It is held in Clark v. Morgan County National Bank 12 that the fact that the plaintiff has resold the securities for as much as or even more than he paid for them is not a defense to his action to recover damages for the false representations which induced his purchase.

$252. Defense of election to disaffirm.

It has been held that the commencement by the subscriber of an action based upon a disaffirmance of his subscription is an election which is conclusive upon him and a bar to a subsequent action for damages for fraud and deceit.13 A mere notice of disaffirmance and an offer to return the shares is, if rejected, probably not a conclusive election.14

§ 253. Defense that plaintiff might readily have ascertained the truth.

When it is shown that the plaintiff's subscription for, or purchase of, shares was induced by a false representation as to a material fact, it is not a defense to his action for fraud and deceit that he might by proper inquiry have ascertained the truth.15

L. R. A. 664; cf. Alexandra Oil & Dev. Co. v. Cook, 10 Ont. W. R. 781, 785, affirmed, 11 Ont. W. R. 1054.

The cause of action is, of course, assignable. Getty v. Devlin, 70 N. Y. 504, 512.

12. 196 Fed. Rep. 709.

13. Clarke v.. Mercantile Trust Co., 110 N. Y. App. Div. 901, 904, 95 Supp. 1118, (dissenting opinion), and cases cited.

14. Miller v. Barber, 66 N. Y. 558.

15. Federal.-Upton V. Engelhart, 3 Dill. (U. S.) 496, 500, 28 Fed. Cas. No. 16,800.

Colorado.-Zang V. Adams, 23 Colo. 408, 48 Pac. 509, 58 Am. St. R. 249.

Illinois.-Cantwell v. Harding, 155 Ill. App. 578, reversed on another ground, 249 Ill. 354, 94 N. E. 488.

Iowa.-Riley v. Bell, 120 Iowa 618, 95 N. W. 170; Howerton v. Augustine, 145 Iowa 246, 121 N. W. 373; Holmes v. Rivers, 145 Iowa 702, 709, 124 N. W. 801; Severson v. Kock, 159 Iowa 343, 140 N. W. 220. Michigan.-Converse v. Blumrich, 14 Mich. 109, 121.

Minnesota.-Redding v. Wright, 49 Minn. 322, 330, 51 N. W. 1056. Missouri.-Cottrill v. Krum, 100

He has a right to retort upon his objector, 'You, at least, who have stated what is untrue, or have concealed the truth, for the purpose of drawing me into a contract, cannot accuse me of want of caution because I relied implicitly upon your fairness and honesty." It is on this principle held that a promoter who has

obtained subscriptions by the concealment of material contracts, cannot escape the consequences of his fraud by showing that the contracts were in some way mentioned in the prospectus.

The fact that a document is mentioned in the prospectus does not charge subscribers with constructive notice of its contents.17 Some authorities hold that each subscriber is chargeable with knowledge of the contents of the corporate charter, and cannot claim to have been deceived by a misrepresentation in relation thereto.18 The better rule seems to be that while a subscriber is ordinarily chargeable with knowledge of the contents of the corporate charter and cannot complain of the failure of the promoters to expressly inform him thereof, an affirmative misrepresentation cannot be excused by showing that an examination of the charter would have disclosed its falsity.19

17. Aaron's Reefs v. Twiss, 1896, App. Cas. 273, 287; Components Tube Co. v. Naylor, 1900, 2 Ir. R. 1, 33, 78-79; Langham v. East Wheal, etc., Min. Co., Ltd., 37 L. J. Ch. N. S. 253.

See ante, § 112.

Cf. Hallows v. Fernie, L. R. 3 Ch. App. 467, 477; Moore v. Burke, 4 F. & F. 258.

18. Oil City Land & Improvement Co. v. Porter, 99 Ky. 254, 35 S. W. 643, 18 Ky. Law. Rep. 151; Wight v. Shelby R. R. Co., 16 B. Mon. (Ky.) 4, 63 Am. Dec. 522; Selma M. & M. R. R. Co. v. Anderson, 51 Miss. 829; Ellison v. Mobile & Ohio R. R. Co., 36 Miss. 572.

See Moore v. Burke, 4 F. & F. 258, 287, where the fact that the plaintiff was a country clergyman who could not be expected to come to the city to make inquiries, was held immaterial.

See note to Fear v. Bartlett, 33 L. R. A. 721, 732. See also American Digest, Century Edition "Corporations," § 251.

19. See Langham v. East Wheal etc., Mining Co., Ltd., 37 L. J. Ch. N. S. 253; Directors, etc., of Central Railway of Venezuela v. Kisch, L. R. 2 H. L. 99, 123, 16 L. T. N. S. 500, affirming, Kisch v. Central Railway Co. of Venezuela, 3 DeG. J. & S. 122, 34 L. J. Ch. N. S. 545, 551, 552, (cited in Oakes v. Turquand, L. R. 2 H. L. 325, 368, and in Components Tube Co. v. Naylor, 1900, 2 Ir. R. 1, 40); Smith v. Chadwick, L. R. 20 Ch. Div. 27, 57, 46 L. T. N. S. 702, affirmed, L. R. 9 App. Cas. 187, 5 Am. & Eng. Corp. Cas. 23; Ex parte Briggs, L. R. 1 Eq. 483, and see ante, § 112.

Distinction must be made between promises inconsistent with the charter, and false representations contradicted by it.

It has been held that a subscriber cannot claim to have been deceived if the subject matter of the promoter's representations was at hand for inspection and the matter was one within the understanding of the lay mind, or if the subscriber, not satisfied with the representations of the promoter, instituted his own inquiry and personally examined into the matter.20

§ 254. Defense that representations concerning credit of another are not actionable unless in writing.

While statutes providing that representations in regard to the credit, ability, trade, or dealings of another person shall not be actionable unless in writing, apply to representations inducing the purchase of corporate notes,21 such statutes have, in most jurisdictions, no application to representations made to induce a purchase of, or a subscription to, the shares of a corporation.22

§ 255. Defense of statute of limitations.

Where the subscriber seeks relief in an action at law to recover damages for fraud and deceit the only delay that will bar his

20. West End Real Estate Co. v. Claiborne, 97 Va. 734, 751, 34 S. E. 900, 906; Mulholland v. Washington Match Co., 35 Wash. 315, 321, 77 Pac. 497, 499; Warner v. Benjamin, 89 Wis. 290, 62 N. W. 179; Jennings v. Broughton, 5 DeGex. M. & G. 126, affirming, 17 Beav. 234, (cited in Aberaman Ironworks v. Wickens, L. R. 5 Eq. 485, 506); New Brunswick & Canada Ry., etc., Co. v. Conybeare, 9 H. L. Cas. 711, and see ante, § 205.

21. McKee v. Rudd, 222 Mo. 344, 367-369, 121 S. W. 312, 319, 133 Am. St. Rep. 529, and cases cited. 22. Coulter v. Clark, 160 Ind. 311,

remedy is that fixed by the statute of limitations.23 Whether the time to commence the action is to be computed from the date of the fraud, or from the date of its discovery, depends upon the provisions of the statute of the particular forum.24 It has been held that the statute runs from the date when the subscription is made, though payment be postponed until a later time.25

§ 256. Defenses to suits for accounting.

It is held in Maxwell v. McWilliams 26 that a promoter who has taken an unlawful profit under such circumstances that he may be compelled to account therefor directly to the subscribers, cannot escape liability by voluntarily surrendering such profits to the corporation. His liability being to the subscribers cannot be avoided by a payment to the company.

The subscribers cannot compel the promoter to account to them for a profit which would, even though acquiesced in by all the complaining subscribers, have constituted a fraud upon the corporation. The complaining subscribers would in such case, by taking a share of the promoter's unlawful profit, make themselves parties to the fraud, and the courts will not assist them to that end.27

23. Peek v. Gurney, L. R. 6 H. L. 377, 384, 402.

24. Higgins v. Crouse, 147 N. Y. 411, 42 N. E. 6; Ball v. Gerard, 160 N. Y. App. Div. 619, 622, 146 Supp. 81; Coffin v. Barber, 115 N. Y. App. Div. 713, 101 Supp. 147; Gibbs v. Guild, L. R. 8 Q. B. Div. 296, affirmed, L. R. 9 Q. B. Div. 59.

See the interesting discussion in Lightfoot v. Davis, 198 N. Y. 261, 91 N. E. 582, 139 Am. St. Rep. 817, 29 L. R. A. N. S. 119, 19 Am. & Eng. Ann. Cas. 747, as to the effect of a fraudulent concealment of the facts on the running of the statute of limitations.

See also note to Pietsch v. Milbrath, 68 L. R. A. 945.

25. Ball v. Gerard, 160 N. Y. App. Div. 619, 146 Supp. 81; Reusens v. Gerard, 160 N. Y. App. Div. 625, 146 Supp. 86.

26. 145 Ill. App. 155, 176, et seq. 27. See Travis v. Travis, 140 N. Y. App. Div. 191, 124 Supp. 1021.

Cf. Mattern v. Canavan, 3 Cal. App. 493, 86 Pac. 618, where Smith, J., concurring in the result arrived at by the majority, said that had the corporation been made a party, as it should have been, the issue of the shares to the defendant would have been held fraudulent