Bankers Trust Co. v. Rood
| Decision Date | 09 December 1930 |
| Docket Number | 40294 |
| Parties | BANKERS TRUST COMPANY, Appellee, v. W. B. ROOD et al., Appellees; THE MONARCH COMPANY, Appellant |
| Court | Iowa Supreme Court |
Appeal from Polk District Court.--F. S. SHANKLAND, Judge.
This was an action by the plaintiff to foreclose a certain security agreement given to it by the defendants-appellees W B. Rood, Mary F. Rood, L. C. Rood, and Maud Amy Rood, to protect their note for $ 36,000. The relief was granted, and the defendant Monarch Company appeals.
Affirmed.
Henry & Henry, for The Monarch Company, appellant.
Burnstedt & Hemingway, for appellant and Therm-A-Jug Company, appellee.
Howard L. Bump, for plaintiff, appellee.
Wilson & Shaw, for W. B. Rood, Mary F. Rood, L. C. Rood, and Maud Amy Rood, appellees.
The defendant-appellant, The Monarch Company, is an Iowa corporation organized for the purpose of manufacturing equipment to be used in the care of hogs. Such equipment includes "watering and feeding troughs, oilers, houses and other articles of a similar character." This corporation has been in existence for many years, and, on March 21, 1921, E. S. Johnson was president, while the appellee E. J. Rood filled the position of secretary. On July 1, 1919, appellee W. B. Rood was a stockholder and director of The Monarch Company. Up to that time, the stock issued by the corporation was small, and consequently the government taxes were exceedingly high. In order, therefore, that there might be some reduction of these taxes, it was agreed, July 1, 1919, by those interested in the corporation, that additional stock should be issued. For some of this stock the purchasers thereof paid cash. Others, however, gave their notes. Among those who procured the stock without cash was the appellee W. B. Rood. His portion of stock thus obtained was 188 shares, represented by Certificate No. 125. The par value of each share was $ 100.
A dispute arises at this juncture concerning the rights acquired by Rood through this transaction. It is claimed by appellant that the stock certificate was merely signed by the corporation with the proper subject-matter filled in in the blanks, and then retained by that institution, together with Rood's note, to be thus held until the purchase price represented by the note was fully paid. Contrary to that contention, it is said by appellees that the stock was duly issued to appellee W. B. Rood in consideration for his said promissory note of $ 18,800. That disagreement will receive further attention in another part of this opinion
After the stock manipulation aforesaid, the appellee W. B. Rood, on March 21, 1921, deposited the aforesaid 188 shares of The Monarch Company stock, together with other securities, with the appellee Bankers Trust Company, at Des Moines, for the purpose of securing a loan of $ 45,000. Following that transaction, payments were made to the Bankers Trust Company by the appellee W. B. Rood on the money thus borrowed, until the indebtedness was reduced from $ 45,000 to $ 36,000. So, finally, on October 4, 1923, the appellees W. B. Rood, Mary F. Rood, L. C. Rood, and Maud Amy Rood, as before said, executed the note in suit for $ 36,000, payable to the Bankers Trust Company, being the balance due that institution, as before explained. Said note was never paid, and the Roods became insolvent. Consequently, the present action was brought by the Bankers Trust Company, to obtain judgment for the amount due on the note and foreclose on the securities above named, including the 188 shares of The Monarch Company's stock belonging to W. B. Rood. Accordingly, judgment and decree was entered by the district court in favor of the Bankers Trust Company. Judgment was duly entered against the Roods, and the collateral security, including said 188 shares of The Monarch Company stock, was ordered sold under foreclosure.
No controversy arises about any part of such judgment and decree except the portion thereof which recognizes the validity of the Bankers Trust Company's lien on the 188 shares of W. B. Rood's stock in The Monarch Company.
Complaint is made by the appellant, The Monarch Company, because the district court did not hold that W. B. Rood received no interest in and to said stock, and consequently that the appellee Bankers Trust Company obtained nothing through the action of W. B. Rood in attempting to pledge such stock. Briefly, that is the storm center of the present controversy. Each argument advanced by appellant will now be considered.
I. At the outset, it is insisted by appellant that the 188 shares of stock before mentioned were never delivered to W. B. Rood, and therefore could not be used by him for the purposes of collateral security. Possession of the stock was obtained by W. B. Rood, appellant insists, through theft or other misconduct. Appellees, on the other hand, maintain that the stock was in fact delivered by the corporation to W. B. Rood, as purchaser thereof. This dispute involves the facts. Hence, reference to them is now essential.
Appellant's witnesses testified that the stock involved was to be paid for from future dividends contemplated. Those witnesses also declared that there was a resolution of the corporation's board of directors covering the proposition, but that the same was not made of record. Apparently the directors agreed among themselves that title should not pass. J. E. Boeye, Earl Mason, and E. S. Johnson so testified. According to those witnesses, W. B. Rood's stock and the note given therefor were to be deposited in the company's safe and there held until the note was paid, in which event the stock would become the property of Rood. Mingle and Mason, witnesses above named, apparently were not present at said meeting. Also, there is much indefiniteness and uncertainty about the alleged conditions under which appellant says the stock was to be delivered.
Continuing its claim, appellant suggests that the stock issued to stockholders other than W. B. Rood was at all times retained by the company, and never, in fact, delivered, because the payments were not made. An inference is drawn from that fact by appellant to the effect that W. B. Rood's stock was handled in a like manner, and never was delivered because he did not pay the note. As a matter of fact, W. B. Rood did not pay the $ 18,800 note given for the stock. Such, in a general way, are the facts and circumstances on which appellant bases its argument that title to the stock never passed from the corporation to W. B. Rood. On the contrary, there are controlling circumstances which indicate that the stock in fact was delivered to W. B. Rood by the corporation. Provision for the issuance of the stock in controversy was made by the stockholders. Under the articles of incorporation set forth in the abstract, it appears that the directors did not have such power. Whether in other parts of the articles of incorporation not shown in the abstract the directors were given the right to place conditions upon the issuance, of course, we do not know. In any event, as before indicated, the directors passed no recorded resolution providing that the stock should remain with the company until the consideration therefor was fully paid. Furthermore, in making its reports to the United States government for revenue purposes, the corporation stated that the 188 shares of stock in question were issued to W. B. Rood. Again, the corporation carried the $ 18,800 note delivered to it by Rood as an asset. W. B. Rood did not testify for either party.
By way of answer, however, he asserted his ownership of the stock, and declared that he had a right to pledge the same with the appellee Bankers Trust Company, to secure money borrowed therefrom. Another important fact is that, on March 15, 1922, The Monarch Company, the corporation in question, received from W. B. Rood, as security for the $ 18,800 stock note and other notes and obligations, certain patents. Moreover, E. J. Rood testified:
Because of the foregoing facts and circumstances, it is quite evident that the company intended to issue the stock in question to W. B. Rood. It is quite unlikely that officers of the institution would make solemn reports to the United States government, indicating the issuance of stock for the purposes of reducing the income tax, if in fact none had been issued. During all the times after the issue, the $ 18,800 note of W. B. Rood was carried as an asset of the institution.
Furthermore, it is most significant that, after the stock was issued to W. B. Rood, he, on different occasions, voted the same at the company's stockholders' meeting. Not only, then, did the corporation recognize the stock as issued in its reports to the United States government, and in the listing of the note therefor as an asset of the institution, but also, it permitted the alleged stockholder to vote at corporate meetings. Manifestly, therefore, W. B. Rood owned the stock in question, so far as the corporation itself is concerned.
II. But it is said by appellant that, the original consideration not having been paid, the corporation, under the statute, had no right to issue the stock to W. B. Rood. Sections of the 1913 Supplement to the Code, under which this stock was issued, provide:
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