Miller v. Hawkeye Gold Dredging Co.

• Decision Date: 27 September 1912
• Citation: 137 N.W. 507,156 Iowa 557
• Parties: MILLER ET AL. v. HAWKEYE GOLD DREDGING CO., LIMITED, ET AL.
• Court: Iowa Supreme Court

156 Iowa 557

137 N.W. 507

MILLER ET AL.

v.HAWKEYE GOLD DREDGING CO., LIMITED, ET AL.

Supreme Court of Iowa.

Sept. 27, 1912.

Appeal from District Court, Linn County; Milo P. Smith, Judge.

From a decree declaring certain sums owing plaintiffs, and establishing liens on an alleged trust fund on deposit with the Cedar Rapids National Bank and ordering payment therefrom, the defendants appeal. Reversed.Crissman, Linville & Churchill and Dawley & Wheeler, all of Cedar Rapids, for appellants.

Grimm & Trewin, of Cedar Rapids, for appellees.

LADD, J.

The Fraser river, having its source near the headwaters of the Yukon, flows south into the Straits leading to the Pacific Ocean. For many years the Indians washed gold from the débris along its shores. Citizens of this state laboring under the delusion that doing so by machinery would prove feasible, as well as profitable, organized a corporation, known as the Iowa Lillooet Mining Company, Limited, under the laws of British Columbia, with its principal place of business at Lillooet, B. C., and through it launched on the river a dredge boat equipped with machinery, with the design of acquiring the gold which they imagined had been accummulating beneath its waters for centuries. This was in 1903, and, as rumors of treasures to be found reached Iowa from afar off, greed of gain grew, and another company, the Hawkeye Gold Dredging Company, Limited, was promoted to take care of the gold at the bottom of some unappropriated portion of the stream. Though Lillooet was named in the articles of each company as the principal place of business, this was in fact at the office of B. B. Bliss, secretary of both companies, in Iowa Falls. In anticipation of what might happen, the stock in the company first organized rapidly advanced in market value, and, as a consequence the shares of capital stock in that being promoted, were sold, as it were, in a day, and not until all were gone was it realized that some who had parted with their money to exploit the first enterprise had not been afforded an opportunity to participate in the last. It is said, by more than one witness, that the people of Charles City were clamorous for stock, and, owing to profound sympathy for them, Mrs. Hamilton, stenographer of the secretary and designated on the prospectus as assistant treasurer of the company, telephoned to John T. Bailey, then at Iowa City, that it would be to his advantage to come to Iowa Falls. Upon arrival, he found her in charge of the office, Bliss and others having gone to British Columbia to formally organize the company, and the “advantage” to Bailey suggested was that he dispose of stock to the aforesaid people of Charles City. After considerable parley, it was arranged that the shares should be sold at 15 cents each, of which Bailey should retain 2 cents as commission, remit 3 cents to Mrs. Hamilton, and whatever more was paid (the par value being 10 cents per share) should be turned over to the company. She claimed that these shares were some for which others had subscribed; and one controversy is as to whether the purchasers were to be regarded as original subscribers, and therefore required to pay but 25 per cent. of the par value in cash and the remainder in five equal monthly installments, or were taking the shares from original subscribers, who had paid in part or wholly therefor, and were to pay in full and stand in the place and stead of their predecessors.

The evidence bearing on this issue was in sharp conflict, and was such that, had the cause been submitted to the jury, we could not have interfered with the verdict returned. Many persons at Charles City either subscribed for or purchased stock through Bailey, as did the plaintiffs, John Miller, 20,000 shares, Jacob Dreyfus, 3,500 shares, M. S. Miller, 1,500 shares, and Charles W. Stafford, 1,000 shares. The subscriptions of each of these persons were separate, and each paid 25 per cent. of the par value and received a separate receipt therefor, signed by “B. B. Bliss, Secretary Hawkeye Gold Dredging Co., Limited, per M. V. H.” (Mrs. Hamilton.) A few days later the remaining 75 per cent. of the par value of their stock was remitted through John Miller and the similar receipts issued.

2. As we understand the record, incorporation was effected under the laws of British Columbia May 19, 1904, and the incorporators met in Iowa Falls June 22d thereafter and elected directors, and on the same day the directors selected officers of the company. On the next day a committee to obtain information with respect to a contract for dredging and report, and to act when directors were not in session, was appointed. The stockholders met August 24 and adjourned until August 30, 1904, when a resolution was adopted, proposing to acquire a certain mining lease from four stockholders in consideration of 1,600,000 shares of stock and $10,000 in money. It was also ordered that subscriptions on which there had been no payment be vacated, and resolved that “no money be paid out and no expenses be incurred, except the ordinary clerk hire, postage, stationery, and necessary incidental expenses, until it shall be demonstrated to the satisfaction of our board of directors that the dredge now in operation by the Iowa Lillooet Gold Mining Company has proven its ability to earn substantial dividends on the stock of the said company, in which event our board of directors shall submit plans and specifications for the building of dredges to a meeting of the stockholders of this company for authorization by such stockholders' meeting to enter into contract for the building of such dredges.” “Also that a special meeting of the stockholders be held Dec. 1, 1904, at which meeting, if it shall appear that the dredge operated and owned by the Iowa Lillooet Company has not earned substantial dividends on the stock of said company, and that it has not proven a financial success, we favor taking provision at such meeting as shall return the money held by this company to the stockholders, less the incidental expenses heretofore referred to.”

Up to this time no stock had been issued. No action had been taken, save as above stated, recognizing any one as stockholder, and, though the minutes of the meetings refer to those present as stockholders, they held no evidence in the way of certificates showing them to be such. The directors elected at the meeting last mentioned met August 10, 1904, and, after electing officers, a counterproposition for the acquirement of the mining lease was accepted; and it was ordered that there be issued to all subscribers of stock a stock certificate on the form now printed, signed by the president or vice president and countersigned by the secretary, with seal of the company attached,” the stock certificates and the record to indicate the amount paid thereon. The directors also resolved that “in pursuance to the recommendation of the stockholders all original subscribers who have paid on their stock in excess of the 25 per cent. assessment be returned all amounts in excess of 25 per cent.”

On September 24th following another meeting was had, at which the office of secretary was declared vacant and resolution to refund was suspended and W. L. Crissman appointed attorney for the company. All books and papers of the company which had not previously been destroyed were removed to the office of Crissman & Sargent at Cedar Rapids, upon the discovery by the attorney of derelictions on the part of the secretary and treasurer. On December 1, 1904, the board of directors, in pursuance of the articles, appointed a committee of three, including Mr. Crissman, as an executive committee, with full power to act in behalf of the company in all matters, and by direction of this committee all payments above 25 per cent. of the par value of stock originally subscribed were refunded, save to plaintiffs. Mr. Crissman, in a report to the directors on January 20, 1905, stated that the claims of plaintiffs required special consideration, and explained in his testimony that “the theory of that was that we were convinced, the board of directors were convinced, and the executive committee were convinced, that these people to whom refund was made had paid in the amount in excess of 25 per cent. innocently, and under a misapprehension of the requirements of the company. I learned that the men who had sold the stock had made representations to them in regard to how the balance over and above the 25 per cent. would become payable. Some of them were paying in 15 per cent. a month, and others had been told that it would have to be paid in so many months, and they had never been advised to the contrary. It had usually been remitted by mail; and there was a distinction drawn as between people whom we had reason to believe had bought other people's subscriptions, speculators, and the original subscribers, and who were advised and had been required to pay the full amount, the full par value, into the company, in order to have transfers made. At that time, from the best information we had, there was plenty of assets of the company to take care of all such people, besides having ample to take care of all future obligations that might come up.” About this time Albada, who had been appointed to audit the company's accounts, prepared a stock register, which the directors adopted. Thereon was a memorandum opposite each of plaintiffs' names, “Trans. from G. L. Dobson,” but of this, prepared as it was by one in ignorance of the facts, it furnished no more than prima facia evidence, though the register be required by the laws of British Columbia to contain such data.

From this recital of facts, it seems very clear that the directors, acting in harmony with the wishes of the stockholders, declined to accept more than 25 per cent. of the par value on original subscriptions. That they had the power so to do appears from the act of the Legislature of British Columbia, as...