66

When an instrument is

ett, where the court say: made to deceive the public generally, and is adopted as well as intended to deceive some portion of the public, and as well one person as another, and was used as it was designed it should be, and fraudulently induces some one to act to his prejudice by acting in the mode it was intended to influence them to act, who might be deceived by it, the person who made the instrument and caused it to be thus fraudulently used is liable to the person who has been defrauded by it."

And in another case: 2 "It is not essential that the reference should be addressed directly to the plaintiff; if it were made with the intent of its influencing every one to whom it might be communicated, or who might read or hear of it, the latter class of persons would be in the same position as those to whom it was directly communicated."

But the corporation is not held liable to the party defendant in such cases; nor are those who are really partners in what was supposed to be a corporation where they do not participate in making the false report or publication. The same rule applies in this country to false and fraudulent statements contained in prospectuses as where they are contained in reports."

1 16 How. Pr. 62.

2 Cazeaux v. Mali, 25 Barb. 578. To same effect, see Morse v. Swits, 19 How. Pr. 275.

3 Prosser v. B'k, 106 N. Y. 677; 13 N. E. 287; Pinedo v. Germania, etc., Co. N. Y. Daily Reg. 1885.

4 Perry v. Hale, 143 (Mass.) 540; 10 N. E. 174.

" In Morgan v. Skiddy, 62 N. Y. 319, it was held that where stock was purchased upon reliance upon the truth of false statements in a prospectus, the purchaser has a right of action for deceit against the persons who, with knowledge of the fraud and with intent to deceive, put it in circulation, the court saying: "The representation was made to each person comprehended within the class of persons who were designed to be influenced by the prospectus; and when a prospectus of this character has been issued, no other relation or privity between the parties need be shown except that created by the wrongful and fraudulent acts of the defendants in issuing or circulating the prospectus, and the resulting injury to the plaintiff."

Formerly in England a distinction was taken between statements made in reports officially made, and those made in prospectuses. The rule prevailing there until recently with respect to the latter is thus stated: "The purchaser of a share in the market, upon the faith of a prospectus which he has not received from those who are answerable for it, cannot, by action upon it, so connect himself with them as to render them liable to him for the misrepresentation contained in it as if it had been addressed personally to himself." 1

§ 646. Of the fraudulent intent. It is not always necessary in equity to show a fraudulent intent; and where necessary it may be established from circumstances. Where the action is brought for rescission, proof of innocent acts and representations if false, though insufficient to sustain an action for deceit, will entitle a party to relief.2

Rescission in equity has been said to be the only remedy of one who has been induced to enter a jointstock company through fraud. In order to justify a rescission against the corporation, the transaction must have been an original purchase. On like principle the

1 Peek v. Guerney, L. R. 6 H. L. 377. In a later case Bellairs v. Tucker, L. R. 13 Q. B. D. 563, a rule similar to the American view was adhered to, and the court held the making of false statements in prospectuses equally reprehensible with other methods of perpetrating fraud. See also the still more recent case of Derry v. Peek, H. of L. 26 Am. & Eng. Corp. Cas. 341. The rule as to the intent which must be shown in order to recover for damages and losses resulting from misrepresentations in sale of stock is thus stated in Wakeman v. Dalley, 51 N. Y. 27: “The action cannot be maintained in the absence of proof that he believed, or had reason to believe at the time he made them, that the representations made by him were false, and that they were for that reason fraudulently made, or that he assumed or intended to convey the impression that he had actual knowledge of their truth, though conscious that he had no such knowledge." See also, Clark v. Edgar, 80 Mo. 106; Schwenck v. Naylor, 102 N. Y. 683; 7 N. E. 788; Gee v. Moss (Iowa); Nelson v. Luling, 4 N. Y. Sup. Ct. 544; aff'd 62 N. Y. 645.

2 Arkwright v. Newhold, L. R. 17 Ch. D. 30.

Benj. on Sales (4th Ed.), sec. 467 a.

contract of an innocent vendor of shares cannot be rescinded on account of the false representations of the corporate agents by means of which his vendee was induced to purchase. The complainant must tender back the stock upon discovering the fraud."

The fraud cannot be set up by the vendor as a defence to an action for specific performance. Where the representations amount to warranties, equity will compel specific performance accordingly.3

§ 647. Remedy by mandamus.-The fact that the refusal or neglect to perform duties which entitles a shareholder to compel performance by writ of mandamus is in reality that of an agent, and only nominally that of the corporation, is sufficient reason for considering the subject in this connection; and the writ should in all cases be directed to some officer or agent. This is true, although he may be a mere ministerial officer, as a cashier of a bank acting under the direction of the directors.1

1 Moffat v. Winslow, 7 Paige, 124.

2 Francis v. N. Y. & B. El. R. R. Co., 108 N. Y. 93; 15 N. E. 192; 17 Abb. N. C. 1. The action in equity cannot be maintained where the purchaser has sold part of the stock. He can in that case only have the remedy at law for damages. White v. Boyce, 21 Fed. Rep. 228. His right of rescission is barred by using the stock in another transaction. Bridge v. Penniman, 105 N. Y. 642; 12 N. E. 19. But it has been held that the right of rescission is not lost by forfeiture of the shares, such forfeiture being known to the vendor. Maturin v. Tredinick, 4 New. Rep. 15. But the right is waived by taking an indemnity bond against liability on the sale after discovery of the fraud. Bridge v. Penniman, 51 Superior Ct. 105 N. Y. 642, 183.

8 See Jones v. Bowles, 9 Wall. 364, where the vendor was enjoined from enforcing a lien which he held on the property, which in selling the stock he represented to be unencumbered.

Where a director has been excluded from the privilege of inspection of the books by vote of the other directors, it was held that there was no impropriety in directing the writ to them as well as to the custodian who had followed their directions in refusing to allow inspection. People v. Throop, 12 Wend. 182.

§ 648. The remedy in case of amotion.-Mandamus is the most appropriate remedy to restore or induct one into the enjoyment of the rights and privileges of an incorporated association of which he is unlawfully and unreasonably deprived.1

But it will be refused if it appear that upon admission under command of the writ the petitioner would be immediately expelled. There is a disinclination on the part of courts to issue process of any kind in the face of power in the hands of those against whom it is issued to render it nugatory.

It is well established that courts will not, in cases of mandamus, try the title to an office or franchise, already held by color of right; yet where no claim is set up against that of the petitioner to an office in a private corporation, the writ will be granted to compel his admittance to the office.3

§ 649. Origin of the remedy.-The use of the remedy by mandamus to restore members of corporations to their rights and privileges of membership, in case of their amotion, is of very ancient origin in England, being one of the earliest uses of the writ in the reign of Edward II.4

§ 650. Jurisdiction of voluntary associations will not be invalid. It is a general rule that courts do not interfere by mandamus in the enforcement of the by-laws of merely voluntary associations created for the advancement of religious, moral and social principles, or merely for amusement.5

1 People v. Med. Soc. of Erie, 32 N. Y. 187; State v. White, 82 Ind. 278. 2 Ex parte Paine, 1 Hill, 665.

Curtis v. McCullough, 3 Nev. 202.

Dr. Widrington's Case, 1 Law, 153.

5 The Board of Trade of Chicago, though incorporated by act of Assem

The bringing of an action for damages for expulsion from a society organized for benevolent purposes is a waiver of the right to a writ of mandamus.1

A member cannot be deprived of any right or privilege as such by the enactment of a by-law which conflicts with the laws of the state, and is not germane to the purposes of its charter; and if the enforcements of such illegal by-law inflict a wrong upon him for the redress of which no adequate means are afforded by action at law, a mandamus will lie, directing that he be restored to his rights.2

But where a minister was subsequently disqualified

bly, was held to be merely a voluntary organization, and having adopted by-laws and a form for their enforcement, and having, under such by-laws, through the exercise of its powers by such form, expelled a member, the court properly refused to award a writ of mandamus to compel the board to admit him again to membership. People v. Chicago Board of Trade, 80 Ill. 134; State v. Milwaukee Chamber of Commerce, 47 Wis. 670; 3 N. 760; Society, etc., v. Com., 3 Pa. St. 123; Foram v. Howard Ben. Ass'n, 4 Barr. 379: Franklin v. Com., 10 Barr. 357.

1 State v. Lipa, 28 Ohio St. 665. A medical society incorporated to promote and disseminate learning in the medical profession, and to give opportunities for the interchange of knowledge among its members, is a private civil corporation in whose franchise the incorporators have a property interest. If a member of such corporation has a clear right therein of which he is illegally deprived, the proper court will award a peremptory mandamus commanding and compelling the society to restore him to all his rights and privileges as a corporator. State v. Waring, 38 Ga. 608.

2 People v. Mech. Aid Soc., 22 Mich. 86; Com. v. German Soc., 15 Pa. St. 251; People v. Med. Soc., etc., 24 Barb. 570; State v. Carteret Club, 40 N. J. L. 295. The same principle was applied to the case of an unwarranted removal of a member of a university from doctor's degrees where he had been degraded arbitrarily and for a cause not recognized at law, as furnishing any ground for such action, and mandamus was granted to compel his restoration. The court said that it was a mistake to say that the degrees of which it had been sought to deprive him were purely honorary, for they were blended with a temporal right so far as to deserve a mandamus to restore the party degraded. King v. University of Cambridge, 8 Mod. Rep. 148. A minister who had been improperly deposed from the charge assigned to him, or to which he has been regularly elected and commissioned, has his remedy by mandamus, provided there are endowments or emoluments of a temporal nature connected with the position. Runkel v. Winermiller, 4 Har. McHen. 429; Weber v. Zimmerman, 22 Md. 156.