Va. Land Co v. Haupt.1

• Decision Date: 08 March 1894
• Parties: VIRGINIA LAND CO. v. HAUPT.1
• Court: Virginia Supreme Court

19 S.E. 168

90 Va. 533

VIRGINIA LAND CO.

v.HAUPT.¹

Supreme Court of Appeals of Virginia.

March 8, 1894.

Corporations — Action on Stock Subscription —Defenses—Fra ud.

1. One who was induced to subscribe for stock in a corporation formed to purchase and develop certain land, by statements made by one of its promoters, on whose supposed disinterested and superior judgment he relied, in ignorance that such promoter had an option on the land, is not liable on his subscription.

2. Laches does not begin to run as against a subscriber's right to repudiate a subscription obtained from him by fraud till he has knowledge of the fraud, or of facts which would reasonably arouse inquiry on his part.

3. The subscriber is not affected with knowledge of the fraud by the disclosure of the facts in regard thereto at a stockholders' meeting for which the perpetrator of the fraud holds proxies from him, and at which he is not present.

Error to circuit court of city of Roanoke.

Action by the Virginia Land Company against one Haupt. Judgment for defendant, and plaintiff brings error. Affirmed.

Watts, Robertson & Robertson, for plaintiff in error.

Griffin & Glasgow, for defendant in error.

LEWIS, P. The defendant in error was sued by the Virginia Land Company to recover certain unpaid assessments on the stock of the company aggregating $2,800. The principal grounds of defense were (1) fraud in procuring the contract of subscription; and (2) a material variance between the prospectus and the charter of the company. The jury found for the defendant, and the court refused to disturb the verdict. The defendant subscribed for the stock at the instance of one O'Leary, who was a real estate agent at Roanoke, and one of the promoters of the company. It was proposed in the prospectus "to organize a company for the purchase of a certain tract of land, lying near the said city, containing about 550 acres, and to lay it out in residence lots, and to develop its natural attractions." By the charter subsequently obtained the company was authorized to buy land, not exceeding 5, 000 acres, also personal property, and to issue mortgage bonds; to loan money to develop lands; to construct street railways, and to use cars impelled by any kind of motive power; to erect and operate motor, gas, and electric works, etc. O'Leary was known to the defendant as a successful business man, and his name headed the subscription list. When he solicited the defendant to subscribe he Informed him, in answer to a specific inquiry, that the land proposed to be purchased belonged to Gates, Moorman & Moorman. In point of fact, O'Leary and one Christian, another subscriber to the stock and a promoter of the company, held options on the land, which fact was not mentioned to the defendant. O'Leary recommended the stock to the defendant as a desirable investment, and upon his advice the defendant agreed to take 100 shares. After the organization of the company the land was transferred to the company, and in consequence O'Leary and Christian realized a very large profit. The company was chartered early in March, 1890, and on the 19th of the same month the first stockholders' meeting was held, at which meeting O'Leary represented the defendant as his proxy. At the same meeting an assessment of 10 per cent, of the capital stock was ordered, notice of which was afterwards sent to the defendant; and on the 23d of the ensuing August another assessment of 5 per cent, was ordered. Upon receipt of notice of this last assessment the defendant wrote the secretary of the company as follows: "Dear Sir: I have your notice of September 1st, calling for an assessment of $500.00, —five per cent, on one hundred shares of your stock. If you will please refer to my letter of April the 28th, addressed to your treasurer, you will notice that I am not a stockholder in your company. Although I have never received a reply to this letter, I take It, In the absence of such acknowledgment, my stock was. as a matter of course, canceled. So that there may be no further misunderstanding in the matter, however, I beg to advise that I am not a stockholder in the Virginia Land Company, having paid no assessment whatever on the subscription." In the notice of the 10 per cent, assessmentof March 19, 1890, it was said: "This amount must be paid promptly, or the stock will be declared forfeited;" and in response to this the defendant's letter of the 28th of April, above referred to, was written, which Is as follows: "Dear Sir: I...