The Court,
Gilpin, C. J.,
charged the jury:
The subscription of the defendant under his hand for one hundred shares of stock in the company, at the price of twenty-five dollars per share, amounting to two thousand five hundred dollars, in the month of July, 1866, had been proved as alleged by plaintiffs and is not denied, and the payment of the first call upon it, amounting to one hundred and twenty-five dollars, by the defendant, on the 13th day of May, 1867, has also been proved and is not disputed. The suit is for the balance, two thousand three hundred and seventy-five dollars, and was instituted on the 10th day of May, 1873. And this would entitle the plaintiffs to recover it unless the defendant has clearly shown to the satisfaction of the jury by the evidence in the case, either that the contract of subscription to the stock was rendered void and of no effect by reason of false and fraudulent representations and assurances made to him by the agent of the commissioners, Mr. Fennimore, appointed to procure subscriptions to the stock of the company, at the time or immediately before he subscribed to the stock, or that the claim has been barred by lapse or efflux of time since it was made under the statute of limitations.
Now, as to the plea of fraud and covin, I remark in the first place that fraud practiced in the inception of a contract renders it void. That is to say, if the transaction be tainted with fraud it is no contract, and consequently it imposes no obligation on the person entering into it. But I must also remark to you in very emphatic terms that fraud is never to be presumed; on the contrary, it must be clearly proved by the evidence to make it available as a defense. Now, I may say that actual or positive fraud may be defined or described to be any false representation, deceit, device, or artifice resorted to or used by one person with the intent and for the purpose of deceiving and misleading
another person to his injury. This is the best general definition which I can give of what is meant by fraud. It is comprehensive in its terms, and it is true as well in its moral as in its legal aspect. It may be proved either directly or inferentially as any other fact is proved. I have said it must be clearly proved in order to constitute a valid defense, for it must be borne in mind that where the circumstances relied upon as indicating fraud are of a doubtful nature, or are susceptible of an innocent interpretation, or are calculated to raise but a bare suspicion of fraud in regard to the person charged therewith, they will not amount to sufficient evidence to establish the fact.
Fraud as meant and signified by the plea of “ fraud and covin,” is not merely legal, but is moral fraud as well, practiced on the defendant by the plaintiff or its authorized agent, or by the railroad commissioners in this- case or their agent, with- the intent to deceive and mislead him in respect to the very transaction in question and which is the subject of controversy between the parties. It means more than a mere false statement ignorantly or erroneously made under a misapprehension and without any intention or design to deceive. It consists in a false representation or concealment of material facts with intent.to deceive. Fraud occurs where one party substantially misrepresents a material fact peculiarly within his own knowledge, in consequence of which a delusion is created, or makes a statement which he knows to be untrue, and which is naturally calculated to lull the suspicion of a careful man and induce him to forego inquiry into a matter upon which the other party had knowledge or information, although such information may not be exclusively within his own reach. But a representation, though false, will not vitiate a contract unless it be fraudulent also, and operates as an inducement influencing the party to enter into it. The misrepresentation of a fact, however, known to the party making it to be untrue, amounts to a fraud in law if the representation be naturally calculated or be expressly intended to induce a person to act upon it, so that he may thereby be prejudiced or injured. .And it may be laid down as a general rule established and sustained by the highest authority, and of universal application and acceptance in the courts of England, as
well as of this country, that a collateral statement in a case like this made at the time of entering into the contract, but not embodied in it, must, in order to invalidate the contract on the ■ground of its being a fraudulent statement, be shown not only to have been false but to have been known to be so by the party making it when he made it, and that the other party was thereby induced to enter into the contract. The representation in this case was a collateral statement, not embodied in the contract, but extrinsic to it, and it seems to me that the rule which I have just stated applies with singular significancé and force to the case now before this court and upon which you are now called upon to pass and determine by your verdict.
Comfool
v.
Fowke,
6
M. & W.
358 ;
Moens
v.
Hayworth,
10
M. & W.
147;
Stevens
v.
Webb,
7
C. & P.
60;
Flinn
v.
Tobin, M. & W.
367;
Exerly
v.
Garrett,
9
B. & C.
928;
Palhill
v.
Walter,
3
B. & A.
114;
Freeman
v.
Baker,
5
B. & Ad.
797;
Heely
v.
Lock,
8
C. & P.
527;
Mears & Son v. Waples,
3
Houst.
581. The question is whether Mr. Fennimore at the time when he made the statement knew it to be untrue, and made it with the fraudulent intent to mislead and deceive the defendant? If he did, then your verdict should be for the defendant. But if he believed at the time that the statement he made to the defendant was true, or did not know that it was false, and did not make it fraudulently or with the intention or design of misleading or deceiving the defendant, and thus induciiig him to enter into the contract of subscription, then your verdict under the plea of fraud and covin should be in favor of the plaintiff.
In regard to the plea of the act of limitations it is proper I should say to you that as the contract is in writing, under the hand of the defendant, the claim is not barred until after the expiration of six years from the time of the accruing of the cause of action. It has been insisted by the learned counsel for the defendant that this contract of subscription is in point of law analogous to, and in effect the same as, a promissory note payable on demand, and that the statute of limitations began to run against the claim from the date of the subscription or the day on which it was made, and if six years had elapsed between that day and the day on which the action was commenced, the
plaintiff must fail to recover by reason of the bar of the statute. But the contract of subscription in this case is not like a promissory note payable on demand, for when it was entered into the company was not yet organized and there was no person legally authorized to receive the money.
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The Court,
Gilpin, C. J.,
charged the jury:
The subscription of the defendant under his hand for one hundred shares of stock in the company, at the price of twenty-five dollars per share, amounting to two thousand five hundred dollars, in the month of July, 1866, had been proved as alleged by plaintiffs and is not denied, and the payment of the first call upon it, amounting to one hundred and twenty-five dollars, by the defendant, on the 13th day of May, 1867, has also been proved and is not disputed. The suit is for the balance, two thousand three hundred and seventy-five dollars, and was instituted on the 10th day of May, 1873. And this would entitle the plaintiffs to recover it unless the defendant has clearly shown to the satisfaction of the jury by the evidence in the case, either that the contract of subscription to the stock was rendered void and of no effect by reason of false and fraudulent representations and assurances made to him by the agent of the commissioners, Mr. Fennimore, appointed to procure subscriptions to the stock of the company, at the time or immediately before he subscribed to the stock, or that the claim has been barred by lapse or efflux of time since it was made under the statute of limitations.
Now, as to the plea of fraud and covin, I remark in the first place that fraud practiced in the inception of a contract renders it void. That is to say, if the transaction be tainted with fraud it is no contract, and consequently it imposes no obligation on the person entering into it. But I must also remark to you in very emphatic terms that fraud is never to be presumed; on the contrary, it must be clearly proved by the evidence to make it available as a defense. Now, I may say that actual or positive fraud may be defined or described to be any false representation, deceit, device, or artifice resorted to or used by one person with the intent and for the purpose of deceiving and misleading
another person to his injury. This is the best general definition which I can give of what is meant by fraud. It is comprehensive in its terms, and it is true as well in its moral as in its legal aspect. It may be proved either directly or inferentially as any other fact is proved. I have said it must be clearly proved in order to constitute a valid defense, for it must be borne in mind that where the circumstances relied upon as indicating fraud are of a doubtful nature, or are susceptible of an innocent interpretation, or are calculated to raise but a bare suspicion of fraud in regard to the person charged therewith, they will not amount to sufficient evidence to establish the fact.
Fraud as meant and signified by the plea of “ fraud and covin,” is not merely legal, but is moral fraud as well, practiced on the defendant by the plaintiff or its authorized agent, or by the railroad commissioners in this- case or their agent, with- the intent to deceive and mislead him in respect to the very transaction in question and which is the subject of controversy between the parties. It means more than a mere false statement ignorantly or erroneously made under a misapprehension and without any intention or design to deceive. It consists in a false representation or concealment of material facts with intent.to deceive. Fraud occurs where one party substantially misrepresents a material fact peculiarly within his own knowledge, in consequence of which a delusion is created, or makes a statement which he knows to be untrue, and which is naturally calculated to lull the suspicion of a careful man and induce him to forego inquiry into a matter upon which the other party had knowledge or information, although such information may not be exclusively within his own reach. But a representation, though false, will not vitiate a contract unless it be fraudulent also, and operates as an inducement influencing the party to enter into it. The misrepresentation of a fact, however, known to the party making it to be untrue, amounts to a fraud in law if the representation be naturally calculated or be expressly intended to induce a person to act upon it, so that he may thereby be prejudiced or injured. .And it may be laid down as a general rule established and sustained by the highest authority, and of universal application and acceptance in the courts of England, as
well as of this country, that a collateral statement in a case like this made at the time of entering into the contract, but not embodied in it, must, in order to invalidate the contract on the ■ground of its being a fraudulent statement, be shown not only to have been false but to have been known to be so by the party making it when he made it, and that the other party was thereby induced to enter into the contract. The representation in this case was a collateral statement, not embodied in the contract, but extrinsic to it, and it seems to me that the rule which I have just stated applies with singular significancé and force to the case now before this court and upon which you are now called upon to pass and determine by your verdict.
Comfool
v.
Fowke,
6
M. & W.
358 ;
Moens
v.
Hayworth,
10
M. & W.
147;
Stevens
v.
Webb,
7
C. & P.
60;
Flinn
v.
Tobin, M. & W.
367;
Exerly
v.
Garrett,
9
B. & C.
928;
Palhill
v.
Walter,
3
B. & A.
114;
Freeman
v.
Baker,
5
B. & Ad.
797;
Heely
v.
Lock,
8
C. & P.
527;
Mears & Son v. Waples,
3
Houst.
581. The question is whether Mr. Fennimore at the time when he made the statement knew it to be untrue, and made it with the fraudulent intent to mislead and deceive the defendant? If he did, then your verdict should be for the defendant. But if he believed at the time that the statement he made to the defendant was true, or did not know that it was false, and did not make it fraudulently or with the intention or design of misleading or deceiving the defendant, and thus induciiig him to enter into the contract of subscription, then your verdict under the plea of fraud and covin should be in favor of the plaintiff.
In regard to the plea of the act of limitations it is proper I should say to you that as the contract is in writing, under the hand of the defendant, the claim is not barred until after the expiration of six years from the time of the accruing of the cause of action. It has been insisted by the learned counsel for the defendant that this contract of subscription is in point of law analogous to, and in effect the same as, a promissory note payable on demand, and that the statute of limitations began to run against the claim from the date of the subscription or the day on which it was made, and if six years had elapsed between that day and the day on which the action was commenced, the
plaintiff must fail to recover by reason of the bar of the statute. But the contract of subscription in this case is not like a promissory note payable on demand, for when it was entered into the company was not yet organized and there was no person legally authorized to receive the money. Moreover, by the terms of the charter, the company had no power or authority when organized to require immediate payment of the subscription. The charter prescribes in express terms the form of the contract of subscription; and according to it the subscribers to the stock contracted to pay for it
“
in such manner and proportion, and at such times, as shall be determined by the president and directors of the company,” whilst the eighth section of it prescribes that upon every such subscription there shall be paid to the person or persons appointed to receive the same, such installments as the president and directors of the company shall require, provided that no payment shall be demanded until at least thirty days’ public notice shall have been given in at least one newspaper published in the county in which the payments shall be demanded. From all of which it clearly appears that the subscriptions were not to be paid immediately, but were to be paid in partial payments or installments from time to time as they should be called for by the president and directors, and then not until thirty days after the call should have been published, as required by the terms of the charter. We therefore instruct you that the bar of the act of limitations did not begin to run in this case, until after the time when the several installments became payable according to the terms of the published notices which are in evidence before you. And if you are satisfied from the evidence that the several installments were made payable at the several times mentioned in the published notices of the calls in evidence before you, then we say to you that the claim of the plaintiff is not barred by the act of limitations, because this suit was commenced for the recovery of it within six years from the accruing of the cause of action upon it. And, moreover, we say to you that if you are satisfied from the proof in the case that the first installment of one hundred and twenty-five dollars was paid by the defendant on the 13th day of May, 1867, then the payment of that
installment at that time took the case out of the operation of the act of limitations from that time, as an acknowledgment of his subsisting liability to pay the subscription, and that the plaintiff would, therefore, have six years afterward from that date within which to commence its action for the recovery of the balance of the subscription remaining due and unpaid on the subsequent installments according to the published calls in evidence before you, this suit having been brought, as before stated to you, on the 10th day of May, 1873.
The plaintiff had a verdict.