Ohlwine v. Pfaffman
| Decision Date | 13 February 1913 |
| Docket Number | 7,819 |
| Parties | OHLWINE ET AL. v. PFAFFMAN |
| Court | Indiana Appellate Court |
From Noble Circuit Court; Andrew A. Adams, Special Judge.
Action by Philip Pfaffman against David F. Ohlwine and another. From a judgment for plaintiff, the defendants appeal.
Affirmed.
Leonard Rose & Zollars, T. A. Redmond and McNagny & McNagny, for appellants.
Deahl & Deahl and Prickett & Carver, for appellee.
OPINION
This is a suit by appellee to recover damages from appellant for alleged fraud in the exchange of a farm for certain stock in the Specialty Case Company, a corporation.
The complaint is in two paragraphs, but the allegations of each are similar, and, in substance, charge that in November 1907, appellee was the owner of a farm in DeKalb county, of the value of $ 8,000; that in November, 1907, appellants falsely and fraudulently represented to appellee that appellant Ohlwine was the owner of 178 shares of the capital stock of the Specialty Case Company, of Kendallville, Indiana, of the par value of $ 8,900, for which he had paid one hundred cents on the dollar, and had purchased said stock from the Specialty Case Company; that appellant, Thomas, was the owner of 128 shares of the capital stock of said company, for which he had paid one hundred cents on the dollar; that said stock was then worth par; that appellants, in order to persuade and induce appellee to purchase said 128 shares of capital stock in said company, further falsely and fraudulently represented to him that the Specialty Case Company was then making money over and above the operating expenses; that if appellee would purchase said 128 shares of stock from appellant, Thomas, appellant, Ohlwine, would retain his 178 shares of stock, and appellee and said Ohlwine would then control the business and make from $ 10,000 to $ 15,000 annually; that appellants colluded and conspired together for the purpose of defrauding and cheating appellee out of his said farm; that the statements made to him by appellants as to the ownership of the capital stock alleged to belong to Thomas, as to the actual price paid for the stock and as to the value thereof at said time, were wholly false and untrue, and were made to appellee by appellants for the purpose of deceiving and defrauding him; that appellee had no knowledge of their falsity, and believed all said statements to be true as made by appellants, and he relied on them and purchased, as he then thought, 128 shares of capital stock from appellant, Thomas, and paid therefor the sum of $ 6,400, being the full par value of said stock; that Thomas did not in fact own any stock in said company, and the stock so purchased was a part of the stock of appellant, Ohlwine; that the stock at the time, viz., November 14, 1907, was worth only thirty-five or forty per cent of its face value, and appellee was thereby defrauded out of $ 4,000.
Appellants answered the complaint by general denial, and by a paragraph of special answer which set up the facts relating to the trade, and also alleged that appellee had prosecuted a former suit to rescind the contract under which the exchange was made, and to obtain a reconveyance of the land to him; that appellee knew all the facts connected with said transaction when he instituted the same; that said suit was prosecuted to final judgment against appellee; that he continued to act as a director of the corporation, participated in its business, and had, with full knowledge of all the facts, ratified and confirmed the original transaction; that the facts alleged in the former suit to rescind are substantially the same as those alleged in this suit. To this special answer a reply was filed in general denial. On the issues so formed the cause was submitted to a jury for trial, and thereupon a verdict was returned for appellee in the sum of $ 2,617. Appellants' motion for a new trial was overruled, and this action of the court is the only error relied on or discussed on appeal.
Appellants complain of the refusal of the court to give instruction No. 22 tendered by them, which, in substance, informed the jury that if with full knowledge of all the facts of the transaction appellee retained all the proceeds thereof and ratified the same, the "verdict must be for the defendants."
In Johnson v. Culver (1888), 116 Ind. 278, 285, 19 N.E. 129, the Supreme Court declared the law applicable to the question presented by the refusal of an instruction, as follows: "
Where a person has been induced by fraud to enter into a contract, he has his choice of remedies. He may repudiate the contract in toto, return or offer to return whatever of value he has received under it, and recover the property he has parted with or its value; or he may affirm the contract, keep whatever of property or advantage he has obtained under it, and recover the damages he has sustained by reason of the fraud perpetrated on him in the transaction. Nysewander v. Lowman (1890), 124 Ind. 584, 588, 24 N.E. 355; Johnson v. Culver, supra, 283; 20 Cyc. 87.
To affirm the contract, retain the actual consideration received under it and ratify the transaction falls short of a ratification with full knowledge of the fraud intending thereby to abandon all right to recover damages sustained on account of such fraud. Furthermore, in instructions Nos. 8 and 12, tendered by appellee and given by the court, the jury was properly instructed on the question of ratification involved in this case under the issues and the evidence.
It appeared from the evidence without dispute that the former suit was dismissed by appellee, at his own costs before the issues were formed and without any trial. The other things alleged to have been done by appellee in relation to the business and property of the corporation were not at all inconsistent with his right to affirm the contract and rely on his action for damages.
Appellants allege error in the refusal of the court to give instruction No. 18 tendered by them, which, in substance, told the jury that it was wholly immaterial who was the owner of the stock transferred to appellee, provided he acquired a good title to the same. It may be conceded that as a general rule the contention of appellants would be correct, but in this case the complaint contained a charge that appellants conspired together to cheat and defraud appellee out of his farm; that they represented that appellant, Thomas, owned the 128 shares of stock he proposed to transfer to appellee for his farm; that, appellant, Ohlwine would not sell his 178 shares of stock if appellee would purchase said 128 shares of Thomas, but would continue to hold his stock and be active in the management of the business of the company, and he and appellee would thereby have control of a majority of the stock of the company, manage its business, and make from $ 10,000 to $ 15,000 per year; that appellant, Ohlwine, would not sell any of his stock at any price; that in fact appellant, Thomas, did not own any stock, and the stock transferred to appellee was a part of the 178 shares owned by Ohlwine; that appellee had no knowledge of the business of said company; that he had been acquainted with appellant, Ohlwine, for many years, had confidence in his honesty and in his ability to manage the business of said company; that he relied on said statements, believed them to be true, had no knowledge to the contrary, and but for such representations and his reliance thereon, he would not have executed said contract. The evidence shows that Thomas had no interest in the business of the company, owned no stock, and after obtaining from the appellee a deed for the farm, conveyed the same to appellant, Ohlwine, without any consideration. This and other evidence warranted the inference that Thomas was only a tool of Ohlwine, and that they fraudulently conspired to deceive appellee, and obtain from him his farm for a grossly inadequate consideration. On this state of facts it cannot be said that the ownership of the stock was immaterial, for it was essential to the perpetration of the fraud that appellee be deceived on this point, and be made to believe that Thomas owned the stock he was purchasing, and that Ohlwine would not sell his stock and would continue in the business.
Appellants complain of the giving of instructions Nos. 3, 4 and 5, at the request of appellee, on the ground that the instructions, in effect, told the jury that mere representations as to the price paid for stock amounted to fraud. Appellants assert that representations of the seller that he paid a certain price for an article are only trade talk, on which the purchaser has no right to rely.
The statements that appellants paid par for their stock were representations as to material, existing facts, and not the mere expression of opinions as to value....
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