Jordan v. Nelson

• Decision Date: 06 July 1920
• Docket Number: No. 33212.,33212.
• Citation: 178 N.W. 544
• Parties: JORDAN v. NELSON ET AL.
• Court: Iowa Supreme Court

178 N.W. 544

JORDAN

v.NELSON ET AL.

No. 33212.

Supreme Court of Iowa.

July 6, 1920.

Appeal from District Court, Story County; G. D. Thompson, Judge.

October 27, 1914, by what plaintiff herein denominated a preliminary written contract between the Upper Michigan Land Company, and defendant Ada Nelson, the first party agreed to sell and convey to her 50,000 acres of what appears to be largely swamp land in Michigan, for $500,000, $100,000 of which was represented by the equity of Mrs. Nelson in Iowa property and the balance of $400,000 payable in 20 equal installments, for which she was to give her notes. The defendant A. Nelson did not sign that contract. Later, and on November 16, 1914, the Northern Michigan Land Company and the defendants entered into a written contract by which the first party sells and agrees to convey, upon payment by second parties, the same property, on substantially the same terms as to consideration and payment. The last contract omits certain provisions contained in the first, by which the grantor in said first contract obligated itself to carry out certain extensive drainage projects on the land; the claim of defendants being that the grantor in the first contract was solvent and able to carry out its obligations in regard to the drainage, but that the Northern Michigan Land Company was not responsible. The defendant's theory is that the last contract superseded the first, and that this switching and substituting of the name of the insolvent grantor was fraudulent and a part of the general scheme to so substitute, and that defendants were thus deprived of their rights against the solvent concern. While appellant contends that there is nothing in the second contract which provides that the liabilities under the first should be done away with, yet they also say in the same connection that the Upper Michigan Land Company never recognized that the first contract was binding upon it. One of the officers of the company says that that contract was never ratified, and that no action was taken with reference thereto and no attention was paid to it. The last contract is set out by plaintiff in his pleadings. One clause of this contract provides that if default is made in the payment of any of the notes the entire amount shall become due and payable. Pursuant to the last contract, defendants executed their 20 notes to the Northern Michigan Land Company for something more than $400,000. Each note was for $20,013, and payable one each year up to 1935. The defendants refused to carry out their part of the contract, setting up defenses referred to later.

The first contract was later canceled, as were 15 or $300,000, of said notes, by written agreement or stipulation, after these defendants had brought a suit in the federal court in Minnesota to cancel said contract and all the notes. The case was not tried. The stipulation is signed by defendants, and both the Northern Michigan Land Company and the Upper Michigan Land Company and C. A. McCann. It was provided therein that said notes did not include those claimed to be owned by this plaintiff, and it was stipulated that the settlement should not affect the dispute between plaintiff and the defendants. The plaintiff claims to be an innocent holder in due course and for value of 5 of said notes. The plaintiff claims that the said second contract was assigned to him in writing May 8, 1915, for $1 and other valuable consideration, and which assignment provides that the Northern Michigan Land Company, assignor, “appoints the said W. G. Jordan, in its name and stead, to collect all money due under said contract, in the same manner and form as it could have done had this assignment not been made.” Plaintiff claims that he purchased said notes August 31, 1915, and on February 19, 1916, he notified defendants by letter of said assignment of the contract and the 5 notes. The letter recites that he did purchase the same and that they were assigned to him. The notes were all indorsed by the Northern Michigan Land Company to the plaintiff, without recourse. This action is brought in 5 counts upon said 5 notes, The last matures, by its terms, March 1, 1926. Defendant Andrew Nelson alleges that he signed the notes as an accommodation and as surety for his wife. Defendants pleaded equitable defenses and cross-bill, and the cause was transferred to equity for trial. After a hearing on the merits the trial court dismissed plaintiff's petition, canceled the notes sued on, and canceled plaintiff's interest, if any, in the contract of November 16, 1914. The plaintiff appeals. Affirmed.Charles H. Hall, of Nevada, Iowa, and J. H. Morse, of Robbinsdale, Minn., for appellant.

Mulvaney & Mulvaney and S. F. Prouty, all of Des Moines, for appellees.

PRESTON, J.

1. Our work has been rendered more laborious by the failure of counsel upon either side to make reference to pages of the abstract in their arguments when referring to the evidence of the different witnesses and on the different points. The printed record is over 600 pages. The notes sued on were given in connection with the sale of Upper Michigan land, in which several different persons and companies were interested.

A brief outline of the general situation is something like this: One Hamilton had promoted, or at least was one of the promoters, in the Western Lands Securities Company, the Upper Michigan Land Company, and the Upper Michigan Timber Company, and seems to have been the moving spirit. Plaintiff himself testifies that Hamilton was the whole thing in more than one of these companies. He was an officer in these companies. He was also interested, as a stockholder at least, in the Northern Michigan Land Company, plaintiff's assignors. Hamiltontestifies that there were several gentlemen, some of them--McCann, Gullickson, and West--in his office, who negotiated with him for the purchase of the unsold Michigan land and finally reached an arrangement for the purchase of 150,000 acres, which includes the 50,000 in controversy. In order to carry out that purchase, the Northern Michigan Land Company was formed by them, and the sale of the land made to that company after it was incorporated; the contract made for the sale of this land to the Northern Michigan Land Company was turned in by the individuals who purchased it through the company, and Hamilton accepted as part payment for the land on behalf of the Upper Michigan Land Company some of the stock which was subscribed. Hamilton was assisted by McCann and others. The companies above mentioned did business in the same office, and were all engaged in the sale of this Upper Michigan land. The plaintiff was associated with these different parties, and had many dealings with them and with this corporation. Plaintiff, with others, formed a corporation and had purchased some land of the Upper Michigan Land Company and formed a corporation known as the Jordan Land Company. He claims to have put some real money into the Jordan Land Company. He held notes against the Northern Michigan Land Company, the Upper Michigan Land Company, the Western Lands Securities Company, C. A. McCann and H. H. Hamilton, which notes were surrendered in the deal by which plaintiff purchased the land constituting the Jordan Land Company. He testifies that he has owned in the upper peninsula of Michigan personally, 10,000 to 12,000 acres of land, which he bought through the Northern Michigan Land Company and some of the others. At one time the Northern Michigan Land Company deeded 2,000 acres to plaintiff in lieu of his interest in “profits guaranteed, to him by McCann and Hamilton in the purchase of 10,000 acres of the land.” These are only some of the circumstances tending to show plaintiff's intimate association with the different parties promoting the sale of Upper Michigan Peninsula lands, and his connection with the different concerns.

It is claimed by appellees that these different companies were fraudulently conceived and organized, and that the multiplicity of the organizations was designed to deceive the general public. We think there are at least a few earmarks of get-rich-quick methods, sometimes called blue sky. The evidence tends quite strongly to show, to say the least, that the Northern Michigan Land Company was a paper concern and fictitious. Referring again to the 15,000 acres of land purchased of the Upper Michigan Land Company, it appears that this company, through Hamilton, made a contract with three others of his associates in his office to sell that land at $5.50 an acre. He took their notes for $300,000, which were never paid, and appellees contend that it was understood that they never should be paid. At any rate, this contract seems to have been used as a basis for the organization of the Northern Michigan Land Company. It seems, as near as we can get at it, that this was what was done. The concern was then organized on the statement to the auditor of the state of Michigan that they had paid $300,000 on the land, and were authorized to issue $300,000 of capital stock, and that the notes were then canceled, and most of the stock issued to Hamilton. By this arrangement, Hamilton had $300,000 worth of stock in the Northern Michigan Land Company, and still had the same land that was put in as a basis of capitalization. Some of these circumstances are shown by the testimony of Hamilton himself, taken by deposition, but as to some of the facts he refused to answer questions pertaining thereto. He refused to produce his books. He states that they had warranty deeds for all the land originally purchased in the Upper Peninsula of Michigan, being about 700,000 acres, and which includes the land in controversy, but upon the advice of his counsel he refused to produce any deeds, and in the same manner refused to answer when the deeds were received, and refused to answer when the last payment was made on the 700,000-acre contract dated January 3, 1911, to a...