Reed v. Benzine-ated Soap Co.

The opinion of the court 'was delivered by Parker, J. We conclude that the decree below should be affirmed, and have little to add to the views expressed as above by the present chancellor. When the complainant as a stockholder prayed an. injunction to restrain the dissolution .proceedings, his claim as a stockholder was met by a cross-bill alleging that defendants Smith and Lowry were induced to go into the corporate venture by fraudulent statements of complainant; that after the incorporation he falsified the expense accounts and employed incompetent and extravagant salesmen so as to depreciate the company as a business venture and induce -defendants to sell out at a low figure; and praying that the contract of June 10th, 1902, be set aside, that complainant be decreed to be not entitled to any rights thereunder and not a stockholder of the company, and that such stock as stood in his name be decreed,.to belong to Smith and Lowry as the actual-subscribers therefor. This is the ■“rescission” that complainant says in his supplemental bill was tendered and which he by that bill wished to accept. There can be little doubt that if he had “accepted” it by joining promptly in the prayer of the cross-bill, he should have had his collateral back. That -was the object of his contention below under the supplemental bill and is the object of this appeal. The acceptance had to be prompt because when the cross-bill was filed on April 7th, 1905, dissolution proceedings were then pending; the certificate of dissolution was filed on May 24th and the property [185] of the company sold in July. During all this time he was treated, except in the chancery suit, as though he was a legal stockholder. About the "same time, viz., July, 1905, the defendants realized on his collateral to meet the amount due them for advances to pay for his stock. It is thus evident that by the complainant’s failure to accede promptly to the claim that he was not a stockholder, the position of affairs has changed so that the status quo cannot be .restored. But complainant not only did not accede to tire prayer -of the cross-bill but resisted it, by moving to strike it out; and during months of litigation maintained the claim that the cross-bill should not be considered by the court. It is well settled in this court that where a party has an election to rescind he must elect promptly, and having elected must abide by his decision; and that failure to rescind within a reasonable time, is plenary evidence of his election not to do so. Dennis v. Jones, 44 N. J. Eq. (17 Stew.) 513; Clampitt v. Doyle, 73 N. J. Eq. (3 Buch.) 678; Faulkner v. Wassmer, 77 N. J. Eq. (7 Buch.) 537. These were all cases of rescission by act of the defrauded party, and it is not clear who was defrauded in- the present case, fraud being claimed on both sides; but the rule is equally applicable where rescission is tendered or offered by one party to the other and an election thus given to accept or refuse it. Such was the case here. Complainant, claiming as a stockholder and threatened with dissolution of the company and sale of his collateral, was put by the act of defendants in a position where by resigning his claim to the stock he could cancel his indebtedness and have liis money,back. Clearly he was not entitled to both stock and collateral. He elected to maintain his claim on the stock, and must abide the result of his choice. For affirmance — The Chiee-Justioe, Garrison, Swayze, Trenchard,■ Parker, Bergen, Minturn, Kalisoi-i, Bogert, Yredenburgi-i, Oongdon, Treacy — 12. -For reversal — None.