Peerson v. Gray

DOWDELL, C. J. — The appeal in this case is taken from the decree of the chancellor overruling a demurrer to the bill. The demurrer set down 14 grounds, and each ground is separately assigned on the record for error; but only the first, second, third, ninth, and fourteenth are insisted on in argument. The first ground is that the complainants do not offer to do equity. The demurrer confesses the facts stated in the bill. The bill shows that the respondent occupied a position of trust and confidence, and avers that the respondent, as such trustee, committed a fraud on the complainants, and offers to pay the reasonable value of the property, to be ascertained by the court, in refer [321] ence to which the fraud is alleged. This we think is a sufficient offer to do equity to save the bill from this ground of demurrer. As a general rule a party cannot affirm a contract in part and rescind in part upon the ground of fraud, but this rule is not without its limitations. And this is true in some instances, as here, where the party occupies the relation of trust and confidence and so acts and so complicates matters as that complete equity cannot be done by the application of the above-mentioned general rule. The respondent was a director and the president of the corporation, and sold the property in question, which was his own, to the corporation for three times its value as alleged in the bill and which the demurrer admits, and took a mortgage on the same, executed by himself and the secretary of the corporation to. himself, and under these conditions carried on the business of the corporation until the concern failed, and then foreclosed the mortgage under powers, becoming the purchaser, and taking the title to himself. The complainants, stockholders, are entitled under these circumstances, on the allegations of fraud, to have the foreclosure sale set aside and have an accounting. There was no authority shown for the execution of the mortgage, by the stockholders- of the corporation, nor any subsequent ratification of it by them. The cases cited by counsel for appellant are therefore, we think, without application on the facts to the present case. Section 3481, subd. 3, of the Code of 1907, provides: “No bonded indebtedness of a corporation shall be created or increased, nor its real property mortgaged, except by the consent of the persons holding the larger amount in value of the capital stock of the corporation present and voting in person or by' proxy, at [322] the meeting of tlie stockholders called for that purpose, or at a regular meeting.” The bill, we think, contains equity and is not open to any of the grounds of demurrer insisted on in argument and brief of counsel; and, finding no reversible error, the decree of the chancellor overruling the demurrer will be affirmed. Affirmed. Anderson, Mayfield, and de Graffenrikd', JJ., concur.