Brown v. Owings

The opinion of the Court was delivered by

Plaintiff sued to recover actual and punitive damages for an alleged fraudulent breach of contract, and, under the rulings and instructions of the trial Court, he recovered judgment for $1,000 actual and $1500 punitive damages; hence this appeal.

The facts are practically undisputed. Defendant was engaged in the city of Columbia in manufacturing and selling ice cream to the retail trade, and owned a plant worth from $2,500 to $3,500. Being engaged in other enterprises and needing a competent assistant for his ice cream business, he advertised for one, and got into communication with plaintiff, who lived in Oconee county. After some correspondence between them, plaintiff came to Columbia, in February, 1917, and the plant was shown to him by defendant, and the possibiblities of making the business a success were discussed between them. Defendant told him that, while he had actually made very little out of it the year before, he believed that, with the assistance of a competent man, it could be made a very profitable business, and painted the *514 possibilities of success in rather glowing terms, as to what they could do and the profits they could make, but without misrepresenting any past or existing fact, and he impressed upon plaintiff in their correspondence and conversations that the success of the business would depend upon the ability and energy with which it was conducted.

Thereupon they entered into a written contract, the substance of which was that they would form a corporation, under the name of Owings Laboratory Company, with a capital stock of $5,000, in shares of the value of $10 each, and that Owings would sell to plaintiff, $1,000 worth of stock, or more, if wanted, for which plaintiff was to pay $500 cash, and the balance at his convenience, without additional cost or interest; that Owings. would put in his formulas and trade names free, and furnish the house in which the business was conducted, without charge for rent or lights during the year 1917, and thereafter at a nominal rent, that plaintiff would devote his entire time and efforts to the business, and was to have one-fourth of the net income, as his “drawing account,” and, if that was not sufficient, then, one-third thereof.

Under this agreement, plaintiff gave defendant his check for $500, on March 6, 1917, and moved his family to Columbia, and began work about the last of April. The business proved a failure, and plaintiff got practically nothing out of it, but the money which he paid in was used in the business. The corporation was never organized, and, of course, no stock was ever delivered to plaintiff.

The foregoing are the salient features of the transaction between the parties. There are some details which it is unnecessary to state, as they have no material bearing upon the case or applicable law. There are exceptions to the admission of testimony and to the charge, but the consideration of these becomes academic in the view which we take of the refusal of defendant’s motion to direct the verdict *515 on the issue of fraud. The testimony does not warrant the inference that Owings was guilty of fraud, either in inducing plaintiff to enter into the contract and pay his money, or in failing to organize the corporation, and give plaintiff the stock which he paid for. But there is no doubt that he broke his contract to organize the corporation and deliver the stock paid for. He testified, however, that the failure to organize it was acquiesced in by plaintiff, in the hope that they could find some one to take plaintiff’s place; and if appears that, in August, they inserted an advertisement in a newspaper with that end in view, which was dictated by defendant and written out by' plaintiff and carried to the paper; and that when defendant offered later to organize the corporation plaintiff refused to join with him. This was admitted by plaintiff.

1 As the business is admittedly a failure, plaintiff’s stock would probably be worth much less than the money he paid for it with interest thereon, and, as defendant admits his liability to that extent, and says he is willing to pay back the money with interest thereon from date of receipt thereof, the judgment of this Court is that the judgment of the County Court be reversed, and that the case be remanded for a new trial, unless plaintiff or his attorneys shall, within 20 days after service upon his attorneys of notice of filing the remittitur herein, remit upon the record all of the judgment recovered, except the sum of $500, with interest thereon from March 6, 1917.

Judgment reversed nisi.

On petition for rehearing.

Plaintiff petitions for a rehearing on the ground that the Court misconceived the issues made by the *516 pleadings, and decide the case on a different theory from that on which it was brought and tried in the Court below, in that plaintiff sued for actual and punitive damages, on the ground that he intrusted to defendant $500 for the purpose of forming a corporation, and not to pay for stock in a corporation already formed, and that, instead of forming the corporation, defendant fraudulently appropriated the money to his own use; and for actual damages, on the ground that, induced by defendant’s promise to form the corporation, he broke up his home and moved to Columbia, the damage so claimed being the expenses of moving, his loss of time, etc.

It is true that we decided' the case on a different theory from that stated, not because we misconceived the issues, but because we found that it had been tried upon an erroneous theory of the law applicable to the facts proved. Cases must be decided according to the facts proved, or facts of which there is some evidence, and not upon mere allegations of fact which are denied and unsupported by evidence. If the facts alleged had been proved or if the evidence had been sufficient to warrant a reasonable inference of their truth, our decision might have been in accordance with the theory upon which the case was brought and tried.

Plaintiff sued for damages for breach of the contract, the substance of which was stated in the opinion, and alleged, also, that defendant induced him, by false and fraudulent representations, to make the contract, and that he was guilty of a fraudulent breach thereof, in failing to organize the corporation and deliver the stock paid for, and in appropriating to his own use the money paid him for the stock.

2 The case was tried upon the theory that there was sufficient evidence to prove the allegations of fraud, and, against defendant’s objection, which was reserved by exceptions to this Court, plaintiff was allowed to prove, as actual damages, his expenses in moving to Columbia, his loss of time, etc.; and, on the same theory, *517 the Court instructed the jury that, if they found the facts alleged to be true, such damages were recoverable, to which instructions exceptions were duly taken.

Now, when we found that the evidence was insufficient to warrant the inference of fraud, either in inducing plaintiff to make the contract, or in defendant’s breach thereof, it necessarily followed, as a logical and legal sequence, that the trial Court had erred in admitting the testimony objected to, and in the charge complained of. We thought that was so clear that it was unnecessary to state it. Perhaps, however, we should have stated explicitly the process of reasoning by which we reached the conclusion that it was unnecessary to consider the exceptions to the admission of evidence and the charge, instead of merely saying that, in view of the insufficiency of the evidence to sustain the allegation of fraud, we deemed it unnecessary to consider those exceptions.

The contention that the money paid to defendant for the work was paid in trust is clearly untenable. The transaction was simply a sale and purchase of an interest in defendant’s business, which the parties agreed should be capitalized at $5,000 and incorporated, and, when incorporated, the stock paid for by plaintiff was to be delivered to him. The money, therefore, belonged to defendant as so much paid to him for an interest in the business, which was to be represented by the stock to be delivered to him, as soon as the incorporation of the business was perfected. The failure to incorporate was nothing more than a breach of the contract to do so.

While defendant denied that the failure to incorporate was altogether his fault, and insisted that the delay in doing so had been acquiesced in by plaintiff to such an extent as to amount to waiver, that issue was decided against him by the jury. Therefore we said that defendant had breached his contract to incorporate, and was liable for the conse *518 quent damages. There was no evidence that plaintiff had suffered any damages from the failure to incorporate, other than the loss of interest on the money paid to defendant, because the evidence is undisputed that .the business was a failure, and did not'make enough to pay running expenses, to say nothing of dividends on the stock, if it had been incorporated, and there was no evidence tending to prove that the failure to organize the corporation caused or had anything to do with the failure of the business.

Having reached the conclusion that the evidence was not sufficient to sustain the charge of fraud, and, therefore, that the Court erred in admitting the evidence objected to, and in its charge as to the plaintiff’s right to recover such damages, a new trial absolute would have been inevitable but for the fact that, during the argument, a member of the Court asked defendant’s counsel if defendant would be willing to pay back to plaintiff the money which he had received, with interest, and, his counsel being unable to answer, defendant himself arose and said that he was perfectly willing to so do. In view of that circumstance, and taking the view, most favorable to plaintiff, that he would probably prefer to hold the judgment which he had obtained for the money paid with interest rather than be put to the trouble and expense of a new trial, we framed our judgment so as to give him the option, and not with the intention of reducing the amount of actual damages found for him at all. ' He still has the option to take a new trial, if he be advised that he can prove ihat he sustained more damages by the failure to organize the corporation and deliver to him the stock which he paid for than the amount which he paid to defendant with interest thereon.

It will be seen, therefore, that counsel for plaintiff is mistaken in supposing that we undertook to consider the sufficiency of the evidence to prove actual damages, notwithstanding there was no motion to direct a verdict as to such damages, as required by rule 77 of the trial Court, or that *519 we undertook to reduce the amount found by the jury. Our judgment was based upon the conclusion that the damages which the jury were allowed to find were not recoverable under the law applicable to the case proved. '

The petition is, therefore, dismissed.