Merch v. O'Rourke

• Decision Date: 12 May 1900
• Citation: 111 Iowa 351,82 N.W. 759
• Parties: MERCHANT v. O'ROURKE.
• Court: Iowa Supreme Court

111 Iowa 351

82 N.W. 759

MERCHANT

v.O'ROURKE.

Supreme Court of Iowa.

May 12, 1900.

Appeal from district court, Kossuth county; Lot Thomas, Judge.

Plaintiff is an assignee for the benefit of creditors under a deed of general assignment executed by one L. Carmichael, and his cause of action grows out of the following facts: The Tama Furniture Company, whose business is indicated by its name, was organized with a capital of $10,000, divided into shares of $100 each. Carmichael was a stockholder; and defendant, also,--the latter being the owner of 10 shares. In several respects the requirements of the statute were not complied with, in effecting the incorporation of the company. The company became indebted for a large amount, which it was unable to pay. Some of these debts were put in judgment against Carmichael, and claims for all were filed with and paid by plaintiff, as his assignee. This action is brought to recover from defendant his proportionate share of the amounts so paid. The answer, so far as material here, is to the effect that Carmichael induced defendant to purchase the stock in question by orally agreeing to take the same off defendant's hands at any time he so desired. It is alleged that, some time after this, defendant desired Carmichael to take the stock from him as so agreed, and presented it for that purpose, and, to induce defendant to retain the stock, Carmichael then agreed orally that if defendant would release him from his agreement to take the stock, and would retain the shares himself, and permit Carmichael to vote the same by proxy, he (Carmichael) would save defendant harmless from any liability growing out of, or in any way connected with, the ownership of said shares. Evidence was received tending to sustain this answer, but on motion of plaintiff it was stricken out, and a verdict directed for plaintiff. On this verdict a judgment was duly entered. Thereafter, on defendant's motion, the judgment and verdict were set aside, and a new trial ordered. From this order plaintiff appeals. Affirmed.Struble & Stiger and Clark & Coneur, for appellant.

Carr & Parker and W. L. Joslyn, for appellee.

WATERMAN, J.

The parties unite in presenting for determination but a single issue, and that is whether the answer sets out a legal defense. It seems to be conceded that, if it does, there was no error in granting the new trial. While we interfere very reluctantly with an order of this kind made by the trial court, yet we have no hesitation in passing upon the correctness of the ruling where the exact ground on which it is based is shown. Turley v. Griffin, 106 Iowa, 161, 76 N. W. 660. There are two contracts set up in the answer, and we shall take them up in their order.

1. Was the agreement valid by which Carmichael assumed to take the shares from defendant whenever the latter desired, and pay him therefor what the same had cost? On the part of appellant it is insisted that the invalidity of this contract is settled by the decision of this court in Kauffman v. Harstock, 31 Iowa, 472. In that case plaintiff had subscribed for certain shares of stock upon defendant's promise to buy them for the price paid, on certain conditions. The action was brought to enforce this agreement, it being alleged that the conditions were all performed. It was conceded that parol proof of the agreement was not admissible unless it was found to be a present sale of the stock, and this court held that it was not such a sale, and therefore could not be established by parol. This is all that is decided in the cited cases. We do not regard the question of the statute of frauds as material in considering this first contract. If it was a lawful agreement, it is of no concern how it might be proved, for there is no attempt made here to enforce it. It is set up only as a basis for the second agreement, which is relied upon as a defense. The statute of frauds does not prohibit an oral contract, nor make such agreement illegal because certain formalities are not complied with. It relates only to the method by which proof may be made. Townsend v. Hargraves, 118 Mass. 334. We shall have more to say on this subject further on. At present we devote our attention to the question of the validity of this first agreement, which seems to be denied for want of mutuality, and because it was without consideration. Option contracts are of frequent occurrence in the business world. Benj. Sales, § 39. Had defendant offered to sell his stock to plaintiff at a certain...