Mississippi Power Co. v. Bennett

Citation173 Miss. 109,161 So. 301
Decision Date29 April 1935
Docket Number31503
CourtUnited States State Supreme Court of Mississippi
PartiesMISSISSIPPI POWER CO. v. BENNETT

Suggestion Of Error Overruled June 10, 1935.

(In Banc.)

1 FRAUD.

Contractual promise made with undisclosed intention of not performing it is "fraud."

2 CORPORATIONS.

In action against corporation to rescind sale of preferred stock on ground of fraud in representing that stockholder could get his money back at any time, corporation could not contend that undisclosed intention of not performing promise was not proved because corporation maintained resale bureau for purpose of reselling stock, where existence of bureau afforded no assurance to stockholders of return of all their investment.

3 CORPORATIONS.

Purchaser of preferred stock from corporation whose agent represented that it would repay amount of money invested at any time held entitled to recover amount invested, where corporation had undisclosed intention of not performing promise, unless stockholder was precluded from recovering because of laches ratification, or estoppel.

4. CORPORATIONS.

Preferred stockholder held not precluded from rescinding sale of stock four years after its issuance on ground that corporation's promise to return amount of money invested "at any time" implied within reasonable time, where parties did not contemplate prompt exercise of right to demand refund of money invested and demand for rescission was made immediately after stockholder discovered that representation was not intended to be carried out.

5. SALES.

Purchaser of personalty, who desires to rescind sale on account of fraud or mistake, must act with reasonable promptness after he discovers fraud or mistake or is chargeable with notice thereof.

6. CORPORATIONS.

That certificates of stock did not contain alleged agreement on part of corporation to refund purchase money at any time held not to charge stockholder with notice that representations were untrue or were made without intention of performing so as to preclude stockholder from recovering money invested.

7. CORPORATIONS.

That stockholder purchasing stock had means of correct information and did not read it, but relied on traudulent representations of corporation's agent that corporation would refund purchase money at any time, held not to relieve corporation of responsibility for mistrepresentations.

8. CORPORATIONS.

In stockholder's action to rescind sale of preferred stock on ground of fraud in representing that corporation would retund purchase money at any time, recital in stock certificates that corporation reserved, upon affirmative vote of majority of common stock outstanding, to redeem preferred stock upon certain payment plus all accumulated and unpaid dividends, held not to charge purchaser with notice that right to redeem particular stock at par had not been granted by common stockholders or that his promised option to call his stock and demand money at any time would not be recognized.

9. CORPORATIONS.

Purchaser of Maine corporation's preferred stock held not precluded from rescinding sale and demanding purchase price on ground of fraud in representing that corporation would refund purchase price at any time, because of Maine statute providing that preferred stock shall not be retired if thereby property and assets of corporation shall be reduced below amount of outstanding debts and liabilities, where there was no proof that retirement of stock sold would reduce corporation's property and assets below amount of its outstanding debts and liabilities (Rev. St Me. 1930. chap. 56, sec. 20).

10. CORPORATIONS.

Purchaser of Maine corporation's preferred stock held not precluded from rescinding sale and demanding purchase price on ground of fraud in representation that corporation would refund purchase money at any time, because of Maine statutes providing that capital shall not be reduced until debts are paid where rights of creditors were not involved (Rev, St. Me. 1930, chap. 56, sees. 20, 93, 101, 102, and sec 37, as amended by Laws Me. 1933, chap. 53).

ERHRIDGE, J., dissenting.

HON, HARVEY McGEHEE, Judge.

APPEAL from the circuit court of Pearl River county, HON. HARVEY MCGEHEE, Judge.

Action by W. Ollie Bennett against the Mississippi Power Company, wherein defendant, filed a demurrer. From a judgment for plaintiff, defendant appeals. Affirmed.

Affirmed.

Heidelberg & Roberts, of Hattiesburg, J. M. Morse, of Poplarville, and Wilbourn, Miller & Wilbourn, of Meridian, for appellant.

It is clear that the mere failure to perform a promise where made cannot be the predicate of a fraud.

14, C. J. 606, 609; 51 A.L.R. 49; Southern Development Co. v. Silva, 126 U.S. 247, 31 L.Ed. 678; Sawyer v. Prickett, 86 U.S. 146, 22 L.Ed. 105; Bartel v. Walton & Whann Co. (CC., Del. 1899), 92 F. 13; Collins v. Collins, 150 So. 660; Clopton v. Cozart, 13 S. & M. 363; 1 Black on Rescission and Cancellation, 47, sec. 24; White v. Stewart, 145 So. 747; A. L. I. Rest. Cont., sec. 749; Deshatreaux v. Batson, 159 Miss. 236, 131 So. 346; Walker v. M. & O. R. R. Co., 34 Miss. 245; Alig v. Lackey, 114 Miss. 396; Saffold v. Barnes, 39 Miss. 399; Ellison v. M. & O. R. R. Co., 36 Miss. 572.

To hold that every subscription to an inchoate undertaking like this can be avoided, because some enthusiastic or reckless agent has boasted of its resources or prophesied its speedy completion, would be to nullify, perhaps, a majority of such contracts.

Wight v. Shelby R. R., 16 B. Mon. 4; Irvin v. Turnpike Co., 2 Penn. 466; Andrews v. Ohio & Miss. R. R. Co., 14 Ill. 169; Ellison v. M. & O. R. R. Co., 36 Miss. 572; Reed v. Cooks, 55 S.W.2d 275; Kennebec v. Barton, 122 A. 852, 123 Me. 293; Railroad v. Anderson, 51 Miss. 829; Bucher v. Federal Baseball Club of Baltimore, 101 A. 535; Howard v. Merrick, 27 P.2d 891.

Failure of appellee to notify the appellant promptly, as soon as he knew or should have known of the alleged fraud, defeats his right to rescind.

Section 485, Restatement of the Law of Contracts; Selma v. Anderson, 51 Miss. 829; Collins v. Collins, 150 So. 660; 13 C. J., Contracts, page 616, section 671, and page 611, section 653; Richardson v. Lowe, 149 F. 625; Baldwin v. Anderson, 103 Miss. 462, 60 So. 578; Parker v. Foy, 43 Miss. 260; Figh v. Tuber, 82 So. 495.

When a party claims to have been defrauded, he has the election, either to pursue the remedy of rescission, or to affirm the contract and claim damages for the deceit. He cannot do both and is bound by his election.

Wilson v. New U. S. Cattle Ranch Co., 73 F. 994; Elgin v. Snyder, 115 P. 280; 2 Black on Rescission and Cancellation of Contracts (2 Ed.), page 1336, section 542; Grant v. Lovekin, 132 A. 342.

The courts take judicial knowledge of the "depression" and of the general knowledge, imported to all men who are compos mentis, of its effect upon general conditions.

The plaintiff is precluded by affirmation of contract.

Section 484, Restatement of Law of Contracts; Ga. Pac. R. R. Co. v. Brooks, 66. Miss. 583, 6 So. 467; Whittington v. Cotton, 130 So. 748, 158 Miss. 554; Scott v. Freeland, 7 S. & M. 418; Ware v. Haughton, 41 Miss. 382; Hanson v. Field, 41 Miss. 712; Pintard v. Martin, 1 S. & M. 126; Hall v. Thompson, 1 S. & M. 487; Commercial Bank v. Lewis, 13 S. & M. 226; Johnson v. Jones, 13 S. & M. 580; Alig v. Lackey, 114 Miss. 396, 75 So. 139; Carter v. Preston, 51 Miss. 423; 2 Black on Rescission of Contracts (2 Ed.), page 1337, section 542; 4 R. C. L., sec. 26; 14 C. J., page 594; Perkins v. Merchants & Farmers Bank, 60 So. 131, 103 Miss. 179; Wingo v. First National Bank of Pontotoc, 60 So. 133; 10 Cyc. 425.

Appellant was further entitled to a directed verdict, because the claim set up in the second count of the declaration was not maintained.

Chapter 97, Laws of 1916, of Mississippi.

Indeed it was not established that either appellant or the shares of stock that it sold was in any way subject to chapter 97 of the Laws of 1916 of Mississippi.

Section 6 of chapter 97 of the Laws of 1916 of Mississippi, now section 4186, Laws of 1930, applies only to suits against companies that have complied with the so-called "Blue Sky" Law.

White v. Stuart, 166 Miss. 694, 145 So. 747; First National Bank v. C. W. Leeton & Bro., 131 Miss. 324, 95 So. 445.

The alleged contractual promise to repurchase the stock, if made, was not enforceable, because vague, indefinite and uncertain and not availed of within a reasonable time.

The court judicially knows, from a declaration of Congress, and the current history of the day, that a national emergency resulting in large depreciation in values, and general decline in revenues of all lines of business has supervened since this stock purchase by appellee.

State v. Industrial Com., 242 N.W. 321; Calihan v. Yellow Cab Co., 13 P.2d 931.

A reasonable time elapsed between the purchase and any request to refund with phenomenal economic changes taking place meanwhile. The contract could not be construed as a perpetual one.

Echols v. N. O. J. & G. N. R. Co., 52 Miss. 610; Rake v. M. & O. R. Co., 100 So. 585, 136 Miss. 38; Jackson v. Railroad Co., 76 Miss. 607, 24 So. 874; Butler v. Smith, 35 Miss. 464; Kirkland v. Carr, 35 Miss. 584; Hall v. Eastman, Gardiner & Co., 89 Miss. 616; Starkweather v. Gleason, 109 N.E. 635; Holland v. Chesire R. R., 151 Mass. 231, 236, 24 N.E. 206; Holbrook v. Burt, 22 Pick. 546, 555; Fuchs v. Meyer, 227 N.W. 265; McDonald v. Van Etta, 228 N.W. 480; Reith v. University Housing Corp., 247 Mich. 104, 225 N.W. 529; Henderson v. Daniels, 205 P. 964; Martin v. Kelley, 126 A. 697; McNeely v. Bookmyer, 140 A. 542.

We insist that the point as to the constitutionality of the act sections 1, 2 and 14 of chapter 97, of Laws of 1916, is...

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