West End Real Estate Co. v. Nash

Dent, President: The West End Real Estate Company of Norfolk complains of a judgment of the circuit court of Mercer County rendered on the 28th day of August, 1899, against it as plaintiff in favor of IT. M. Nash| defendant. The plaintiff sued the defendant for a balance of seven hundred and ton dollars due on a stock subscription made by the defendant in the year 1890 for ten shares at the par value of one hundred dollars each. Defendant filed four speciál pleas to the effect that be had been misled into making such subscrip'tion by the fraudulent representations of the promoters of such company prior to its organization in that they represented in their prospectus that the proposed real estate of the company was worth two hundred and fifty thousand dollars and would only cost them one hundred and seventy-five thousand dollars, at [343] which latter sum the capital stock was fixed, thus giving all share holders a handsome profit at once; and that he had found out since the institution of this suit that in such sum of one hundred and sevent3r-five thousand dollars the promoters who obtained the stock subscriptions and the charter and organized the company, had included a sum of more than thirty thousand dollars for themselves, which they had not revealed or made known to him at any time until it came to his knowledge on the taking of the depositions in behalf of the plaintiff; that also he had learned the contents of the charter and ascertained that the object of the proposed corporation had been changed without his knowledge, assent or after confirmation from “the purpose of purchasing, improving and disposing of several valuable tracts of land in the city of Norfolk,” to the following purposes, to-wit: “To purchase, hold, improve and dispose of real estate, bonds, notes and other securities; to purchase, hold and dispose of personal property; to borrow money with which to carry on its business; to issue and dispose of bonds and promissory notes, or either of them, in such amounts as may be expedient, and to secure the payment of such bonds and notes, or either of them, by tire hypothecation or conveyance of its personal or real property or otherwise; to receive money on deposit and pay interest thereon; to invest such money received on deposit and other moneys of the company in or lend the same upon stocks or any other security, real or personal, or use the same in purchasing or improving real or personal estate, to build or make improvements on real estate, to build bridges for the purpose of affording ingress or egress from or of otherwise improving such lands as it may acquire, to build wharves, piers, bulkheads or any other structure or improvement upon its property; to improve such lands as it may hold by the opening or establishment of streets or avenues or otherwise; to guarantee bonds, securities-and credits; to engage in various manufacturing enterprises; to subscribe to the capital stock- of other corporations, and to do anything of any other description that may come within the legitimate scope of its business;” that the defendant never attended any meeting of the corporation,' although Ire gave George K. Dunn-, who was one of the promoters and who afterwards became a director a power of attorney on his solicitation to act for him; that as soon as he learned of the misrepresentations made to him and which led him to [344] subscribe to the capital stock of tbe proposed company, he refused to have anything to do with' it, and repudiated the matter. On these pleas issue was joined and the proof on behalf of the plaintiff fully established the material allegations thereof. The plaintiff attempts to show that defendant by his conduct took such part by payment on his subscription, by his letters in regard thereto and by his being present and represented by his agent Dunn at the first meeting and organization of the company, as to condone, ratify and confirm the misrepresentations as to the value of the real estate, the promoter’s thirty thousand dollar fund and the change in the charter. Defendant testifies, however, and his evidence is not contradicted, that he never knew of the change in the purposes of the corporation until the bringing of this suit, nor of the promoter’s fund, and that as soon as he found out the true value of the real estate, he repudiated the transaction unless the promoters would make their promises good. In this he is borne out by his letters written to the officers of the corporation, seeking information. All his transactions with the company occurred in 1890 and 1891, except there is credit of a payment alleged to have been made by him of one hundred and thirty-eight dollars and ninety cents of November 10, 1893, entered in the company’s books. Of this he denies all knowledge. This is the only matter of dispute and if substantiated would not affect' the result. In the case of West End Co. v. Clairborne, 47 W. Va. 734, being a suit brought by the same company on a similar subscription to stock, it is held: “A subscription to stock of a joint stock company procured by fraudulent representations is voidable at the election of the subscriber on discovery of the fraud; and such fraud is a good defence to an action by the company on the subscription unless the contract has been subsequently ratified by the subscriber.” “A stock holder is bound at his peril to take notice of the charter and by-laws of the company of which he is a member. If he pays any instalment on his stock, or participates in any meeting of the stockholders after the charter is obtained, he is estopped to deny knowledge of its terms and provisions, however much it may vary from Iris contract of subscription.” These are the principles that must govern in this case. The defendant did not attend any meeting of the stock holders, and did nothing to ratify his stock subscription after the charter was obtained. He gave George R. Dunn [345] a power of attorney to act for Bim at the meeting to be held for the formation of a company in accordance with the terms and purposes of the prospectus, but there is no evidence to indicate that he authorized him to exceed these powers in any manner. Dunn’s evidence is not taken, and hence it must be considered as adverse to the plaintiff’s pretensions. Union Trust Co. v. McClelland, 40 W. Va. 405. Even if it wore, he could not act as agent both for and against defendant at the same time. An agent must be loyal to his principal, and if he does acts antagonistic to his principal either in favor of himself or third parties such acts are frauds upon the rights of the principal and may be treated as void by him. Am. & En. En. Law, (2d Ed.) 1071, 1072, 1073. So that the acts of Dunn in so far as he pretended (if he did so, of which fact there is no evidence) to act for the defendant at the charter meeting of the stockholders, must be regarded as a continuation of the original fraud, rather than a ratification or eondonement thereof. There is no act on the part of the defendant other than his apparent silence that can be construed into a ratification or condonation of the fraud practiced upon him in securing his subscription. Iiis silence cannot be charged against him, for it was occasioned by his confidence in the prospectus and its promoters. West End Co. v. Clairborne, cited. Hence the defendant cannot be held to be a subscriber to the company as changed in its purposes by its charter. Greenbrier Industrial Exposition v. Rhodes, 37 W. Va. 738; Norwich Lock Mnfg. Co. v. Hockaday, 89 Va. 557, (16 S. E. 877). The fact that defendant was kept in ignorance of the large promoter’s fund until after the bringing of this suit entitled him to avoid his subscription. Virginia Land Co. v. Haupt, 90 Va. 533 (19 S. E. 168). On a demurrer to the evidence this case is plainly for the defendant •under the holdings of the Virginia courts. The plaintiff insists that although this be true, that the court had no right to instruct the jury to find for the defendant at the time such instruction was given. The jury had been sent to their rooms to consider their verdict at the time the instruction was asked, and while the court had the matter under deliberation, the jury appeared with a verdict in favor of the plaintiff. The court would not receive it, and sent thorn to their room. They were after-wards brought into court and instructed to find for the defendant. This was irregular, but how has the plaintiff been in346 jurccl by it? Its answer is that it was entitled to its verdict, and if it was wrong and set aside by the court, if it could manage to got two more similar, the court would be powerless to set the last aside although wrong. Such a probability is most too remote to furnish the basis of judicial action. When litigation is abortive and useless it should be ended. Justice should be administered without sale, denial or delay, or fear, favor, or affection. This case is clearly for the defendant on both the law and evidence. Why then should this Court because of am. irregrilarity in the action of the circuit court promotive of justice, reverse the judgment and remand the case for a new trial which could not possibly reach a different result? Tn this respect this case is governed by the case of E. E. White's Admr., etc., v. The L. Hoster Brewing Co., decided herewith, and Ketterman v. Railroad Co., 48 W. Va. 606. The judgment is affirmed. Affirmed.