McDonald v. Van Etta

• Decision Date: 07 January 1930
• Citation: 201 Wis. 77,228 N.W. 478
• Parties: MCDONALD ET AL. v. VAN ETTA ET AL.
• Court: Wisconsin Supreme Court

201 Wis. 77

228 N.W. 478

MCDONALD ET AL.

v.VAN ETTA ET AL.^a1

Supreme Court of Wisconsin.

Jan. 7, 1930.

Appeal from judgment of the Circuit Court of Jackson County; James Wickham, Circuit Judge.

Action by John R. McDonald and others against J. K. Van Etta and others. Judgment for plaintiffs, and defendants appeal. Reversed, with directions.--[By Editorial Staff.]

Action commenced December 29, 1927; judgment entered January 23, 1929. Defendants appeal.

The action for damages for breach of a contract to deliver preferred stock of a corporation was tried to the court without a jury. The plaintiffs were stockholders in the Black River Falls Manufacturing Company and held $11,200 of a total of $60,000 first mortgage bonds. They were also on the company's notes held by local banks, and their bonds were up as collateral to these loans. Suit to foreclose the mortgage was pending and a receiver had been appointed. The individual defendants were conducting a similar business at Wausau. They secured options for purchase of the bonds held by others than plaintiffs for 50 cents on the dollar and entered into an agreement with plaintiffs which was evidenced by three writings, all executed on November 8, 1922. One gave defendants the option to purchase plaintiffs' bonds for $5,600 provided the defendants would continue to operate the plant at Black River Falls. Another provided for forming a new corporation which should issue $10,000 preferred stock redeemable in five years to draw 7 per cent. cumulative dividends, all to be given to plaintiffs for $5,000 payable in plaintiffs' bonds at the price stated. The bonds being up as collateral and their purchase price being payable to the banks, the third writing provided that on contingency of their payment to the banks, the $10,000 preferred stock should be given to plaintiffs for $5,000 cash. The defendants took over all the bonds under their options and paid the purchase price of plaintiffs' bonds to the banks holding them as collateral. The payment was less than $5,000 because of some costs and expenses deducted, but the plaintiffs accepted the payment made in lieu of the $5,600 agreed as consideration. The individual defendants purchased the plant on foreclosure sale and promptly began to operate it. There was delay in completing the organization of the corporation, but incorporation of the defendant corporation was finally effected pursuant to the agreement and the defendants own all its stock. On January 31, 1923, the parties agreed in writing that plaintiffs should give their note for $5,000 to be negotiated by defendants, the defendants to pay the interest until the preferred stock should be issued and the plaintiffs to pay it thereafter, and a note payable to the Marathon County Bank dated March 1, 1923, and due July 1, 1923, was executed, delivered, and negotiated accordingly. The purpose of this transaction was to provide working capital for operation of the plant. The note was not paid when due. The bank carried it for a while, but finally insisted on its payment, and the new corporation then paid it and kept it in its possession. Three letters were written to plaintiffs, dated August 9, October 1, and October 12, 1923. The first stated that the bank would not renew the note, was pressing the defendants who had indorsed the note for payment, and asked plaintiffs to send the money for its payment. The second stated that the bank had insisted that the note be taken up, that the corporation had therefore paid it and held it subject to plaintiffs' disposal, and that when plaintiffs were ready to make payment they might get the stock. The third, written by defendant Scholfield after a conversation with plaintiff McGillivray, stated that he had presented a suggestion of McGillivray to the “other parties,” but that “they” (the defendants) were more interested in getting the $5,000 in cash and preferred that the matter he so handled; plaintiffs to pay the $5,000 and defendants to issue the stock. The plaintiffs did not pay the note or demand the stock. The defendants did not tender manual delivery of the stock. There were oral conversations respecting the matter between different ones of the parties, and Mr. Perry acted for both sides at different times in trying to get the parties together to settle the matter. These conversations continued at intervals for a year and a half. Defendant McDonald was in Michigan a good part of the time. The plaintiffs in October, 1927, demanded their stock. The defendants refused to deliver it and returned their note to plaintiffs. The plaintiffs sent the note back to defendants, who placed it with a bank subject to plaintiffs' order. The preferred stock was never issued or stock certificates therefor prepared. The corporation lost $500 the first two years, made $3,600 the third and $13,000 the fourth, and had a surplus...