Reid v. Hughlett

Stockbridge, J., delivered the opinion of the Court. The bill of complaint which was filed in this case was for the rescission of a contract of sale, or more precisely of two contracts of sale, entered into respectively in June and October, 1916. In each case the subject matter of the sale was stock of the Auto Fender Go., ten shares of which were preferred stock, accompanied by a bonus of ten shares of the common stock. The preferred stock was sold to the plaintiff, Miss A. Page Reid, at $10 per share; the first purchase being of fifty shares, for which she paid $500, and the second, at the same price, and for Hie same amount of stock for which she also paid $500.

These two sales are by her bill filed in September, 1918, asked to be set aside upon the ground of misrepresentation and fraud. Equity will afford relief in such cases when the basis of the application is because of some fiduciary relation existing between the parties to the contract, or second, whei’e there has been a mistake, or third, where there has. been misrepresentation and fraud either actual or constructive. It does not appear to be seriously contended that there was any fiduciary relation existing between the parties to this suit; nor is there anything in the testimony to suggest the existence of such a relation; nor can the present proceeding be based upon a mis ¹⁸³ take. To afford ground for the rescission of a contract upon the basis of mistake, the mistake must have been mutual (Boulder v. Wood, 96 Md. 332 ), not unilateral, and the evidence offered by the plaintiff at no point tends to show any mutual mistake.

If the, plaintiff is to prevail at all, it must be because of misrepresentation or fraud, either actual or constructive, and such misrepresentation, concealment or suppression must have been of some material fact. The Auto Fender Co. was the owner of certain patent rights, covering a supposed improvement in fenders to be placed upon automobiles, and the stock of the company was issued as full paid stock in consideration of the transfer by the patentee to tlie company of all rights of manufacture. The stock as issued gave to the patentee approximately one-third of the total stock, for which the corporation had been capitalized, another thml was issued to Messrs. Hughlett and Hill as promoters, and the remaining third was placed in the treasury, and thereafter known as treasury stock.

The Auto Fender Co. did not itself undertake any manufacturing of the-fender; but by contract the right to manufacture was granted to the Auto Appliance Co. in consideration of certain royalties to be paid upon each fender produced and sold. It is thus apparent that the Auto Fender Co. would have use for very little capital, actually paid in cash. In the month of June, 1916, Mr. W. P. Lawson, an agent of Edward W. Hughlett, called on the plaintiff, and offered her some of the stock of the Auto Fonder Co., which she agreed to buy and did purchase and pay for. In cases where fraud is the basis upon which relief is sought, the burden of proof is upon the plaintiff to establish the fraud.

Hopkins v. Neal, 128 Md. 256 ; Wenstrom Co. v. Purnell, 75 Md. 120 . The witnesses on behalf of the plaintiff in this case were the-plaintiff herself and Air. W. P. Lawson, the stock and bond