Huffman v. Bankers Automobile Insurance ( 1924 )

Dean, J.

This action is based on a rescission of a sale contract involving 50 shares of stock in the Bankers Automobile Insurance Company, for which plaintiff paid $100 a share. He tendered the stock to defendants, and also tendered certain alleged dividends in the sum of $210, which he received from the company, and seeks to recover the purchase price paid for the stock. It is alleged that the stock, at all times material to the issues herein, was of greatly less value than plaintiff paid for it. The argument is that the sale to plaintiff was induced by defendants’ false and fraudulent representations, in respect of value, which plaintiff believed to be true, and upon which he relied and acted.

Plaintiff made the Bankers Automobile Insurance Company, hereinafter called the insurance company, and Charles Maixner, who was president of the insurance company, Oliver Sacks and Fred Noah, who were its agents and representatives, and A. H. Armstrong, F. P. Dwiggins and H. W. Kenyon, parties defendant. The action was dismissed as to Armstrong, and service of summons was not had upon ■ Dwiggins or Kenyon. A default judgment was rendered against Maixner. The jury returned a verdict for plaintiff and against the insurance company, and Oliver Sacks and Fred Noah, for principal and interest, in the sum of $5,897.78. A joint judgment was thereupon rendered on the verdict against the .insurance company, and Oliver Sacks and Fred Noah. Except Maixner, all defendants appealed who were served with summons.

The action was originally begun against the same defendants to recover $5,000 damages on account of the alleged fraud. Two petitions are in the record. The original petition was filed within a reasonable time after plaintiff made the discovery of the facts of which he complains. In his subsequent amended petition he alleged substantially the same facts which he pleaded in the original petition, and he therein pleaded a rescission of the contract, and tendered to “defendants and each of them in open court the said 50 shares of stock,” and also $210, which was sent to him by the company in two or more payments as alleged dividends. Plaintiff also pleaded that it was impossible for him to make an earlier tender to the defendants, because, when he first, discovered the fraud, the agents from whom he purchased the stock were out of the state and could not be found. It was also disclosed that at the time the president of the insurance company was in the penitentiary. Hence, for these reasons he made his tender in his amended petition. And the proofs, in these respects, tend to support the allegations.

All defendants contend, in pleading and in briefs, that plaintiff is estopped from maintaining an action on his amended petition. The argument is that, by delay and by filing his original petition for damages, without first having rescinded his contract, he affirmed the contract and thereby elected his remedy and is bound thereby. But there are exceptions to the rule which will be hereinafter noticed.

October 5, 1921, the insurance company filed its answer, and therein pointed out the conceded fact that the department of trade and commerce, hereinafter called the Department, acting under an order of the district court for Lancaster county, January 14, 1921, took possession of the property and effects of the defendant insurance company, of every nature and description, under section 4, ch. 190, Laws 1919, being section 7748, Comp. St. 1922. The court in its order, pursuant to the power conferred upon it by the laws relating to insurance companies (Comp. St. 1922, title V, art. Ill, secs. 7745-7765), ordered the Department to retain in its possession all the property of the insurance company, its records and effects, and to conduct, its business and to do all things imposed upon it by the order until the further order of the court. As a part of the proceedings, preliminary to the making of the order in question, the district court found the insurance company’s affairs “to be in such condition that its further transaction of business would be hazardous to its policy-holders, its creditors, its stockholders, and to the public.” And, among other recitals in the record, it is disclosed that various violations of the law by the defendant company had been established.

After the appeal was filed in this court, and shortly before the case was submitted on oral argument, plaintiff, by an agreement with the Department, effected a settlement with the insurance company, with the court’s approval, and dismissed his action in this court against the insurance company only, with prejudice. Of course, no further appearance was thereafter made here by the insurance company.

Sacks and Noah complain because the insurance company was dismissed without their knowledge, and because they received no consideration therefor and at no time approved or acquiesced therein, and that the joint judgment against them and the insurance company now stands against them alone. There is no ground for this complaint. It is obvious that their liability on the judgment would be decreased in such amount as plaintiff received upon settlement with the insurance company, and that the judgment can only be enforced against them as to the unpaid remainder. They further complain that in the settlement the defendant insurance company, or its successor, has accepted from plaintiff, and now holds as its own, all the shares and certificates of stock involved in this action. .

However, Sacks and Noah contend, in substance, that they cannot properly be a party to this action because it has to do with the rescission of the sale of corporate stock in which they have no proprietary interest. But by the settlement between plaintiff and the insurance company, and its acceptance of the stock and its withdrawal from the case, this embarrassment has been removed. And it may be noted that, in their joint answer, Sacks and Noah allege that the stock which plaintiff purchased “belonged to the defendant Charles Maixner,” and in their brief they say that defendant “Noah testified that he was selling the stock of defendant Charles Maixner.” Be that as it may, the question in regard to the value of the stock, from whomsoever purchased, and Maixner is a party defendant, was a question for the jury. And it is conceded in their brief that “an action in damages for fraud might properly be directed against the agent alone or against the agent and principal jointly, for the liability is joint and several.” And they contend that Maixner was their principal.

In view of the argument, it is obvious that the defense of Sacks and Noah is not tenable. Besides, there is evidence to support a finding that Sacks and Noah knew the stock was of small value, as compared with the price for which they sold it. But in any event they should have known it. In view of all the facts, it is unthinkable that they should now escape liability on the specious plea that plaintiff was negligent in that he did not make inquiry in respect of the value of the stock, or on the plea of their own ignorance of values, which was within their power to discover and upon which it was their bounden duty to be informed. Neither Sacks nor Noah havé been prejudiced by any of the facts disclosed by the record.

“Contributory negligence is not a defense to an action for deceit. If the false statement is made by one who may be fairly assumed to know what he is talking about, it may be accepted as true, without question and without inquiry, although the means of correct information are easily within reach. * * * It would, indeed, be singular to hold a swindling deceiver exempt from liability because he has swindled only foolishly credulous and trusting persons, and more singular still to hold that such a swindler may successfully plead the incredibility of his falsehood and the. folly of his victim’s belief.” King v. Livingston Mfg. Co., 180 Ala. 118.

It is contended that Maixner, and either Sacks or Noah, or perhaps all three together, called on plaintiff at his farm home, about 25 miles distant from defendant’s Lincoln office, and here made the false and fraudulent representations, perhaps in the first instance, which in part induced him to make the purchase, and that Sacks and Noah followed up and at other times saw and ' repeatedly urged plaintiff to invest, and always with the assurance that the stock would certainly increase greatly in value and that he could not lose on the investment. It clearly appears from the record that the representations so made to plaintiff were such as to convince the jury that they were not mere expressions of opinion, but were false and fraudulent representations of fact. Farmers Cooperative Grain Co. v. Startzer, ante, p. 19.

The general rule is that one who seeks to rescind a contract on the ground of fraud must, within a reasonable time, offer to return the property or consideration which he received. But we think the present case comes within recognized exceptions to the rule, as shown by well-established authority, which in effect holds that where the injured party has done no wrong, arid where neither the defendant, nor any other person, has been shown to have been prejudiced in any lawful right by the delay complained of, the remedy by rescission may be invoked./Independent Van & Storage Co. v. Iowa Mercantile Co., 184 la. 154; Stotts v. Fairfield, 168 la. 726. It has been held that an offer “to restore the status quo is sufficient.” Maine v. Midland Investment Co., 132 la. 272.

“Whether a subscriber’s delay in rescinding his subscription for fraud was unreasonable, so as to constitute laches, depends upon the circumstances, as well as upon the extent of the delay. Even a long delay will not be fatal if satisfactorily explained, and if the circumstances are not such as to fender rescission inequitable, or where the rights of creditors or stockholders, ■ who may'have becorne such'on the faith of the defrauded party’s subscription, have not intervened.” 2 Fletcher, Corporations, 1408, sec. 634.

The following opinion on motion for rehearing was filed December 4, 1924.

Substantially the same principle is involved in Carson v. Greeley, 107 Neb. 609, wherein we held: “When a suit is begun for the rescission of a contract on the ground of fraud, the plaintiff may dismiss her action Without prejudice, and begin an action at law to recover damages for the perpetration of the fraud under facts which are not inconsistent with the facts in the former action, and no estoppel is worked thereby, where the plaintiff has acquired no benefit in the former action and no detriment has been caused to the defendant in such action.”

Defendants complain of the giving of certain instructions, and also of the refusal of the court to give certain tendered instructions. An examination of the record does not disclose reversible error in this respect. Evidently the jury’s belief in plaintiff’s veracity controlled the issue of fact.- Error which would affect the result has not been shown.

The judgment is

Affirmed.

Note — See Contracts, 13 C. J. p. 621, sec. 680; Corporations, 14 C. J. p. 596, sec. 868. Election of Remedies, 20 C. J. p. 13, sec. 10.

Heard before Morrissey, C. J., Letton, Rose, Dean, Day, Good and Thompson, JJ.