Cotter v. Butte & Ruby Valley Smelting Co.

MB. COMMISSIONEB OLAYBEBGr prepared the following opinion for the court: This is an appeal by defendant from an order granting plaintiff a new trial. Plaintiff filed a complaint in which he sought to recover upon five separately stated causes of action. The defendant answered the first cause of action, and allowed judgment to be taken against it on the other four. Plaintiff replied to this answer by way of general denial. By these pleadings an issue was formed, which was tried before a jury, and a verdict was rendered for — 132 — defendant Plaintiff moved for a new trial, which was also granted. The cause of action thus tried arose out of the following circumstances: In 1899 a syndicate composed of Charles Schatzlein, William Owsley, Silas F. King, John W. Cotter and S. W. Davis agreed and mutually contracted to enter into a company or co-partnership for the purpose of carrying on smelting and mining operations through a lease of the properties of the Montana Smelting & Mining Company at Twin Bridges. It appears that these parties paid certain money to rehabilitate the properties leased, and to prepare for the operations of the company. Cotter paid $6,000, and says: “There was a corporation to be formed, and we were to take stock in the corporation.” The corporation was subsequently organized, and corporate meetings were held, at which Cotter participated as a stockholder, voting 10,000 shares of stock. Afterwards the capital stock of the corporation was increased, in which proceedings Cotter also participated as a stockholder. No certificate of stock was ever delivered to Cotter. After some time two of the syndicate turned over certain promissory notes to the First National Bank of Butte, and that bank brought suit thereon, attaching all the properties of the company. The record is somewhat indefinite as to the purpose and character of these notes, but, as we view the case, this matter is entirely immaterial. After the attachment Cotter gave notice to defendant and to its president and secretary in the following form: “Gentlemen: You and each of you are hereby notified and requested to return and pay over to me the sum of $6,000 which was heretofore paid to the Butte & Iiuby Valley Smelting Company, on or about the 15th day of September, A. D. 1899, as a subscription for stock in the said company, which said stock has never been delivered to me, and I have elected to rescind the said contract of subscription for stock, owing to the failure of the company to deliver the stock to me in accordance with the terms of my subscription; and I hereby demand that the said company immediately repay to me the said sum of $6,000 with interest thereon from the date of — 133 — tlie payment of the same to the said company to the date of repayment of same to me. Dated, Butte, Mont., September 4, 1902. John W. Cotter.” Subsequently Cotter assigned his claim to plaintiff, and this suit was brought. 1. The issue presented by the pleadings and proof was a very narrow one, and the evidence on material points was practically undisputed. Cotter says that he paid $6,000, which the company used, and that he was to have stock in return for it. He admits that the company was organized; that stockholders’ meetings were held, at which he participated as a stockholder, voting 10,000 shares of stock. It will be noticed that he undertook to rescind the contract under which the money was paid, and demanded a return of his money. He did not seek to compel the delivery to him of the certificates representing his stock, or to recover damages because the certificates were not delivered. His admissions that he paid the money for the benefit of the company and was to take stock therefor, and that he voted such 10,000 shares of stock as a stockholder in corporate meetings of the company, seem to us to be conclusive in this case that he was recognized as a stockholder by the company, and is estopped to claim the contrary. The mere issue of the certificates of stock to him would but furnish him with evidence of his ownership. One can be a stockholder prior to the issuance and delivery to him of certificates of stock. (Clark & Marshall on Private Corporations, Secs. 378 a, 378b; Cook on Corporations, Sec. 13; Cartwright v. Dickinson, 88 Tenn. 476, 12 S. W. 1030, 7 L. R. A. 706, 17 Am. St. Rep. 910; Mitchell v. Beckman, 64 Cal. 117, 28 Pac. 110; California Hotel Co. v. Callender, 94 Cal. 120, 29 Pac. 859, 28 Am. St. Rep. 99; Pacific Fruit Co. v. Coon, 107 Cal. 447, 40 Pac. 542; Packard Machinery Co. v. Laey, 100 Wis. 644, 76 N. W. 596.) Section 2271 of the Civil Code provides that contracts may be rescinded “in the following cases only”: “(1) If the consent of the party rescinding, or of any party jointly contracting with him, was given by mistake, or obtained through duress, menace, fraud or undue influence, exercised by or with the connivance — 134 — of the party as to whom he rescinds, or of any other party to the contract jointly interested with such party; (2) if, through the fault of the party as to whom he rescinds the consideration for his obligation fails, in whole or in part; (3) if such consideration becomes entirely void from any cause; (4) if such consideration, before it is rendered to him, fails in a material respect, from any cause; or, (5) by consent of all the other parties.” Section 2273 provides that rescission “can be accomplished only” by compliance with the following rules: “(1) He must rescind promptly, upon discovering the facts which entitled him to rescind, if he is free from duress, menace, undue influence or disability, and is aware of his right to rescind; and, (2) he must restore to the other party everything of value which he has received from him under the contract, or must offer to restore the same, upon condition that such party shall do likewise, unless the latter is unable or positively refuses to do so.” The record is barren of pleading or proof of the existence of any of the grounds of rescission mentioned in Section 2271, supra, and of compliance with either of the rules announced in Section 2173, supra. There was, therefore, no rescission shown. Before the right to recover the money paid upon the contract arose, the contract must have been rescinded. '2. One of the grounds urged by plaintiff upon his motion for a new trial was that the verdict was “against the law,” being contrary to the instructions of the court. All the instructions given are to be taken into consideration in determining this question, and if the verdict was justified by any of the instructions given, and the instructions as a whole were inconsistent or conflicted with each other, the verdict was not contrary to the instructions. By instruction No. 1 the jury were charged that if they found from the evidence that Cotter paid to defendant $6,000, or any amount, with the understanding that he was to receive a certain number of shares of the capital stock of the company, and if they — 135 — further found “that defendant failed or neglected to deliver to him shares of its capital stock within a reasonable time, or at all, thereafter,” and that Cotter demanded a repayment to him of the amount and interest, and assigned his claim to plaintiff before the commencement of the suit, they should find a verdict for plaintiff. Under this instruction we believe that the jury was justified in finding a verdict for defendant. As above stated, the certificate of stock is merely evidence of ownership. The evidence disclosed that the company recognized Cotter as a stockholder to the extent of 10,000 shares, and that he voted that amount of stock as a stockholder at different stockholders’ meetings of the company. In our opinion this is equivalent to a delivery of the shares of stock to Cotter and an acceptance by him ydiich he is estopped to deny, and that the jury might have found such delivery, and therefore have rendered a verdict for defendant. In instruction No. 2 the court charged the jury that if they found from the evidence that Cotter paid $6,000 as subscription to the capital stock of said company, to be thereafter organized, and if they further found that the company was organized and did not deliver to Cotter the certificates of stock for which he had subscribed or paid, “and if you further find that after the expiration of such reasonable time he rescinded said contract, and demanded a repayment to him of the money so paid as a consideration for such stock, to be delivered,” and if they further found that he assigned his claim to the plaintiff before the commencement of the suit, and that same has not been paid since the assignment, the verdict should be in favor of plaintiff for the amount so paid, together with interest. Instructions Nos. 4 and 5 also left the question .of rescission to the jury. The jury may have found, and were justified in finding, under these instructions and the evidence, that the contract had not been rescinded. In instruction No. 8 the court charged the jury that “you are instructed that the written notice offered in evidence in this ease, signed by John W. Cotter, and notifying defendant that he had — 136 — elected to rescind-the contract of subscription, and demanding a repayment of money claimed to be due him thereunder, was a sufficient rescission of said contract, and rescinded the same, provided you find that defendant failed to deliver to said John IV. Cotter the stock subscribed for by him, as explained in these instructions.” By this instructioii the court took away from the jury the right to fiixd as to whether or -not Cotter rescinded the contract, but left the jxxry to find xxpon the delivery of the stock. This instruction is inconsistent with the others given, and clearly the jury might have returned a verdict for defendant upon a finding that the stock had been delivered. The court below was evidently confused xxpon the necessity for the delivery of the certificate of the shares of stock, instead of placiixg Cotter in the position of a stockholder and recognizing him as such. Under the cases of Murray v. Heinze, 17 Mont. 353, 42 Pac. 1057, 43 Pac. 714, and King v. Lincoln, 26 Mont. 157, 66 Pac. 836, the rule of this court has been established that the jury is boxxnd by the law as givexx by the court, whether correct or ixot, and, if they do not follow such instructions in rendering their verdict, the verdict will be set aside and a íxew trial granted. This rule was adopted in California, as annoxxnced in the case of Emerson v. Santa Clara County., 40 Cal. 543. In oxir opinion this rule is not applicable in this case. Takixxg the whole charge of the court together, the jury was warranted by instrxxctions 1, 2, 4 and 8, as above recited, to find a verdict for defendant. In the case of Altoona Quicksilver M. Co. v. Integral Quicksilver M. Co., 114 Cal. 100, 45 Pac. 1047, the court instrxxcted the jxxry to find a verdict against plaintiff. At the saxne time he gave other instrxxctions sxxbmittixxg the entire case to the jxxry. The court say: “In various iixstrxxctions it sxxbxnitted to the jxxry the qxxestion as to whether the plaintiff or its graxxtors had coxnplied with the law ixi regard to the location and working the mine, and as to its claixxi of right by actual adverse possession. — 137 — The jury found for the plaintiff. In so doing they disobeyed the express direction to find against the plaintiff, but they obeyed the other direction to consider and pass upon the rights of the plaintiff, and to find according to the facts and principles of law declared by the court. The judge, in considering the case on motion for a new trial, was convinced that he had erred in directing the jury to find against the plaintiff, but thought, nevertheless, he ivas bound to grant a new trial on the authority of Emerson v. Santa Clara Co., 40 Cal. 543, in which it was held that a verdict against the instruction of the court is a verdict against the law. This case is not within the reason of that ease. Here the instructions were, in effect, contradictory, and the verdict, while opposed to one instruction, is warranted by others.” Under the case of Murray v. Heinze. supra, we are not allowed to consider the correctness of any of the instructions given to the jury, but ive hold that we may look to the instructions 1o ascertain whether or not any thereof justified the verdict as returned by the jury. AYe have seen that the verdict was justified by instructions 1, á, 4, 5 and 8. AATe cannot conceive how any verdict could be rendered upon the testimony as disclosed in the record except one for defendant. This being the case, we can perceive no reason for granting a now trial, and we therefore conclude that the court below abused its discretion in granting the new trial prayed for, and advise that its action in that regard be reversed. AYe have not been aided in the investigation of this appeal either by printed brief or oral argument in behalf of respondent. Per Ourtam. — For the reasons stated in the foregoing opinion, the order appealed from is reversed, and the court below instructed to set aside the order granting the plaintiff a new trial. Mr. Justice Milu urn, not having heard the argument in this case, does not participate in this decision.