Ryan v. Miller.

to time find to be for its advantage and purpose and to conduct other enterprises which can be conveniently carried on by this corporation in connection with any of its objects and not in conflict with the laws of South Dakota; to carry on business in any other state or in any part of the world; to hold meetings, transact business and keep such books as may be necessary outside the State of South Dakota, providing however, that nothing is done inconsistent with the laws of South Dakota.

"Third. The place where the principal business of this corporation shall be transacted is Huron, in the county of Beadle, State of South Dakota, but a business office may be located at city of St. Louis, where meetings of the directors and stockholders may be had for the transaction of business.''

By paragraph four it is charged that in pursuance of such conspiracy and as a part of the scheme defendants opened an office in the city of St. Louis, issued a large quantity of blank certificates of stock and procured agents to sell the same under false representations afterwards set out in the petition.

In the fifth paragraph and some succeeding paragraphs of the petition, these alleged false statements are set out. The principal one is in the fifth paragraph and reads: "Plaintiff further states that immediately after said certificates of incorporation were issued defendants, in pursuance of said conspiracy, issued public notices and prospectuses, and published and largely circulated advertisements in the leading newspapers in the city of St. Louis and other cities not known to the plaintiff and throughout the State of Missouri, in which they falsely and fraudulently announced and declared to all persons that the corporation known as the 'J. N. Miller Company,' being said corporation, was a corporation of wealth and means and was backed by defendant Miller, a man of immense wealth and unimpeachable integrity; that

Ryan v. Miller.

said corporation had invested $25,000 for capital to operate on; and further in pursuance of said conspiracy, falsely alleged and stated that over $5,000,000 was offered annually in such purses and that owing to special facilities and privileges so possessed by said corporation, which they did not more fully explain, said corporation would obtain enormous sums as winners of such purses and would distribute such sums among the subscribers to the stock of said corporation, of which fifty thousand shares at the rate of one dollar per share was for sale; and plaintiff states that by reason of false representations and statements, and relying upon their truth, a large number of persons, who saw advertisements, notices and prospectuses, were induced to buy over one thousand of said shares of stock at said price of one dollar per share and pay for the same to defendants, whereby they obtained over $100,000 in cash, all of which was divided amongst the defendants, as, and as soon as, received, but the defendant Miller retained the largest amount."

By the sixth paragraph it is charged that defendants falsely pretended to have purchased certain horses from Miller and Givens at the price of $25,000; and falsely stated and advertised that such horses were first class race horses and sure winners of the purses described as aforesaid, and that such horses were cheap at the price.

By the seventh paragraph it is charged that these sales of stock extended over a period of several months, and that during such term in pursuance of their fraudulent scheme and design and to sell further and other stock, defendants returned to the purchasers of stock about three per cent thereof as dividends, falsely claiming that such had been earned and obtained by the corporation by purses won by the horses as aforesaid.

Ryan v. Miller.

By paragraph eight it is averred that the horses pretended to have been bought from Miller for $25,000 were not good race horses, and were not worth more than $2000, and "were purchased by the defendants for the fraudulent purpose of inducing the public to believe the other false and fraudulent representations aforesaid of defendants, and that they really intended to compete for said purses and divide them amongst so-called stockholders."

In paragraph nine plaintiff alleged that no capital stock had been paid up at the time of the incorporation of the company nor for a long time thereafter; that the company had no place of business in South Dakota and did no business and never held a meeting in said State, and the incorporators of said company never had any intention of doing business in South Dakota, but that said incorporation and organization in South Dakota was done with the fraudulent purpose of cheating and defrauding people of other states, including the plaintiff herein; that the money paid by plaintiff and others to defendants for said pretended stock has been spent and lost, and that the pretended officers of said company are wholly insolvent, and that defendants although requested by plaintiff and the other purchasers to repay the amounts given for said pretended stock have wholly failed to repay any part of it.

In paragraph ten of the petition it is averred that soon after the distribution of notices, advertisements and announcements of defendants, plaintiff was advised by defendant Dees to invest money in said pretended enterprise; that defendant Dees assured plaintiff that such representations and promises of defendants were true, and plaintiff, relying on and believing in them and in the assurances of Dees, paid to defendants, through Dees, who was their authorized agent, the sum of $500, and also paid them, through another agent, one William Moss, a further sum of $1500, and

Ryan v. Miller.

received from defendant Kahn four certificates, each for 500 shares of said pretended stock; that afterwards, plaintiff, discovering the fraudulent nature of defendant's enterprise and of their acts, tendered to defendant the 500 shares of stock and demanded the repayment of his money which was refused.

The above fairly outlines the exceedingly long petition in the case. The several counts differ only in the amount claimed. There is contained in all of the counts except the first an averment of assignment, in this language: "Plaintiff further states that afterwards, on the 27th day of April A. D., 1903, said Vogel transferred and assigned to plaintiff all his claims and demands, legal and equitable, of every nature and description against defendants, including his claims and demands arising out of the matters hereinbefore set forth, for collection, for his use, and delivered to plaintiff the said 300 shares of said pretended stock to be tendered again to defendants, and plaintiff now tenders said 300 shares of said stock to defendants and prays judgment against them for said sum of three hundred dollars, with interest.”

We quote this because the sufficiency thereof is challenged, along with a challenge to the whole petition.

The answers make certain admissions and denials, but are sufficient to put in issue all the matters pleaded by plaintiff, if plaintiff had in fact stated a cause of action. In addition the answers plead some new matter, which, if required, can best be noted in the course of the opinion along with the points made by counsel. The evidence can likewise be so considered. The reply placed in issue all new matter in the answers. Defendant J. N. Miller answered separately, and the other three defendants answered jointly. For the present, this sufficiently states the

case.

Ryan v. Miller.

I. Plaintiff concedes his action to be one to rescind a contract for fraud and deceit. Defendant is doubtful as to whether it is such an action or an action at law to recover for money had and received. If it is an action to rescind a contract for fraud and deceit, it is one in equity rather than at law. In cases of fraud and deceit the plaintiff has two remedies: (1) he can stand upon his contract and sue for the damages growing out of the fraud and deceit practiced upon him in the procurement of the contract, or (2) he can elect to rescind the contract and sue to have the same cancelled and for naught held. [Brown v. South Joplin Lead & Zinc Mining Co., 231 Mo. 166.]

Of these two remedies the first is at law and the latter in equity. The measure of damages is different as well as the forum. In the first action the plaintiff can recover the difference between the full value of the property, as its value would have been had the property been up to the representations, and the real or actual value of the property, thus giving to the grantee the benefits and profits of his bargain. [Kendrick v. Ryus, 225 Mo. 150.] In the action in equity the court simply places the parties where they were before the vitiated contract was made.

Plaintiff concedes his action to be one in equity to rescind subscription contracts made by himself and others to the capital stock of the J. N. Miller Company. To such case we must therefore apply equitable rules. The case below was tried as a case in equity. Defendants challenge the right of the plaintiff to a standing in equity upon ninety-four of the ninety-five counts of the petition. The allegation of the ninetyfour counts upon assigned claims we have set out. It nowhere charges that plaintiff bought the stock of the ninety-four claimants and with it their right to sue upon any assigned equitable action. It nowhere avers as to these ninety-four counts that the plaintiff was undertaking to do more than to come into a court of