Opinion
No. 31626.
March 25, 1935.
1. BONDS.
Representations by seller that bonds were gilt-edged and as good as gold held assertion of opinion so as not to impose liability on seller for misrepresentation where statements were not true.
2. BONDS.
Statement by seller of bonds that bonds were guaranteed by surety company held an assertion of fact so as to make seller liable for misrepresentation, where statement was false, notwithstanding seller acted in good faith believing statement to be true.
3. SALES.
Seller's misstatement of facts to be material, so as to furnish ground for rescission, need not be in any particular words so long as impression created by statement relied on by buyer was one which reasonably could be derived from statement made, and which seller could reasonably have anticipated buyer would derive from words used.
4. ELECTION OF REMEDIES.
Buyer who has been defrauded in purchase may elect to retain property and sue for damages for breach of contract any time within period allowed by statute of limitations in which to institute his action.
5. SALES.
Defrauded buyer, who has right to rescind, must offer to do so within a reasonable time ater discovery of those facts which justify rescission, or within a reasonable time after discovery of facts reasonably sufficient to put buyer on inquiry, which inquiry, if reasonably pursued, would have led to discovery of facts sufficient to justify rescission.
6. SALES.
Generally, burden is on seller to show that buyer, who had right to rescind sale because of fraud, did not act within a reasonable time after discovery of facts which justified rescission.
7. BONDS.
Buyer who purchased bonds in 1929, on seller's representation that payment of bonds was guaranteed by surety companies, who learned for first time in 1932 that representations were untrue and brought suit for rescission within a reasonable time thereafter, held entitled to rescind purchase, notwithstanding buyer learned that company which issued bonds was in financial difficulties in 1931.
8. BONDS.
Buyer, who purchased bonds on seller's representations that bonds were gilt-edged, good as gold, and payment thereof guaranteed by a surety company held not entitled to rescission for material misrepresentation, where undisputed evidence disclosed that payment of bonds was guaranteed by reputable surety company, notwithstanding company which issued bonds was insolvent.
9. CORPORATIONS.
Buyer, who purchased bonds issued by four companies, on seller's representation that payment of bonds was guaranteed by surety companies, who sued to rescind purchase of two issues within reasonable time after learning seller's representations were untrue, could not file supplemental bill or rescission of purchase of other two issues nine months later, since notice that seller's representations were untrue as to first two issues was sufficient to put buyer on inquiry as rest of bonds.
10. SALES.
Where several things contracted for in one transaction have no such relation to each other so that value or price of one thing is increased or diminished or otherwise materially affected by its association with other things, transaction is "divisible contract" so as to permit buyer to rescind part of transaction and affirm remainder.
11. CORPORATIONS.
Buyer, who, in one transaction, purchased bonds issued by four different companies, held entitled to rescind purchase of bonds issued by one company because of seller's misrepresentations, notwithstanding buyer could not rescind rest of contract since purchase agreement was a "divisible contract."
12. APPEAL AND ERROR.
In suit for rescission, where chancellor failed to make findings of fact on issue whether misrepresentations of seller's agent were those of seller and erroneously dismissed suit on another ground, case was remanded so that chancellor could make finding of fact on disputed issue as required by statute (Laws 1934, chapter 252).ON SUGGESTION OF ERROR. (Division B. June 10, 1935.) [162 So. 169. No. 31626.]
BANKS AND BANKING.
National bank is liable for fraud and deceit, or fraudulent representations, by which a customer is led to make an investment on the faith of such fraudulent representations.
APPEAL from chancery court of Lauderdale county.
HON. A.B. AMIS, SR., Chancellor.
Suit by Sylvia G. Bullard against the Citizens' National Bank. From a judgment of dismissal, plaintiff appeals. Affirmed in part and in part reversed and remanded.
On suggeston of error. Suggestion of error overruled.
Graham Graham, of Meridian, for appellant.
There was by express terms absolute trust and confidence placed in appellee by appellant, with actual notice to appellee of an utter lack of knowledge, or means of knowledge, on the part of appellant; and of her absolute trust and confidence being then reposed in appellee.
Appellant was then charged with a duty, not imposed in a case of dealing at arm's length, but one charging it with the exercise of utmost good faith, and placing upon it the burden of proof to show such good faith.
Ham et al. v. Ham et al., 110 So. 583, 146 Miss. 161; Watkins et al. v. Martin et al., 167 Miss. 343; Bourn v. Bourn, 163 Miss. 71; Griffith's Chancery Practice, par. 47; 26 C.J. 1158, par. 72 (6); 2 Black on Rescission and Cancellation (2 Ed.), page 714, par. 253.
It is wholly immaterial whether the representations were made ignorantly and innocently or intentionally, under the circumstances in this case, as the result to appellant is the same and her remedy the same.
Vinson v. Corbitt, 94 Miss. 46; 14 Am. Eng. Encyc. of Law (2 Ed.); Davis v. Heard, 43 Miss. 50; McNeil v. Bank of Bay Springs, 100 Miss. 271; Alexandria v. Meeks, 132 Miss. 289; Allen v. Luckett, 94 Miss. 868; Canadian Agency, Ltd., v. Assets Realization Corp., et al., 165 App. Div. (N.Y.) 96, 150 N.Y. Supp. ___; 9 C.J. 1169; Smith v. Richards, 10 L.Ed. 42; 3 Williston on Contracts, page 2650, par. 1490, and page 2668, par. 1500; Roberts v. French, 153 Mass. 60; Restatement of the Law of Contracts, par. 476 (b).
Statement by agent, detailed to investigate a security, that it is gilt-edge, is not a hazard of an opinion, but the declaration of a fact.
26 C.J. 1102(a), 1103, 1217; Scribner v. Palmer, 81 Wn. 474, 142 P. 1166; Palmer v. Bratager, 41 S.D. 649, 172 N.W. 507; 3 Williston on Contracts, page 2657, par. 1494; 26 C.J. 1219, footnote 13(b), 1098 (28) C., 1091, 1085, par. 22 (c); Olston v. Oregon Water Power Co., 52 Or. 343; Rogers v. Rosenfield, 158 Wis. 285; Coulter v. Clark, 66 N.E. 739; Restatement of the Law of Contracts, par. 474 (a).
Every case is to be determined by its own particular circumstances, and it is eminently proper, and necessary to a right decision, to take into account the relative situation of the parties with reference to mental capacity, experience, shrewdness, and native cunning.
1 Black, Rescission of Contracts and Cancellation of Written Instruments, page 386, par. 125; Chamberlain v. Fuller, 59 Vt. 247; Whorton on Contracts (1 Ed.), par. 245; Prescott v. Brown, 30 Okla. 428; Robinson v. Rhinehart, 137 Ind. 674; Wilcox v. Schisler, 55 Mont. 246; Quinly v. Clock, 60 N.Y. 253; Banaghan v. Maloney, 200 Mass. 46; 19 L.R.A. (N.S.) 871, 128 Am. St. Rep. 378; Carter et al. v. Eastman Gardner Co., 95 Miss. 651; Nash Mississippi Valley Motor Co. v. Childress, 125 So. 708; King v. Livingston Mfg. Co., 60 So. 143; Restatement of Law of Contracts, par. 499 (2).
Acquiescence and waiver are always questions of fact, and, where set up to defeat rescission, the burden is upon the defendant to make it out.
Josly v. Cadillac Automobile Co., 101 U.S. 77; Pence v. Langdon, 99 U.S. 578; Mudsill v. Watrous, 22 U.S. App. 12; Griffith's Chancery Practice, par. 47; 3 Black on Rescission and Cancellation, page 1481, par. 615; 87 So. 585; Galliher v. Cadwell, 145 U.S. 368; Lake v. Perry, 95 Miss. 550; Booner v. Bynum, 72 Miss. 442; 9 C.J. 1201; 2 Black on Rescission and Cancellation (2 Ed.), page 1348, par. 546; 3 Williston on Contracts, page 2816, par. 1595.
There can be no denial of the doctrine of "election," as an established rule of law, but, like its theological namesake it is held and applied with many variations, by the hundreds of cases in which it has been invoked.
Murphy v. Hutchison, 93 Miss. 643.
Whether or not a person has acquiesced in the continuance of a contract which he had legal ground to rescind, or has ratified a voidable contract, or elected to affirm it rather than rescind it, depends primarily upon his intention, and this is to be shown by his declaration, his acts, or his conduct, which are matters of fact. The question is therefore a question of fact for the determination of a jury, in any case at law where it arises, and if a prima facie right to rescind is made out, then the burden of proving acquiescence, waiver, or election to affirm is on the party alleging it.
53 A. 314, 52 S.E. 247; 20 C.J., page 6, par. 6, pages 26, 36, and 37, (29) B.; 26 C.J. 35 (28) A. 1142; 3 Black on Rescission and Cancellation (2 Ed.), page 1481, par. 615; 91 Va. 183.
It will be noted that each of the four sets of bonds were recorded on separate invoices signed by appellee and the additional one thousand dollars in bonds purchased January 16, 1930, involving five hundred dollars Central Securities and five hundred dollars National Union Mortgage Co., were scrupulously separated so that each is covered by a separate invoice, the invoices dated November 15, 1929, aggregated eight thousand, fifty-two dollars and sixty-seven cents, with accrued interest, making total purchase of eight thousand, one hundred forty-nine dollars and seventy-six cents, on which eight thousand dollars was paid before invoices were issued. And on these facts appearing from the record of appellee, we have in jocular parlance a "Grey Horse Case" in the Bank of Antigo v. Union Trust Co., 149 Ill. 343, 23 L.R.A. 611, 36 N.E. 1029.
The rule of Mississippi in equity favors divisibility of contracts as against the entirety thereof.
Dunlap v. Petrie's, 35 Miss. 590; Ganang Chenoweth v. Brown, 88 Miss. 53; Wooten v. Walters, 110 N.C. 251; Camp v. Dill, 27 Ala. 553; Ledoux v. Armour, 4 Rob. La. 381; Freeman v. Skinner, 31 N.C. (9 Ired. L.) 32; Edward Thompson Co. v. Schroeder, 131 Minn. 125; Lampson v. Cummings, 52 Mich. 491; Miner v. Bradley, 22 Pick. (Mass.) 457; Weil v. Stone, 33 Ind. App. 112, 104 Am. St. Rep. 243; Ruben v. Sturtevant, 51 U.S. App. 286; Young C. Manufacturing Co. v. Wakefield, 121 Mass. 91.
Where the contract is divisible or separate and in distinct parts, the injured party may maintain a suit in equity to rescind part on equitable terms, while adhering to another independent part.
9 C.J. 1261, par. 209; 13 C.J. 561, sec. 525 (C); Southwell v. Beezley, 5 Or. 458.
A test of severability which has frequently been applied is to the effect that if the consideration is single, the contract is entire, but if the consideration is either expressly or by necessary implication apportioned, the contract will be regarded as severable.
13 C.J. 563, sec. 528; Sturbent v. Gas Co., 188 Iowa 584; 55 C.J. 270, par. 249, and page 1080, par. 1063 (2); McKnight v. Delvin, 11 Am. Rep. 715; Costigan v. Hawkins, 11 Am. Dec. 583; Restatement of the Law of Contracts, par. 480, sec. 2, ex. "D," and sec. 487, illustration No. 3, page 931; 49 C.J. 560-561, pars. 777 and 509; Bowen v. Needles National Bank, 79 Fed. 49; 26 C.J. 35 (26)-1.
The learned Chancellor says that appellant elected to keep the town of Decatur and the National Union Mortgage Company bonds and was thereby estopped because the contract was entire and indivisible, defeating her right to rescind on the bonds originally included in the suit; but we submit that the learned Chancellor is in error on this point, under the Mississippi cases of Murphy v. Hutchinson, 93 Miss. 643; Archibald v. General Motors Acceptance Corp., 157 So. 709; Commons v. Tapley, 101 Miss. 203, 573, Ann. Cas. 1914B, 307; Plant Flour Mills Co. v. Sanders Ellis, 157 So. 713; Restatement of the Law of Contracts, pars. 381-384; 3 Black on Rescission (2 Ed.), page 1481, par. 615.
Where a party prosecutes an action at law based on a misapprehension as to the legal effect of a written instrument, and dismisses the action, or where, in such case, on prosecution to judgment, is defeated because of such error, such acts do not constitute an election of remedies so as to preclude a subsequent action to reform the instrument.
20 C.J., page 26, page 6, par. 6, page 35 (28) A, and 37 (29) B.
Wilbourn, Miller Wilbourn, of Meridian, for appellee.
There can be no doubt about the reasonableness of the investigation made by the bank before it purchased and held these bonds and its entire and sincere faith in the validity and soundness of the bonds. Any opinion expressed with reference to such bonds, was honestly entertained and based upon reliable information, and nothing appears to have been said by Mr. Blanks to Dr. Cooper which could form a predicate for any actionable fraud.
Deshtreaux v. Batson, 131 So. 346, 159 Miss. 236; Germania Life Ins. Co. v. Bouldin, 100 Miss. 660, 56 So. 609; Springfield Fire Marine Ins. Co. v. Nix, 138 So. 518, 162 Miss. 669; Home Mutual Fire Ins. Co. v. Pittman, 111 Miss. 420, 71 So. 739; New York Life Ins. Co. v. O'Dom, 100 Miss. 660, 59 So. 609; Maryland Casualty Co. v. Adams, 159 Miss. 88, 131 So. 544; National Union Fire Ins. Co. v. Provine, 148 Miss. 659, 114 So. 750; 20 Cyc. 49; Corley v. Reed, 164 Miss. 678, 145 So. 241; 2 Pomeroy's Equity Jurisprudence (4 Ed.), sec. 892, pages 1849-1851; Continental Jewelry Co. v. Joseph, 105 So. 639, 140 Miss. 582; Gunter v. Henderson-Molpus Co., 115 So. 720, 149 Miss. 603.
A person cannot avoid a written contract which he has entered into on the ground that he did not read it or have it read to him, and that he supposed its terms were different, unless he was induced not to read it or have it read to him by fraudulent representations made to him by the other party, on which he was entitled to rely.
Continental Jewelry Co. v. Joseph, 140 Miss. 582, 105 So. 639; American Oil Co. v. Williamson, 122 So. 488, 154 Miss. 441; Gunter v. Henderson-Molpus Co., 149 Miss. 603, 115 So. 720; Coats Sons v. Bacon, 77 Miss. 320, 27 So. 621; 18 C.J. 226.
That the appellee did not honestly believe the bonds were safe is not contended. That appellee was not warranted in so believing is not shown. That appellee had investigated the matters was shown, and we submit the proof fails to show by clear and convincing evidence that any actionable misstatement was made.
White v. Stewart, 145 So. 747.
The burden of proof was on the appellant to establish her case by clear and convincing testimony.
McCain v. Cochran, 120 So. 823, 153 Miss. 237.
Burden of proof as to missrepresentations was on complainant to establish same by "clear and convincing" proof.
McCain v. Cochran, 120 So. 823, 153 Miss. 237; C. N.W. v. Wilcox, 116 Fed. 913; Lion Oil Co. v. Refining Co., 21 F.2d 280.
The alleged expressions of opinions as to bonds not actionable under facts here before the court, even if made.
Section 474, Restatement of the Law of Contracts; White v. Stewart, 145 So. 747, 166 Miss. 694; Deshatreux v. Batson et ux., 131 So. 346, 159 Miss. 236.
A representation which is expressed and understood as nothing more than statement of opinion cannot constitute fraud and this is especially true where the opinion expressed is honestly entertained.
26 C.J., sec. 20, p. 1079; Selma v. Anderson, 51 Miss. 829; Walker v. Mobile Ohio R.R. Co., 34 Miss. 245; Anderson v. Hall, 20 Miss. 679, 51 Am. Dec. 130; Hall v. Thompson, 9 Miss. 443; Anderson v. Burnett, 6 Miss. 165, 35 Am. Dec. 425; Kidney v. Stoddard, 7 Metcalf 252; Shores v. Hutchinson, 125 P. 142; Moore v. Carick, 140 P. 485; 1 Black on Rescission and Cancellation of Contracts (2 Ed.), p. 200, sec. 76, and page 207, sec. 77.
There was no confidential relation existing at time of sale.
26 C.J., sec. 24, p. 1087.
Any statement that appellant made to the effect that she was "relying on you," made in the room when and where were Dr. Cooper and Mr. Blanks, was rightly understood by him to mean nothing more than that she was expecting information concerning the matter to come from Mr. Blanks and from Dr. Cooper, her confidential agent, physician and advisor.
26 C.J. 1158, sec. 72.
But even where the confidential relationship appears to have existed, the result of it has been simply either as excusing the buyer from investigating personally, or as obligating the defendant to make a full disclosure. There is no showing here that Mr. Blanks knew anything concerning the securities that he dishonestly withheld or concealed from the appellant to her detriment.
Ricketts v. Tompkins, 68 A. 75; 26 C.J., p. 1158, sec. 72, and pp. 1159, 1160; Hemingway v. Coleman, 49 Conn. 390, 44 Am. Rep. 243.
The contract of November 15, 1929, was entire for purchase of batch of bonds aggregating eight thousand dollars at par and accrued interest, for purpose of permanent investment of that amount of money, with interest paying dates so arranged as that interest should come in at different times, agreed upon orally at one sitting, and consummated the same day by delivery of a check for eight thousand dollars by buyer and issuance by seller of safe-keeping receipt for the actual bonds. It may not be rescinded in part.
Johnson v. Stone, 69 Miss. 826; Floyd v. Arky, 42 So. 569, 89 Miss. 162; Strain Son v. National Park Furniture Co., 24 So. 703, 76 Miss. 343; Kansas Hat Cap Mfg. Co. v. Blakeny, 108 So. 139, 142 Miss. 851; Dixie Rubber Co. v. Catoe, 110 So. 670, 145 Miss. 342; Nelson Sons v. Wilkins, 118 So. 436, 151 Miss. 492; Hytken Bros. v. International Dress Co., 124 So. 653, 155 Miss. 469; Hytken Bros. v. Hanover Children's Wear Co., 124 So. 654, 155 Miss. 478; Colossus Co. v. D.L. Fair Lumber Co., 127 So. 300, 156 Miss. 878; Ormond v. Henderson, 24 So. 170, 74 Miss. 34; Restatement of the Law of Contracts, sec. 487; 3 Black on Rescission and Cancellation of Contracts (2 Ed.), sec. 583, page 1429; 2 Williston on Contracts, sec. 863.
Failure of appellant to notify the appellee promptly as soon as she knew or should have known of the alleged fraud, defeated her right to rescind.
Restatement of the Law of Contracts, sec. 483; Selma v. Anderson, 51 Miss. 829; Collins v. Collins, 150 So. 660, 168 Miss. 733; 13 C.J., page 611, sec. 653, and page 616, sec. 671; Richardson v. Love, 149 Fed. 625; Baldwin v. Anderson, 103 Miss. 462, 60 So. 578; Parker v. Foy, 43 Miss. 260; Figh v. Taber, 82 So. 495.
Where a party claims to have been defrauded, he has the election, either to pursue the remedy of rescission, or to affirm the contract and claim damages for the deficit. He cannot do both, and is bound by his election.
Wilson v. New U.S. Cattle Ranch Co., 73 Fed. 994; Elgen v. Snyder, 118 P. 280; 13 L.R.A. 92; 9 R.C.L. 965; 2 Black on Rescission and Cancellation of Contracts (2 Ed.), sec. 542, page 1336; Grant v. Lovekin, 132 A. 342.
Continuing after notice to treat the bonds as her own and to receive the income therefrom, constituted an affirmation of the contract by appellant, and worked a ratification of its precluding right to rescind.
Restatement of the Law of Contracts, sec. 484; Ga. Pac. R.R. Co. v. Brooks, 66 Miss. 583, 6 So. 467; Whittington v. Cotton, 130 So. 748, 158 Miss. 554; Scott v. Freeland, 7 S. M. 418; Ware v. Haughton, 41 Miss. 382; Hamm v. Field, 41 Miss. 712; Pintard v. Martin, 1 S. M. 126; Hall v. Thompson, 1 S. M. 487; Commercial Bank v. Lewis, 13 S. M. 226; Johnson v. Jones, 13 S. M. 580; Alig v. Lackey, 114 Miss. 396, 75 So. 139; Carter v. Preston, 51 Miss. 423; 2 Black on Rescission of Contracts (2 Ed.), sec. 542, page 1337; 4 R.C.L., Permanent Supplement Edition, sec. 26.
Evidence of statements alleged to have been made by Blanks to others than appellant and/or Cooper, to-wit, Pigford and Miss Hosey, as to how the bonds were secured, was incompetent. It cannot be considered here.
Rex Motor Car Co. v. Dupont, 132 Miss. 504, 96 So. 684.
The Blue Sky Law is inapplicable.
In the case at bar, the concealed fraud on the part of Central Securities Company and Central Bank Trust Company, and Central Bank Trust Company's breach of trust with reference to the collateral deposited with it as security for the bonds was unquestionably a latent matter, of which the bank officer knew nothing, and which he did not even have any ground to suspect, and which he was in no better position to know about than anyone else. When it comes to a concealed fraud of this nature, perpetrated as this one was, and constituting the ground of loss of those who bought Central Securities Company bonds, we respectfully submit that it cannot be charged against the appellee under the pleadings and proof here developed.
Tjosevig v. Butler, 38 P.2d 1022; Griffith's Chancery Practice, sec. 673.
The Chancellor's findings of fact are not reversible unless manifestly wrong.
Griffith's Chancery Practice, sec. 674; Briggs v. United States (C.C.A. 6, Dec., 1930), 45 F.2d 479; Lewys v. O'Neal et al., 48 F.2d 603; St. Paul, etc., Co. v. Tire Clearing House (C.C.A. 8, 1932), 58 F.2d 610; Automatic, etc., Co. v. Smith Corp. (C.C.A. 7, 1932), 60 F.2d 740.
It is clearly stated in section 863 of Williston on Contracts, vol. 2, page 1652, that the question as to whether or not a contract is or is not divisible in a given case is essentially one of fact. That is certainly true in the present case.
There was no written contract with referece to the purchase of these bonds. Therefore the Chancellor made no finding on the issue of fact as to whether or not the contract was divisible or indivisible until he had heard all the facts, pro and con, bearing on that question. The Chancellor went over the facts briefly, and from those facts, found that as a fact the parties to the contract of November 15, 1929, intended to make one contract for the purchase and sale of all the bonds that day negotiated for.
The Chancellor's finding of fact that Mrs. Bullard had lost the right to rescind, for the reasons set forth by him, is abundantly supported by the testimony, and is a conclusion of fact which is certainly not manifestly wrong.
The request to the Chancellor in the lower court to make any finding of fact, we submit, not only came too late, after the Chancellor already had made such findings of fact as he deemed essential to dispose of the case, but, in addition thereto no error can be predicated on the Chancellor's failure to find further facts, where he has already, without any request, found sufficient facts upon which to predicate a final decree.
Griffith's Chancery Practice, secs. 627 and 594.
Argued orally by D.M. Graham, for appellant.
In the fall of 1929, appellant, a widow of little or no business experience, had on deposit in bank eight thousand dollars, the proceeds of insurance, which she desired to invest in six per cent. bonds. She enlisted the assistance of her family physician who, in turn, got in touch with the officer of appellee bank in charge of its bond department. The physician disclosed to the bank officer that neither he nor appellant had any knowledge or experience in bonds or in the purchase thereof, and that they would have to depend upon the banker and in the trust that he would offer and sell to appellant only first-class securities in which the chance of ultimate loss would be reduced to the least practicable possibility.
The bank officer suggested, and placed before the physician bonds to be selected out of the issues hereinafter named; assured the physician that they were gilt-edged and as good as gold, and that their ultimate payment was guaranteed by surety companies of large resources, well known in the business world for their solvency and general dependability. The physician did not understand and called for an explanation as to what was meant by the statement that the ultimate payment of the bonds was guaranteed by surety companies, and it was explained to him by the bank officer that this meant that if there were any default in the payment of interest or principal, resort must first be had against the principal obligors in the bonds and against all their property, after the exhaustion of which any deficiency would be made good by the surety companies mentioned, in other words, that the bonds were ultimately good and absolutely safe because of the ultimate guaranty of their payment by the surety companies.
In a day or two thereafter, the physician and the bank officer went to the home of appellant where the statements above mentioned were repeated by the bank officer, and in the presence of appellant and appellant's daughter and the physician. And relying upon said statements and undertaking to make no investigation for herself, as to which, as the seller knew, she was not personally capable, appellant delivered to the bank officer her check for the eight thousand dollars with the understanding that he would select the bonds in such an order of arrangement that the interest coupons would mature at different times throughout a year, and in an aggregate amount of bonds closely approximating the sum aforesaid, would send her the proper sales invoices for them, and a trust receipt by which the bank would keep and retain the bonds in its vaults for her account.
Upon the return of the officer to the bank, he made out and mailed to appellant five separate sales invoices, all dated November 15, 1929, this being the actual date of the transaction, one of which invoices was for three bonds of Central Securities Company for two thousand five hundred dollars; another for one bond of National Union Mortgage Company for five hundred dollars; another for two bonds National Union Mortgage Company for one thousand dollars; another for two bonds Lookout Mountain Hotel Company for two thousand dollars; and another for two bonds town of Decatur for two thousand dollars, all these being the par value. But when the accrued interest was calculated on those selling at par and this deducted from those selling at slightly less than par, the aggregate amount was eight thousand one hundred forty-nine dollars and seventy-six cents, which difference appellant afterwards paid. Later, and on January 16, 1930, appellant purchased from the bank another bond of Central Securities Company, par value five hundred dollars, and under the influence of the representations in respect thereto above mentioned.
During the year 1930 and within less than a year after the purchases aforesaid, it was learned by the bank, which information was transmitted by it to appellant, that the Lookout Mountain Hotel Company was in financial difficulty and that a committee representing its bondholders had been organized. The bank still owned some of these bonds, and it was suggested by the bank that appellant join with it in sending their bonds to this committee, which was done. Later during 1931, similar adverse news came in respect to the Central Securities Company, and upon a similar arrangement the Central Securities bonds owned by the bank and those owned by appellant were forwarded to a bondholders' committee. Thereafter appellant inquired from time to time of the bank as to what reports it had received from these committees; but, particularly as to the Central Securities bonds, the bank could or did give only the information that the committee was at work and that the outcome would require time and patience.
While matters thus rested awaiting some definite information, appellant learned for the first time, during the month of July, 1932, that the Central Securities Company's bonds were not guaranteed by any surety company in any substantial manner whatsoever; and she thereupon employed an attorney to go to North Carolina, where this concern had its domicile, there to make a full investigation, which investigation revealed that the guaranty upon which she relied had never had, as to these Central Securities bonds, any existence in point of fact and that the only guaranty which had any existence was of a matter merely collateral to the bonds themselves, skillfully arranged so as to make it appear that the bonds were guaranteed, when in fact they were not; and that the Central Security Company's bonds were practically worthless, if not entirely so.
Within a reasonable time after the said investigation, appellant filed her bill for a rescission and for the recovery of the full amount paid by her so far as concerned the three thousand dollars in Central Securities Company's bonds and the two thousand dollars in the bonds of the Lookout Mountain Hotel Company. She did not include in this suit the one thousand five hundred dollars National Union Mortgage Company, nor the two thousand dollar town of Decatur bonds. But about nine months after the filing of her original bill, she filed a supplemental bill bringing in for the first time the bonds last mentioned.
The bank defended by a denial that the stated representations were made by its officer, and defended further by the contention that even if the alleged representations were made, they were assertions of opinion only, which would impose no legal liability upon the bank.
As to the representation that the bonds were gilt-edged and as good as gold, we think the contention of the bank is well taken. There is authority that such an assertion is a statement of fact and not of opinion. Scribner v. Palmer, 81 Wn. 470, 142 P. 1166, and there are cases to the contrary, as, for instance, Gleason v. McPherson, 175 Cal. 594, 166 P. 332. Without attempting an analysis of the cases from other jurisdictions, we rest our conclusion upon the observation that, at most, such a statement involves an admixture of fact and opinion, wherein it cannot be determined what is of fact and what is of opinion, nor where fact has ended and opinion has begun.
But the statement made and relied upon that the ultimate payment of the bonds was guaranteed by surety companies is an assertion of fact, for it is a matter within the range of definite and positive knowledge; and, although the assertion may have been made in good faith believing it to be true, this is immaterial when the statement was actually untrue, the legal responsibility upon the seller in such case is precisely the same as had he made the representation of fact knowing at the time that it was untrue. Alexander v. Meek, 132 Miss. 298, 96 So. 101; Fay Egan Co. v. Cohn Bros., 158 Miss. 733, 740, 130 So. 290.
In ruling upon the differences in legal effect, such as above noted, between assertions of opinion and statements of fact, it is not to be understood that there is any necessity that the statement, in order to be a material misstatement of fact, shall have been in any particular form of words or expression. The true inquiry is what was the sense or impression conveyed to the purchaser, and whether the sense or impression relied upon was one (a) which in view of all the circumstances was a sense or impression admissible within the bounds of reason, and (b) which in view of all the circumstances ought, as the court sees it, reasonably to have been anticipated by the seller as likely to be derived by the purchased from the expressions used; in which connection due consideration must be given to the known relative experience and capacity of the parties, particularly as to the experience and capacity of the purchaser as known to the seller, and the likelihood also from that circumstance whether the purchaser would or would not reasonably gain the impression relied on from the expressions used by the seller in relation to the facts. 1 Black on Rescission and Cancellation (2 Ed.), pp. 384-389; cf. Nash Mississippi Valley Motor Co. v. Childress, 156 Miss. 157, 125 So. 708.
In such matters as this, it may yet be a long time before we shall in practical administration attain to the exalted ideal expressed in the ornate language of Mr. Justice STORY in Doggett v. Emerson, Fed. Cas. No. 3,960, 3 Story, 700, 733; but we can, in proper cases and upon sufficient proof, enforce the requirement as stated by our own court seventy-five years ago in Townsend v. Hurst, 37 Miss. 679, wherein the court said: "Good faith and justice require that parties making representations and holding out inducements intended to influence the action of those with whom they deal in matters of contract, and upon which they are expected to rely and do rely, shall be strictly held to make good such representations, and to fulfill the reasonable expectations thereby created. It is of the last importance that courts of equity should rigidly adhere to a rule so consonant with morality and common honesty."
The bank next contends that appellant unduly delayed her offer to rescind and her suit for that purpose. When a purchaser has been defrauded in his purchase, he may elect to retain the property and sue for damages, in which case he has the entire period allowed by the statute of limitations in which to institute his action. But if he elect to rescind, and thereby to recover the entire amount paid for the property, the established rule justly requires reasonable promptitude on his part. Hundreds of cases and numerous texts have dealt with the latter question, but when all that is said in them is summarized, it leads to this: A purchaser who, under the actual facts, has the right to rescind must offer to do so within a reasonable time after discovery by him of those facts which justify the rescission, or within a like time after the discovery by him of facts reasonably sufficient to put him upon inquiry, which inquiry, if reasonably pursued, would have lead to a discovery by him of those facts. And thus it is that each case must rest upon its own peculiar facts upon the stated issues of reasonableness, Bonner v. Bynum, 72 Miss. 442, 446, 18 So. 82, and as to which in general the burden of proof is upon the defendant as in other instances of affirmative defenses. 3 Black on Rescission and Cancellation (2 Ed.), pp. 1481, 1621, 1622.
Applying the rule of reasonableness to the evidence in this case, we are of the opinion that appellant has not been cut off from her right of rescission as to the three thousand dollars of bonds in the Central Securities Company embraced in her original bill. We refrain from pursuing the various phases of the voluminous record which lead us to this conclusion, for to do so would unduly extend an already lengthy opinion. But, as to the two thousand dollars of Lookout Mountain Hotel Company bonds embraced in her original bill, she is not entitled to recover, because the evidence shows, without dispute, that the ultimate payment of that particular issue was in fact guaranteed by a reputable surety company, solvent and responsible at the time.
As hereinbefore stated, appellant did not bring into her original bill the bonds of the National Union Mortgage Company, nor those of the town of Decatur, and did not sue upon these two issues of bonds until about nine months after her original bill, when she did so by a supplemental bill. As to these, under the rule of reason above stated, she was too late. Her investigations made a short time before the filing of her original bill were sufficient to have put her upon notice as to all of these bonds, with the result that she is bound by her election to retain the bonds not included in her said original suit.
It was upon the ground stated in the foregoing paragraph that the chancellor dismissed appellant's entire case. The chancellor held that the purchase of these bonds on November 15, 1929, was an indivisible contract, and that the retention by appellant of a part of the bonds embraced in that contract resulted, in legal effect, in an election to retain all of them.
The line of demarcation between divisible and indivisible contracts is often difficult to distinguish; but we find that one among the best of the tests upon that question is discernible in the discussion of it in 2 Williston on Contracts, section 863, which may be restated more briefly as follows: The inquiry is whether several bargains were made in one transaction, or whether several things were contracted for as one bargain. If several things are contracted for in one transaction, which things have no such relation to each other as that the value or price of one would be increased or diminished or otherwise materially affected by its association with the other or others, then prima facie there are several separable or divisible bargains in one transaction. That test is suitable to be applied to the transaction now before us, and applying it, we are of the opinion that the several issues of bonds are separable in the transaction and that it was not indivisible. See Ganong v. Brown, 88 Miss. 53, 40 So. 556, 117 Am. St. Rep. 731.
The purpose and effect of chapter 252, Laws 1934, requiring the chancellor upon request to make a finding of facts, is to include the opinion of the chancellor as a material part of the record. The chancellor's opinion shows that he did not make any finding of fact whether the representations which form the basis of the suit were made by the bank, although appellant made a written request upon the chancellor so to do. There is ample evidence in the record to sustain a finding that the representations substantially as alleged by appellant were made, and apparently the chancellor assumed, for the sake of the argument, that the stated issue was proved in appellant's behalf, but then proceeded to dismiss the bill for the reasons heretofore mentioned. And in all our foregoing statement of facts we have proceeded upon the same assumption so far, but only so far, as regards the issue of misrepresentation. But it is clear from the opinion, and from the chancellor's response to appellant's request, that he did not actually decide the issue mentioned in this paragraph. The decree will, therefore, be affirmed as to all the bonds except the three thousand dollars of the Central Securities Company, and, as to those, the decree is reversed and the cause remanded in order that the chancellor may make a finding of fact upon the stated issue.
Affirmed in part and in part reversed and remanded.
An elaborate suggestion of error has been filed in this case, challenging many portions of the opinion heretofore rendered. We have carefully considered the suggestion of error, and adhere to our former holding. Certain issues were remanded to the court below for findings of fact and judgment thereon, the chancellor not having dealt with these facts in his decision in the case. It is suggested that we have made statements of fact in the opinion which might cause embarrassment to the chancellor in his finding, and it is further suggested that we should not have found facts.
The facts, as stated, were such as to show that, if believed to be true on remand, relief should be granted. Practically all the issues to be tried on the remand are in dispute, and the court below will understand that we were stating such facts in favor of the appellant which, if found true, would entitle her to relief; but that we did not intend to make any finding of fact on these issues which would bind or embarrass the chancellor on the remand. The chancellor, of course, will hear the evidence and find the facts as in any other case, and apply the law accordingly.
Our attention has also been called to the recent case of Awotin v. Atlas Exchange National Bank of Chicago, 55 S.Ct. 674, 79 L.Ed. ___; and it is contended that this case absolves the bank from liability in the transaction herein involved. The Awotin Case dealt with a statute there involved as affecting the power of a bank to make contracts of the character there prohibited, and to incur any liability in dealing with such transactions by contract. It was not intended by the court, as we understand it, to hold that the statute prohibited the bank from being liable in actions of fraud and deceit, or in actions of tort, involving misrepresentations of facts in selling its securities, or disposing of such property which it had acquired for its own use, or as agent for others. It is inconceivable to us that the federal statutes should prohibit a person dealing with a bank, and who has been misled by false representations, from holding the bank liable for such false representations as would render other persons and corporations liable in actions for fraud or torts.
The suit here is for fraud and deceit, or fraudulent representations, by which a customer was led to make an investment on the faith of such representations. We do not believe the federal court will construe the statute to prohibit recovery in such cases.
Nothing herein said is intended to establish the truth of the complainant's bill, or to decide conflicts in testimony, which are matters solely for the chancellor, on the remand, to hear and determine, subject, of course, to the right of appeal.
The suggestion of error is overruled.
Overruled.