It was for the jury to determine whether representations by a seller of stock that the company had no indebtedness related to an indebtedness existing when the representations were made, or related to obligations or liabilities then existing, or to a liability contingent on future conditions; there being some evidence on the subject in the buyer's action for fraud. 2. FRAUD 59(1)-DAMAGES-LAW GOVERNING CONTRACT INDUCED BY FRAUD. Where a contract for the sale and purchase of stock was made and performable in Pennsylvania, the law of Pennsylvania should be applied, if there is established in that state a settled rule as to the measure of damages from fraud in the sale of stock. value was the measure. 4. FRAUD 18-MISREPRESENTATIONS. Error to Superior Court, New Castle County. Action by Henry L. Williams against John Beltz and another. To review a judgment for defendants, plaintiff brings error. Judgment set aside as to the named defendant, and new trial awarded as to him. See same case below, 6 Boyce, 554, 101 Atl. 905. Argued before CURTIS, Ch., and BOYCE and CONRAD, JJ. Daniel O. Hastings, of Wilmington, and James Balph, of Pittsburgh, Pa., for plaintiff in error. Edward G. Bradford, Jr., of Wilmington, and Thomas Watson, of Pittsburgh, Pa., for defendants in error. The action in assumpsit was begun by a foreign attachment, and the declaration alleged that the defendants knowing the plaintiff to be a prospective purchaser of shares of stock of the Great Western Lead Manu In an action for fraud in the sale of cor-facturing Company, and to induce him to buy porate stock, the sellers having represented the company had no outstanding obligations, since the stock falsely and fraudulently representthe alleged misrepresentation was of a fact af-ed to him that the company had at that time fecting the value of the stock, the jury could no outstanding obligations other than a few consider the subject-matter of the representations in fixing damages under the applicable Pennsylvania rule that the measure was the difference between price and value. small debts, whereas a certain contract then existed between the defendants on one side, and one Fritch and others for the company on the other side, wherein it was agreed that 5. FRAUD 20-MISREPRESENTATIONS-RE- 50 per cent. of the net profits of the company LIANCE. should be applied to the repayment to the The buyer of corporate stock under repre- defendant John Beltz $36,000 previously exsentations that the company had no outstand-pended by him for the company; that relying ing obligations could not recover as for mis- on the representation the plaintiff purchased representations and fraud on account of the pur- from the corporation shares of its stock of chase of any shares after knowledge of the ex- par value of $3,000; that afterwards Beltz istence of a liability of the company. in a suit on his contract with Fritch and oth 6. LIMITATION OF ACTIONS 100(6) — Dis-ers obtained a decree in a court in PennsylCOVERY OF FRAUD-SALE OF STOCK. OF DISCOVERY OF FRAUD - QUESTION FOR vania directing that 50 per cent. of the net profits of the company be paid to the defendant Beltz, until the $36,000 was paid; that the money was paid by the company to Beltz; and that by reason thereof the shares of stock held by the plaintiff had decreased in value. Testimony was produced relating to the representations, the contract and the enforcement of payment of $36,000 with interest to If there was a conflict of testimony on the question as to the time of plaintiff's discovery of defendant's fraud, or if it is urged that plain-Beltz, but none as to any change in value of tiff by the exercise of reasonable diligence would the shares of stock of the company. It was have discovered the fraud earlier, such questions shown that after the plaintiff became a stockshould have been left to the jury under proper holder the company was very successful, and (107 A.) within a period of 18 months dividends were for liabilities then existing, or related to a paid to stockholders aggregating 365 per cent. of the par value of the stock. liability contingent on future conditions. There was some evidence on the subject, the weight and effect of which was for the jury to decide. At the conclusion of the testimony for the complainant a motion for a nonsuit was made by the defendant, and the court direct- [2] Because the contract was made and ed that the case proceed, reserving the ques- performable in the state of Pennsylvania tion for hearing on a motion for binding in-counsel for all parties agree that the law of structions. Later, after both sides had clos- that state should be applied if there be there ed, the court after argument directed a ver- established a settled rule as to the measure dict for the defendant on the ground that of damages in such cases. From the cases there was no evidence to show that by reason cited from that state it seems clear that the of the payment to Beltz of the money due measure of the plaintiff's damages is the difon the contract with the company the stock ference between the value of the shares purof the company had depreciated in value, and chased by him and the price paid for them so no evidence that the plaintiff had suffer- by him. This was the rule applied in High ed any pecuniary loss by reason of the repre- v. Berret, 148 Pa. 261, 23 Atl. 1004, and subsentations of the defendant. stantially in Curtis v. Buzard, 254 Pa. 61, 98 Atl. 777. A writ of error was thereupon taken. In the former case (High v. Berret), the CURTIS, Chancellor, delivering the opin- plaintiff was induced to buy shares of a new ion of the Court: mining company organized to buy the property of another mining company, relying on false and fraudulent representations as to the success of the old company and the amount of ore in the mine. Later the new company failed, and the buyer brought an action for damages. On the question of the measure of damages the appellate court said that the damages of the plaintiff should equal the loss which the deceit inflicted. Defining the loss specifically the court said: "The loss in the transaction before us, is the difference between the real value of the stock at the time of the sale, and the fictitious value at which the buyer was induced to purchase." The main question raised is whether the court below rightly instructed the jury to find a verdict for the defendant. Deceit was the basis of the action, and the deceit alleged was the withholding from the plaintiff, as the prospective purchaser of shares of stock of a lead mining company, of information sought by him as to the financial standing of the company before becoming a purchaser thereof. In the court below, after both sides had concluded their testimony, the jury were instructed to find a verdict for the defendant. The representations complained of were not as to the value of the stock, but as to the financial standing of the company. There was evidence that before the plaintiff bought not based on actual loss plus anticipated specThe court said also that the damages was any shares of stock, and in response to in-ulative results, and approved the action of quiries as to the indebtedness, or obligations, or abilities of the company, representations were made to him by the defendant Beltz, as to certain debts then owed by the company, and that the existence of the contract between Beltz and the company was not then disclosed to the plaintiff, and was not known by the plaintiff until after he had bought stock of the par value of $3,000. By this contract Beltz was to receive $36,000, and was entitled to have 50 per cent. of the profits of the company until that sum was paid, and subsequently by action he recovered that sum from the company. the court below in limiting the verdict to the difference between the value of the property which the stock represents and the price paid for the stock. In the latter case (Curtis v. Buzard), which was an action of deceit based on misrepresentations as to the price which the defendant, the seller, had paid for the shares which he had sold to the plaintiff, the court said the damages was the difference between what the buyer was induced to pay for the shares and their actual value at the time of purchase. This is substantially the rule applied in the earlier case of High v. Berret. In the other cases in the courts of Pennsyl to the physical condition of personal property sold, and in such cases the rule of damages would be different from that applicable when the representations were as to the financial condition of the company in cases of sale of shares of its stock. Thompson v. Burgey, 36 Pa. 403; Stetson v. Croskey, 52 Pa. 230; Lukens v. Aiken, 174 Pa. 152, 34 Atl. 575. [1] It is unimportant whether the contract of the company with Beltz created an indebt-vania cited here, the representations were as edness of the former to the latter, or only a contingent interest in the future profits of the company. Assuming that the essential elements of a debt were lacking, still there was a liability to pay a sum from profits when and as earned, and subsequently this liability was established and enforced by an action at law. It was for the jury to determine whether the representations related to an indebtedness existing when the representations were made, or related to obligations [3, 4] The court below should have applied the rule of High v. Berret, viz. the difference [8] It was argued for the defendant in error that the evidence showed that the plaintiff was not in fact deceived by the representations of the defendant. But this is clearly for the jury, there being some evidence to support the plaintiff's allegation of deception. in the value of the shares (1. e., of the prop- [ November 22, 1913. If there was a conflict of erty and assets of the company which the testimony on the question as to the time of shares represented) at the time of the sale, discovery of the fraud, or if it be urged that and the price paid by the plaintiff for the the plaintiff should, by the exercise of reasonstock. Instead thereof the court in effect said able diligence, have discovered the fraud that the plaintiff could not recover because earlier, then both questions should have been he had not shown that the stock had depre- left to the jury under proper instructions as ciated in value, and so had not proved a pe- to the application of the statute of limitacuniary loss resulting from representations tions. of the defendant as to the financial standing of the company. There was some evidence in the case from which the jury could have found the difference between the value of the shares of stock at the time they were bought by the plaintiff (which necessarily included a consideration of the pecuniary liabilities of the corporation, and especially its liability to Beltz) and the price paid by the plaintiff for the stock. The effect of the existence of this liability to Beltz on the value of the shares was for the jury to determine. As pointed out by the court below the alleged misrepresentation was of a fact affecting the value of the shares of stock, and it follows that the jury could rightly take into consideration subject matter of the representations. [5] The point at issue is not whether by reason of the payment of the money by the company to Beltz the shares of stock had depreciated in value, the test applied by the court below, but whether and to what extent the existence of that liability to Beltz affected the value of the shares at the time the plaintiff purchased them. The difference between the value of the shares if and as so affected and the price paid by the plaintiff for the shares he bought is the measure of his damages. Therefore, the court below should not have directed a verdict for the defendant, but should have instructed them as to the rule of damages as herein indicated. It is obvious, of course, that the plaintiff could not recover damages as to the purchase of any shares of stock after knowledge of the existence of the liability of the company to Beltz. [6, 7] The question as to the operation of the Statute of Limitations was also raised by a plea and argued in the brief of the defendant in error. The cause of action is one of deceit, a species of fraud, based on misrepresentations as to the indebtedness or liabilities of the company, the shares of which were bought by the plaintiff. In such cases at law and in equity the statute does not begin to run until the fraud has been discovered, or, perhaps, should have been discovered. This was established by the Supreme Court of this state in Lieberman v. First National Bank, 2 Pa. 418, 45 Atl. 901, 48 L. R. A. 514, 82 Am. St. Rep. 414. In the case at bar the false representations were made prior to April 1, 1913, and the action commenced June 1, 1916. But there was testimony by the plaintiff that he did not know of the contract between the company and Beltz until We agree with the finding of the court below that there is nothing in the record to support the allegations of fraud made against Francis E. McGillick, one of the defendants, and find no error in the direction to the jury to find a verdict for him. The judgment entered below on the verdict should be set aside as to John Beltz, and the plaintiff below, plaintiff in error, awarded a new trial as to the defendant John Beltz. NOTE.-By agreement of counsel, the case of Joseph E. McGinness, plaintiff in error, v. Defendants Above was tried with the case above, and the same judgment was entered. (107 A.) or offer an assignment of the mortgage security | pelled to pay, he is entitled to an assignin order to recover on the notes; the mortgagee ment of the mortgage as security-is asunder Gen. St. 1918, § 5105, not being required serted as to the note described in the fourth to release the mortgage until after written re- count. quest and satisfaction thereof. Gager, J., dissenting in part. Appeal from Superior Court, Fairfield County; Howard J. Curtis and Donald T. Warner, Judges. Action by Jennie C. Barnes against George A. Upham, in which the Citizens' National Bank of Waterbury was made a party plaintiff. From a judgment in part for plaintiff, in part for plaintiff bank, and in part for defendant, both parties appeal. Affirmed. Action on four promissory notes. Judgment for the plaintiff on the first, third, and fourth counts of the complaint and for the defendant on the second count. The complaint is in four counts. The first, second, and fourth counts are on notes executed and delivered by the defendant. The third count is on a note originally executed by the plaintiff to one Partree, which the defendant afterward agreed in writing to assume and pay. In addition to the usual admissions and denials, special defenses were pleaded. The first special defense, covering all four counts, was that all of the indebtedness in question had been attached in the hands of the defendant by garnishment proceedings in an action still pending and undetermined in the superior court. This defense was eliminated by making the garnishee a party to the action, and is not now insisted upon. A second defense to the first count alleges that on the date of the note the defendant owned certain real estate in Waterbury subject to a first mortgage; that the note counted on was secured by a second mortgage of these premises; that the defendant afterward parted with his equity in said premises; that thereafter, and while the plaintiff still held the note and the second mortgage, proceedings to foreclose the first mortgage were brought to which the plaintiff was a party and defendant not; that plaintiff failed to redeem and gave defendant no notice of the pendency of the action, but permitted the second mortgage security for the note to be extinguished, though it was of great value. Under this defense it is alleged that the defendant was damaged in the sum of $3,000. By way of counterclaim, a second defense to the third and fourth counts alleged that the note given by the plaintiff to Partree was a mortgage note; that in the assignment of the note back to the plaintiff the security was also assigned; and that, if the defendant is compelled to pay the note, he is entitled to an assignment of the mortgage security. The same claim-that it is a mortgage note, and, if the defendant is com A third special defense to the third and fourth counts alleged that the plaintiff has pledged the notes in question, which are still held by pledgee; that the defendant has been notified by pledgee and will be liable to the pledgee if compelled to pay the plaintiff. This defense also was eliminated by making the pledgee a party and is no longer relied on. All of the special defenses were success. fully demurred to. The Citizens' National Bank of Waterbury-the plaintiff creditor referred to in the first special defense and the pledgee referred to in the third special defense to the third and fourth counts-was made a party to the action and filed a pleading stating its claims as creditor and pledgee. The cause went to trial on the defendant's admissions and denials, and judgment was rendered against the defendant on the first, third, and fourth counts for $10,501.01 payable in part to the plaintiff and in part to the pledgee bank; and against the plaintiff on the second count. Both parties appealed. Other facts are sufficiently stated in the opinion. Nathaniel R. Bronson, Lawrence L. Lewis, and Charles E. Hart, Jr., all of Waterbury, for appellant Citizens' Nat. Bank of Waterbury. Carl Foster and Frederick E. Morgan, both of Bridgeport, for appellant Barnes. BEACH, J. (after stating the facts as above). [1] The second special defense to the first count is based on the theory that the defendant, after having parted with the equity of redemption, was entitled to notice of the pendency of the proceedings for the foreclosure of the first mortgage, and that it was the duty of the second mortgagee, if she elected not to redeem, to give such notice in case she desired to hold the defendant on the note. Neither of these propositions is sound. In the first place, the defendant, by a conveyance of the equity, had parted with his entire interest in the premises. As the record title stood, he had no interest in the premises sufficient to give him a standing in the foreclosure proceedings, and therefore was not in law entitled to notice. [2] Nor was the second mortgagee under any equitable obligation to give the defendant notice. The case is not analogous to that of a pledgee who allows the pledge to be taken out of his hands on the demand of a stranger without notifying the pledgor to give him an opportunity to defend. Independently of the fact that the plaintiff never had physical custody of the premises, the security which she held had been al There is no error. PRENTICE, C. J., and RORABACK and WHEELER, JJ., concurred. ready, by the defendant's own act, subject-"true holder" of this note justifies and reed to be taken on foreclosure before the sec- quires the conclusion that the plaintiff had ond mortgage was executed. Consequently, not sustained the burden of proving her ownboth the parties to the second mortgage knew ership. that the first mortgage was liable to be foreclosed, and that the security of the second mortgage was liable to be extinguished by such foreclosure. Admittedly, it was not the duty of the plaintiff to protect the defendant against the extinguishment of the seGAGER, J. (dissenting in part). While I curity of the second mortgage note. The concur in the result reached by the majordefendant knew all the facts, and the plain-ity of the court so far as the disposition of tiff was legally and equitably entitled to the case upon the pleadings is concerned, I assume that, if he chose to part with the must, with great deference to the other memequity and with his right to notice of fore-bers of the court, record my dissent with closure proceedings, he would protect his respect to the discussion of the second speown interests in his own way. The answer cial defense to the first count, and the legal does not expressly allege whether the de- propositions upon which the case is decided fendant has or has not done so by requiring so far as this defense is concerned. By the the grantee of the equity to assume and pleadings it appears that the defendant ownagree to pay the second mortgage note. But ed the property subject to a first mortgage. the material consideration is that he had Contrary to the assumption in the opinion, full knowledge of the risk which he ran it does not appear, either expressly or by when he parted with the equity in the implication, that the defendant himself gave premises. Presumably he received a satis- this mortgage. The defendant, while such factory consideration for assuming that owner, gave a second mortgage to the plainrisk. At any rate, he was not dependent tiff to secure the note sued on in the first upon, and therefore was not entitled to, any count of the complaint. Thereafter the deassistance from the second mortgagee in fendant parted with his equity. The first looking after his own interests. mortgagee then brought foreclosure, making the plaintiff, the second mortgagee, a party, but not making the defendant, who had parted with his equity, a party defendant in the foreclosure suit. The present defendant, having parted with his equity of redemption, was not a necessary party in the foreclosure of the first mortgage, and was not made a party. Unless he gave the first mortgage, which does not appear, he was not even a proper party. The service of process in the foreclosure suit made the present plaintiff chargeable with notice that the defendant had no legal notice of the pendency of the foreclosure suit in which the interest in the property being foreclosed, mortgaged by him to the second mortgagee, was liable to be taken away leaving the defendant still personally liable on the second mortgage note. [3] The second special defense to the third and fourth counts stands on the claim that, as a condition of recovery on the mortgage notes, the plaintiff must tender or offer an assignment of the mortgage security. That is not our law. The mortgagee has always been permitted to bring foreclosure, ejectment, or an action on the note. 2 Swift's Digest, 167. He is not bound to tender or offer a release of the mortgage until the debt is satisfied. Resort to a court of equity in order to compel a release is no longer necessary, for by section 5105, G. S., the execution and delivery of a release of the mortgage, after written request and satisfaction thereof, is required under a penalty for failure to do so. redeem without giving notice to the defendant of the pendency of the foreclosure. Turning now to the plaintiff's appeal from The answer also alleges that the present the judgment for defendant on the cause of plaintiff, who was a defendant as second action stated in the second count, the find- mortgagee in the foreclosure suit, gave no ing of facts is that the note for $1,900, de- notice to the present defendant of the pendscribed in the second count, was assigned ency of this foreclosure suit, and "either by the plaintiff to a third party to secure knowingly and willfully, or by her carelessan indebtedness of $500, that the plaintiffness and neglect," allowed her second morthas not paid the $500 for which the note gage to be extinguished by her failure to was pledged as collateral security, and that the note was not in the possession of the plaintiff at the time of the trial, but is now The trial court sustained the demurrer to "in the hands of some other person, and the answer upon the ground that these facts was produced upon notice by her to counsel did not constitute a defense to the note. of defendant, having passed by indorsement With this conclusion I agree. Whether the through the hands of several parties, and claim undertaken to be set forth in the neither the Waterbury Coal & Lumber Com- second special defense to the first count now pany (the original pledgee) nor the true hold- under discussion is sound or unsound, it is er of the note is a party to the case." not, as a matter of pleading, a defense to |