Poole v. Camden.

• Decision Date: 28 November 1916
• Docket Number: No. 2986.,2986.
• Citation: 79 W.Va. 310
• Court: West Virginia Supreme Court
• Parties: Poole v. Camden.

79 W.Va. 310

Poole

v.Camden.

No. 2986.

Supreme Court of Appeals of West Virginia.

Submitted November 14, 1916.

Decided November 28, 1916.

1. Principal and Agent Undisclosed Principal Parties.

An undisclosed principal is not a necessary party to a suit against the one with whom a contract is made to rescind the contract and recover the property the subject of the contract or the value thereof. (p. 313).

2. Cancellation op Instruments Nature of Belief.

When the subject of such a contract is shares of stock in a corporation, and the purchaser has transferred to his undisclosed principal a part of the shares purchased, but has other shares of the same class in the same corporation he may on cancellation of the contract be decreed to make up the deficiency out of such other shares owned by him, or there may be a money decree against him for the value thereof. (p. 314).

3. Corporations Directors Fiduciary Character.

The relationship of a director to stockholder in a corporation is not of that strict fiduciary character as to preclude him as a matter of law from purchasing the shares of stock of such stockholder without incurring the penalty of having the sale set aside at the election of the stockholder, regardless of the facts and circumstances of the transaction. (p. 314).

4. Same Directors Managing Directors.

But a director or managing officer of a corporation does sustain such fiduciary relationship to a stockholder of a corporation, as to require of him when proposing to purchase his stock, and he is called upon for information as to the property and financial condition of the corporation, and its plans and purposes for the future, and for all other facts affecting the value of such stock, and if he offers his opinion thereon, and undertakes to give some information peculiarly within his knowledge as such director or officer, he is bound at his peril, and upon penalty of having the sale rescinded, to give full and correct information and to withhold nothing from such stockholder affecting the value of his shares. (p. 314).

5. Contracts Misrepresentations Expressions of Opinion.

The mere expression of an opinion, though false, respecting the subject matter of a contract, will not generally be regarded as fraudulent, but when there exists a fiduciary relationship between the parties, and it is accompanied by other matters going to establish misrepresentation, imposition, undue influence, undue confidence, mental inability, or surprise, it may amount to fraud justifying a rescission of the contract. (p. 321).

Appeal from Circuit Court, Wood County.

Suit by Sophie R. Poole against Sprigg D. Camden. From a decree for plaintiff, defendant appeals.

Affirmed.

H. P. Camden, for appellant.

Geo. W. Johnson and Smith D. Turner, for appellee.

Lynch, Judge:

The purposes of the suit were, upon grounds alleged, to have cancelled the contract of sale and purchase by plaintiff Sophie R. Poole to defendant Camden, on January 21, 1910, of two hundred and fifty eight (258) shares of the capital' stock of the Parkersburg, Marietta and Inter-Urban Railway Company, to have said shares returned to her, and an accounting by Camden of all stock and cash dividends received by him, and if he should have disposed of any or all of said stock, that he might be decreed to deliver and transfer to plaintiff an equal number of shares out of other stock owned by him in said company, and that he be required also to accept the return to him of the sum of money paid by him to plaintiff for said stock upon such terms and conditions as the court might impose in accordance with equitable principles.

The court below upon the pleadings and proofs adjudged and decreed in accordance with the prayer of the bill, that the purchase and sale of said two hundred and fifty eight shares of stock be set aside and annulled and declared void; that upon an accounting thereby decreed defendant Camden should be entitled to receive from plaintiff at the rate of one hundred and seventy five dollars per share for each share recovered by plaintiff with interest thereon from the date of payment. And the court not being advised of the exact status or present ownership of two thirds of the shares of stock sold by plaintiff to defendant, and the dividends declared and paid thereon, and whether he now owns in his own right sufficient additional shares of stock in said railway company which he can and should turn over to plaintiff in lieu of the shares so obtained from her with the dividends thereon and as to other matters referred to in its decree, it was further adjudged and decreed that the cause be referred to a commissioner thereby authorized to ascertain and report upon the matters on which the court wished information as a basis for its final decree adjusting and settling the rights of the parties.

The first point is that it was error to pronounce the.decree complained of in the absence of J. N. Camden, Jr., for whom and himself it was alleged in the answer of Sprigg D. Camden he had purchased said stock.

Upon the filing of said answer the court of its own motion required plaintiff to amend her bill bringing in said J. N. Camden, Jr., as defendant. When so brought in the court sustained his demurrer to the bill, and on final hearing was of opinion that he was not a necessary party, and dismissed the bill as to him, and pronounced the decree now complained of.

The amended bill alleged that J. N. Camden, Jr., if interested originally in the purchase of said stock, was an undisclosed principal, that all the transactions of plaintiff relating thereto were with Sprigg D. Camden individually, and that she was ignorant of any interest of said J. N. Camden, Jr., therein, until informed thereof by the pleadings and proofs filed by defendant in this cause. Appellant having upon demurrer thereto procured the dismissal of said amended bill, nevertheless contends, that no decree should have been pronounced on the original bill, in the absence of J. N. Camden, Jr.; that as the latter is owner of two thirds of the stock purchased by plaintiff there can not be a partial rescission of the contract; that if a rescission be had it must be of the entire contract, and that the decree is, therefore, erroneous in this particular if for no other reason.

The effect of the decree below was to find as a fact that J. N. Camden, Jr., was not a party to the contract of sale and purchase of the plaintiff's stock, and if interested therein was an undisclosed principal, and if so, Sprigg D. Camden cannot escape personal liability by disclosing the fact that another was interested with him in the transaction. We cannot say from the evidence that the finding of the court was erroneous. Indeed we do not see how it could have found otherwise. The transaction was covered by documentary evidence; the sales order in the broker's office was signed by Sprigg D. Camden individually; he gave to plaintiff his individual check for $10,000.00, the cash payment, and his individual note for $35,150.00, for the deferred payment, and L. H. Poole, plaintiff's husband, who represented her as agent in the transaction, swears positively, that the name of J. N. Camden, Jr., was not mentioned in the negotiations, and that he had no dealings with him; and Mrs. Poole herself swears that she did not know J. N. Camden, Jr., in the transaction. The testimony of George Newberger, broker, is that he represented S. I). Camden only, in the negotiation with plaintiff for the purchase of the stock.

Although an undisclosed principal, when discovered, may be rendered liable for the contract of his agent, the law is well settled that one dealing with an agent for an undisclosed principal may at his election sue one or both on the contract, and that if he elects to sue the one the other is not a necessary party to the suit. Mechem on Agency, (2nd ed.) sections 1410-1411, 1750 to 1758; Poole & Co. v. Rice, 9 W. Va. 73; Leterman v. Charlottesville Lumber Co., 110 Va. 769, 67 S. E. 281; Waddill v. Sebree, 88 Va. 1012, 14 S. E. 849, 850; Burks' Pleading and Practice, section 62.

The contention, nevertheless, is that, as two thirds of plaintiff's stock has been transferred to J. N. Camden, Jr., the decree against Sprigg D. Camden is erroneous, it being beyond the power of the court to restore to Mrs. Poole all of the stock purchased from her. Upon ample authority we think it entirely competent for a court of equity, under the circumstances of this case, to mould its decree so as to do equity between the parties. If defendant has only a part of the actual stock purchased from plaintiff, he may be decreed to restore that part; and if he has other stock of the railway company, of the same class, he may be compelled to transfer a sufficient proportion of that to make up the deficiency, or if he has not sufficient stock to make restitution there may be a money decree against him for the value of the stock not restored. The bill and the prayer thereof are framed with this end in view. The authorities cited and relied on by counsel for plaintiff fully support this proposition. Engeman v. Taylor, 46 W. Va. 699, 714; Worthington v. Collins, 39 W. Va. 406; Krouse v. Woodward, 110 Cal. 638; Marshall v. Marshall, 11 Colo. App. 505; 10 Cyc. 645; 2 Cook on Corporations, (7th ed.) section 475, p. 1323; 4 Thompson on Corporations, (2nd ed.) section 4235; 2 Elliott on Contracts, section 2462, page 614. And this relief is suggested by Judge Brannon in Hogg v. McGuffin, 67 W. Va. 456, 465.

The next proposition relied on for reversal is that it was error for the court below to hold as matter of law that a director of a corporation sustains such fiduciary relationship to the stockholders of his corporation that he cannot buy their stock without incurring the penalty of having the sale set aside at the option of the stockholder. We do not understand from the written opinion of the learned judge who presided in the court below that the court based its decree on the...