Southern Building & Loan Ass'n v. Bryant

• Citation: 225 Ala. 527,144 So. 367
• Decision Date: 06 October 1932
• Docket Number: 8 Div. 428.
• Parties: SOUTHERN BUILDING & LOAN ASS'N v. BRYANT.
• Court: Supreme Court of Alabama

144 So. 367

225 Ala. 527

SOUTHERN BUILDING & LOAN ASS'N v. BRYANT.

8 Div. 428.

Supreme Court of Alabama

October 6, 1932

Rehearing Denied Nov. 3, 1932.

Appeal from Circuit Court, Morgan County; W. W. Callahan, Judge.

Action for deceit by J. J. Bryant against the Southern Building &amp Loan Association. From a judgment for plaintiff, defendant appeals. Transferred from Court of Appeals, under section 7326, Code of 1923.

Affirmed.

Lange Simpson & Brantley, of Birmingham, for appellant.

Julian Harris and A. J. Harris, both of Decatur, for appellee.

THOMAS J.

The count was one on the case claiming $3,000 for deceit in the sale to plaintiff on the 4th day of February, 1929, of a "surplus certificate," issued by the defendant, a building and loan association. It is charged that an agent of the defendant on the sale made representations to the effect that plaintiff was purchasing stock which had a value of $250, and which bore interest at the rate of 8 per cent., on which plaintiff could at any time withdraw his $250, with interest; that these representations were false and were willfully made and knowingly false; that the surplus certificate had no market value, and under the rules and by-laws of the defendant it did not bear any interest, and had no value other than a remote future possibility. The count claims the damages sustained by plaintiff, together with punitive damages for the deceit.

The defendant demurred and thereby challenged the sufficiency of the averments and the representations to constitute fraud and also the sufficiency of the averments to apprise the defendant of the character and extent of the misrepresentations; whether misrepresentations of the terms of the contract, or whether a promise to do a future act. It is urged by demurrers that it appears on the face of the count the defendant was at the time a building and loan association, a corporation with shareholders and members, and that plaintiff, being a member and shareholder and electing to remain a member and shareholder, could not sue the defendant for damages for a deceit in the sale of the shares of stock. The demurrer was overruled.

Defendant thereupon filed pleas 1 and 2 of the general issue; pleas 3 and 4 of the statute of limitations of one year; pleas of recoupment A and B; and plea of set-off C. Pleas A, B, and C were amended, and to each of the pleas as amended plaintiff filed a demurrer.

Each of the last-indicated special pleas sets up the contract by virtue of which plaintiff purchased the stock or certificate as alleged in the complaint; avers that plaintiff entered into a contract for the purchase of 50 units of stock of the par value of $100 per unit, and agreed to pay $250 cash and $25 per month until the entire purchase price of $5,000 should be paid; purports to set up the non-payment of the purchase price of the stock; and claims $475 as the amount due defendant at the time of the filing of the complaint. Each of said pleas avers a written contract was signed by plaintiff at the time, and pleas A and B aver that the contract described is the same transaction as that described in the plaintiff's complaint. Plaintiff's demurrer to each of the pleas, A, B, and C as amended, was sustained, whereupon the plaintiff filed replications 1, 2, and 3 to each of the defendant's pleas 3 and 4 of the statute of limitations, viz., the first replication joined issue. Defendant's demurrer to replication 2 was sustained, and therefore is not considered on this appeal. Replication 3 set out that the suit was brought by the plaintiff within one year after the fraud alleged in the complaint was discovered by the plaintiff, which was, to wit, January, 1930, and the defendant's demurrer to this replication was overruled. Grounds 5, 6, and 7 of this demurrer raised the point that the circumstances and the manner under and in which plaintiff discovered the fraud are not set out.

It is declared by the decisions, that one induced by fraud to contract has an election of remedies: (1) To rescind and sue for his money back, when he has restored the benefits received, then only may he recover the payments made; or (2) he may affirm the contract, retain its benefits, and sue for the deceit and damages accruing to him (Day v. Broyles, 222 Ala. 508, 133 So. 269; Coleman v. Night Commander Lighting Co., 218 Ala. 196, 118 So. 377; Chandler v. Wilder, 215 Ala. 209, 110 So. 306; Gulf Electric Co. v. Fried, 218 Ala. 684, 119 So. 685; Fairbanks, Morse & Co. v. Dees, 220 Ala. 41, 126 So. 624; Southern Building & Loan Association v. Wales, 224 Ala. 40, 138 So. 556); or (3) the party defrauded, under appropriate facts, when sued by the party who perpetrated the fraud, may defeat such action at law by an appropriate plea setting up the facts amounting to the fraud that induced that defendant to enter into the contract, by way of recoupment or set-off or estoppel, as the case may be (13 C.J. 395, §§ 304, 306; 14 C.J. 589, § 864; Sass v. Thomas, 6 Ind. T. 60, 89 S.W. 656, 11 L. R. A. (N. S.) 260; 6 R. C. L. p. 636, § 52; Thompson v. Fourth Nat. Bank, 214 Ala. 452, 456, 108 So. 69; Prestwood v. Carlton, 162 Ala. 327, 339, 50 So. 254; Lowery v. Mutual Loan Soc., 202 Ala. 51, 79 So. 389; Grissom v. J. B. Colt & Co., 218 Ala. 336, 118 So. 580); (4) that the measure of actual damages in such suit is the difference between the value of the shares at the time of discovery of fraud and the purchase price, or the value the article would have had, if it passed the qualities represented and within the contemplation of the parties, with interest (Southern Building & Loan Association v. Wales, supra; C. D. Chapman & Co. v. G. P. Dowling Hardware Co., 205 Ala. 586, 88 So. 748; Attalla Oil & Fertilizer Co. v. Goddard, 207 Ala. 287, 92 So. 794; Grissom v. J. B. Colt & Co., supra; Ewart v. Cunningham, 219 Ala. 399, 122 So. 359; Hogan v. Thorington, 8 Port. 428; Maxwell v. Sherman, 172 Ala. 626, 55 So. 520; Preston Motors Corporation v. Wood, 208 Ala. 172, 94 So. 70; Kilby Locomotive & Mach. Works v. D. B. Lacey & Son, 12 Ala. App. 464, 67 So. 754, and authorities; King v. Livingston Mfg. Co., 192 Ala. 269, 68 So. 897; Caffey v. Alabama Mach. & Supply Co., 19 Ala. App. 189, 96 So. 454; Robinson v. Steverson, 20 Ala. App. 59, 100 So. 910); (5) that punitive damages may not be recovered in such an action (deceit) unless the fraud is gross, malicious, oppressive, and committed with an intention to so injure and defraud. (Caffey v. Alabama Mach. & Supply Co., 19 Ala. App. 189, 96 So. 454, 457; Ex parte Alabama Machinery & Supply Co., 209 Ala. 466, 96 So. 459; Alabama Mach. & Supply Co. v. Caffey, 213 Ala. 260, 262, 104 So. 509; 24 C.J. 104, § 265).

It is unnecessary to observe that when the action is deceit, and therefore a ratification of the contract, the defendant may recoup any sum due the defendant under the contract. That is, the defendant is entitled to his damages on the basis of the performance of the contract. § 10180, Code; Preston Motors Corp. v. Wood, 208 Ala. 172, 94 So. 70; Moore v. Oneonta Motor Co., 223 Ala. 510, 137 So. 301; Fairbanks, Morse & Co. v. Dees, 220 Ala. 41, 126 So. 624; Lowery v. Mutual Loan Soc., 202 Ala. 51, 79 So. 389; Grissom v. J. B. Colt & Co., 218 Ala. 336, 118 So. 580; McCready v. Phillips, 56 Neb. 446, 76 N.W. 885.

Since writing the above there has been a decision by the other division of Southern Building & Loan Association v. Dinsmore (Ala. Sup.) 144 So. 21. This case is ruled, in respects to the ruling on demurrer to the pleas and in all other respects, except as now to be considered, by that recent decision by Mr. Justice Gardner.

A further consideration is necessary as to the refusal of the affirmative charge requested in writing by the defendant, and the motion for a new trial, and its ground that the verdict was excessive.

The witness Bryant testified in his own behalf that defendant's agent talked with him three times about the sale, which was consummated about February 2, 1929, and a receipt given for the check of plaintiff for $250; that the "surplus certificate and a little book" were delivered to him at a later date; about February 4th. The witness said that he paid him (Mr. Abbott) the $250 "for units-$5.00 a unit. He said he could not sell me over five hundred, or five hundred dollars worth, and I bought $250.00 worth of Southern Building & Loan Stock. He told me it was $5.00 a unit, and said I could buy as little, but I could not buy over $500.00 worth from him; said that was as much as he was allowed to sell of the stock. He told me that it would give me 8% twice a year, 4%-that would be every six months; that the stock would grow, and he would guarantee me that much, and the growth of it would make it double inside, he said, not over three years, but said two and a half years the growth would double; and he said also any day you want your money, all you got to do is to send in your pass book. He had another book looked like the one, but I never looked at it, and said: 'I will give you that and any day you want your money, you can send that in to the office and get it just the same as you can down there at the Tennessee Valley Bank.' *** On the third trip he said: 'Here's your certificate,' and he gave me another little sheet about like that receipt and said, 'You can sign this and send it into the Company if you want to and give them a right to vote any way they want to, and it is not binding, you don't have to if you don't want to.' Nothing...