The cause should be affirmed. Per Curiam: Rehearing denied March 10, 1914. WEST VIRGINIA SUPREME COURT A. MORRISEY et al., Appts., V. C. L. WILLIAMS, Receiver. C. L. WILLIAMS, Receiver, V. BANKING & TRUST COM- erally established. It has been seriously | demurrer to such petition was properly susquestioned whether this right to quit one's tained. employment equally exists in a case of a combination to so quit employment or discontinue working. In other words, the question is whether strikes are legal, for we define a strike as a simultaneous quitting of employment by a number of employees in pursuance of agreement. Apart from the lurking idea, already considered, that an act entirely lawful if done by a single individual may be unlawful by reason of being done in pursuance of a combination of individuals to do the same act, it is difficult, on principle, to discover any illegality in a strike, as we have just defined it, and this is the view that has been generally adopted in this country." And the author, after discussing the doctrine of the English courts relative to combinations among workmen, and after eliminating the ques- FIDELITY tion of physical violence and unlawful methods which sometimes accompany strikes, sums up by saying on page 36: "Applying, however, what has already been said, we say here that (apart from the existence of contractual liability) the existence of the relation of employee justifies, as a natural incident or outgrowth of such relation, the quitting of employment, whether singly or in a combination, and whether or not with the intent to injure the employer (or any other person)." J. F. Parkinson Co. v. Building Trade Council, 154 Cal. 581, 21 L.R.A.(N.S.) 550, 98 Pac. 1027, 16 Ann. Cas. 1165; Lindsay & Co. v. Montana Federaton of Labor, 37 Mont. 264, 18 L.R.A.(N.S.) 707, 127 Am. St. Rep. 722, 96 Pac. 127; 24 Cyc. 821, and note 41 of authorities; Meier v. Speer, 96 Ark. 618, 32 L.R.A. (N.S.) 792, 132 S. W. 988; Pierce v. Stablemen's Union Local No. 8,760, 156 Cal. 70, 103 Pac. 324. The case of Pickett v. Walsh, 192 Mass. 572, 6 L.R.A. (N.S.) 1067, 116 Am. St. Rep. 272, 78 N. E. 753, 7 Ann. Cas. 638, considers when a strike will be illegal, and an extended discussion of the question will be found both in the opinion and in the note collecting the authorities. A petition based on the charge that the plaintiff, a nonmember of a labor union, was discharged from his employment because of the demands therefor made by the authorized agents and committees of a labor organization, who informed the common employer that if such nonunion man was not discharged, the union men would strike, does not state a cause of action for dam (W. Va., 82 S. E. 509.) Corporation scription. rescission of stock sub 1. The general rule that a subscription will not be rescinded even for fraud, when or purchase of the stock of a corporation no action to that end is taken until after the declared insolvency of the corporation by a receivership, is not without qualificanot be affected, the rule should not apply. tion. If proper equities of creditors will And particularly where no debts of the corporation have accrued subsequent to the subscription or purchase, rescission may be had. Same laches. bank insolvency of shares of its capital stock may be re2. A fraudulent sale by an insolvent bank scinded by the purchaser, though action in that behalf is not taken until after a receiver for the bank has been appointed, where no great length of time elapsed between the sale and the receivership, the purchaser did not actively participate in the management of the bank, no want of diligence on the part of the purchaser in discovering the fraud or in taking steps to rescind appears, and no considerable amount against the bank subsequent to the sale. of indebtedness, remaining unpaid, accrued (June 30, 1914.) Headnotes by ROBINSON, J. Note. - Fraud as a ground of release from subscription to stock after insolvency of corporation. The earlier cases on this question are discussed in the note to Gress v. Knight, 31 L.R.A. (N.S.) 900. As pointed out in the earlier note the American doctrine is that the mere inages against either the labor organization | solvency of a corporation does not bar the or the individual members thereof, and a right of rescission for fraud, but in order A contract induced by a party making a false statement under circumstances that the duty of knowing the truth rested upon him, although made in good faith, is sufficient for rescission. Grim v. Byrd, 32 Gratt. 293; Schuttler v. Brandfass, 41 W. Va. 201, 23 S. E. 808. A subscriber to stock may rely on printed statements of the company given him as an inducement to subscribe. The facts are stated in the opinion. Messrs. Ross & Kahle, for appellants: A contract may be rescinded if the misrepresentations were relied upon by the 1 Cook, Corp. 6th ed. §§ 144, 352; Newparty deceived, though the means of obtain-ton Nat. Bank v. Newbegin, 33 L.R.A. 727, ing information are fully open to both parties. Cleavenger v. Sturm, 59 W. Va. 658, 53 S. E. 593; Engeman v. Taylor, 46 W. Va. 669, 33 S. E. 922; Rorer Iron Co. v. Trout, 83 Va. 397, 5 Am. St. Rep. 285, 2 S. E. 713. A contract induced by a false statement made in good faith may be rescinded by the party deceived. Schwarzbach Tolley v. Poteet, 62 W. Va. 231, 57 S. E. 811; Fitzgerald v. Frankel, 109 Va. 603, 64 S. E. 941; Virginia Land Co. v. Haupt, 90 Va. 533, 44 Am. St. Rep. 939, 19 S. E. 168; V. Ohio Valley Protective Union, 25 W. Va. 622, 52 Am. Rep. 227; Crislip v. Cain, 19 W. Va. 438; Engeman v. Taylor, 46 W. Va. 669, 33 S. E. 922; Lowe v. Trundle, 78 Va. 65; Grim v. Byrd, 32 Gratt. 293; Solomon v. Bates, 118 N. C. 311, 54 Am. St. Rep. 725, 24 S. E. 478; 1 Cook, Corp. 6th ed. § 149; Wren v. Moncure, 95 Va. 369, 28 S. E. 588. to entitle the subscriber to such rescission he must act promptly. The rule is stated in People v. Califor nia Safe Deposit & T. Co. 19 Cal. App. 414, 126 Pac. 516, 520, to be that the mere insolvency of the corporation and the appointment of a receiver do not in themselves bar the stockholder's right to a rescission of his contract, considering the corporation was the real owner and vender of the stock, and that the stockholder was defrauded (which in this case the complaint charged and the demurrer admitted), and, this being so, the stockholder is entitled to have a complete rescission of the fraudulent action complained of, provided he has not been guilty of laches. The right of subscribers to rescind their subscriptions for fraud, and, upon the rescission, to have notes given in payment of a part of the subscription price canceled, was sustained in Joyce v. Eiffert, Ind. App., 105 N. E. 59, but there is no discussion of the effect of insolvency; in fact, the rescission was made before the corporation was completed or any business for which it had been formed was transacted. As to cash payments made by these subscribers, they were held entitled to share with other subscribers who subsequently, upon discovering the fraud, had a receiver appointed, in the proportion that the cash note; Solomon v. Bates, 118 N. C. 311, 54 Am. St. Rep. 725, 24 S. E. 478; Huntington v. Attrill, 118 N. Y. 365, 23 N. E. 544; 3 Thomp. Corp. § 4244. The fact that the bank is insolvent and a receiver appointed to take charge of its assets is not a bar to rescission. Stufflebeam v. De Lashmutt, 83 Fed. 449; Winters v. Armstrong, 37 Fed. 508; Florida Land & Improv. Co. v. Merrill, 2 C. C. A. 629, 2 U. S. App. 434, 52 Fed. 77; Newton Nat. Bank v. Newbegin, 33 L.R.A. 727, 20 C. C. A. 339, 40 U. S. App. 1, 74 Fed. 135; High, Receivers, 4th ed. § 205; Bolles, Bkg. 1907, 763; 2 Clark & M. Priv. Corp. § 473. To constitute a waiver of right to rescind a contract induced by fraud, defrauded party must, first, have full knowledge of all material circumstances; and, second, with this knowledge in mind, have done some deliberate act with the intent to waive his rights. 20 Cyc. 23; Clark & M. Priv. Corp. § 473; paid in them bore to the total amount of cash paid in by all the subscribers. A rescission was allowed in case of an insolvent corporation in which no rights of innocent purchasers or creditors were affected in Farnsworth v. Muscatine Produce & Pure Ice Co. 161 Iowa, 170, 141 N. W. 940, but there is no discussion of the effect of insolvency. But creditors whose rights have intervened have rights superior to the right of the stockholders to rescind, and as against them rescission will not be allowed. Burleson v. Davis, Tex. Civ. App. —, 141 S. W. 559. Thus, where the corporation incurs debts after the subscription to the capital stock has been made, and the fact of insolvency by reason of these debts exists, it has been held that there can be no rescission for fraud as to creditors whose claims arose after the stockholder became such, although the corporation is still a going concern and is itself bringing an action on the note given for the subscription. Southern Tobacco Co. v. Armstrong, 11 Ga. App. 501, 75 S. E. 828. In Southern Tobacco Co. v. Armstrong, supra, the president of the corporation who had induced the subscription by false representations of the company's solvency was one of its chief creditors. It is stated by 1 Cook, Corp. 6th ed. § 162; Virginia Land | bank to recover an assessment upon such Co. v. Haupt, 90 Va. 533, 44 Am. St. Rep. stock. 939, 19 S. E. 168; Cottrill v. Krum, 100 Mo. 397, 18 Am. St. Rep. 563, 13 S. W. 753; Wilson v. Carpenter, 91 Va. 183, 50 Am. St. Rep. 824, 21 S. E. 243; Fitzgerald v. Frankel, 109 Va. 603, 64 S. E. 941. Article 11, § 6, of the Constitution of West Virginia, and § 2394 of the Code of West Virginia (1906), only provide for the recovery of the double stockholders' liability for "all liabilities accruing while they are such stockholders;" and the double liability, being in derogation of the common law, this provision must be strictly con strued. 36 Cyc. 1178, 1180; Nimick v. Mingo Iron Works Co. 25 W. Va. 199. One who has been induced to purchase the shares of a national bank by false representations, who rescinds the contract, and tenders back the shares, duly assigned, to the president of the bank, and calls upon him to return the consideration, and brings a suit for rescission of the contract, cannot be held liable in a suit by a receiver of the the court that if the detbs were limited to this, the court would be inclined to allow the subscriber to rescind his subscription; other debts, however, had been contracted after the subscription had been made, and it is stated that if the company was insolvent by reason of the other debts, the rule would apply, and there could be no rescission. If the subscriber has been guilty of laches, he cannot rescind after insolvency of the corporation or the commencement of proceedings to liquidate its affairs on the ground of insolvency, where to grant the relief would prejudice the rights of creditors. Thus, a stockholder in a bank who had purchased a part of his stock more than two years before the bank went into liquidation, and a part of it more than one year before it was insolvent, during which time he not only had the right, but had ample opportunity, to investigate and ascertain the condition of the bank, and take such proceedings as appeared to him necessary to protect his interests, but did not do so, but accepted as true the representations as to the condition of the bank made by its officers, and received regularly large dividends on his stock, was held guilty of laches in Reid v. Owensboro Sav. Bank & T. Co. 141 Ky. 444, 132 S. W. 1026, and not entitled to rescind. This case was approved in Little v. Owensboro Sav. Bank & T. Co. 150 Ky. 331, 150 S. W. 334, in case of a subscriber who lived in London, the court treating that fact as unimportant. One induced by fraud to subscribe to the stock of a corporation, who neglects for an unreasonable time after he has discovered the fraud, or is chargeable with notice 10 Cyc. 443; Stufflebeam v. De Lashmutt, 83 Fed. 449; People v. California Safe Deposit & T. Co. 19 Cal. App. 414, 126 Pac. 516, 520. Messrs. Sanders & Crockett, for appellees: Even if the plaintiffs had shown fraud on the part of the officers of the bank in inducing them to purchase the stock, they are precluded from rescinding the contract of purchase, and are estopped to deny that they are stockholders, for the reason that, after they purchased the stock, and before they took any action to rescind, the bank became insolvent, and went into the hands of a receiver, and the rights of creditors intervened, and their rights are superior to any rights of the plaintiffs. Cook, Corp. 5th ed. §§ 163, 164; Scott v. Deweese, 181 U. S. 202, 45 L. ed. 822, 21 Sup. Ct. Rep. 585; Chubb v. Upton, 95 U. S. 665, 24 L. ed. 523; Upton v. Tribilcock, 91 U. S. 45, 23 L. ed. 203; Ogilvie v. Knox Ins. Co. 22 How. 380, 16 L. ed. 349; Howard v. Turner, 155 Pa. 349, 34 thereof, to have his subscription canceled, is not entitled to have such relief, where the interests of third persons have in the meantime become involved and such persons would suffer injury by reason of the cancelation. People v. California Safe Deposit & T. Co. supra. Whether a subscriber has lost his right to rescind by laches or by participation in the affairs of the corporation as a stockholder after discovery of the fraud is a question for the jury. Southern Tobacco Co. v. Armstrong, supra. One induced to subscribe to the stock of bank through the fraudulent statements and representations of the officers and agents of such bank at a time when the bank was in fact insolvent, and who does not discover the insolvency for about seventeen months thereafter, when insolvency proceedings were begun against the bank, is not guilty of such laches as bars his right to a rescission. People v. California Safe Deposit & T. Co. supra. It is stated in Reid v. Owensboro Sav. Bank & T. Co. supra, that if the corporation is insolvent when the action for rescission or other relief is brought, and the rights of creditors will be affected, the shareholder who has been induced by fraud or misrepresentations to purchase stock cannot obtain relief from his contract unless he became a stockholder so shortly before the insolvency as not to have had reasonable time or opportunity to investigate its affairs and discover the fraud, nor unless upon the discovery he, without delay, asserts his right to appropriate relief. See supra for further discussion of this case, and see, also, Little v. Owensboro Sav. Bank & T. Co. supra. W. A. E. tical distinction can be made between them. Yet in the Scott Case, decided some months later than the other, the chancellor decreed a rescission. It therefore appears that upon maturer consideration the chancellor most commendably confessed his error in the former decree in the Morrisey Case. One of the noblest traits of a judge is willingness to change his views when convinced that they are wrong. Am. St. Rep. 883, 26 Atl. 753. Thompson identical with the other so that no pracv. Reno Sav. Bank, 19 Nev. 103, 3 Am. St. Rep. 797, 7 Pac. 68, see note to 3 Am. St. Rep. 824, 825; Germantown Pass. R. Co. v. Fitler, 60 Pa. 124, 100 Am. Dec. 546, see note to 100 Am. Dec. 556; Turner v. Grangers' Life & Health Ins. Co. 65 Ga. 649, 38 Am. Rep. 801; 2 Thomp. Corp. §§ 1450, 1451; West End Real Estate Co. v. Claiborne, 97 Va. 734, 34 S. E. 900; Martin v. South Salem Land Co. 94 Va. 28, 26 S. E. 591; 10 Cyc. 441; Howard v. Glenn, 85 Ga. 238, 21 Am. St. Rep. 156, 11 S. E. 610; Lantry v. Wallace, 182 U. S. 536, 45 L. ed. 1218, 21 Sup. Ct. Rep. 878; Rehbein v. Rahr, 109 Wis. 136, 85 N. W. 315; Wallace v. Hood, 89 Fed. 11. It will serve no practical purpose to narrate the evidence in relation to the sale of the stock to Morrisey. It suffices to say that the facts and circumstances point clearly to the conclusion that the bank officer, by representations which he knew or at least was chargeable with knowing were Robinson, J., delivered the opinion of false, palmed off on Morrisey stock in the the court: The appeal brings up for review decrees in consolidated causes, styled as Morrisey v. Williams, Receiver, and Williams, Receiver, v. Fidelity Banking & Trust Co. In the first-named cause Morrisey sought, on the ground of fraud, a rescission of a sale of bank stock, which sale was made to him by an officer of the bank on its behalf only a short time before the bank as insolvent went into the hands of a receiver. The decree therein denies him relief. The object of the other cause was to enforce for the benefit of the creditors of the bank the socalled double liability of the stockholders. In it the receiver has decreed against Morrisey for an amount equal to that of the shares of stock held by him under the sale that he sought to have rescinded in the first-named suit. Morrisey complains of the decrees against him. If the decree in the first-named cause must be reversed, the decree in the other cause necessarily falls. Clearly if the sale of the stock is rescinded, liability as a holder of the stock cannot be enforced against Morrisey. insolvent bank, held by it as collateral to a past-due note, through leading him to believe it was new stock, and took in lieu of the same from Morrisey a good and valuable certificate of deposit in a foreign bank. In less than a month thereafter the bank was forced to close its doors. The certificate of deposit is still in the hands of the receiver. In equity and good conscience it must be returned to Morrisey. It is submitted for the receiver that a subscription or purchase of stock in a corporation cannot be rescinded even for fraud when no action in that behalf is taken until after a declared insolvency of the corporation by a receivership, the rights of creditors then having stepped in as entitled to superior consideration. In many cases this is 'rue. It is not true in this case. The rule rests on the rights of creditors. When the reason for the rule does not arise, the rule is of course not applicable. From the record it does not appear that the rights of creditors intervened between the time Morrisey took over the stock and While we have great respect for the judg- the time the receiver took charge, a period, ment of the learned chancellor who decided as we have said, of less than a month. It the causes, we are of opinion that the sale does not appear that liabilities of the bank of the stock to Morrisey was fraudulent in accrued within this period for which the equity, and that under the facts and cir- stockholders would be liable. We cannot cumstances appearing he may have the same see that the liabilities increased 1 cent, or rescinded. We are confirmed in this view that a single new creditor came in, while by the same chancellor's finding and de- the stock was in Morrisey's hands under cree in a cause presenting the same issues the fraudulent sale. Liabilities of the bank upon virtually the same facts and calling accruing prior to the purchase by Morrisey for the application of the same law as in of the stock did not attach against him as the Morrisey Case. That cause is Scott v. a stockholder. Our law plainly says that Williams, W. Va. 82 S. E. 511, also the stockholders are only liable for the liahere on appeal, and to be decided herewith bilities of the bank "accruing while they by separate memorandum. Scott's Case, de- are such stockholders." Const. art. 11, § mnding on the ground of fraud a rescis- 6 (Code 1913, p. cxxi), Code 1913, chap. sion of a sale to him of stock in the insol- 47, § 78aIII (§ 3034); Dunn v. Bank of vent bank, is the same as Morrisey's. It Union, W. Va. L.R.A. 1915B, 168, 82 is no stronger. Indeed the one is nearly S. E. 758, decided at this term. Stockhold the benefit of its creditors. The view that he has such right is supported by well-considered cases, both in England and in this country. This rule should undoubtedly be applied where no debts have been contracted by the corporation since the date of the subscription." 2 Clark & M. Priv. Corp. § 473g. ers in banks by the issuance of new stock to them, or by the transfer of the stock of others to them, do not assume the socalled double liability as to debts of the bank existing prior to the issuance or transfer of the stock. They are liable only for debts accruing subsequent to their acquirement of the stock. A transferrer of bank stock remains liable for debts of the A complete examination of the authoribank that accrued while he held the stock. ties leads us to believe that the United This is the plain import of our law. Sim- States circuit court of appeals of the eighth ilar provisions in other states are so un- circuit, in Newton Nat. Bank v. Newbegin, derstood. Laws of Illinois, 1889, page 59; 33 L.R.A. 727, 20 C. C. A. 339, 40 U. S. Shuey v. Holmes, 21 Wash. 223, 57 Pac. App. 1, 74 Fed. 135, fairly states the law, 818. Surely it would not be equity to wherein it is said: "If a considerable allow the receiver to apply Morrisey's period of time has elapsed since the submoney to the payment of creditors of the scription was made; if the subscriber has bank to whom the law does not bind him. actively participated in the management of Plainly Morrisey's right to a rescission is the affairs of the corporation; if there has superior to the rights of creditors to whom been any want of diligence on the part of debts were due from the bank before he the stockholder, either in discovering the became a stockholder. They lent no credit alleged fraud, or in taking steps to rescind on the strength of his having stock, either when the fraud was discovered; and, above theoretically or actually. They are in no all, if any considerable amount of corporate worse position than if he had never pur-indebtedness has been created since the chased the stock. A rescission can do them no harm. While the general principle relied on by the receiver is usually applicable when a considerable length of time elapsed between the purchase of the stock and the demand for rescission, yet sound authorities refuse to apply it under such circumstances as are disclosed in Morrisey's Case. We shall not cite the cases. The books readily disclose them. From a leading text the following is pertinent: "In England, and in some of the states in this country, it has been held that a subscription cannot be repudiated on the ground of fraud, for the first time, after the corporation has become insolvent, and has made an assignment or gone into the hands of a receiver or an assignee in bankruptcy, even though the fraud may not have been discovered before insolvency, and though there may have been no laches in discovering it. According to the better opinion, however, this doctrine cannot be sustained without qualification. Surely, the equity of a person who has been induced to subscribe for stock in a corporation, without negligence on his part, by the deceit of its officers or agents, and who has not been guilty of negligence, either in failing to discover the fraud, or in repudiating his subscription after its discovery, cannot be said to be inferior to the equity of persons dealing with the corporation and becoming its creditors, and he should not be denied the right to set up the fraud as a defense in an action or other proceeding to enforce his subscription, merely because the corporation has become insolvent, and it is sought to enforce the subscription for subscription was made, which is outstanding and unpaid,-in all of these cases the right to rescind should be denied, where the attempt is not made until the corporation becomes insolvent. But if none of these conditions exist, and the proof of the alleged fraud is clear, we think that a stockholder should be permitted to rescind his subscription as well after as before the company ceases to be a going concern." Now, without entering into details, we may say that none of the conditions mentioned above as warranting a denial of rescission appear in Morrisey's Case. No considerable period of time elapsed. Morrisey did not actively participate in the management of the affairs of the bank; there was no want of diligence on his part in discovering the fraud or in taking steps to rescind; and no considerable amount of the bank's indebtedness accrued while he held the stock. The mere presence of Morrisey at a meeting in response to a hurried call of the stockholders when the bank's failing condition first became generally known cannot bind him as participating in the management of the affairs of the bank. He would naturally go there to see how things stood. While there he in no way committed himself to keep the stock-in no way did that which would condone the fraud practised on him. Indeed, it is a reasonable inference that, by the report of the president made at this meeting, Morrisey first realized that he had been deceived by the sale of the stock to him. Only a short time before that in the negotiation of the sale he had been assured by officers of the bank that its condition was flourish |