Grover v. Cavanaugh

• Decision Date: 10 October 1907
• Docket Number: No. 6,046.,6,046.
• Citation: 82 N.E. 104,40 Ind.App. 340
• Parties: GROVER v. CAVANAUGH et al.
• Court: Indiana Appellate Court

40 Ind.App. 340

82 N.E. 104

GROVER

v.CAVANAUGH et al.

No. 6,046.

Appellate Court of Indiana, Division No. 1.

Oct. 10, 1907.

Appeal from Superior Court, Marion County; Vinson Carter, Judge.

Action by Martha A. Grover against Joseph R. Cavanaugh and others. From a judgment for defendants, plaintiff appeals. Reversed with directions.Harvey, Pickens, Cox & Kahn, for appellant. Frederick E. Matson and Jos. F. Cowern, for appellees.

HADLEY, J.

This was a suit instituted by appellant against the Mercantile & Bureau Company, an Indiana corporation, and Joseph R. Cavanaugh, Samuel A. Townsend, Joseph B. Gwin, Edward D. Moore, Charles M. McCabe, Frank L. Wayman, and James E. Pierce for damages. The complaint is in two paragraphs. Each of said appellees demurred separately to each paragraph of the complaint. Each of said demurrers, except that of the appellee corporation, was sustained. Appellee corporation answered, trial was had, and judgment rendered in favor of appellant against appellee corporation, and in favor of appellees against appellant on their demurrers. The question presented in this appeal is upon the ruling of the court in sustaining the demurrers of appellees to the complaint.

The first paragraph of the complaint avers that the Mercantile & Bureau Company is an Indiana corporation, with an authorized capital stock of $150,000, of which $100,000 was designated as common and $50,000 as preferred stock; that appellees Cavanaugh, Townsend, Moore, McCabe and Wayman were the incorporators, and Pierce a director and Gwin a stockholder and manager; that none of the capital stock of said company was paid in except that Cavanaugh and Townsend assigned to said company certain copyright inventions and received therefor the whole of the authorized common stock; that at that time said copyright inventions were not of the value of $100,000, but were of little or no value; that all of said officers and managers knew that said copyrights had no value and could have no value until they were perfected and placed on the market and a demand created therefor; that, for the purpose of raising a fund to so place said copyright article upon the market, said parties provided for the sale of $50,000 of the preferred stock, at the time knowing that said company would have no capital or assets to carry on the sale except by the sale of said preferred stock, and that said preferred stock could have no value over and above the value of said copyrights; that said company was not successful in its business, and failed to perfect said copyrights or create a demand therefor; that thereafter said company and the other appellees, knowing that said copyrights were of no value and that said company was constantly losing money, determined to further experiment with said copyrights, and, knowing that said company had no cash capital for so doing, determined to purchase a printing plant for its use, and, to procure the necessary money, said company and other appellees determined to represent and hold out to others, including this appellant, that its said stock was a good investment, and its business and assets such that said stock was worth par, and to thereby sell a portion of said preferred stock, and said company and its officers and managers and some of its stockholders, to wit, the said other appellees named herein, conspired and confederated and formed a joint and common purpose so to do; that, in furtherance of said plan, scheme, conspiracy, and confederation by and through its said officers and managers, particularly these appellees who each and all had knowledge of the said purpose and of the condition of the business, property, and finances of said company, as the agents of said company for said purpose, represented to appellant that the business of said company was prosperous and a good paying investment; that the output of said company was a valuable asset and was selling rapidly at $10 per book, while the cost thereof was no more than $.65 per book, and with a great demand existing therefor; that said company was earning profits, and was negotiating for a large printing establishment to be used in this business; that said company then owned a good size printing plant, but needed a larger one for this business; that said company then owned two Lamson monotypes which were of the value of $2,000; that said company was solvent, and did not need more money, but that its stock was a good investment at par, and that the said stock would pay, under the then existing circumstances, at least 6 per cent. dividend annually; that it was not necessary that the said company sell any of its said stock, but that appellant would be granted the privilege of purchasing a portion thereof, if she desired to make a paying investment. It is then averred that each and all of said statements were untrue, and known by said company and said officers at the time to be untrue. Each of said averments is then specifically denied, and the facts set out in the denial averred to have been within the knowledge of appellees at the time. It is then averred that appellant theretofore had had no dealings with appellee corporation, and was unacquainted with its financial affairs, and knew nothing thereof, except as stated and represented to her by said appellees, that she had no opportunity for learning the actual facts, and that appellees pretended to have knowledge of the facts so stated and represented to be true and that appellant relied thereon and had no information to the contrary. It is then averred that, because of said representations so made and for said purpose, appellant bought 26 shares of said preferred stock and paid therefor $2,600, and received therefor 26 shares of preferred stock and 13 shares of common stock; that said company received said amount and appropriated the same to its own use; that neither said common nor preferred stock at the time she so purchased the same was of any value, and has not since been of any value, and by reason thereof sh...