Rosenberg v. McKinney

• Decision Date: 09 March 1909
• Citation: 120 N.W. 230,138 Wis. 381
• Parties: ROSENBERG v. MCKINNEY.
• Court: Wisconsin Supreme Court

138 Wis. 381

120 N.W. 230

ROSENBERG

v.MCKINNEY.

Supreme Court of Wisconsin.

March 9, 1909.

Appeal from Circuit Court, Milwaukee County; Orren T. Williams, Judge.

Action by I. J. Rosenberg against R. A. McKinney. From a judgment for defendant, plaintiff appeals. Reversed and remanded, with directions.

Plaintiff sued on a note dated May 24, 1905, due in 120 days, for $1,000, which was duly indorsed to him and of which he claimed to be an innocent holder for value in due course. Defendant set up that the note was given for certain mining stock of the Standard Lead & Zinc Smelting & Mining Company, for which he was induced to pay $1,000 in money and to give his four $1,000 notes by fraudulent representations of one Davidor, an officer of the company. The answer also set up by way of counterclaim that the plaintiff was indebted to him for certain 10,000 shares of the stock so purchased which had been delivered by defendant to plaintiff and retained and converted by the latter. The jury rendered a verdict for defendant on the plaintiff's cause of action, and also for the defendant upon his counterclaim for the sum of $750 and interest, from judgment upon which verdict the plaintiff appeals.C. H. Hamilton, for appellant.

Boden & Beuscher, for respondent.

DODGE, J. (after stating the facts as above).

1. The trial and record in this case were confused and amplified by a tremendous amount of utterly irrelevant testimony and evidence, much of it so inadmissible that it was an abuse to occupy the court therewith; but almost incidentally a small amount of undisputed evidence, mainly from the defendant himself, appears in the record which we deem wholly conclusive of the rights of the parties upon the cause of action presented by the complaint. The cause of action is on a note given for part of the purchase price of a quantity of capital stock. The defense thereto is fraud on the part of the taker of the note in stating to the maker “that there was no promotion stock in the company, that defendant should be elected a director, and that all the other directors had paid for stock which they held.” This is pleaded as a defense and as a reason why defendant should be relieved from his contract to pay for the stock. It is tantamount, of course, to rescission. If it be conceded that the statements were false, were originally relied on, and might constitute actionable fraud, the defendant, when he discovered the falsity, doubtless had a right of election to promptly rescind and demand release from his promise to pay; but he equally had the option to retain that which he had received, thereby affirming the contract with the accompanying right to recover such damage as he had suffered by reason of the fraud. It is established most conclusively by defendant's own evidence that the falsity of any of these statements which might have constituted fraud became fully known to him very shortly after the purchase of the stock. He was immediately elected a director. He joined in a confederacy to place the stock of himself and the other directors in the hands of an escrow to hold the same out of the market in order to facilitate jobbing its price. He had full access to the books, participated actively in the examination of the property which the corporation had received as a consideration for the issue of this stock, learned of the terms under which one-half of the stock of the corporation had been issued to the seven directors, including himself; so that, if it met the definition “promotion stock,” he knew of the fact, and he himself testified that he learned as early as July, after the purchase, that the whole scheme was a fraudulent conspiracy. Meanwhile he continued to hold all rights gained by the purchase. He availed himself of the opportunity as a member of what he describes as a fraudulent conspiracy to manipulate and deal in what small amount of the stock of the corporation had reached the general market, buying and selling the same in...