portant for a subscriber to know that no other person is, by reason of having acquired shares at a lesser price, in a position to sell more cheaply.27 If, as is frequently the case, the representation relates to the price at which the shares were sold by the corporation itself, the representation is material, not only because of the considerations already stated, but also because the price received by the corporation has, in general, a direct bearing upon the extent of its assets and therefore upon the value of its shares.28 § 222. Materiality of representation that stock sold is treasury stock. It may, in many cases, be a matter of no moment to the purchaser, whether the stock acquired by him is treasury stock, or stock previously issued by the corporation. This consideration may, however, sometimes become material. The fact that a shareholder, or a particular shareholder, is desirous of selling his shares, might often be taken into consideration in determining the probable desirability of the shares. It is also sometimes a material consideration in the mind of the purchaser, that the purchase moneys to be paid by him are to go into the treasury of the corporation.2 It is held in National Leather Co. v. Roberts 30 that a false representation made to complainant that the preferred stock offered to him had been contracted for by a prior subscriber who insisted on retaining the common stock given as a bonus, as a result of which representation the complainant took the preferred stock without the bonus of common stock given to all other subscribers, 27. See Hambleton v. Rhind, 84 Md. 456, 488, 36 Atl. 597, 40 L. R. A. 216, 231. 28. Coolidge v. Goddard, 77 Me. 578, 1 Atl. 831; Caswell v. Hunton, 87 Me. 277, 32 Atl. 899. 29. Hunter V. French League Safety Cure Co., 96 Iowa 573, 65 N. W. 828; Caswell v. Hunton, 87 Me. 29 277, 32 Atl. 899; Findlater v. Dorland, 152 Mich. 301, 116 N. W. 410; cf. Wilson v. Meyer, 154 N. Y. App. Div. 300, 138 Supp. 1048, also Burwash v. Ballou, 132 Ill. App. 71, affirmed, 230 Ill. 34, 82 N. E. 355, 15 L. R. A. N. S. 409. 30. 221 Fed. Rep. 922, 137 C. C. A. 492. did not entitle the complainant to rescind on discovering that the stock sold to him was treasury stock, for the misrepresentation did not tend to induce his subscription, but the contrary. § 223. Misstatements as to value of shares. It has been held that a false statement that the shares of the company are of great value and a profitable and safe investment may be made the basis of an action for fraud.81 It was held in Gerhard v. Bates 32 that a statement that the promoters did not hesitate to guarantee an annual dividend of 33 per cent upon the shares, was equivalent to a representation that the undertaking was a safe and profitable one. In Muck v. Hayden,33 representations that the stock had an actual intrinsic value of $120 a share, and that the value of the stock was rapidly increasing, were held to be representations as to existing facts. It is said in Gray v. Collins 34 that a statement of the defendant that he believed money might be made in the shares and that it would pay to hold them for a month, is fraudulent if the defendant did not, in fact, entertain the belief which he asserted. 31. Murray v. Tolman, 162 Ill. 417, 423-424, 44 N. E. 748; Coulter v. Clark, 160 Ind. 311, 66 N. E. 739; Grover v. Cavanaugh, 40 Ind. App. 340, 82 N. E. 104; McAleer v. Horsey, 35 Md. 439; Champion Funding & Foundry Co. v. Heskett, 125 Mo. App. 516, 532, 102 S. W. 1050; Cross v. Sackett, 2 Bosw. (N. Y.) 617, 6 Abb. Pr. 247, 16 How. Pr. 62, and cases cited; Barber v. Morgan, 51 Barb. (N. Y.) 116. Cf. Kimber v. Young, 137 Fed. Rep. 744, 70 C. C. A. 178, and cases cited; Coca-Cola Bottling Co. of Chicago v. Anderson, 13 Ga. App. 772, 80 S. E. 32; Van Slochem v. It has been held that promoters who by means of fictitious sales create an artificial market value for the securities of the corporation, may be held liable to those who, in reliance upon the apparent market value, purchase the securities to their damage. 35 § 224. Materiality of representations as to legal status of company, or shares. A representation that the company is a legally organized corporation is, unless the company is at least a de facto corporation, a misrepresentation of a material fact, because of the bearing of that question upon the stockholders' liability.3 36 The issuance of a stock certificate is a representation to the world that a corporation is an existing institution, and the persons signing the certificate may, if this is not so, be held liable to any one injured thereby.87 A representation that the subscription solicited is one to the shares of a company to be formed, has been held a misrepresentation of a material fact if the company in question was at the time already in existence.3 38 35. McElroy v. Harnack, 213 Pa. 444, 63 Atl. 127, distinguished in Ballantine v. Cummings, 220 Pa. 621, 633, 70 Atl. 546. See Fottler v. Moseley, 179 Mass. 295, 60 N. E. 788. 36. See Maine v. Midland Investment Co., 132 Iowa 272, 109 N. W. 801; Nichols v. Buell, 157 Mich. 609, 122 N. W. 217; Bolton v. Prather, 35 Tex. Civ. App. 295, 80 S. W. 666. If the company is a corporation de facto, the circumstance that it is not a corporation de jure is perhaps immaterial. Burwash v. Ballou, 230 Ill. 34, 82 N. E. 355, 15 L. R. A. N. S. 409, affirming, 132 Ill. App. 71, 108, see Nelson v. Luling, 62 N. Y. 645. But compare Wright Bros. V. Merchants' & Planters' Packet Co., 104 Miss. 507, 61 So. 550. And see note to Jones v. Dodge, L. R. A. N. S., 1915 A. 475. A person induced by the false representations of the promoter to donate lands to the supposed corporation, may sue the promoter for damages for fraud and deceit. Davidson v. Hobson, 59 Mo. App. 130. 37. Merchants National Bank v. Robison, 8 Utah 256, 30 Pac. 985. 38. Johns v. Coffee, 74 Wash. 189, 133 Pac. 4, affirmed on rehearing, 77 Wash. 700, 137 Pac. 808. A representation that the shares of an existing corporation are non-assessable, is a representation that the corporation has taken such steps as are necessary to effectually bar its right to levy an assessment, and therefore a representation of an existing fact.39 A representation that the shares of a corporation to be organized are to be non-assessable, would generally be a representation in regard to some future action, and often a representation as to a matter of law. § 225. Representations as to future action. It is a general rule that a representation is not fraudulent unless it is a misrepresentation of some existing fact, and not a mere expression of opinion or promise in regard to some future action.40 Promissory statements may, however, be made in such terms that they imply that certain conditions exist at the time and form the basis of the promised future state of things. When they are of 39. Browne v. San Gabriel River Rock Co., 22 Cal. App. 682, 136 Pac. 542; Windram v. French, 151 Mass. 547, 24 N. E. 914, 8 L. R. A. 750; cf. Van Slochem v. Villard, 207 N. Y. 587, 101 N. E. 467. 40. Federal.-Banque FrancoEgyptienne v. Brown, 34 Fed. Rep. 162, 192. Indiana.-Fort Wayne, etc., Turnpike Co. v. Deam, 10 Ind. 563. Maryland.-Hughes v. Mfg. Co., 34 Md. 316. Antietam Ohio R. R. Co., 34 Miss. 245; Selma Missouri.-Muck v. Hayden, 173 New Jersey.-Vreeland v. N. J. Stone Co., 29 N. J. Eq. 188, (and cases cited), affirmed, 29 N. J. Eq. 651. New York.-Holdredge v. Webb, 64 Barb. 9. Texas.-Gough Mill & Gin Co. v. Looney, 112 S. W. 782. Wisconsin.-Warner v. Benjamin, 89 Wis. 290, 62 N. W. 179. See note to Fear v. Bartlett, 33 L. R. A. 721, 730, et seq.; and note to Cottrill v. Krum, 18 Am. St. Rep. 549, 556, 558, and see post, § 238, also ante, § 224. But see Gray v. Collins, 4 F. & F. 302, and see ante, § 223. this nature they may be actionable if intentionally false.11 Otherwise, it is said, fraud cannot be predicated upon promises not performed.42 It was held in Edgington v. Fitzmaurice 43 that a statement, in a circular inviting subscriptions for certain debentures, that the object of the issue was the making of certain alterations and additions to the plant of the company, when the real object was to pay off certain pressing liabilities, was a false statement of an existing fact. The court said, "It has not been directly held in any of the cases cited that if the thing stated to exist is an intention of the mind that may not be a statement of fact which is obviously and certainly false." 44 A statement that the company would not issue shares except upon a certain stated basis is a false representation of fact if shares have already been issued upon a different basis.45 § 226. Falsity of representations. It has been held that a statement that certain properties have been acquired by the company is, if false when made, none the less so because the properties mentioned were actually acquired by the company after the complainant subscribed for his shares, and that the complainant might rescind his subscription 46 or bring an action for damages 17 because of such misrepresentation. If the 41. Banque Franco-Egyptienne v. Brown, 34 Fed. Rep. 162, 192; Allen v. Pulfer, 159 Mich. 616, 124 N. W. 525. 42. See Banque Franco-Egyptienne v. Brown, 34 Fed. Rep. 162, 192. 43. L. R. 29 Ch. Div. 459, 473, et seq. 44. That a false statement as to one's intention may be made the basis of an action for fraud, see Gabriel v. Graham, 168 N. Y. App. Div. 847, 154 Supp. 493. A false statement as to one's belief in the future value of the shares may be fraudulent. See ante, § 223. 45. Weems v. Georgia Midland & Gulf R. R. Co., 84 Ga. 356, 11 S. E. 503, 88 Ga. 303, 14 S. E. 583. 46. Lehman-Charley v. Bartlett, 135 N. Y. App. Div. 674, 683, 120 Supp. 501, affirmed, 202 N. Y. 524, 95 N. E. 1125. See ante, § 209. 47. McConnell v. Wright, 1903, 1 Ch. Div. 546. And see Reeve v. Dennett, 145 Mass. 23, 30, 11 N. E. |