Dowdle v. Central Brick Co.
| Decision Date | 06 March 1934 |
| Docket Number | 25,976 |
| Citation | 189 N.E. 145,206 Ind. 242 |
| Parties | Dowdle v. Central Brick Company et al |
| Court | Indiana Supreme Court |
From Dubois Circuit Court; R. E. Roberts, Special Judge.
Consolidation of several causes against the Central Brick Company, wherein a receiver was appointed, from a judgment declaring null and void a certain trust deed and the bonds secured thereby, John J. Dowdle, owner thereof, appealed.
Reversed.
Daniel H. Ortmener, W. D. Curel, and Fisher Buden, Bell, Boyd & Marshall, for appellant.
Chase Harding and Leo H. Fisher, for appellees.
This is an appeal by the appellant John J. Dowdle from a judgment of the Dubois Circuit Court in consolidated cause No. 7752 wherein, among other things, it was adjudged that the bonds owned by appellant were void and the trust deed given to secure the same did not constitute a lien upon the real estate therein described and ordered appellant to deliver the bonds to the receiver for cancellation and ordered the mortgage released.
The parties involved in the consolidated cause are numerous being mechanic's lienholders, creditors, and stockholders of the various underlying companies, and the pleadings are numerous and lengthy to the extent that it would be impractical to but make a brief reference in this opinion to them. The parties involved in this action are LaMonte Cowles and Joseph L. Buckley (organizers and promoters of what is known as the Central Brick Company), the Central Brick Company, the Southern Indiana Clay Products Company, the officers and stockholders of said company, the Huntingburg Dry Press Brick Company, the officers and stockholders thereof, the Coshocton Brick Company, of Coshocton, Ohio, the officers and stockholders in said company, the Central Trust Company of Illinois, the Central Trust Company of Illinois as trustee under the trust deed hereinafter mentioned, Aksel K. Bodholdt, co-trustee with the Central Trust Company of Illinois, Eldo W. Wood, trustee, successor of Aksel K. Bodholdt, trustee, the Citizens Trust Company of Huntingburg, Indiana, receiver for the Central Brick Company, William E. Menke, creditor and stockholder of the Huntingburg Dry Press Brick Company and of the Central Brick Company, and as plaintiff in cause No. 7663, Ray P. Olinger, plaintiff in cause No. 7750 and John J. Dowdle, appellant herein, and various other creditors and lienholders.
A brief statement of the facts will afford a clearer understanding of the pleadings and issues here involved and which may be stated thus: That prior to January 1, 1928, LaMonte Cowles, an attorney of Burlington, Iowa, and Joseph L. Buckley of Chicago, conceived the idea of perfecting a merger of several brick plants into one large corporation. Buckley, being more or less familiar with the brick business and connected with a certain brick company located inChicago, was the moving party in perfecting this new corporation. He went to Huntingburg, Indiana, and secured an option to purchase fifty-one per cent of the common stock of the Southern Indiana Clay Products Company for the cash price of $ 30,000.00. He also secured an option to purchase the entire capital stock of the Huntingburg Dry Press Brick Company located at Huntingburg, Indiana, for the cash price of $ 130,000.00. He secured an option to purchase the physical property and the going business of the Coshocton Brick Company located at Coshocton, Ohio, for the cash price of $ 100,000.00, for the plant and business, plus cost price of the inventories and manufactured stock on hands and in process of manufacture. He also secured an option to purchase the property of a brick company located at Veedersburg, Indiana, for the cash price of $ 200,000.00. All of these options were authorized by the proper board of directors and officers of the several companies and the stockholders thereof. These options, under a provision contained therein, were renewed from time to time until finally exercised, the exact number of times is not clearly shown. Neither Mr. Cowles nor Mr. Buckley were financially able to finance this proposed company and after having secured the various options, presented the proposition to the Central Trust Company of Illinois for the purpose of securing financial aid in perfecting the new company. The negotiations, hereinafter recited, were conducted with one Joseph E. Lindquist, vice-president of said bank. It was explained to Mr. Lindquist that the purpose of Mr. Cowles and Mr. Buckley was to consolidate and merge the several individual brick companies above mentioned into one large company which they had organized and known as the Central Brick Company of Indiana. That the Central Brick Company desired to borrow $ 150,000.00 of the bank, the same to be used to purchase said property and that said company proposed to secure the bank by issuing bonds secured by a trust deed upon all of the property purchased and to pledge the bonds thus issued as collateral security for said loan; and as a result of the several conferences between Buckley and Cowles and the officers of the bank, the bank agreed to and did place to the credit of the Central Brick Company of Indiana, the sum of $ 150,000.00, the same to be secured by $ 250,000.00 of the bonds of said company, said bonds to be secured by a trust deed on the properties taken over.
This transaction took place on or about the sixth day of February, 1928. Prior to that date, to wit, on January 10, 1928, Cowles and Buckley had caused the certificate of incorporation of the Central Brick Company of Indiana to be issued by the Secretary of State of Indiana. The articles of incorporation of said company provided that the common stock should consist of 50,000 shares of no par value to be sold at $ 10.00 per share, and $ 500,000.00 of preferred stock to consist of 5,000 shares of $ 100.00 each.
The $ 150,000.00 placed to the credit of the Central Brick Company as above set forth, was in fact used to purchase the property taken over by the Central Brick Company. Mr. Buckley did not exercise the options as originally written but secured a modification as follows:
In the case of the Southern Indiana Clay Products Company, the negotiations were carried on with four stockholders of said company, who owned fifty-one per cent, or 347 shares, of the common stock of that company. Instead of paying $ 30,000.00 cash, it was agreed that for the 347 shares of the common stock, William E. Menke and Charles Moenkhaus were to receive $ 10,000.00.par value of the first mortgage bonds of the Central Brick Company and $ 6,000.00 preferred stock of said company. Daniel Reutepohler and Russell R. Reutepohler were to receive $ 10,000.00 of first mortgage bonds of the Central Brick Company and $ 4,000.00 of the preferred stock of said company and for 100 shares of preferred stock of the Southern Indiana Clay Products Company held by William E. Menke, said Menke was to receive in exchange therefor $ 10,000.00 of first mortgage bonds of the Central Brick Company. Said four stockholders of the Southern Indiana Clay Products Company transferred their shares to the Huntingburg Bank, as trustee, to hold the same until the stocks and bonds were delivered to the bank for said stock. It seems, however, that the bank transferred the common and preferred stock to Mr. Buckley upon receiving the preferred stock from the Central Brick Company and before receiving the bonds mentioned in the agreement, and through this arrangement, Mr. Buckley obtained the controlling interest in the Southern Indiana Clay Products Company without delivering the bonds as agreed.
As to the Huntingburg Dry Press Brick Company, this option was modified to the effect that they would accept $ 100,000.00 cash, $ 6,000.00 of first mortgage bonds, $ 24,000.00 par value preferred stock and 240 shares of the common stock of the Central Brick Company.
The Coshocton option was modified to the effect that they would accept $ 32,600.00 cash, $ 30,000.00 of first mortgage bonds, $ 37,000.00 preferred stock and 340 shares of the common stock as payment for the plant and property, other than the inventory and supplies, and that they would accept a note from the Central Brick Company for the inventory and supplies, the amount to be ascertained, based upon the cost of the materials inventoried. The amount of the note was fixed at $ 30,583.94 which was executed and delivered and is still retained by them. The cash payment of $ 32,600.00 was made and accepted by the Coshocton interests which they still retain. The common and preferred stock was issued to the parties designated, which stock is still retained by them but the $ 32,000.00 of bonds have never been delivered or received as provided in said option.
The $ 100,000.00 paid to the Huntingburg Dry Press Brick Company and the $ 32,600.00 paid to the Coshocton interests, was paid out of the $ 150,000.00 placed to the credit of the Central Brick Company by the Central Trust Company of Illinois, above mentioned. The stockholders of the Huntingburg Dry Press Brick Company, transferred all the common stock in that company to Mr. Buckley and Mr. Cowles, and thereafter new officers were elected and all the property transferred to the Central Brick Company. The property of the Coshocton Brick Company was transferred, by deed and by bill of sale direct to the Central Brick Company.
The option as to the brick company located at Veedersburg was never exercised. All of the above transactions took place in the first part of February, 1928, and the Central Brick Company took charge of all the property of the Southern Indiana Clay Products Company, the Huntingburg Dry Press Brick Company, and the Coshocton Brick Company of Coshocton Ohio, with full management and control, and...
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