inconsistent with any other purpose, and must be alleged with such certainty and precision as to exclude every construction, except the fraudulent and wrongful purpose complained of; and, if from the face of the pleading it is doubtful whether the allegations do in fact amount to that particular fraud, it is not well pleaded. Fraud is never presumed. It must be particularly alleged, as well as all the essentials which warrant it, especially when the act or acts charged as fraudulent may be, in fact, innocent. Loomis v. Jackson 6 W.Va. 613; Dickenson v. Bankers' Loan & Investment Co., 93 Va. 498, 25 S.E. 548. Every act, fact, and intent which necessarily entered into the alleged fraud must be...
To continue reading
Request your trial