Campbell v. Park

• Decision Date: 17 December 1904
• Citation: 101 N.W. 861,128 Iowa 181
• Parties: CAMPBELL v. PARK ET AL.
• Court: Iowa Supreme Court

128 Iowa 181

101 N.W. 861

CAMPBELL

v.PARK ET AL.

Supreme Court of Iowa.

Dec. 17, 1904.

Appeal from District Court, Carroll County; S. M. Elwood, Judge.

Action on promissory notes signed by defendant D. H. Park, with E. C. Park as surety. The defendant pleaded that the notes were procured by fraud, and were without consideration and void; and the defendant D. H. Park, by way of counterclaim, asked judgment against plaintiff for damages on account of false and fraudulent representations made by plaintiff and relied on by defendant, whereby said Park was induced to pay $1,700 in cash, and execute the notes sued on, for the purchase from plaintiff of certain shares of stock in a corporation known as the Daniels Foot Cycle Company, which stock was without value and worthless. At the conclusion of defendant's testimony, plaintiff's motion for verdict in his favor on the notes, and against defendant D. H. Park upon his counterclaim, was sustained, and judgment rendered accordingly, from which judgment defendant appealed. As no separate issue was raised with reference to the liability of E. C. Park, D. H. Park will be referred to as sole defendant and appellant. Reversed.F. M. Powers and W. E. Saul, for appellant.

Salinger & Korte, for appellee.

McCLAIN, J.

The allegations of defendant's answer made by way of affirmative defense, and those made by way of counterclaim, are not in any way separated in the pleading; but, as plaintiff interposed no objections on this ground, and, by asking a directed verdict in his favor on the notes and against defendant on his counterclaim, he recognized the pleading as sufficient to interpose both an affirmative defense and a counterclaim, we shall consider the case as involving the two distinct issues of the right of plaintiff to recover on the notes as against the defense of fraud and want of consideration, and the right of defendant to recover damages for deceit. The evidence introduced was treated as applying indifferently to the defense and the counterclaim, and properly so, for the two issues involved, in common, the elements of fraud on the part of the plaintiff, and reliance thereon to his damage by defendant.

The evidence for defendant tended to show that he was induced by one Gallund to enter into negotiations with plaintiff for the purchase of 34 shares of stock in the Daniels Foot Cycle Company, of which company plaintiff was the president and Gallund was the vice president; that plaintiff referred defendant to Gallund as plaintiff's agent for the purpose of negotiating the sale of the stock, telling him that whatever arrangements he made with Gallund would be satisfactory to plaintiff; that thereupon Gallund made written representations to the defendant with reference to the value of the stock mentioned, which were that the capital stock of the company was $20,000, all paid up, and that it had assets of the value of about that amount, consisting of machinery, raw material, and manufactured product, and cash in treasury, and that its liabilities were about $1,000, a large portion of which was on long-time payments, and that it had on its books orders for its manufactured product--a so-called foot cycle, or kind of roller skate--several hundred pairs of which had been sold for spot cash on delivery; that, relying on these representations, defendant concluded with plaintiff the purchase of plaintiff's stock for $4,000, $2,000 of which was paid by the execution of the notes in suit, and $1,700 of the balance by cash advanced to the company for use in its business; that Gallund's written representations were shown to plaintiff at the time the sale of the stock was consummated and the notes executed, and that these representations were acquiesced in by plaintiff as true; that defendant relied on these representations, and had no other knowledge or means of knowledge as to the value of plaintiff's stock, and that the representations were substantially false in material respects, and the stock worthless; that, soon after the purchase of the stock, defendant became the general manager of the business of the corporation, and, as such manager, became aware of the falsity of the representations, especially the representation as to the indebtedness of the company, which greatly exceeded the sum of $1,000, and amounted in fact to about $9,000, and learned that the machinery, which constituted a large part of the assets of the company, did not belong to it, but was in fact held by lease or conditional sale, under which it was taken away by the owners or sellers thereof; that the foot cycle did not work, and could not be sold; and finally that Gallund, while acting as plaintiff's agent in effecting the sale of the stock to defendant, was aware of the substantial falsity of these representations.

Counsel for appellee raises some question as to the sufficiency of the affirmative defense of falsity and want of consideration, on the ground that no offer was made by defendant to surrender the stock to plaintiff; but it appears by the allegations of plaintiff's petition, as well as by the evidence, that the certificates of stock remained in the possession of plaintiff as security for the notes, and it was therefore wholly unnecessary, and, indeed, impossible, for defendant to return or surrender the certificates. So far as the counterclaim for...