Thorpe v. Cooley

• Decision Date: 07 December 1917
• Docket Number: No. 20571.,20571.
• Citation: 138 Minn. 431,165 N.W. 265
• Parties: THORPE v. COOLEY.
• Court: Minnesota Supreme Court

138 Minn. 431

165 N.W. 265

THORPE

v.COOLEY.

No. 20571.

Supreme Court of Minnesota.

Dec. 7, 1917.

Appeal from District Court, Steele County; Arthur B. Childress, Judge.

Action by Margaret A. Thorpe against E. W. Cooley. Verdict for defendant, and plaintiff appeals. Reversed.

Syllabus by the Court

Where notes are procured by fraud, the giving of renewal notes after discovery of the fraud is a waiver of the fraud.

An issue not pleaded nor voluntarily litigated on the trial cannot be made the basis for relief.

Defendant was a stockholder in a corporation the success of which consisted in making sales of water from a spring which the corporation owned. The matter of financing the corporation had proved difficult and at a corporate meeting defendant made a motion for an issue of bonds. The motion was carried and the bonds issued. Statement by a representative of the corporation to defendant, to induce him to exchange stock for bonds and to renew notes given for the stock, that the bonds were good as gold, and that he could resell them, held a mere statement of opinion and not such misrepresentation of fact as to constitute actionable fraud.

There is no evidence of such relation between the parties that fraud can be predicated on nondisclosure of facts. Allen & Fletcher and John C. Benson, all of Minneapolis, for appellant.

Leach & Leach, of Owatonna, for respondent.

HALLAM, J.

Action on four promissory notes of $500 each, made by defendant to himself and indorsed to plaintiff. Defendant claimed the notes were procured by fraud. Plaintiff denied fraud and alleged she was a bona flde purchaser without notice. Defendant denied this. The jury found for defendant.

On June 8, 1911, the Hiawatha Water Company owned about 30 acres of land near Janesville, Wis., on which was a spring. Some buildings had been erected thereon. The property was not of great value, save as the spring was valuable. The company was formed for the purpose of bottling and selling water from this spring. To do this it was thought the expenditure of a large sum for advertising and promotion was required. The corporation was capitalized for $1,250,000 and the stock put on sale. Plaintiff was a doctor at Blooming Prairie, Minn. One Campbell, an agent selling the stock of the company, asked defendant to buy. On June 8, 1911, defendant agreed to invest $2,500 in stock and gave therefor five notes, of $500 each, due in six months. Those in charge of the corporation conceived the notion, popular in some quarters, that real wealth could be amassed by watering the stock and selling $6 of stock for $1 in money. Defendant was not averse to this method of finance and it was agreed that he should receive stock of the par value of six times his investment. Defendant paid one note and had the others renewed from time to time until March 26, 1913. At that time Thomas Peebles, who was connected with the company in some way, made demand for payment of the notes. At Peebles' suggestion defendant went to Minneapolis to see him. While there, defendant gave the notes in suit in renewal of his former notes and at the same time exchanged his right to receive stock for a right to receive, at par, bonds which the company had issued secured by a trust deed of its property.

The defense charges fraud committed by Campbell in procuring defendant to buy the stock and give his notes on June 8, 1911, and fraud by Peebles in procuring the renewal notes on March 26, 1913. We may assume that plaintiff was chargeable with notice of every fact in this whole transaction. The difficulty we have is in finding the existence of fraud that will avoid these renewal notes.

1. There is evidence that some misrepresentation was made to induce defendant to make the original purchase of stock and to give the original notes. The fact is, however, after he made the original purchase of stock, defendant went to Janesville and investigated fully and also participated in corporate meetings. After returning from Janesville he wrote that he would soon pay his notes, and as above stated, did pay one and secured extension of the others.

It is clear that at the time defendant gave the new notes in 1913 he had full knowledge of the truth or falsity of all representations which he claims in his answer were made to him when he bought his stock and gave the first notes in 1911. All these he waived by giving the new notes. 7 Cyc. 881; 8 C. J. 445; Daniel, Neg. Inst. (6th Ed.) p. 302; Long v. Johnson, 15 Ind. App. 498, 44 N. E. 552;Brown v. First National Bank, 115 Ind. 572, 18 N. E. 56;Sawyer v. Wiswell, 9 Allen, 39;Keyes v. Mann, 63 Iowa, 560, 19 N. W. 666;Calvin v. Sterritt, 41 Kan. 215, 21 Pac. 103.

2. Defendant claims on this appeal that there was one misrepresentation, the falsity of which he had not discovered when he gave the renewal notes, namely, there was a statement in a prospectus handed to him by Campbell that the...