Wiser v. Lawler

• Decision Date: 09 November 1900
• Docket Number: Civil 651
• Citation: 62 P. 695,7 Ariz. 163
• Parties: CLINTON B. WISER et al., Plaintiffs and Appellants, v. JOHN LAWLER et al., Defendants and Appellees
• Court: Arizona Supreme Court

62 P. 695

7 Ariz. 163

CLINTON B. WISER et al., Plaintiffs and Appellants, v. JOHN LAWLER et al., Defendants and Appellees

Civil No. 651

Supreme Court of Arizona

November 9, 1900

APPEAL from a judgment of the District Court of the Fourth Judicial District in and for the County of Yavapai. Webster Street Judge. Affirmed.

The facts are stated in the opinion.

T. W Johnston, and Kretzinger, Gallagher & Rooney, for Appellants.

In statements sent to the public for the purpose of inducing investments in a corporation, representations of fact must be made with strict accuracy, and no fact material to the investment should be omitted. Bispham on Equity, sec. 208; Directors etc. v. Kirch, 2 L.R., Eng. & Ir. App. 113; Railway Co. v. Muggeridge, 1 Drew. & S. 363; Edington v. Fitzmaurice, 29 Ch. Div. 459; Henderson v. Lacon, L.R. 5 Eq. 262; Hubbard v Weare, 79 Iowa 678, 44 N.W. 915.

The prospectus and accompanying documents must be construed together to determine meaning of any part. Schyville etc Co. v. Moore, 2 Whart. 491.

The court in reading statements of this character circulated generally among the people will consider how they would influence the ordinary mind. Railway Co. v. Muggeridge, 1 Drew & S. 363; Sessions v. Rice, 70 Iowa 306 30 N.W. 737; Arnison v. Smith, 41 L.R. Ch. Div. 359; Elsworth v. Campbell, 85 Iowa 532, 54 N.W. 477.

Due weight should be given to the testimony of the large number of persons who say they were led by the statements of the prospectus to believe the company the absolute owner of the mines. Clark v. Dickson, 95 Eng. Com. L.R. 463.

The public had the right to rely on the prospectus without inquiry. Bosher v. Richmond, 89 Va. 455, 37 Am. St. Rep. 879, 16 S.E. 360; Clark v. Dickson, 95 Eng. Com. L.R. 463; Wilson v. Higby, 62 F. 723; Quirk v. Thomas, 6 Mich. 120; Morgan v. Skiddy, 62 N.Y. 325; Thompson on Corporations, sec. 1312.

The false representation must be material to the investment, but it need not be the sole inducement. Morgan v. Skiddy, 62 N.Y. 319; Peek v. Derry, 37 L.R. Ch. Div. 541; 1 Bigelow on Fraud, p. 544; James v. Hodsohn, 47 Vt. 127; Arnison v. Smith, 41 L.R. Ch. Div. 359; Putsford v. Richards, 17 Beav. 96; Smith v. Chadwick, 20 L.R. Ch. Div. 27.

The law presumes that subscriptions coming in within a reasonable time after the general circulation of a prospectus were induced by it. "The estoppel will be extended far enough to protect every one who may have been presumed to have acted upon or governed by it." Herman on Estoppel and Res Adjudicata, secs. 794, 795; Hatch v. Spooner, 13 N.Y. 642; Bradley v. Poole, 98 Mass. 183, 93 Am. Dec. 114.

Lawler and Wells are estopped to disturb the appearance and representation of ownership of the mines in the Seven Stars Company. Gill v. Griffith & Schley, 2 Md. Ch. 270; Wendell v. Van Rensselaer, 1 Johns. Ch. 353; 2 Pomeroy's Equity Jurisprudence, sec. 802; Jones v. Bolles, 9 Wall. 364; Horn v. Cole, 51 N.H. 287, 12 Am. Dec. 111; Jowers v. Phelps, 33 Ark. 465; Lucas v. Hart, 5 Iowa, 415; Anderson v. Hubble, 93 Ind. 570, 47 Am. Rep. 394; Herman on Estoppel and Res Adjudicata, 938, 939, 943, 952, 953, 954; Nettlewell v. Watson, L.R. 26 Ch. Div. 507; Carincross v. Lorimer, 3 Macq. App. Cas. 829; Truesdale v. Ward, 24 Mich. 117; O'Connor v. Clark, 170 Pa. St. 318, 32 A. 1029; Bank v. Roop, 48 N.Y. 392; Hayen v. O'Hagan, 60 Mich. 150, 26 N.W. 861; Logan v. Gardner, 136 Pa. St. 588, 20 Am. St. Rep. 939, 20 A. 625; Tilton v. Nelson, 27 Barb. 595; Storrs v. Barker, 6 Johns. Ch. 166, 10 Am. Dec. 316, and note; Richardson v. Hyams, 1 La. Ann. 286.

The principle of the doctrine of equitable estoppel is honesty and fair dealing, and in its application the court seeks to make the parties do what honesty and fair dealing require. No contractual or fiduciary relation is necessary; knowledge imposes the duty. Logan v. Gardner, supra; Anderson v. Hubble, supra; The Ottumwa Belle, 78 F. 643.

Intent to mislead is unnecessary; "fraudulent effect" or "unjust result" is sufficient. Dair v. United States, 16 Wall. 1, 4; Hill v. Blackwelder, 113 Ill. 283; The Ottumwa Belle, supra; Horn v. Cole, supra; Anderson v. Hubble, supra.

Presence of title on record is no excuse or justification for acquiescence, participation, and receipt of benefits here shown on part of Wells and Lawler. Sumner v. Leaton, 47 N.J. Eq. 103, 19 A. 884; Carr v. Wallace, 7 Watts, 394; Markham v. O'Connor, 52 Ga. 183.

There need be no direct communication between parties claiming the estoppel and the party alleged to be estopped. Anderson v. Hubble, supra; Clark v. Dickson, 95 Eng. Com. L.R. 463; Kelley v. Frick, 110 Ind. 552, 11 N.E. 453; Stevens v. Ludlum, 46 Minn. 160, 24 Am. St. Rep. 210, 48 N.W. 771.

"Standing by" does not necessarily mean actual presence. Anderson v. Hubble, supra; Herman on Estoppel and Res Adjudicata, sec. 954.

Estoppel may arise in favor of one not purchasing directly into the title. The doctrine has been applied for the protection of stockholders and creditors. Jones v. Bolles, 9 Wall. 364; Trenton Nat. Bank v. Duncan, 86 N.Y. 222; Herman on Estoppel, sec. 397; Livermore v. Maxwell, 87 Iowa 705, 55 N.W. 37.

These persons defrauded in the act of purchasing stock are under no theory of the law chargeable with notice of what the records of the company disclosed. Even stockholders are not chargeable, as matter of law, with notice of the acts of officers or resolutions of the directors. Thompson on Corporations, sec. 4455; Cook on Stockholders, sec. 731.

A party who receives benefits gained by representations that the title to his property is in another will not be permitted to assert rights inconsistent with the transaction to the injury of the person misled. Brewster v. Baker, 16 Barb. 613; Breedens v. Stamper, 57 Ky. 174; Whittaker v. Williams, 20 Conn. 109.

A party cannot participate in the fruits of a fraud and at the same time repudiate it as not his act. Texas etc. Co. v. Dublin Compress Mfg. Co., (Tex. Civ. App.) 38 S.W. 404; Olmstedt v. Hatuling, 1 Hill, 317; Cran v. Hunter, 28 N.Y. 389; Morse v. Ryan, 26 Wis. 356.

"He who receives money or property or a benefit of any kind, under an instrument, whatever its character or his relation to the maker, cannot question the instrument in whole or in part." In re Peaslee's Will, 73 Hun, 113, 25 N.Y.S. 940; Havens v. Sackett, 15 N.Y. 365; Birmingham v. Kirwin, 2 Schoales & L. 444; Wood v. Seeley, 32 N.Y. 105.

In addition to the foregoing, the following are different applications of the same principle that here estops Lawler and Wells from asserting their legal rights under the Cowland contract to the injury of these purchasers of stock, after having affirmed the representation of title and apparent ownership in the company by receiving the gross proceeds of the company's operation, the fifty thousand dollars in stock, the superintendency of Lawler, and the $112,339.96 sent from New York on behalf of the company. Field v. Doyon, 64 Wis. 560, 25 N.W. 653; Leathers v. Ross, 74 Iowa 630, 38 N.W. 516; Maple v. Kussart, 53 Pa. St. 348, 91 Am. Dec. 214; Herman on Estoppel and Res Adjudicata, secs. 800, 1063; McConnell v. People, 71 Ill. 487; Daniels v. Tearney, 102 U.S. 415; Franklin v. Pollard Mill Co., 88 Ala. 318, 6 So. 685; Swain v. Seamans, 9 Wall. 254; Fry v. Morrison, 159 Ill. 244, 42 N.E. 774; Robinson v. Elliott, 22 Wall. 513; Gill v. Griffith & Schley, 2 Md. Ch. 270; Wendell v. Van Rensselaer, supra.

The concealment of the important terms of a transaction or the secret retention of benefits by a grantor has always been held sufficient to show the fraud of a transaction and support a decree for the restoration of the property or money of the deceived purchaser or creditor. Robertson v. Elliott, 22 Wall. 513; Gill v. Griffith & Schley, 2 Md. Ch. 270; Wendell v. Van Renssellaer, supra.

That one or two of the stockholders may have purchased with knowledge of the fraud is no defense. Otherwise, to corrupt one would save the fraud. New Sombrero Co. v. Erlanger, 5 L.R. Ch. Div. 73.

Equitable estoppel is frequently held a ground for affirmative relief. Jones v. Bolles, 9 Wall. 364; Kirk v. Hamilton, 102 U.S. 68; Storrs v. Barker, 6 Johns. Ch. 166, 10 Am. Dec. 316, and note; Lucas v. Hart, 5 Iowa, 415; Anderson v. Hubble, 93 Ind. 570, 47 Am. Rep. 394, and note; Drexel v. Berney, 122 U.S. 241, 7 S.Ct. 1200.

The estoppel is commensurate with the representation and operates to put the title where it was represented to be. Grisster v. Powers, 81 N.Y. 57, 37 Am. Rep. 475; Beach on Equity Jurisprudence, 800; Trenton Baking Co. v. Dinan, 86 N.Y. 221; Ellsworth v. Campbell, 85 Iowa 532, 54 N.W. 477.

A court of equity has power to decree a title to real estate as against a party whose conduct raises an estoppel. Jones v. Bolles, 9 Wall. 364; Lucas v. Hart, 5 Iowa, 415; Kirk v. Hamilton, 102 U.S. 68; Robbins v. Moore, 129 Ill. 57, 21 N.E. 934; Stone v. Tyree, 30 W.Va. 701, 5 S.E. 878; Storrs v. Barker, 6 Johns. Ch. 166, 10 Am. Dec. 316, and note.

Granting that Lawler and Wells may keep the property, it would be so unjust and fraudulent for them at the same time to retain the money that equity will decree its repayment to the stockholders. Field v. Doyon, 64 Wis. 560, 25 N.W. 653; Piper v. Hoard, 107 N.Y. 73, 1 Am. St. Rep. 789, 13 N.E. 626; Day v. Brenton, 102 Iowa 483, 63 Am. St. Rep. 460, 71 N.W. 538; Maple v. Kussart, 53 Pa. St. 348, 91 Am. Dec. 214; Quick v. Milligan, 108 Ind. 419, 58 Am. Rep. 49, 9 N.E. 392; Story's Equity, secs. 1255, 1256; Third Nat. Bank v. Stillwater Gas Co., 36 Minn. 75, 30 N.W. 440.

E. M. Sanford, J. F. Wilson, and Herndon & Norris, for Appellees.

The language of the prospectus must be clear and unambiguous as to a fact to constitute a misrepresentation. Fuller, C.J.,...