Downer v. Union Land Company of St. Paul
| Citation | 129 N.W. 777,113 Minn. 410 |
| Decision Date | 10 February 1911 |
| Docket Number | 16,824 - (209) |
| Parties | T. B. DOWNER v. UNION LAND COMPANY OF ST. PAUL and Others |
| Court | Supreme Court of Minnesota (US) |
Action in the district court for Ramsey county to recover from defendant land company and its stockholders the balance of plaintiff's judgment, amounting to $3,955.96, with interest; that the agreement by which seventeen thousand shares of defendant land company were issued as full paid stock be adjudged fraudulent and void as to plaintiff; that the court ascertain the true value of the land conveyed to the company in exchange for the stock and the percentage of overvaluation at which the land was so taken, and that plaintiff recover from each of defendants other than the Union Land Company the difference between the par value of the shares of stock owned by each, respectively, and the respective amounts actually paid thereon, taking the land at its true valuation, or so much thereof as may be required to pay the amount adjudged to be due plaintiff. The facts are stated in the opinion. From an order, Hallam, J., overruling plaintiff's demurrer to that part of the answer of Ferdinand Willius set out for and numbered as a second defense, plaintiff appealed. Reversed.
Action by judgment creditor of corporation -- statute of limitations.
Action by a judgment creditor of the defendant corporation to compel the defendant stockholders to make good, by paying the difference between the par value of their stock and what they paid for it, so far as may be necessary to satisfy the judgment, their alleged false representation, relied on by the plaintiff when he purchased the bonds of the corporation which are the basis of his judgment, that they had paid the full par value of their stock. The bonds contained an agreement that no stockholder should be in any wise liable for the payment thereof and that no bondholder should be entitled to any remedy to enforce payment thereof against any stockholder. Held, that it does not appear upon the face of the complaint that the action is barred by the statute of limitations, and that the bond agreement is a defense to this action.
James E. Trask, for appellant.
Lightner & Young, for respondents.
This is an appeal by the plaintiff from an order of the district court of the county of Ramsey overruling his demurrer to the second alleged defense in the answer of the defendant Willius.
The action was commenced in December, 1909. The here material allegations of the complaint, briefly stated, are to the effect following: The defendant Union Land Company, hereafter referred to as the company, is and has been since 1887 a corporation for pecuniary profit duly organized under the laws of this state. On April 5, 1887, it issued seventeen thousand shares of its capital stock, of the par value of $100 each, as full paid to its organizers, of which fifty shares were delivered to the defendant Willius, hereafter referred to as the defendant. The company, after such issue of stock, became indebted in the sum of $98,000, and thereafter, for the purpose of securing the money to pay such indebtedness, it issued its bonds, amounting in the aggregate to $126,000, with ten per cent. annual interest, payable to trustees or bearer February 1, 1894. The plaintiff purchased six of such bonds, each for $500, and paid therefor $3,000 relying upon the representation that the seventeen thousand shares of stock so issued had been paid for in full. None of his bonds, or any part thereof, were paid, except interest to August 1, 1895. He recovered a judgment against the company in the district court of the county of Ramsey, on February 25, 1902, for the amount due on the bonds, $4,979.83. Execution was issued on the judgment and returned satisfied only to the extent of $1,023.87. The balance of the judgment has never been paid and the company is insolvent.
The organizers and stockholders of the company, including the defendant, with the intent of acquiring the seventeen thousand shares of stock as full paid, when in fact they were not, purchased fourteen hundred seventy-six acres of land for which they paid only $679,289, which was more than it was worth. They caused this land, with cash sufficient to make the price actually paid for the stock not more than $850,000, to be transferred and turned over to the company in payment of the seventeen thousand shares of stock, an overvaluation of the land of more than $790,000. Such valuation was not the result of mistake, but was a gross overvaluation, intentionally made by all the parties to the transaction, with the knowledge of all the past and present stockholders of the company, and with the intent to enable such stockholders to acquire, and they did thereby acquire, each his respective portion of the seventeen thousand shares of the capital stock, by paying to the company therefor not to exceed $50 per share. The seventeen thousand shares so issued are the only portion of the authorized capital stock of the company which was ever issued. The plaintiff did not discover the fraudulent character of the issue of the seventeen thousand shares, and was unable with due diligence to discover the same, until the summer of 1906, and such discovery was then for the first time made after several years of diligent inquiry. The complaint then alleges in detail the steps taken by the plaintiff to ascertain the facts as to the issue of such stock.
The complaint prays, in effect, judgment against the company for the amount due on the original judgment, and that each of the defendant stockholders be required to pay so much of the difference between the par value of his stock and the amount actually paid by him therefor as may be necessary to pay the judgment against the company, and for general relief.
The answer of the defendant avers four alleged defenses, viz.: (1) The stock was in fact fully paid. (2) The plaintiff's bonds contained an express agreement that the stockholders should in no wise be liable for their payment. (3) The action is barred by the statute of limitations. (4) Laches.
The plaintiff replied to all the alleged defenses, except the second, to which he demurred. The trial court overruled the demurrer. The second alleged defense was to the effect: That the bonds of the company drew interest from their date at the rate of ten per cent. per annum, and their payment was secured by a trust deed of all of the corporate property. That each purchaser of the bonds, including the plaintiff, entered into an agreement with the company, in consideration of the high rate of interest and the provision for the payment of the bonds, which was included in the body of each bond in these words: "It is a condition of the issue of this bond and the execution of said trust deed that this bond is an obligation of said company only" (meaning said defendant land company) And further, that no representations were ever made to the plaintiff that the shares of stock issued by the company were fully paid, or to any extent, except such representations as may be deemed to have arisen from the mere fact that seventeen thousand shares had been issued as fully paid, of which twelve thousand one hundred thirty-two shares were outstanding when the plaintiff purchased his bonds.
1. The first contention of the defendant in support of the order overruling the demurrer, to be considered, is that the complaint does not allege facts sufficient to constitute a cause of action, for the reason that on its face it appears that the alleged cause of action is barred by the statute of limitations.
A demurrer, as a general rule, searches the record, and judgment will be given against the party whose pleading was first defective in substance. It is not clear that this rule is here applicable, for the reason that the question whether the alleged cause of action is barred by the statute of limitations has become, by the answer pleading the statute and the reply thereto, an issue of fact between the parties. 1 Chitty, Pl. 669; 6 Enc. Pl. & Pr. 332; Hanson...
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