Rigler v. Reid

• Decision Date: 08 December 1914
• Docket Number: No. 13751.,13751.
• Citation: 171 S.W. 952
• Parties: RIGLER v. REID et al.
• Court: Missouri Court of Appeals

171 S.W. 952

RIGLER v. REID et al.

No. 13751.

St. Louis Court of Appeals. Missouri.

December 8, 1914.

Rehearing Denied January 7, 1915.

1. CORPORATIONS (§ 121) — STOCK SALES — FRAUD — RESCISSION — ELECTION.

One defrauded into purchasing corporate stock has one election, either to rescind, or to abide by the contract and recover damages, and, having once elected, his election is final.

2. CORPORATIONS (§ 117) — STOCK SALES — EVIDENCE — FALSE REPRESENTATIONS.

Where defendant sought to rescind a purchase of corporate stock made May 16, 1911, for fraud, and had elected to affirm a prior purchase of certain of the same stock, false representations antedating and concurring with the prior purchase were irrelevant and inadmissible.

3. EVIDENCE (§ 441) — RIGHT TO RESCIND — PAROL EVIDENCE.

Where a written contract for the sale of corporate stock was plain and explicit on its face, and contained no provision authorizing defendant to rescind, if dissatisfied, at the end of 30 days, parol evidence that such option was an agreed provision of the sale was inadmissible.

4. CORPORATIONS (§ 117) — STOCK SALES — RESCISSION — FRAUD.

Evidence held insufficient to warrant a finding that defendant was induced to purchase certain corporate stock from plaintiff and execute a note for a part of the price by fraudulent representations.

5. CORPORATIONS (§ 116) — SALE OF STOCK — CANCELLATION — FRAUD.

Cancellation of a contract for the sale of corporate stock cannot be had for the seller's mere breach of a promise nor because of his statement that the stock was very valuable.

6. CORPORATIONS (§ 117) — STOCK SALES — RESCISSION — FRAUD — TIME — "IMMEDIATELY."

While the word "immediately," as used in the rule that one induced to purchase property by fraud must immediately rescind, does not mean "instanter," regardless of hindering conditions, it does mean within a reasonable time, considering the conditions and circumstances prevailing, and that the buyer shall not be permitted to speculate on whether to rescind; and hence, where defendant purchased certain corporate stock from plaintiff on May 16th, and was immediately elected secretary of the company, and did not elect to rescind for alleged fraud until July 29th, his election was not made within a reasonable time, and his right to rescind was lost.

Appeal from St. Louis Circuit Court; Wm. M. Kinsey, Judge.

Action by R. I. Rigler against H. E. Reid and others. Judgment for defendants, and plaintiff appeals. Reversed, and judgment ordered for plaintiff.

A. H. Breitenbach and H. A. Loevy, both of St. Louis, for appellant. Thomas H. Sprinkle, of St. Louis, for respondents.

NORTONI, J.

This is a suit on a promissory note, but the important question for consideration relates to the equitable defense set forth in the cross-bill. The answer and cross-bill charge the note was induced through fraudulent representations on the part of plaintiff; avers defendant rescinded the contract on discovery of the fraud; and prays the court for a decree of rescission touching the note and the contract of purchase for which it was given. The finding and judgment were for defendant, and plaintiff prosecutes the appeal.

It appears that plaintiff, one Bloomer, and Williamson were conducting a small business in St. Louis in partnership and manufacturing extracts. About February 25, 1911, this business was incorporated for $10,000 under the name of the Mound City Extract Company. The goods of the partnership were given over to the corporation in payment of the capital stock of $10,000, and such stock was issued to plaintiff, Bloomer, and Williamson. About March 9th defendant Reid, desiring to go into business, purchased 300 shares of the stock, the face value of which was $10 each, for $1,000, from plaintiff, Dr. R. I. Rigler. At the time of this purchase, March 9th, it is said plaintiff made certain false representations to defendant with respect to the value of the stock, etc. Among other things, it is said Dr. Rigler told defendant he had invested $3,500 in the business, and that it made a profit of 400 per cent. However, there is no statement that it made a net profit of that amount. There is evidence tending to prove that some of the receptacles for extracts were not full, as they seemed to be, and that, in fact, the inventory was "stuffed." There is some evidence, too, that all of the liabilities of the company were not truly revealed to defendant; the discrepancy being some $500 or $600, thereabout. But, after all, the statement of assets and liabilities that defendant details shows total assets of $11,488.05 owned by this $10,000 corporation, and it appears defendant purchased $3,000 worth of stock at par value therein from plaintiff for $1,000, or at 33 1/3 cents on the dollar. On March 31, defendant was elected secretary of the company, and it appears that he continued in and about its office and plant all of the time, and took an active part in managing the affairs of the business. Plaintiff, Dr. Rigler, was a practicing physician, and it is said he was present at the place of business only occasionally. Matters moved along with defendant present in the place of business and Bloomer traveling "on the road" until about the 16th of May, when one Herzog desired to purchase defendant's stock and the controlling interest in the business. On May 16th defendant made a new purchase of stock from plaintiff, Dr. Rigler, with a view, he says, of selling his entire interest to Herzog. By this second purchase, effected on May 16, 1911, defendant procured from plaintiff 460 additional shares of the stock in the company for the agreed price of $1,800, to be paid as follows: $50 cash; and $1,750 by a note, dated May 16, 1911, and due in 30 days. This transaction was evidenced by a written contract of even date therewith, executed by both parties, and, as part of the consideration, defendant agreed to pay a note held by the Cass Avenue Bank for $203 and another note to the Merrill Drug Company for $80. Defendant insists, too, that it was agreed that if he became dissatisfied within 30 days he could surrender the stock to plaintiff, Dr. Rigler, take up his note, and receive the $50 paid, which was to be returned, and be released from the bargain; but there is no mention of this feature of the transaction in the written contract referred to. About June 1st defendant had occasion to go through the books of the company, and discovered, as he says, that he had been deceived on purchasing his stock on the 9th of March theretofore, in that the liabilities of the company were several hundred dollars greater than he had understood, and the amount of goods on hand was not as great as had been represented to him at the time; also that plaintiff had not invested $3,500 therein. Thereafter he sought to rescind by tendering the stock purchased on May 16th to plaintiff and demanding the return of his note and the $50 paid on the purchase of stock. Plaintiff declined to accede to the proffered rescission, and said they would straighten the matter out some way, but nothing was done. Several months thereafter plaintiff instituted suit against defendant on the note of date May 16th, given in consideration of the second purchase of stock, and defendant sets forth in his cross-bill that the note was induced by fraud; that upon the discovery of the fraud he rescinded the contract; and prays the court for a decree of rescission canceling the note and a judgment awarding him a recovery of the $50 from plaintiff. There is much evidence in the record concerning representations made by plaintiff to defendant, pertaining to the first purchase of stock on March 9, 1911, but obviously this is foreign to the issue here in judgment, for the present suit deals alone with the note given May 16, 1911, and the cross-bill seeking a rescission for fraud in the inception of that transaction. Defendant in no wise seeks to rescind the contract by which he purchased the stock in the company of plaintiff on March 9th, but, on the contrary, affirms that transaction.

A person defrauded into making a contract has but an election, and an election once determined is determined forever. An election to abide by the contract will prevent its rescission.

Defendant clearly affirms the transaction of March 9th, and his cross-bill seeks equitable relief only with respect to the transaction of May 16th. The fraud, if any, antedating and concurring with the purchase of March 9th, appears to be condoned and ratified by defendant. But, though such be true, he details in evidence alleged fraudulent representations with respect to the transaction of March 9th as if they are pertinent to be considered on his cross-bill for rescission of the contract entered into May 16th thereafter. Obviously this evidence is beside the case, for the contract in judgment is to be determined with reference to the facts and circumstances under which it was made. Concerning this matter, we find no substantial evidence in the record tending to prove fraudulent representations sufficient to mislead defendant and authorize the cancellation of the contract entered into on May 16th.

However, on reviewing defendant's evidence, it appears his real ground of complaint on which he seeks a rescission of the contract of May 16th in judgment here is that plaintiff agreed to take...