McMillan v. Batten , 52 Or. 218 ( 1908 )

Opinion by

Mr. COMMISSIONER SLATER.

To reverse the judgment defendants contend, first, that plaintiffs failed to make a case sufficient to support a verdict, and this is based on the claim (1)' that the written instrument sued upon as a contract contains no binding obligation on defendants to take and pay for the remaining ten shares of stock, but they say it amounts only to an option on their part, to purchase; and (2) that there was a failure of proof of performance by plaintiff of all the obligations of the contract on their part.

1. The first- position is not tenable. While the written instrument does not contain in explicit language an agreement by defendants to purchase, yet, when construing the whole instrument, the obligation is plainly deducible therefrom. It was prepared and drawn by the defendants in the absence of the plaintiffs, who, at the former’s request, afterwards signed it with defendants in the evident belief that mutuality of obligation was expressed therein. By its terms several things are to be done by plaintiffs as sellers, and other things are to be done by the purchasers. It declares an agreement by plaintiffs to sell to the defendants, who are thereinafter termed purchasers, 20 shares of stock as an entirety for $2,500. Ten shares are to be delivered and paid for immediately, and 10 shares to be delivered to a third party and to be paid for within 30 days; and “it is mutually understood that”' dividends on these latter shares should go to “said purchasers with the original ten shares and as a part thereof.” Finally, the respective parties “agree to carry out the provisions hereof on their respective parts to be performed.” No other conclusion can be reasonably derived from such provisions but that defendants were agreeing to be purchasers. If there was an agreement on their part to take and pay for the first 10 shares as their conduct by accepting thereof plainly implies, then there must also have been an obligation to take and pay for the second 10 shares. The agreement is to sell 20 shares, and is entire and not severable. Moreover, as to the plaintiffs, it is an executed, and not an executory contract. Delivery was at the time made to a third party —a bank—selected by defendants, to receive the possession of the certificate evidencing the ownership of the stock, and indorsed by plaintiffs. The defendant Drake was vice president of the depositary bank, and transacts his business there. No further delivery could possibly be made by plaintiffs. Everything required and necessary to be done by them to transfer the title and possession has been done, and nothing remains to be done but to, receive payment from defendants.

2. Defendants’ second contention, that the general averment of performance of the contract by plaintiffs was denied, and that there was a failure of proof on their part to establish that they had observed and performed the covenants of the said agreement, to the effect that they would not engage in the general merchandise business in the city of Bend, or within a radius of 20 miles thereof within 12 months, that they will not do or suffer anything to be done or said, now or hereafter, adversely affecting or prejudicial . to the business of the Bend Mercantile Company, and to aid the purchasers in advice or explanation about the business when requested, and to promote the general welfare of the company. But none of these terms are conditions precedent, the performance of which by plaintiffs must be shown to entitle them to demand and receive payment for the stock. Nor would a breach of such covenants, if shown, be a bar to plaintiffs’ recovery, but only confers a right of action for the breach. Clark, Contracts (2d ed.), 450; Krebs Hop Co. v. Livesley, 51 Or. 527 (92 Pac. 1084).

3. We come now to defendants’ third and principal contention, that they had presented or offered to present sufficient testimony in support of their affirmative defenses to make a prima facie case, and require the case to go to the jury. The first defense was fraud and deceit in bar of the action. It is alleged that certain representations were made by plaintiffs as an inducement for defendants to purchase, that they were false, and that defendants relied upon them not knowing them to be false; but it is not alleged in what respect or to what extent they were false. In a defense upon the ground of fraudulent representations, it is not sufficient to aver that the representations were false, but the pleader must show wherein they were false.

'4. In such cases, facts, not conclusions, must be alleged (Specht v. Allen, 12 Or. 117: 6 Pac. 494) ; and, where the contract is an executed one, the defense of fraud and deceit to an action for the price is not available as a bar to the action, except only where rescission is plead or an entire failure of consideration is shown. 24 Am. & Eng. Enc. Law (2 ed.) 1160.

5. The second defense was to the effect that plaintiffs had committed a breach of certain independent covenants of the agreement which we have already referred to and discussed and determined not to be a bar to the action. The third defense was by way of counterclaim, seeking to recover from plaintiffs on the ground of fraud and deceit the price paid .for the first 10 shares of stock received by them. The fraudulent representations alleged to have been made by plaintiffs and relied upon by the defendants are the same matters set up in the first defense, but they are more precisely and accurately plead. They refer generally to the prosperous condition of the company, and as to what was the book value of the stock as shown by the books of the Bend Mercantile Company, which, it is alleged, was represented by plaintiffs to be $165 per share, but it is alleged, in fact, that it was of no value. Conceding that these representations were material and of such character that defendants were entitled to rely upon them, of which we have much doubt, it being admitted that defendants were at the time owners of other stock in the same corporation and were its officers, yet we are of the opinion that whatever right to recover they might have otherwise possessed, they effectually destroyed that right when one of them testified on cross-examination, to the effect that on the next day after purchasing and paying for the first 10 shares, they sold and transferred the title to the same on the books of the company to one Crocker, for the same amount they had paid for it, and that they had induced Crocker to indorse it and tender it into court for the benefit of plaintiffs, so that these defendants might make good their offer to return the possession of the stock. This was not accompanied by any evidence that defendants had been obliged by any contract of warranty with Crockér, to take back the stock and to make good to him what they had received for it, nor was there any averment in the answer to that effect; but, as it appeared to the trial court, it was an attempted rescission by defendants of the contract with plaintiffs and a recovery from them for the sole benefit of a stranger.

6. Rescission for fraud and deceit is based upon the theory of a total or partial failure of consideration and because of the fraud, resulting in damage to the party defrauded, but 'evidence that defendants soon after having-made the purchase sold the property to others for the same amount paid by them destroys any inference of damage, unless perhaps, it is averred and shown that the purchaser was engaged in the business of buying and selling for profit and bought for that purpose. Counsel for defendants site the case of Ellison v. Johnson, 74 S. C. 202 (54 S. E. 202: 5 L. R. A. (N. S.) 1151), to the effect that, in an action for the price of goods sold where the main defense was damages for breach of warranty as to the quality of the article sold, the measure of damages is the difference in value between the article sold and the article delivered at the time and place of delivery, and that the question is not affected by the fact that the buyer has sold the property at an increased price. But that case is not like the one now under consideration in two important respects. Breach of a warranty of quality is not involved here, nor is the defense a recoupment of damages for fraud or deceit. No damages are asked, but a recovery of the purchase price in assumpsit is demanded based on rescission for' fraud and deceit. After setting up the facts constituting an alleged fraudulent sale and a tender back of the stock, defendants allege that by reason thereof, plaintiffs becáme indebted to defendants in the amount of $1,250, the purchase price paid. In Ellison v. Johnson, 74 S. C. 202 (54 S. E. 202: 5 L. R. A. (N. S.) 1151), the learned court goes to some trouble to distinguish such a case as is attempted to be made here from the one there considered. Mr. Justice Jones there says: “The fact-that the buyer sells the articles without loss, or at a profit, becomes very material when the case presented is one of rescission of contract. The cases cited show that, when the action or defense is based upon a rescission of the contract for a total failure of consideration, the buyer must account for whatever he obtained for alleged worthless articles. In such a case, of course, if the buyer has sold the alleged worthless articles at a profit, he has sustained no damage. An action or defense based upon the rescission of a contract, proceeds upon the theory that the title of the goods revests in the seller, and so the buyer who has sold them in whole or in part must account to the owner, whereas, an action or defense based upon a partial consideration leaves the title of the goods in the buyer, and what he gets for his own property (except as evidence of value), is not a vital matter in determining whether the seller has performed his contract and what he must render to the buyer as an equivalent for nonperformance.”

From these considerations, it follows that the judgment should be affirmed. Affirmed.