Pryor v. Oak Ridge Development Corp.

• Decision Date: 22 December 1928
• Citation: 97 Fla. 1085,119 So. 326
• Parties: PRYOR et al. v. OAK RIDGE DEVELOPMENT CORPORATION.
• Court: Florida Supreme Court

119 So. 326

97 Fla. 1085

PRYOR et al. v. OAK RIDGE DEVELOPMENT CORPORATION.

Florida Supreme Court, Division B.

December 22, 1928

Suit by the Oak Ridge Development Corporation against Jack Pryor and others.From orders overruling demurrers to the bill of complaint, defendants appeal.

Reversed.

Syllabus by the Court

SYLLABUS

Bill by corporation which purchased property, alleging that its stockholder and agent made false representations as to his commission, which were corroborated by vendor, held insufficient to present case for rescission.In suit by corporation to rescind purchase of lands, bill alleging that one of defendants as stockholder and agent of corporation made false representations as to amount required to purchase property and as to commissions and secret profit which he realized from transaction, and that he procured another defendant, as part owner of property, to make similar misrepresentations to stockholders, held insufficient to state case for rescission, for want of allegations showing corporation was deceived as to material facts affecting value of property.

Representations of vendor as to payment or nonpayment of commission, if false, held not fraudulent as to vendee, warranting rescission.Representations, on part of owner and vendor of property to corporation, as to payment or nonpayment of commissions by vendors, even if false, did not constitute legal fraud as to corporation, so as to warrant cancellation and rescission of sale, since vendor was not in fiduciary relation to corporation and was not required to disclose what would be done with the proceeds of the sale.

Demurrer admits truth of allegations of bill.Truth of allegations of bill is admitted by demurrer.

Stockholder acting as corporation's agent in purchase of property must disclose true facts to corporation, and may not make secret profit.Stockholder of corporation, acting as its agent in purchase of property, occupies fiduciary relation towards corporation and other stockholders, which requires him to disclose true facts with regard to the transaction and precludes him from making secret profit.

Remedy of corporation for fraud of stockholder and agent making secret profit on corporation's purchase of property is at law or in equity for accounting, not by suit to rescind.Remedy of corporations for fraud and deception of its stockholder acting as agent in purchase of property, in failing to disclose facts and making secret profit on transaction, is by action at law or by suit in equity for accounting, and not by suit to rescind contract.

Only misrepresentations which were inducement to contract afford ground for rescission.Misrepresentation, to constitute ground for rescission of contract, must have been an inducement thereto; otherwise it will not be ground for avoiding it.

Fraud to constitute ground for rescission, must affect value of property purchased or cause loss to purchaser.Fraud, to constitute ground for rescission, must consist of affirmation of fact, affecting value of property purchased or causing loss to purchaser.

Inability to restore parties to status quo prevents rescission of contract for fraud or misrepresentation.Contract cannot be rescinded for fraud or misrepresentation, where it is impossible to put the parties back into their original position with their original rights.

Purchaser's reconveyance to third party of part of lands purchased held to bar recovery in rescission suit against vendors.Purchaser's sale and reconveyance of part of lands purchased to third party held to preclude rescission and cancellation of purchase contract, since vendor could not be restored to his original position.

Appeal from Circuit Court, Polk County; Harry G. Taylor, judge.

COUNSEL

Palmer, Dickenson, Shurley & Lake, all of Tampa, and Swearingen & Wilson, of Bartow, for appellants.

OPINION

BUFORD, J.

A bill of complaint was filed in the circuit court of Polk county to rescind a purchase and sale of certain lands.The bill alleges, in substance: That R. E. L. Pryor and some other person, unnamed, procured an option from the owners to purchase said lands for $83,700.That Pryor and his associates were unable to finance the deal, and thereupon Pryor organized a corporation under the laws of the state of Florida under the name of Oak Ridge Development Corporation and sold stock in that corporation to certain individuals who are now owners of such stock.That the corporation was formed and the stock therein sold for the purpose of purchasing the property upon which Pryor and his associates held the option.That Pryor was a stockholder in the corporation and acted for and in behalf of the corporation in consummating the purchase of the lands.That Pryor represented to the stockholders of the corporation that the lands could not be purchased for less than $83,700, and procured Jack Pryor, one of the defendants, to make the same statement to one of the stockholders of the corporation prior to the closing of the deal, when, in truth and in fact, the said R. E. L. Pryor was to receive a sum of money, and did receive a large sum of money, as his commission, and also received certain notes as commission, all of which he retained and did not divulge to the corporation or its stockholders.The bill alleges that this action on the part of R. E. L. Pryor, who, it is alleged, was agent for the corporation and its stockholders and of Jack Pryor, who was part owner of the lands involved and represented the other owners, constituted a fraud on the corporation and its stockholders, because of which the purchase and sale should be canceled and rescinded and the consideration received by the vendors returned to the vendees.By implication, it is alleged in the bill that a compromise has been heretofore effected between the parties in the following language:

'That the defendants in this suit will set up as a defense that there has been a compromise and that the land has been deeded back to the defendants, with the exception of two (2) lots, in consideration of the satisfaction of the fifty-six thousand seven hundred dollar ($56,700.00) mortgage securing notes for fifty-six thousand seven hundred dollars ($56,700.00) made and executed by the complainant corporation as evidence of the amount of the unpaid purchase price and the surrender of said notes, but the complainant corporation says that at the time this transaction took place it was without knowledge of the fraud.A copy of the Satisfaction of Mortgage and the Deed are attached hereto and made a part of this bill.'

It is also alleged that the complainants in the court below have demanded the return of all the purchase price and have tendered to the defendants deed embracing all the lands, except two lots which had been sold and released from the mortgage.

A demurrer was filed by R. E. L. Pryor, and separate demurrer was filed by the other defendants.The demurrers were each overruled, and from such orders the appeal was taken.

There is no allegation or intimation in the bill of complaint that the character of the lands involved in the litigation was not inspected by the Oak Ridge Development Corporation, or its stockholders.There is no allegation or intimation in the bill of complaint that any false representation was made by any of the owners selling the lands to the corporation as to any existing fact which affected the value of the lands.There is no allegation in the bill of complaint that the complainants, or any of them, were deceived by the vendors of the lands as to any existing fact regarding the location, condition, or title to the lands which would in any wise affect its value.

Cancellation and rescission is sought upon the sole ground that R. E. L. Pryor, while acting as agent for, and a stockholder of, the purchasing corporation and its stockholders, made false statements in regard to commissions which he was to receive and made a secret profit out of the transaction, and that he procured one of the vendors representing himself and other vendors, to make a like statement to one of the stockholders of the corporation, representing himself and other stockholders.

The deed conveying the lands from Corwine and wife was dated October 8, 1925.The mortgage bore the same date. $9,450 was due one year from date.The satisfaction of mortgage referred to in the bill of complaint appears to be dated December 30, 1926.The suit was filed October 24, 1927.

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