McManus v. Fulton
| Decision Date | 08 June 1929 |
| Docket Number | 6377. |
| Citation | 278 P. 126,85 Mont. 170 |
| Parties | McMANUS v. FULTON. |
| Court | Montana Supreme Court |
Appeal from District Court, Toole County; John J. Greene, Judge.
Action by Thomas J. McManus against William M. Fulton. Judgment for defendant, and plaintiff appeals. Affirmed.
William Scallon, of Helena, and Louis P. Donovan, of Shelby, for appellant.
J. A McDonough, Art Jardine, and Freeman, Thelen & Freeman, all of Great Falls (H. C. Smith and C. A. Spaulding, both of Helena of counsel), for respondent.
During the March term, just ended, the judgment of the trial court was reversed by a three to two decision. Two opinions were filed. Considering the case upon motion for a rehearing, and as a result of an extensive study of the authorities, one of the Justices has changed his mind, now being of the opinion that the judgment ought to be affirmed. In coming to this conclusion he but followed the commendable rule of judicial conduct expressed a thousand years ago by Khalif Omar, instructing his first Kadi: "If today thou seest fit to judge differently from yesterday, do not hesitate to follow the truth as thou seest it; for truth is eternal, and it is better to return to the true than to persist in the false."
The plaintiff brought this suit to recover from the defendant the sum of $56,581 for breach of contract. The amended complaint sets forth two causes of action. In the first it is alleged, inter alia, that in the month of April, 1925, in the city of Chicago, state of Illinois, the defendant employed the plaintiff to sell on commission certain shares of the capital stock of the Fulton Oil Company, a Montana corporation, and agreed that plaintiff should receive a commission of 25 cents a share "for every share sold and paid for by the purchasers at the rate of one dollar ($1.00) per share or over, or take his commission in shares of said stock, the number of shares to be fixed by taking them as of value of sixty (60) cents per share"; that pursuant to the agreement the plaintiff proceeded to sell the shares of stock placed in his hands for sale, and did sell and deliver to purchasers 12,200 shares which were paid for by purchasers at the rate of $1.00 per share, and in some cases more, and that all of the money realized from the sales of the shares, at the prices thereof, was transmitted from Chicago to the defendant in Montana; that in May, 1925, the plaintiff elected to take his commission in shares of stock in the Fulton Oil Company, being then entitled pursuant to the terms of the contract to 5,083 shares; that after plaintiff became entitled to the shares the company declared and paid a dividend of $1.00 per share; that plaintiff has repeatedly demanded of defendant delivery of the shares, but defendant has not delivered the same, or any part thereof; that the shares at the time of filing the complaint were of the value of $30,498.
In the second cause of action it is alleged, inter alia, that in the month of April, 1925, the plaintiff, at the special instance and request of the defendant, "made in the city of Chicago, state of Illinois, rendered services to the said defendant in the said city of Chicago," in connection with negotiating for the sale of stock in the Fulton Oil Company to one McGinley and one Ponting, in consideration whereof the defendant then and there agreed and promised to deliver to the said plaintiff 3,000 shares of the capital stock of the company; that, after plaintiff became entitled to the shares, the company declared and paid a dividend of $1.00 per share; that demand has been made by plaintiff on defendant to deliver the shares to plaintiff, but defendant has not delivered the same or any part thereof; that at the time of filing the complaint the shares were then of the value of $18,000.
Judgment against defendant for $35,581 on the first cause of action and for $31,000 on the second cause of action is asked.
The defendant, by amended answer, denied that he had made the contracts sued upon, or that plaintiff had rendered any services to the defendant, and averred that the alleged contracts made the bases of plaintiff's causes of action "are, were and would have been, absolutely void, as contrary to the express provisions of law, contrary to the policy of express law, contrary to good morals and public policy, and absolutely void and unenforceable because any and all such agreements are, were and would have been in absolute violation of the laws of the state of Illinois," and particularly an act approved June 10, 1919, known as the Illinois Securities Act (Laws Ill. 1919, p. 353), a copy of which was attached to and made a part of the amended answer. Defendant then pleaded facts showing that the shares of stock of the Fulton Oil Company are of the character of securities designated as class D in the Illinois Securities Act, and alleged, inter alia, that the value of the stock of the Fulton Oil Company depended entirely upon prospective income within the meaning of the Illinois Securities Act, for the reason that its income was to be derived from the drilling of oil and gas wells on 160 acres of then undeveloped oil land in Toole county, Montana, and the corporation then had no other assets save and except an oil and gas lease on the land; that the Fulton Oil Company never at any time complied with any of the requirements of the Illinois Securities Act which plaintiff at all times well knew; that plaintiff claimed to be a broker engaged in the selling of stocks and securities with his office at Chicago, Ill.; that plaintiff never at any time complied with any of the requirements of the act; that all the sales of stock made by plaintiff were made in the state of Illinois; that it was unlawful and contrary to the Illinois statute for plaintiff or any one else to negotiate any sale of any stock of the Fulton Oil Company within that state.
Defendant pleaded want of consideration for the plaintiff's alleged second cause of action, in that the agreement set forth in the plaintiff's complaint contemplated and required the offering for sale and the sale of stock in the Fulton Oil Company as a general course of conduct in violation of the Illinois Securities Act.
Plaintiff replied, admitting that a true copy of the Illinois Securities Act was attached to the amended answer, and that the plaintiff made sales of stock, but denying the other affirmative allegations of the amended answer.
The case came on for trial before the court sitting with a jury.
It appeared from the evidence that W. H. Essex, W. E. Rice, and the defendant Fulton were the owners of an oil and gas lease upon 160 acres of land in Toole county, Montana, and that for the purpose of exploring and developing the land for oil and gas in accordance with the lease, they organized, under the laws of Montana, a corporation under the name of Fulton Oil Company, with a capitalization of $200,000, divided into 200,000 shares of the par value of $1 each. Upon the completion of the corporation, Essex, Rice, and defendant assigned the lease to Fulton Oil Company, in consideration of the issuance to them, or to those whom they might designate, of a total of 115,000 shares of the capital stock of the company, for which, in addition to the assignment of such lease, they agreed to pay the company in cash the sum of $30,000, to enable it to proceed with work upon the property. In carrying out the agreement the defendant proceeded to Chicago, and in April, 1925, with the aid and assistance of the plaintiff, sold 50,000 shares of stock in the company to McGinley and Ponting at Chicago, for the sum of $30,000. On April 24, 1925, the plaintiff at his office in Chicago, in defendant's presence, dictated the following statement, which was signed by defendant and delivered to plaintiff (addressed to plaintiff): While the sale to McGinley and Ponting was pending, plaintiff and defendant actively were engaged in selling, or attempting to sell, stock in the company to others in Chicago. It was agreed that plaintiff was to sell 15,000 shares of the stock of the company upon a 25 per cent. commission. In a letter written by plaintiff to defendant on June 25, 1925, this was referred to as "the proposed sale by you for the accounts of Essex, Rice and Fulton of ten thousand shares of their personal stock in the Fulton Oil Company, and five thousand shares of treasury stock in said company." It seems that the proceeds of the sales were to be remitted to defendant who was to retain plaintiff's commissions subject to plaintiff's orders; plaintiff was privileged to demand the cash or the equivalent amount in stock of the company at 60 cents per share. Plaintiff made sales to his relatives and clients, totaling 12,200 shares, the proceeds of which were all sent to defendant, and plaintiff would have completed the contract and sold the entire 15,000 shares allotted to him, within the time agreed upon, but for the fact that the defendant refused to permit him to sell more of the stock. The commissions claimed by plaintiff, being 25 per cent. of the money remitted by him to defendant, amounted to $3,060; and plaintiff elected to convert this amount into stock at 60 cents per share, and accordingly demanded of defendant 5,083 shares of the Fulton Oil Company. Other facts are referred to in the remarks of the trial court, and in this opinion. Upon the conclusion of the evidence introduced by the parties, the plaintiff moved for a directed verdict, whereupon the court said: ...
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