Hubbard v. Weare

• Decision Date: 13 February 1890
• Citation: 44 N.W. 915,79 Iowa 678
• Parties: HUBBARD v. WEARE. HERVEY ET AL. v. WEARE. SAVERY v. WEARE.
• Court: Iowa Supreme Court

79 Iowa 678

44 N.W. 915

HUBBARD

v.WEARE.

HERVEY ET AL.

v.WEARE.

SAVERY

v.WEARE.

Supreme Court of Iowa.

Feb. 13, 1890.

Appeal from district court, Linn county; J. D. GIFFIN, Judge.

The Williams Harvester Company was organized as a corporation under articles dated May 13, 1878, fixing the capital stock at $18,000, in shares of $100 each, with the defendant as president, which position he continued to hold during all the time the company carried on business. The capital stock was increased by amendment of the articles, dated August 25 and recorded October 23, 1879, to $100,000; again, by amendment filed for record January 3, 1882, to $150,000; and again, by amendment filed for record December 11, 1882, to $250,000. The plaintiff Hubbard subscribed and paid for stock in the company as follows: July 1, 1878, in cash, $500, October 22, 1879, dividend, $187.50, cash, $12.50, making $200; February 21, 1880, cash, $500; November 29, 1880, cash, $3,000; December 3, 1881, dividend, $120, cash, $80, making $200; November 7, 1881, cash, $5,000; December 13, 1881, cash, $600; and December 13, 1881, for grandsons, $200,--being $307.50 in dividends, and $9,892.50 in cash. In addition to this, he loaned to the company on April 25, 1885, $500, and again on June 15, 1885, $500, taking the notes of the company therefor. He also, with others, indorsed notes of the company as follows: November 19, 1883, a note of $5,000; March 31, 1884, note of $5,000; and June 30, 1884, his acceptance for $5,000,--which notes and acceptance are now outstanding. October 3, 1881, the plaintiffs Hervey, by N. M. Hubbard, subscribed and paid $5,000 for 50 shares of the capital stock of said company, for which a certificate was afterwards issued to said Herveys in their own name. On October, 1881, plaintiff Savery subscribed for 100 shares of said stock; and, having thereafter paid $10,000 in cash for the same, a certificate was issued to him therefor, dated November 7, 1881. Dividends were declared, for the year ending October 1, 1879, 37 1/2 per cent.; for 1880, 10 per cent; and for 1881, 16.78 per cent. The plaintiffs each allege that they were induced to and did pay their money and incur the liabilities aforesaid by reason of certain representations made and caused to be made to them, respectively, by the defendant, which representations were false and fraudulent, and known to the defendant to be so at the time he made the same.

The representations set out by all the plaintiffs as being made by the defendant, and by which they were induced to subscribe and pay for stock, may be summed up as follows: (1) That said corporation was well organized and well conducted, upon a good business basis; (2) that it had made large gains and profits, and had actually earned the dividends declared; (3) that a greater dividend than 10 per cent. might have been declared in 1880, but that it was thought best by defendant to hold a surplus; and (4) that there was sufficient profits and earnings to have declared a dividend of 10 per cent. in 1882, but that the money could be used to great advantage in the business. The plaintiffs Hervey and Savery each also allege that they were induced to subscribe and pay for stock as aforesaid by the further false and fraudulent representations of the defendant that the dividends theretofore declared had been paid in cash, and that by reason of the dividends declared and paid, and to be declared and paid, the stock was worth a premium of 25 per cent. The plaintiff Hubbard also alleges that he was induced to make said loan of $1,000 by a false representation of the defendant; that said corporation had a large amount of property, promissory notes and securities on hand, from which means could be realized to repay said loan; when, in fact, as defendant well knew, said corporation had no personal property but what had been transferred to the First National Bank of Cedar Rapids. The plaintiff Hubbard also alleges that, by reason of all said representations, he was induced to sign two notes of $5,000 each, and said acceptance. Each alleges that the company is insolvent. The plaintiffs Hervey and Savery each allege that, when they discovered the fraud practiced upon them by the defendant, they tendered back in writing to said company said stock, by reason of said fraud, and demanded a return of their money, with interest; that said company, through the defendant and other officers, acceded to the demand, received back said stock, and by the defendant as president, and D. G. Edgerly as secretary, executed to plaintiffs notes for the amount paid for said stock, with interest, together with mortgages on certain real estate of the company to secure the same; that they foreclosed their said mortgages, and bid off the property on execution sale for amounts less than the judgment; that they thereafter caused special execution to issue, which was returned, “No property found.” The plaintiffs each ask to recover damages, and the plaintiff Hubbard further asks that, as between the defendant and himself, the defendant may be decreed to pay said $5,000 notes and acceptance, and hold the plaintiff harmless therefrom. The plaintiffs Hervey and Savery allege that they are ready and willing to assign and turn over to the defendant, without recourse, the balance of said judgments, and they respectively demand an accounting of the money advanced and paid out by them for their stock, with interest, less the credit received by them on said judgments, after deducting costs, and that the balance be decreed to be due to them, respectively, from the defendant.

The defendant, in answer to each of the petitions, admits the organization of the company; that its articles were amended; that he was president thereof; that stock was subscribed and paid for at the times and in the amounts alleged; that dividends were declared as alleged; and that no dividend was declared or paid after December, 1881. As to the plaintiff Hubbard, he admits that he loaned $1,000 to and indorsed for the company as alleged, and that all the personal property of the company had been transferred to the First National Bank of Cedar Rapids before said loan. As to plaintiffs Hervey and Savery, he admits that they tendered back their stock, and received the notes and mortgages of the company as alleged, and that said mortgages were foreclosed and property sold as stated. Answering each plaintiff, he denies that any of said stock was taken or received by the plaintiffs at the instance or request of the defendant; or because of any statements or representations made by him; denies that he ever made any untrue, false, or fraudulent representations whatever to the plaintiffs to induce them to take said stock, or to the plaintiff Hubbard to make said loan; and denies that said loan was made or stock subscribed because of any representations made by him. He denies that he made any concealment of the affairs of the company, or that indorsements by the plaintiff Hubbard and others were secured through any false or fraudulent representations of defendant, or because of any concealment by him of the affairs of said company. He denies that the plaintiff Hervey ever subscribed for any of the capital stock of said company, or paid to the defendant or said company any amount therefor. He denies that the company is insolvent, or that the execution against said company was ever returned, “No property found.” The defendant avers that said company was legally organized; that the dividends were declared by the directors of said corporation after a careful investigation of the property, credits, and other assets and liabilities of the corporation; that the corporation had sufficient, good and available assets, over and above all its debts and liabilities, upon which to declare said dividends, and that the same were declared in good faith; that the transfer of all the personal property of the company to the First National Bank of Cedar Rapids was made before the loan of $1,000 by plaintiff Hubbard, and with the full knowledge, and upon the request and demand, of said Hubbard; that said Hubbard has ever taken a lively interest in and maintained a close acquaintance with the affairs of said company, and that all acts of said company were known to and approved by him; that he had as full means of knowledge at all times as defendant, as to the affairs of said corporation; that he was a director during the year 1879, and until May, 1880, and as such participated in and actively urged a vote for declaring the dividend of 37 1/2 per cent. He avers that the only stock of said company ever owned or held by the plaintiffs Hervey was shares received and purchased by them from N. M. Hubbard, who subscribed for the same in his own name, and for himself, and paid for the same by his own money. He further avers that he believed, at the time said dividends were declared, that said company had actually earned all the dividends named, prior to the time the same were made, and avers that all the dividends were so earned; and that at the time Hubbard received said Hervey stock he had full knowledge of the condition of said company.

The issues being in part the same, and the cases resting largely upon the same state of facts, they were submitted together in the district court, without being consolidated, under a stipulation that “the testimony offered and received in all of said cases shall apply to each one thereof, so far as it has reference to said causes, and that one transcript shall be made in all of said causes.” The cases were brought and submitted as in equity, without objection, and, the district court having rendered judgment dismissing the plaintiffs' bills and for costs, plaintiffs appeal, and the causes are again submitted together, upon the entire record.C. A. & W. G. Clark and F. F. Dawley, for appellants.

F. C. Hormel and C. J. Deacon, for appellee.

GIVEN, J.

1. Counsel have discussed with evident...