Wright v. Hix

• Decision Date: 30 October 1919
• Docket Number: 3 Div. 398
• Parties: WRIGHT, Ins. Com'r of Georgia, v. HIX.
• Court: Alabama Supreme Court

83 So. 341

203 Ala. 425

WRIGHT, Ins. Com'r of Georgia, v. HIX.

3 Div. 398

Supreme Court of Alabama

October 30, 1919

Appeal from Circuit Court, Montgomery County; Leon McCord, Judge.

Action by William A. Wright, as Insurance Commissioner of the State of Georgia, against W.T. Hix in assumpsit. Judgment for defendant, and plaintiff appeals. Reversed and remanded.

Thomas J., dissenting.

The allegations of the complaint sufficiently appear from the two opinions. The pleas were as follows:

(1) That prior to and at the time of the execution of the note sued on the said Empire Life Insurance Company was a nonresident corporation duly, legally, and fully organized and incorporated, and was engaged in business; that subsequent to the said incorporation of the said the Empire Life Insurance Company, and while it was a going concern engaged in business for which it was organized, it issued a large amount of additional capital stock, commonly known as treasury stock; that this issuance of said stock was prior to the execution of said note; that the agent, servant, or employé of the said company, who was engaged in the business of selling said additional stock for the said company, while acting within the line or scope of his employment, on, to wit, May 24, 1914, in the county of Montgomery, state of Alabama, sold to this defendant a part of said additional stock of the par value of, to wit $1,100; that the note here sued on was, in the county of Montgomery, state of Alabama given by the defendant, who was then a resident of said state, to the said corporation for said stock sold as aforesaid; that said note was procured and obtained from the defendant by the fraud or misrepresentation of the said agent, servant, or employé of the defendant while so acting in the line or scope of his said employment, in this; the said agent, servant, or employé at the time of the said sale while so acting, falsely represented and stated to the defendant that said company was solvent, and in a flourishing condition, that it had paid to its stockholders regularly large dividends, and had not since its organization failed to pay yearly to its stockholders less than 8 per cent. per annum on their investments.

Defendant further avers that said representations and statements were false, fraudulent, and untrue; that as a matter of fact said company was not in a flourishing condition; that it had never paid to its stockholders large dividends, and had never since its organization paid yearly to its stockholders 8 per cent. per annum on their investments; that he, the defendant, was ignorant of the falsity and untruth of said statements and representations that believing said statements and representations to be true, and relying and acting thereon in said county and state, he bought said stock, and then and there executed and delivered the note here sued on in payment therefor; that the said stock purchased as aforesaid was held and retained by the company as collateral security for the payment of said note; that there was no other consideration for said note than as above set forth; that the transfer of said stock to defendant was never entered upon the books of said corporation.

Defendant further avers that he has never participated in any meeting of the stockholders of said company, has never been an officer thereof, and has never received or accepted any benefit of any character whatever from said company by reason of his said purchase of said stock.

Defendant further avers that he did not learn of or have any notice of said fraud or misrepresentation until the affairs of said company were placed in the hands of the plaintiff which was in the month of January, 1915, before said note became due; that he thereupon and immediately notified plaintiff of the fraud that had been practiced upon him, as averred hereinbefore, and rescinded said sale, and stated that he would not pay said note when the same became due, and that he relinquished all of his right, title, interest, and claim in and to said stock, and repudiated said contract, and offered to rescind said purchase.

The defendant further avers that at the time the business and affairs of said Life Insurance Company were placed in the hands of plaintiff as Insurance Commissioner of the State of Georgia the said company was indebted in a large sum to creditors whose debts were incurred prior to the execution of said note, and that only a small part of the indebtedness of the said company were incurred subsequent to said time, and that plaintiff, as such Insurance Commissioner of the State of Georgia, was at the time of the filing of the suit and is now conducting the business of such company, and no creditor of said company, whose debt was contracted subsequent to the execution of said note, has requested, authorized, or empowered the plaintiff in this cause to institute this suit.

Defendant further avers that all of the books and affairs of and business of said Empire Life Insurance Company were kept, conducted, and transacted in the state of Georgia; that he, from the time of the execution of said note to the time when the affairs of said company were placed in the hands of the plaintiff, did not visit the state of Georgia, received no notice or information and had no knowledge of the true condition of said corporation or of said fraud or misrepresentation, and nothing occurred to put him, as a reasonable man, on notice of said true conditions or of said fraud or misrepresentation.

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(2) The defendant, for answer to the complaint and each count thereof, pleads and says:

That prior to and at the time of the execution of the note sued on the said Empire Life Insurance Company was a nonresident corporation fully, legally, and duly organized and incorporated, and was engaged in business; that subsequent to

the said incorporation of the said the Empire Life Insurance Company, and while it was a going concern, engaged in business for which it was organized, it issued, or authorized to be issued, a large amount of additional capital stock, commonly known as treasury stock; that this issuance of said stock was prior to the execution of said note; that the agent, servant, or employé of the said company who was engaged in the business of negotiating the sale of said additional stock for the said company, while acting in the line or scope of his employment, on, to wit, May 24, 1914, in the county of Montgomery, state of Alabama, made and entered into an agreement or contract with defendant whereby the defendant made and executed in said county and state the note here sued on, and in consideration thereof said agent, while so acting, agreed to sell to this defendant a part of said additional stock of the par value of, to wit, $1,100, which sale was to be made when plaintiff should pay the note here sued on. Defendant further avers that said note was procured and obtained from the defendant by fraud or misrepresentation of the said agent, servant, or employé of the said company while so acting, in this: the said agent, servant, or employé at the time of the said agreement, while so acting, falsely represented and stated to the defendant that said company was solvent, and in a flourishing condition, that it had paid to its stockholders regularly large dividends, and had not since its organization failed to pay yearly to its stockholders less than 8 per cent. per annum on their investments.

Defendant further avers that all of said representations and statements were false, fraudulent, and untrue; that, as a matter of fact, said company was insolvent, and was not in a flourishing condition; that it had never paid to its stockholders large dividends, and had never since its organization paid yearly to its stockholders 8 per cent. per annum on their investments; that he, the defendant, was ignorant of the falsity and untruth of said statements and representations; that believing said statements and representations to be true, and relying and acting thereon, he then and there executed and delivered the notes here sued on; and the defendant further avers that he has never participated at any meeting of the stockholders of said company, has never been an officer thereof, and has never received or accepted any benefits of any character whatever from said company by reason of said stock.

Defendant further avers that he did not learn of or have any notice of said fraud or misrepresentation until the affairs of said company were placed in the hands of the plaintiff, which was in the month of January, 1915, before said note became due; that he thereupon and immediately notified plaintiff of the fraud that had been practiced upon him as averred hereinbefore, and rescinded said sale, and stated he would not pay said note when the same became due, and that he relinquished all of his right, title, interest, and claim in and to said stock, and repudiated said contract, and offered to rescind same; and defendant further avers that there was no other consideration for said note than as above hereinbefore set forth.

The defendant further avers that at the time the business and affairs of said Life Insurance Company were placed in the hands of plaintiff, as Insurance Commissioner of the State of Georgia, the said company was indebted in a large sum to creditors whose debts were incurred before the execution of said note, and that only a small part of the indebtedness of the said company were incurred subsequent to said time, and that plaintiff, as such Insurance Commissioner of the State of Georgia, was at the time of the filing of this suit, and is now, conducting the business of such company, and no creditor of said company whose debt was contracted subsequent to the execution of said note has requested, authorized, or empowered the

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