Buhler v. Loftus

Citation53 Mont. 546
Decision Date26 May 1917
Docket NumberNo. 3770.,3770.
PartiesBUHLER ET AL. v. LOFTUS ET AL.
CourtUnited States State Supreme Court of Montana

53 Mont. 546

BUHLER ET AL.
v.
LOFTUS ET AL.

No. 3770.

Supreme Court of Montana.

May 26, 1917.


Appeal from District Court, Flathead County; T. A. Thompson, Judge.

Suit to cancel mortgage and notes by A. J. Buhler and another against W. J. Loftus and others. Decree for plaintiffs, and defendants Loftus appeal. Affirmed.


J. E. Erwin, of Dixon, Ill., and C. W. Pomeroy, of Kalispell, for appellants.

F. H. McDermont, of Davenport, Wash., and Brennen & Kendall, of Kalispell, for respondents.


BRANTLY, C. J.

The plaintiffs, A. J. and J. M. Buhler, are father and son. On October 14, 1913, the latter executed and delivered to the defendant W. J. Loftus, a resident of Chicago, Ill., his promissory note, negotiable in form, for the sum of $2,000, due and payable three years after date, with interest at 8 per cent per annum. To secure the payment of the note he executed and delivered to Loftus a mortgage upon certain lands owned by him and situate in Flathead county. The mortgage was duly recorded on October 23d. The $2,000 was the purchase price, agreed to be paid to Loftus by A. J. Buhler, of 100 shares of the capital stock of the American Mortgage Insurance Company, a corporation organized under the laws of the state of South Dakota and having its principal office at Chicago. The purpose of the organization of the corporation was to loan money upon the security of first mortgages on farm lands. It was authorized to do business throughout the United States. Hereafter it will be mentioned as the company. It was capitalized for $1,000,000, divided into shares of the par value of $10 each. Loftus was one of the agents of the company to sell shares of its stock and also to appoint local agents to negotiate loans for the company upon a commission. The plan pursued was that any one, desiring or agreeing to become a local agent, was required to purchase from the company 125 shares of its stock at $20 per share. He was then required to enter into a written contract to cover a term of 10 years, by the stipulations of which he was appointed the exclusive agent in certain designated territory, in consideration of his performing certain duties for, and assuming certain obligations to, the company. Loftus went to Polson, in Flathead county, the residence of the plaintiffs, to arrange for the appointment of one A. D. Maynard, also a resident of Polson, as local agent. Maynard being away from home, Loftus entered into negotiations with the Buhlers. The negotiations resulted in the purchase by A. J. Buhler of 100 shares from Loftus personally at $20 per share; the latter agreeing to accept the note and mortgage of J. M. Buhler in place of cash, and giving the assurance that A. J. Buhler would be appointed agent. The action of Loftus was ratified by the company, and the appointment was made on October 20th. It was understood at the time that the two Buhlers and F. H. McDermont, an attorney at law then residing at Polson, should each have a one–third interest in the business transacted under the appointment; A. J. Buhler alone being responsible to the company under his contract. The company was not then ready to begin negotiating loans, but was to begin within two months thereafter. It never did any business, however, for the reason that a sufficient number of shares of stock had not been and could not be sold to realize money enough to enable it to make loans. The note was made payable at the City National Bank at Dixon, Ill. On January 6, 1914, W. J. Loftus assigned the note and mortgage to defendant John H. Loftus, a brother residing at Dixon, as part payment of a debt due the latter. The assignment was recorded in Flathead county on May 16, 1914. On May 25, 1915, plaintiffs brought this action to obtain a decree directing a cancellation of the note and mortgage, on the ground of fraudulent representations by Loftus whereby plaintiff J. M. Buhler was induced to execute and deliver them. As ground for relief, the complaint alleges:

“(5) That it was represented to plaintiffs, at the time said plaintiff A. J. Buhler entered into said agency contract, by the defendant W. J. Loftus, and the president of the defendant the American Mortgage Insurance Company, H. A. Luther, that the said defendant company, although not fully organized, had not sold all of its capital stock, and was not quite ready to commence business, or to make and accept farm loans in the territory above described, but would be ready for business and accept loans in said territory within about two months from the date of making and entering into said contract, and that the said defendant loan company would allot to plaintiff A. J. Buhler, from month to month, that proportion of its available funds as the number of shares of its capital stock purchased by plaintiff A. J. Buhler bears to the total number of shares of its capital stock then sold for loaning purposes, which would amount to, as a loaning fund, at least $100,000 annually.”

It is then alleged in substance:

(6) That in order for plaintiff A. J. Buhler to secure the appointment as the sole and exclusive agent of the company, and to secure his approval of the contract, it was represented by Loftus that said Buhler was required to purchase at least 100 shares of the capital stock of the company at $20 per share, or a total of $2,000.

(7) That in consideration of A. J. Buhler securing the contract, and that he would be furnished with money for the making of loans in the said territory, Buhler purchased the 100 shares for the sum of $2,000, and gave in payment therefor his promissory note, payable to the order of Loftus, and that it was signed and indorsed by J. M. Buhler.

(8) That thereafter, and on the same day, the plaintiff J. M. Buhler, to secure the payment of the note, and for no other purpose, executed and delivered the mortgage.

(9) That thereafter, on or about November 3, 1913, the company issued and delivered to A. J. Buhler the shares of stock, having on October 20th approved the contract and delivered the same to him, thus constituting him its sole and exclusive agent in the said territory.

(10) That by reason of the statements and representations before mentioned A. J. Buhler was induced to purchase the shares, to enter into the contract, and to make the promissory note and mortgage and deliver the same to W. J. Loftus.

(11) That the representations were wholly false and untrue, that they were then known by the company and Loftus to be false and untrue, that they were made with the intent and purpose of inducing the plaintiff A. J. Buhler to purchase the stock, and to secure from him and J. M. Buhler the note and mortgage, that the company was at all times unable to sell a sufficient amount of stock or otherwise to raise money with which to begin business, or to carry out its contract and agreement with A. J. Buhler, that it has never at any time furnished said Buhler with any money to make farm loans, that the company was insolvent and without funds with which to carry on business, and unable to perform any of the terms of its agreement with A. J. Buhler, and that it was well known to both Loftus and the company, when the note and mortgage were delivered to Loftus, that the company must at an early date go out of business and be dissolved.

(12) That the mortgage was recorded in the office of the clerk of Flathead county on the _______ day of November, 1913.

(13) That by reason of the facts heretofore alleged the mortgage and note were given to W. J. Loftus without any consideration...

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