I am unable to agree with the opinion of the majority in this case. As I understand it, they base their opinion upon the theory that the plaintiff was entitled to a peremptory instruction under the common-law count, and they eliminated from their consideration the count under the Blue Sky Law. *Page 138
1. I do not think the plaintiff's statement and the evidence of his witnesses warranted the inference of fraud in procuring the contract.
2. I am of the opinion that, even if fraud was sustainable under the evidence, when the certificate of stock was delivered to the plaintiff, which was two or three days after the subscription therefor, and the giving of the check, he was put upon notice that the contract delivered was not the contract which he had made, and he was under the duty within a reasonable time to rescind the transaction, and demand the return of his money.
The statement upon which the plaintiff predicated his action is as follows:
"They were there and laid the proposition down to me and said what a good proposition it was and everything and said, `You've got your money in the bank and this is a better proposition than the bank because it pays you more money; it pays you four times a year or quarterly six per cent' and so I looked it over and I said, `I think myself it is pretty good' and they told me, `Why, it's a better proposition than the bank is because it is bigger than a bank and it's growing all of the time and you can get your money out of it at any time you want it.'"
"Q. Did they tell you how you could get your money out? A. Yes, sir, just take the certificates and carry them to Gulfport and they would cash them, and they said, `Or, if you do not have time to do that, just go to the office and Mr. Bostick will send them in for you and they will send your money back.'"
He testified that the parties making the negotiations were Messrs. Bostick and Jordan, of the Mississippi Power Company, and that he believed what they said and relied upon them.
Mr. Jordan testified that the general manager of the sales department of the Mississippi Power Company, Mr. Armstrong, instructed the agents as to selling points, and among other things stated as follows: *Page 139
"Q. What representation, if any, did he authorize you to make toward the selling of this stock to the people in this territory? . . . A. They told us that we had three strong selling points. One was that their money was safe, and second, that it paid a higher rate of interest than an ordinary savings account, and third, that they could get their money whenever they wanted it, and those were the three strong selling points they said we should talk. . . .
"Q. Did they tell you who could give them the money? A. No, sir, they just said take it to the Gulfport office.
"Q. And what would happen when they took it there? A. They would get their money back."
It will be seen from this testimony that the representations were as to the future, and not representations of existing facts. In order to predicate fraud upon a future representation, the proof must show that there was no intention, at the time of making such representation, of carrying it out. It is not a breach of a contract based on representations as to the future that constitutes fraud, but it is the fraudulent intent existing in the mind at the time not to perform the contract. While proof of a fraudulent intent may be inferred from circumstances, such circumstances must be inconsistent with honest intention and good faith. Fraud is never presumed, but must be proven by clear and convincing testimony. In 27 C.J., p. 65, it is said: "The facts and circumstances proved must clearly establish the inference of fraud; it is not sufficient that they lead only to a suspicion thereof, nor are they sufficient where they are as consistent with honesty and good faith as with fraud. When the proved or admitted facts are consistent with any reasonable theory of good faith and honest intent, they should be so construed. Fraud cannot be inferred or presumed from ambiguous evidence."
In Willoughby v. Pope, 101 Miss. 808, 58 So. 705, 706, it was held as follows: "Circumstances were given in *Page 140 evidence which might have raised a suspicion; but suspicion does not rise to the dignity of proof. It has grown to be the fashion to view the acts of our fellowmen with suspicion and distrust. According to the tenets of this cynical school of thought, fraud should be presumed wherever fraud is suggested. This transitory mental attitude does not meet with the approval of this court, and, as it appears to us this rule of action was adopted as a rule of law upon the trial of this case, we cannot approve the verdict of the jury upon this branch of the case."
In Sawyer v. Prickett, 19 Wall. (86 U.S.) 146, 160, 22 L. Ed. 105, in discussing the question of fraud, the court said that: "The law gives a different effect to a representation of existing facts, from that given to a representation of facts to come into existence. To make a false representation the subject of an indictment, or of an action, two things are generally necessary, viz., that it should be a statement likely to impose upon one exercising common prudence and caution, and that it should be the statement of an existing fact. A promissory statement is not, ordinarily, the subject either of an indictment or of an action. [Citing authorities.] The law also gives a different effect to those promissory statements based upon general knowledge, information, and judgment, and those representations which, from knowledge peculiarly his own, a party may certainly know, will prove to be true or false."
In Deshatreaux v. Batson, 159 Miss. 236, 131 So. 346, 348, it was held that such statements are generally mere expressions of opinion, or judgments which will not excuse the other party's failure to make examination for himself for the purpose of ascertaining the real facts. The court there said that: "The general rule is that a person has no right to rely on representations as to value; he is required to exercise his own judgment as to value. It is an act of folly on his part to accept the other person's statement in that respect. Such statements are usually *Page 141 mere expressions of opinion, or judgment, which will not excuse the other party's failure to make an examination for himself for the purpose of ascertaining the real facts. This is especially true where the relation of the parties are naturally antagonistic, such as buyer and seller. Where the means of information are equally accessible to both parties, expressions of opinion, however positive, by one of the parties, cannot be considered as a fraud upon the rights of the other," citing authorities.
In Walker v. Mobile O.R. Co., 34 Miss. 245, Walker subscribed for stock, upon the statement of the agent that Congress had donated a large quantity of land to the railroad from which millions of dollars could be realized, but failed to pay for the same. Two grounds of defense were set up in the pleas, and in the discussion as to the second plea, the court there said: "The defence set up by the second plea consists of alleged fraudulent representations and acts in several particulars. First, as to the representations in relation to the value of the lands donated by Congress, they must, from the nature of the subject, have been mere expressions of opinion upon a matter of which the agent could not possibly have any precise knowledge, or anything more than a mere opinion. The means of information were equally accessible to both parties; and the expressions of opinion, however positive, by the agent, cannot, under such circumstances, be considered as a fraud."
In Saffold v. Barnes, 39 Miss. 399, the court said, in discussing the alleged false representation, that:
"The alleged false representations relied on by him to discharge him from his subscription are, that the boat was, at the time of his subscription, being built in New York, and was to be ready for the business of the company in May and ready for the summer trade; to be a first-class iron steamboat, to run from New Orleans to Biloxi in six or seven hours, and sufficient to do all the business; but that the boat did not arrive at New Orleans *Page 142 until August or September, was an inferior boat, could not make the trip from New Orleans to Biloxi in less than eight or nine hours, cost thirty or forty thousand dollars more than was represented by the agent of the company obtaining the subscriptions; that the agent in taking the subscriptions, stated that, unless these representations were fulfilled, the garnishee would not be required to pay his subscription; and that the boat was destroyed by blowing up the first year.
"It is obvious that the subscriptions for stock were the means by which the president and directors were to make contracts for the building or purchase of boats for the enterprise, and to pay for them; and to that end the subscribers had become parties to the enterprise, agreeing to contribute the sums subscribed by them respectively, and clothing the corporation with power and discretion `to do all proper things for the successful prosecution of the business of the company.' The representations, though alleged to be false, appear from their nature to amount to but this: that the boat was not delivered at the time stated by the agent, and was not of the character and quality represented when the subscriptions were obtained. If this be true, it might have been good ground for the company to refuse to accept the boat; but, as she was accepted, is it a sufficient ground to absolve the subscribers from liability? It appears not. The acceptance was the act of the subscriber's own agent, acting in pursuance of the general authority conferred; and if that agent did not faithfully or judiciously perform the duty, are the creditors of the company to lose their rights acquired against them, as the constituents of the company? The creditors had the right, in making contracts with the company, to regard the subscriptions as their security for the debts contracted in furtherance of the enterprise; and any private understandings between the individual corporators, as to the manner in which the president and directors were to perform the duties *Page 143 required of the corporation, and in derogation of the general powers conferred upon them in the articles of incorporation, was a matter which could not affect the rights of parties dealing with the corporation, within the scope of its articles of incorporation."
In 51 A.L.R., pages 1 to 177 [Russell v. Industrial Transportation Co., 113 Tex. 441, 251 S.W. 1034, 258 S.W. 462; Bushnell v. Elkins, 34 Wyo. 495, 245 P. 304; Foster v. Dwire,51 N.D. 581, 199 N.W. 1017; Councill v. Sun Ins. Office,146 Md. 137, 126 A. 229; Holcomb Hoke Mfg. Co. v. Auto Interurban Co.,140 Wash. 581, 250 P. 34; Palmetto Bank Trust Co. v. Grimsley,134 S.C. 493, 133 S.E. 437], fraud is discussed, and in an elaborate case note beginning at page 46, there is a general discussion upon the proposition, citing many authorities. On page 63 it is said that: "When a promise is made, the promisor, by necessary implication, asserts a present and bona fide intention to perform, and if, therefore, the intention to perform does not exist, there is a misrepresentation of a fact upon which fraud may be predicated, the gist of the fraud in such a case being not the breach of the agreement to perform, but the fraudulent intent of the promisor, and the false representation of an existing intention to perform, when such intent did not, in fact, exist; and the courts have pointed out that the state of the promisor's mind at the time he makes the promise is a fact, and one which is exclusively within his own knowledge; and if he represents his state of mind, i.e. his intent, as being one thing, whereas it is the opposite, he misrepresents a then existent fact. In other words, there is a prima facie presumption of fairness and honesty in the dealings of individuals, and where one makes a promise to another as an inducement for a change of position, or other action on the part of the latter, he, if not expressly, impliedly avers that he has an existing intent to fulfill his promise, and such implied averment of existing intent is one of matter of fact, and *Page 144 if false and fraudulent, is a fraudulent representation which may or may not according to circumstances, furnish the basis for an action ex delicto in the nature of deceit."
Measured by these rules, there is not sufficient evidence to establish an intent not to perform, in the case at bar, at the time the contract of subscription was made. The contract was made in January, 1930, and the stock certificate was delivered in January, 1930, and the six per cent quarterly dividends were regularly paid up to and including October, 1933; the January, 1934, being the first dividend left unpaid, because of financial difficulties due to the great depression. Numbers of subscribers had availed themselves of the privilege of the resales agency established by the company, and a number of witnesses were introduced, who testified that they had taken their stock to the company and secured cash therefor. It is clear that this resale agency was established and existent at the time of the subscription, and that the company was then able to dispose of all stock returned, and that money for such returned stock was sent by the company to each such purchaser. This, it seems to me, instead of establishing a fraudulent purpose, establishes conclusively a bona fide intention on the part of the appellant to carry out its agreement.
It is also clear that the reason for the later inability and failure to perform was the financial distress then existing, during which it was impossible to sell stock or to borrow money. It is significant that the power company continued to pay the six per cent dividends during the financial distress. It is not a case where the company had no means of carrying out its promise at the time it was made; but, on the contrary, it is a case where the company carried out its agreement to pay the six per cent dividend, and to comply with the desire of a number of its subscribers to have their stock resold through its resale agency.
In the case at bar there were no representations made *Page 145 by an agent as to what plan or method the company would use in refinancing sales of stock, or in refunding money given therefor.
It seems to me to be manifest that if a person is to be credited with general knowledge of the law — and we must so assume in administering the law — that the resale agency was the only feasible means of carrying out the contract, and that the parties must have had some understanding thereof. A contract to do an unlawful thing, of course, is not enforceable, and parties having knowledge of such must know that the company cannot make valid and legal such a contract.
The appellant, on receiving the stock certificate which did not contain the agreement alleged to have been made, was under the duty, at once or within a short time, to elect whether he would keep the contract as given him, or whether he would rescind it, and demand the return of his money. Under notice of special matter under the general issue, the plaintiff was given notice that the stock certificate sold to him contained the provision that it was subject to the laws of Maine, and to all the provisions of the contract. The certificate of stock showed on its face that the preferred stockholders had different rights from the common stockholders, and that the seven per cent preferred stock had prior rights to the six per cent common stock; and of course plaintiff was bound to take notice of the charter of incorporation and the laws of the state under which the corporation was created. The stock certificate contained provisions which expressly referred purchasers to that information, or to where it could be obtained; and they were bound to accept the stock under the laws of the state of the corporation's domicile. There are a number of statutes of the state of Maine, under which the power company was created, of which stockholders must take notice. It may be true that a person actually does not know what the law is, but in dealing with corporations of other states, and of this *Page 146 state, a person must take notice of their power under the law. Such persons are charged with the duty of ascertaining what the law is with respect to the powers and duties of such corporations, and all pertinent provisions growing out of same. If a person makes a contract in another state, he necessarily makes it subject to the laws of that state, and he must be charged with knowledge of the laws thereof, whether he has actual knowledge or not.
It appears that by the law of Maine, under which the corporation in the case at bar was created, stock may be issued under such provisions without a par value; "it shall be unlawful to set forth any par value or value in dollars thereon, or to express any rate of dividend to which the shares represented thereby shall be entitled in terms of percentage of any par or other value. Every such certificate shall have plainly stated on its face the number of shares which it represents and each such share (except as to preferences, rights, limitations, privileges, and restrictions, lawfully granted or imposed with respect to any stock or class thereof) shall be deemed to be equal to every other share of the same class. Preferences, rights, limitations, privileges, and restrictions authorized by the laws of this state may be stated in dollars and cents per share." Section 14.
Section 14, art. 4, pt. 3, Const. Maine 1930, provides that: "Corporations shall be formed under general laws, and shall not be created by special acts of the Legislature, except for municipal purposes, and in cases where the objects of the corporation cannot otherwise be attained; and, however formed, they shall forever be subject to the general laws of the state."
Section 17, chapter 56, Rev. St. Maine 1930, provides that: "Every corporation may create two or more kinds of stock with such classes and with such designations, preferences, and voting powers, or restrictions, or qualifications thereof, as shall be fixed and determined in the *Page 147 by-laws, or by vote of the stockholders at a meeting duly called for the purpose. Restrictions and qualifications of voting power so imposed shall control in all cases where any vote or consent of stockholders is now or hereafter required by statute, unless such statute shall provide expressly to the contrary, and the provision of any statute requiring a specific vote of all, a majority, or a fractional part of the stock issued or of the stock outstanding, or any similar provision, shall be construed as limited by any such restrictions and qualifications."
Section 19, chapter 56, Rev. St. Maine 1930, further provides that: "Corporations may issue and dispose of their authorized shares having no par value for such consideration as may be prescribed in the certificate of organization or in the certificate of amendment, or if no consideration is so prescribed then for such consideration as may be fixed by the stockholders at a meeting duly called and held for the purpose, or by the board of directors when acting under general or special authority granted by the stockholders."
Section 20, chapter 56, Rev. St. Maine 1930, provides for the retirement of preferred stock, and provides: "That no preferred stock shall thus be called in or retired if thereby the property and assets of the corporation shall be reduced below the amount of its outstanding debts and liabilities."
The pleadings and the record show that a repurchase of all the stock would diminish the assets of the corporation below its outstanding debts and liabilities, and consequently this provision in the contract limited the plaintiff's right to recover, and the action on this proof should not be sustained.
By section 93, chapter 56 of the Revised Statutes of Maine 1930, it is provided that: "Corporations, not created for literary, benevolent, or banking purposes, shall not so divide any of their corporate property as to reduce their stock below its par value, until all debts *Page 148 are paid, and then only for the purpose of closing their concerns."
Section 101, chapter 56 of the Revised Statutes of Maine 1930, provides as follows: "The capital stock subscribed for any corporation is declared to be and stand for the security of all creditors thereof, and no payment upon any subscription to or agreement for the capital stock of any corporation, shall be deemed a payment within the purview of this chapter, unless bona fide made in cash, or in some other matter or thing at a bona fide and fair valuation thereof."
Section 102 of chapter 56 of the Revised Statutes of Maine 1930 provides that: "No dividend declared by any corporation from its capital stock or in violation of law . . . is valid as against any person who has a lawful and bona fide judgment against said corporation, based upon any claim in tort or contract or for any penalty, or as against any receivers, trustees, or other persons appointed to close up the affairs of an insolvent corporation."
Section 14, art. 4, pt. 3, of the Constitution of Maine provides that: "Corporations shall be formed under general laws, and shall not be created by special acts of the Legislature, except for municipal purposes, and in cases where the objects of the corporation cannot otherwise be attained; and, however formed, they shall forever be subject to the general laws of the state."
It is manifest from these provisions of the law of Maine that in the case at bar the plaintiff was under the duty at once either to retain or repudiate the contract delivered to him. On the duty to promptly rescind, it is said, in 13 C.J., p. 611, that: "One induced by fraud to make a contract may on discovery of the fraud either affirm the contract and sue for damages, or assert them by way of counterclaim, or he may repudiate the contract, tender back what he has received under it, and recover what he has parted with, or its value, even in the *Page 149 hands of third persons, unless they are bona fide purchasers for value, without notice of the fraud, but the adoption of one remedy excludes the other." See Alig v. Lackey, 114 Miss. 392, 75 So. 139.
In Black on Rescission and Cancellation, vol. 1, p. 47, sec. 24, it is said that: "There must also be an intention that the fraud practiced shall influence the action of the other party, and there must be the fact that it did influence him and induced him to enter into the contract or obligation."
It is not permissible for a person to take a written contract which, under the law, is the exponent of its own terms, and neglect or refuse to limit himself to its provisions, and then, after a long delay, having received benefits under it, to repudiate it upon the ground that he did not know its terms. A contract cannot exist in parol and in writing at one and the same time. The plaintiff must exercise reasonable diligence to determine whether the contract complied with the agreement. He had the contract in his possession in ample time to become acquainted with its provisions.
In 13 C.J., title "Contracts," p. 616, sec. 671, it is said: "A party seeking to rescind for fraud or false representations must do so within a reasonable time; and the right is lost by failure to act promptly on discovery of the fraud or after it might have been discovered by the use of due diligence. And it would seem that although delay is induced by additional fraudulent representations the party cannot thereafter take advantage of the original fraud as a ground for rescission. So in equity, unreasonable delay in taking steps to set aside a fraudulent contract will have the effect of affirming it."
In section 542, Second Edition, Black on Rescission and Cancellation of Contracts, vol. 2, p. 1336, it is said: "The purchaser of personal property who desires to rescind the sale on account of fraud, mistake, defective quality, or other cause, is required to act with reasonable promptness. *Page 150 It is, of course, impossible to fix an absolute limit of time within which such action must be taken, as each case must be governed by its own circumstances. But from an examination of the authorities it would appear that thirty days is about the utmost length of time which the courts are disposed to allow to the purchaser for this purpose, unless there are unusual circumstances in the case excusing a longer delay. At any rate, periods of time ranging from one month to a year have been held too great to save the party attempting to rescind from the imputation of laches, while, on the other hand, purchasers who have rescinded the sale within periods extending from one day to thirty days have been held to have acted with reasonable promptness. In a case in Delaware, it is said that a reasonable time within which to rescind a sale for fraud and return the goods, where the parties live not more than fifteen miles apart, would be one or two days after discovering the fraud, and in a case where the subject of the sale was certain hay and straw, which was found to be of poor quality, it was held that a delay of six days in rescinding the sale was unquestionably great, and in another case a buyer of silverware was adjudged guilty of unreasonable delay, who waited six weeks before repudiating the sale on the ground that the goods did not class with the sample. So where lumber is sold under a false representation that it is sound, and the buyer makes no objection until nearly three months after discovering its quality, it is too late to rescind. And a similar ruling was made in a case where an inferior grade of whiskey was substituted for that supposed to have been sold, but the buyer made no complaint for two years after discovering the situation."
See Columbia Milling Co. v. Russell Co., 89 Miss. 437, 42 So. 233; Germania Life Ins. Co. v. Bouldin, 100 Miss. 660, 56 So. 609; Home Mut. Fire Ins. Co. v. Pittman, 111 Miss. 420, 71 So. 739; Corley et al. v. Reed et al., 164 Miss. 678, 145 So. 241; American Oil Co. v. Williamson, *Page 151 154 Miss. 441, 122 So. 488; Gunter v. Henderson Molpus Co., 149 Miss. 603,115 So. 720; Continental Jewelry Co. v. Joseph, 140 Miss. 582,105 So. 639; J.B. Colt Co. v. Fuller, 144 Miss. 490,110 So. 427; Springfield F. M. Ins. Co. v. Nix, 162 Miss. 669,138 So. 598.
Many other authorities to the same effect could be cited, and many are contained in the briefs filed; but it is deemed unnecessary to set them forth with greater elaboration.
I am also of the opinion that it was error to permit the introduction of evidence of the representations made by other agents to other purchasers of stock. Lindsey v. Lindsey, 34 Miss. 432; Rex Motor Car Mfg. Co. v. Dupont, 132 Miss. 504, 96 So. 684; Clopton v. Cozart, 13 Smedes M. 363; 23 Cent. Dig. Fraud, sec. 17. There was no relation between what representations other agents made to other buyers of stock and the representations involved in the case at bar. No notice of such representations is shown to have come to the knowledge of Bennett, or to have influenced him in the purchase of his stock. It was an effort to corroborate by hearsay evidence the plaintiff and his witnesses as to their evidence.
The case should have been tried upon the representations made and relied on in the present case, and the other witnesses to other transactions could only have a prejudicial effect upon the minds of the jury trying the case.
For the errors mentioned, I think the judgment should be reversed and the cause remanded. *Page 152