In an action to recover the balance due from the defendant upon a subscription to stock in the plaintiff corporation, the defendant denied liability, and in a cross-complaint averred that he had rescinded his contract of subscription sued upon because of certain fraudulent representations of the plaintiff’s agent by which it was induced, and prayed judgment for the recovery of the amount paid by him upon said subscription. The court rendered judgment in defendant’s favor, and granted him the relief sought by his cross-complaint, basing its judgment upon findings, among others, as follows:

The court also found that the defendant, upon discovering the falsity of the representations, promptly rescinded his subscription, and, having reference to the duty of one seeking to rescind a contract, to return to the other party to it anything received under it, found that the defendant had received nothing.

In urging a reversal of the judgment and order denying its motion for a new trial, the plaintiff makes several contentions, viz., (1) that the record contains no allegation, evidence, or finding that the cross-complainant was in any way pecuniarily damaged by the alleged false representations; (2) that he failed to rescind promptly upon discovery of the facts entitling him to rescind; (3) that the notice of rescission by the cross-complainant was insufficient for various reasons, but chiefly because it failed to state the grounds upon which the right was attempted to be exercised; (4) that the defendant lost his right to rescind because he did not offer to return whatever of value he had received, and (5) errors of law in the admission of certain testimony.

(1) Addressing ourselves to the first of these contentions, in an action such as this, where the defendant and cross-complainant merely recites the payment of his subscription and asks for its rescission, an allegation or proof of pecuniary damage sustained by him is not necessary. The author of Cook on Corporations, speaking of the rescission of a subscription to corporate stock, says:

That such misrepresentations as are complained of in the case at bar are sufficient to entitle the subscriber to rescind, without proof of pecuniary damage suffered, is well settled. At section 145 (page 410) of the work just referred to the author says: “Any false statement by the authorized agents of a corporation in regard to the past or present status of the corporate enterprise or material matters connected therewith, whereby subscriptions are obtained, is a fraudulent representation. Thus, a false statement that . . . certain individuals are directors . . . have been held to constitute a fraudulent representation entitling the subscriber induced thereby to subscribe to the remedies provided for him by law in such cases ...” (citing Blake’s Case, 34 Beav. 639, [55 Eng. Reprint, 782]; Munster’s Case, 14 W. R. 957; In re Metropolitan etc. Assn., 64 L. T. 561; Ex parte Brown, 95 L. T. 756).

The rule announced was followed in the case of Coles v. Kennedy, 81 Iowa, 360 , [ 25 Am. St. Rep. 503 , 46 N. W. 1088 ].) There one of the representations by which the complaining subscriber had been induced to take the stock was that one L. H. Mallory, a resident for many years of the community and known as a man of large business experience and capacity, and a successful business man, had subscribed for five thousand shares in the company, whereas in truth he was given the stock for the influence of his name in procuring subscriptions. In speaking of this feature of the case the court said: ‘‘ The fact that Mr. Mallory was not to pay for his stock was concealed from the appellee. To have disclosed it would have been to defeat the very purpose for which the five thousand shares were given to Mr. Mallory. We have no doubt but the belief that Mr. Mallory had subscribed for five thousand shares of the stock, and that he had or was to pay for the same, operated as an inducement to appellee to subscribe for the stock and execute the contract in question. This was such a fraud as cannot have the approval of a court of equity, and for which the contract induced by it should be canceled and held for naught.”

In the case at bar it plainly appears that the sole inducing cause of the subscription was the false statements as to the connection of Mr. Carlson with the corporation plaintiff—a man in whose integrity and business capacity the respondent placed special reliance. We think it clear that such a subscription could be rescinded without the subscriber averring or proving pecuniary damage.

(2) The second contention of the appellant, that the respondent failed to rescind promptly, is also, we think, untenable. The evidence shows that immediately upon discovering the falsity of the representations, and within eight days of the making of the contract of subscription, the respondent wrote to the president of the company repudiating the contract.

(3) Nor do we think that the appellant’s third contention, can be upheld. The letter of rescission unequivocally stated that the reason for this action on the part of the respondent was that the subscription had been obtained by misrepresentation and fraud on the part of the company’s agent. It is true that the specific misrepresentations complained of were not enumerated, and that no reply was vouchsafed by the wife of the respondent to a letter written to her by the attorney of the appellant inquiring of what they consisted. But the most detailed enumeration of those representations would not have made the attempted rescission more unequivocal, although undoubtedly the possession of them would have enabled the plaintiff to form an opinion as to whether the respondent’s withdrawal from his contract was justified. The appellant, however, had other means of finding out what these representations were inasmuch as they were made by its own agent, and we cannot assume that the agent would not have disclosed them to his principal upon the latter’s demand. In the ease of Savage v. Bartlett, 78 Md. 561 , [ 28 Atl. 414 ], speaking of the rights of a stockholder with regard to a corporation to the stock of which he has subscribed, induced by false representations, the court says: “A notice to the company that he rescinds the subscription, giving the reasons therefor, is sufficient.”

(4) Nor can we give our adherence to the appellant’s fourth contention. The respondent having received nothing from the appellant, could return nothing. The appellant had merely undertaken to issue a certain number of shares of stock upon payment of the balance of the purchase price. While this was a contingent obligation on the part of the corporation, it was ipso facto canceled upon the rescission by the stockholder of his subscription, and the corporation was thereby placed in the same position as if stock issued by it had been returned by the subscriber. The argument that a certain number of shares had been “set aside” for the subscriber, and that the latter therefore had received something which he failed to return, has not even the merit of plausibility.

But one other point made by the appellant requires mention. The respondent’s wife was a witness at the trial on his behalf, and, over the objection of the appellant, was permitted to answer affirmatively the following question: “Did you rely on a statement of Mr. Harper that he had a letter from Mr. Carlson and that Mr. Carlson was to be president of the Vulcan Fire Insurance Company prior to your subscribing for this certificate of stock?” The objection was that the question was incompetent, irrelevant, and immaterial, and assumed facts not in evidence. While the subscription sought to be canceled was one made by the husband, and therefore ordinarily it would be immaterial what effect the representations made in obtaining it had upon the wife, it sufficiently appeared that the wife was present at the interview between the agent and her husband and took an active part therein. The company’s reply to the letter of cancellation was addressed to her, and was couched in such terms as if she were the active head of the marital community whose funds had been invested in the stock; and it was quite apparent from the evidence of the whole transaction that when the company’s agent in his efforts to sell the stock to the respondent had won the lady over, he had gained three-fourths of the battle. But quite apart from this the evidence of the husband that he was induced by the agent’s untrue representations to enter into the subscription contract was uncontradicted, so that even if the court ought not to have permitted this question to be answered, its action in so doing cannot be held to have caused any prejudice to the appellant.

For the reasons given the judgment and order are affirmed.

Kerrigan, J., and Richards, J., concurred.

A petition to have the cause heard in the supreme court, after judgment in the district court of appeal, was denied by the supreme court on July 27, 1917.