Houston & Texas Central Railway Co. v. Van Alstyne

Walker, P. J. Com. App.— The character of this suit is to enforce specific performance of a contract- made under a mistake of fact as to the essential elements and considerations which éntered into it. The proper determination of the issues between the parties rests upon the inquiry whether the transaction between Van Alstyne and the proper officers, representing the defendant, which resulted in issuing to him, as the assignee of Bartlett, a certificate of five shares of stock, was in law or equity one which constituted him a bona fide stockholder; one entitled to receive dividends with other stockholders of the corporation; a stockholder entitled to demand and have the benefit of the resolution of the directors of the defendant, entitling each of its stockholders to eight shares of new stock in its company for each share previously issued. Van Alstyne, when he applied for and obtained the certificate on which he relies in this suit for five shares [447] of stock, does not pretend to acquire or hold the same as the assignee of any certificate for stock hitherto issued to Bartlett;' but whatever rights he pretended to claim under Bartlett were asserted to exist under an assignment of said Bartlett’s stock. Bartlett’s certificate of stock had long before the said assignment ceased to exist. It had been delivered to Baker as the assignee thereof, and by Baker surrendered to the defendant, receiving in lieu thereof certificates for the five shares of stock, which transaction was properly evidenced by the books of the corporation, through appropriate entries made thereof. Van Alstyne therefore took no legal title whatever to any interest or right of Bartlett to said five shares .of stock, so far as any transfer from Bartlett to Van Alstyne was concerned, after the transactions which have been recited under his transfer to Baker transpired, culminating in the utter extinction of Bartlett’s certificate, and of all right of Bartlett, legal and equitable, as shown by the surrender of stock referred to, and its replacement by an original and independent certificate issued to Baker instead. It was the same, when Bartlett made his assignment to Van Alstyne, as though he had never been in any wise connected with said five shares of stock. Clearly, Van Alstyne acquiring no legal title under Bartlett’s assignment to him, his right, or rather the right of his heirs or estate, to enforce the rights claimed in this suit against the defendant must depend upon such equities, as against the defendant, as can be shown to exist under the facts of this case. The rules of law or equity applicable to. this case are not complicated with questions as to the relative rights of Baker and of Van Alstyne under their respective assignments, nor with any question as to what might be the rights of a third person who had purchased from Van Alstyne, without notice as to the facts, bona fide, and for [448] a valuable consideration. The case which is before us presents the question whether, as between the original parties to the assignment made to Van Alstyne, he is entitled to enforce specifically the contract which entitled him, prima facie, on the face of the certificate which was issued to him, to the benefits pertaining thereto. No ground of equitable relief, in behalf of the plaintiff, seems to be relied upon by either allegation in the plaintiff’s pleadings, nor does the same appear in the statement of facts, nor by the case agreed upon. It is not pretended by the plaintiff that Van Alstyne procured the assignment upon which he relies, under inducements or representations held out or made to him by the defendant or its officers; nor is it alleged that he was ignorant in fact of the status of Bartlett’s right- at the time of his procurement of the assignment from him (Bartlett); nor is there any charge of any concealment or suppression of evidence as to the condition of the Bartlett stock, or the certificate therefor; nor is it alleged that Van Alstyne was ignorant of any of these material facts, or that he made inquiries concerning the same, or that he would have been unable to ascertain the facts by duly making inquiry concerning them. It is not alleged, nor shown by proof, that Van Alstyne was a purchaser of Bartlett’s right to five shares of stock, for a valuable consideration, in good faith and without notice. And on the other hand, Van Alstyne is shown by the evidence to have occupied a position of trust towards the defendant — being one of the directors of defendant,— which relation charged him with the duty of advising himself concerning the interest and affairs of the stockholders of said railroad company; and the evidence disclosed the fact that he was expert, and well informed concerning the stock books and stock transactions relating to the defendant. 1 ‘ When the means of inquiry are equally open to both parties, if a mistake occur without any fraud or falsehood, no relief can be granted [449] on account of the mistake alone.” Daniel v. Mitchell, 1 Story, 172; Warner v. Daniel, 1 Wood & Min., 90; Hill v. Bush, 19 Ark., 522; Jouzin v. Toulmin, 9 Ala., 662. Equity will not favor and aid a party thus situated, in his acts of negligence or carelessness, where he seeks to make either available as the basis whereTby to obtain and assert an interest adverse to that of his cestui qui trust. His relation bound him to care and vigilance in behalf of the defendant and the interest of the stockholders, if he went into the market as a dealer in its securities; and he was bound besides to the utmost good faith towards the corporation whose interest he represented. Van Alstyne is shown to have occupied a position and a relation to the facts, as well as to all the parties concerned, as to preclude him from asserting a right to be protected against a mistake in which he was to profit so largely. “ Though a court of equity will relieve against mistake, it will not assist a man whose condition is attributable only to that want of due diligence which may be fairly expected from a reasonable person.” Kerr on Fraud and Mistake, p. 407 and note and authorities cited. The brief of counsel for appellee disclaims that this is a suit for specific performance; but it certainly seems to be nothing less than an effort by the plaintiff, in effect, to enforce specifically the obligation which, it is alleged, arose and exists under and by virtue of the evidence, which the certificate for stock issued to Van Alstyne, to require the.issuance of additional certificates in the ratio of eight for one to said Van Alstyne, and in default thereof to compensate the plaintiff in damages to the amount of the value of all such evidences of plaintiff’s rights to dividends. As the plaintiff’s case is not rested upon equities which might entitle her to a specific performance, the discussion and application of principles of law applicable to such remedy is wholly superfluous. Evidently the rules ap [450] plicable to relief upon equitable grounds find nothing in the facts of this case suggestive of their application. [Opinion delivered March 13, 1882.] The mistake of fact which is so clearly admitted by the parties possesses a two-fold force; in equity it constitutes a full answer to the plaintiff’s case in respect to her alternative claim for damages in case specific enforcement of the contract be denied to her by the court; and, as we have endeavored in this opinion to show, the alleged mistake is not connected with any equity which the plaintiff’s testator could assert. The plaintiff’s case is made to depend upon the intrinsic value of a certificate for stock issued under a clear mistake of fact on the solicitation of the plaintiff’s testator, who was a director of the corporation, the stock of which he was endeavoring to acquire; whose interest he was charged by his official duty to protect; and the plaintiff failing to show any fraud used to his disadvantage, or any mistake which he might not have guarded against, and failing to show besides either ignorance in fact, surprise, or that he was a bona fide purchaser for a valuable consideration without notice, we perceive no reason, and acting on principles and maxims of law the most elementary, to hesitate to say that the judgment rendered for the plaintiff below was erroneous, and that the evidence in the case warranted a judgment for the defendant. Wherefore we conclude that the proper disposition of this appeal is that the judgment below be reversed and the cause remanded for further proceedings. Reversed and remanded.