McKay v. McCarthy
| Decision Date | 15 December 1909 |
| Citation | 123 N.W. 755,146 Iowa 546 |
| Parties | W. N. MCKAY, Appellant, v. C. G. MCCARTHY |
| Court | Iowa Supreme Court |
REHEARING DENIED, WEDNESDAY, MARCH 16, 1910.
Appeal from Polk District Court.--HON. JAMES A. HOWE, Judge.
THE petition as amended alleged the organization of the Rocky Mountain Smelting Company prior to May 11, 1900, at which time defendant and others were directors thereof, for the purpose of constructing and operating a smelting and refining plant at Florence, Colo.; that in 1903, through foreclosure proceedings, the company's plant was sold to Anna Kendall; that defendant, with others, organized the Iowa Fiduciary Company, which acquired the property from Anna Kendall, and thereafter the same parties organized the Colorado Smelting & Refining Company, which purchased the property from the Iowa Fiduciary Company May 10, 1904, when owners of preferred stock in the Rocky Mountain Smelting Company were given a like amount of stock in the company last organized upon condition they purchase a stipulated percent additional stock therein. Plaintiff surrendered the fifty-six shares in the company first mentioned with $ 140, and received in lieu thereof seventy shares in the Colorado Smelting & Refining Company. The plaintiff alleged that through false representations of defendant he was induced to and did purchase fifty-six shares of the preferred stock in the Rocky Mountain Smelting Company, paying therefor $ 750 on May 11, 1900, $ 250 on September 27th, and $ 400 on October 16th of the same year, that he did not discover the fraud practiced on him until in 1902, within five years prior to the commencement of this action; that upon such discovery he tendered the stock back to the directors of the company in 1903, by whom it was refused, and was about to bring suit because of said fraud, when defendant induced him not to do so by promising to see that plaintiff got his money back, and causing encouraging reports to be sent to him, and represented that the stock was all right and the plant would soon be in operation, and that such a suit would ruin the credit of the company, and, because of these and other statements, plaintiff forbore bringing suit. That, after the foreclosure proceedings, plaintiff was again about to bring suit when defendant represented the company would be reorganized, that men of influence were going to invest therein and the plant would soon be in operation, and, if plaintiff would forbear bringing suit, defendant would personally agree to see that plaintiff got his money back and, in consideration of that promise, plaintiff agreed to do, and did, forbear bringing suit, and said representations and promises were repeated at divers times up to 1907, but although often requested, defendant has never returned the moneys paid for said stock, and plaintiff prayed judgment therefor and for certain expenses and moneys paid out and for loss of time.
In the second count of the petition, the allegations with reference to the promises of defendant that plaintiff would get his money back or that defendant would see to this are repeated, and it is alleged that, though often requested, defendant has refused payment. Prayer was for the amounts mentioned with interest. It was stipulated that the first count was based on false representations, and the second on the promise alleged to have been made as an inducement not to bring suit, and thereupon the defendant demurred to the counts of the petition separately. The demurrer to count one was sustained, and, as plaintiff elected to stand on the ruling, the count was dismissed. The demurrer to count two was overruled, and defendant filed an answer in six divisions, which was assailed by a motion to strike in fifteen paragraphs. This motion was overruled, and plaintiff demurred to each of the last five divisions of the answer. The demurrer was overruled, and plaintiff having elected to stand on the ruling on the motion, in so far as it assailed division one, and on that on the demurrer to the remaining five divisions of the answer, the petition, as amended, was dismissed. The plaintiff appeals. Affirmed in part, and reversed in part.
Affirmed in part. Reversed in part.
Hubert, Utterback and J. M. Parsons, for appellant.
Baily & Stipp, for appellee.
OPINION
The gravamen of the action pleaded in the first count of the petition is fraud alleged to have been perpetrated in the sale of stock in a smelting company. The representations alleged to have been false, and by which plaintiff is said to have been induced to part with his money, were that defendant had examined into the affairs and property of the company; that it was the best located of any plant in the country because of which it would smelt ore for twenty-five percent less in cost than other smelters; that the metallurgical process which it would use had been tested, and was superior to that of other plants; that the company had contracted with the railroad company to haul ore from Cripple Creek at $ 1 per ton less than it could be carried to other competing smelters; that the smelter would use three hundred to five hundred tons of ore per day, and that the preferred stock would earn an annual dividend of eighty-one percent and the common stock seventy-three percent when in operation; that no smelter had ever failed, and that the investment was safe and defendant had invested his own money therein; that no commission or salaries had been or would be paid for the sale of preferred stock, and that the entire proceeds thereof would be used in equipping and building the plant. The defendant claims that these were no more than opinions and not statements of fact, and that in any event the action is barred by the statute of limitations; while plaintiff contends that the cause of action is not deemed to have accrued until the discovery of the fraud which was within five years prior to the bringing of the suit, and that, regardless of this, defendant is estopped from taking advantage of such plea in bar. Section 3447 of the Code (paragraph 6) provides that action must be commenced "for relief on the ground of fraud in cases heretofore solely cognizable in a court of chancery and all other actions not otherwise provided for in this respect, within five years." Section 3448: "In actions for relief on the ground of fraud or mistake and those for trespass to property, the cause of action shall not be deemed to have accrued until the fraud, mistake or trespass complained of shall have been discovered by the party aggrieved." The last section has been held to refer to "fraud in cases heretofore solely cognizable in a court of chancery." Daugherty v. Daugherty, 116 Iowa 245, 90 N.W. 65. In Relf v. Eberly, 23 Iowa 467, the court, in construing these sections, decided that the intention was "to protect the rights of the parties and to recognize their right to relief, not in every case allowed by the prior rule, but in those cases where the relief asked was alone grantable in a court of equity." In that case it was conceded that, had the action been for damages, the delay in discovering the alleged fraud would not have postponed the time when the cause of action accrued, but, as the suit was for the rescission of a contract procured by fraud, it was not deemed to have accrued until the discovery of such fraud. In Higgins v. Mendenhall, 51 Iowa 135, 50 N.W. 539, the true test was said to be whether chancery, before the enactment of the statute, had exclusive jurisdiction to grant the relief prayed, and the court declared in substance that an action for damages based on deceit was not such a suit. Such relief was obtainable at the common law in an action on the case, and appears to have been founded on the ancient writ of deceit. The first count of the petition as amended states no more than a cause of action for deceit which was cognizable at the common law, and therefore accrued when the transaction was consummated rather than when the fraud was discovered by the aggrieved party. Jacobs v. Frederick, 81 Wis. 254 (51 N.W. 320), 25 Cyc. 1081. See Mason v. Henry, 152 N.Y. 529 (46 N.E. 837); Jaffray v. Bear, 103 N.C. 165 (9 S.E. 382); Lenhardt v. French, 57 S.C. 493 (35 S.E. 761). It is not alleged that the cause of action was concealed by defendant, and, for this reason, Faust v. Hosford, 119 Iowa 97, 93 N.W. 58; Blakeney v. Wyland, 115 Iowa 607, 89 N.W. 16; District Tp. of Boomer v. French, 40 Iowa 601, and Carrier v. Ry., 79 Iowa 80, are not in point.
But it is argued that the defendant, by reason of having asked plaintiff to forbear bringing suit and promising him that if he would do so defendant would see that he got his money back, and plaintiff having complied with such request, is now estopped from pleading the period of limitations in bar. It is not alleged that defendant agreed not to interpose such a plea, as in Holman v. Ry., 117 Iowa 268, 90 N.W 833, nor is it asserted that the promise was made with the fraudulent design of taking advantage of the statute of limitations. Probably the conduct of a party may be quite as potential in estopping him from taking advantage of the statutory bar as an express promise, but we do not regard the mere promise to see that the person claiming to have been defrauded will get his money back, and roseate representations of what is likely to be the outcome of the enterprise concerning which the fraud is alleged to have been practiced, alone sufficient for this purpose. What was said to dissuade plaintiff from bringing suit the first time, in addition to the promise, was no more than a representation that the plant was all right and would be put in operation soon, that to start the suit would ruin the company's credit, and that plaintiff would make a mistake if...
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