Moloney v. Cressler

• Decision Date: 07 October 1913
• Docket Number: 1,912,1,921.
• Citation: 210 F. 104
• Parties: MOLONEY v. CRESSLER et al. CRESSLER v. MOLONEY.
• Court: U.S. Court of Appeals — Seventh Circuit

210 F. 104

MOLONEY v. CRESSLER et al.

CRESSLER v. MOLONEY.

Nos. 1,912, 1,921.

United States Court of Appeals, Seventh Circuit.

October 7, 1913

In December, 1898, Cressler represented to Moloney: (1) That he owned and controlled the capital stock of the Ottawa Gaslight & Coke Company, 450 shares of the par value of $100 per share; (2) that he desired to and would sell it to appellant for $115,000. (3) That the corporation owned a gas plant at Ottawa, Ill., which appellee intended putting in 'first-class condition,' giving in detail alterations, improvements, and repairs so contemplated. Appellant--being unacquainted with gas plants, their construction, operation, or the requisites of equipment or operation of a first-class plant-- stated to the appellee that he would require a statement in writing showing the then condition of the gas plant; also, the main features of the contemplated improvements; that if he should agree to purchase such stock appellee 'must agree to make all the repairs and improvements necessary to make such plant a first-class, well equipped gas plant, to be passed upon and approved by a thoroughly competent expert before acceptance,' by appellant.

To the conditions last above, appellee assented, agreeing to furnish such written instrument, to make the repairs and improvements, the same to be completed not later than July 1899, if the contemplated purchase and sale was carried out. Appellee further represented good title in the corporation subject only to a $25,000 mortgage; that an abstract of title would be furnished; that imperfection in title would be remedied; that all indebtedness of said corporation contracted prior to January 1, 1899, would be paid by him if the sale were consummated. Appellant was willing to risk $15,000 of his own money in purchasing the plant if it were improved as promised, but was unwilling to put in $115,000 and was willing to purchase it on condition that $100,000 could be borrowed on the security of the plant-- to which appellee assented.

Thereupon the agreement was made, appellant to buy, appellee to sell said stock for $115,000. The latter, pursuant to his promise furnished appellant a written statement showing the extent and condition of, and the contemplated improvements to, the plant. It contained a description of the real estate and machinery; the projected additions and improvements, such as gas holder, hydraulic elevators, new pipe connections, tramway and dump car, repairs in purifying room, retort room changes, new boiler room as specified, painting buildings, etc.; all estimated to cost $17,000, and when completed, enable delivery of gas at a cost of one-half of gross receipts, i.e., if the latter were $30,000, the profit would be $15,000.

The appellant, Moloney, a citizen of Illinois, filed his bill in the circuit court for Cook county, against the appellee, Cressler, a citizen of Indiana, joining as parties defendant the members of the copartnership N.W. Harris & Co., a number of whom were citizens of Illinois, others of New York, others of Massachusetts.

The allegations of the bill are: Such statement represented the coal gas and water gas capacities of the plant to be 170,000 and 150,000 cubic feet, respectively, per 24 hours. The connection, mains, leakage, and gas sales are detailed and described. It was therein further endeavored to demonstrate the effect of the contemplated improvements in increasing the earnings of the plant through a saving in items such as coal fuel expense, proper holding capacity, purifying, new tramway, etc., aggregating an amount to total of $2,520.27.

It was also in such statement declared that 21 miles of new mains had been laid, and most, if not all of the buildings erected in six years last past; 760 new meters had been purchased in such years, and in eight years last past improvements aggregating in cost $75,000 had been made. The holder was in good repair for substantial work.

This statement was made January 1, 1899. Appellant soon after the making of the agreement inquired of N.W. Harris & Co. whether $100,000 could be borrowed on the plant. They assured him that, in view of the contemplated improvements, such loan could be effected, on first mortgage, provided good title and corporate power in the company be shown.

After such assurances had been given, and, to wit, on March 22, 1899, appellee induced appellant to advance him $28,000 on account of the purchase. Thereupon an additional and supplemental contract was entered into, which recites the making of the agreement to sell for $115,000, and that an outstanding issue of $25,000 bonds is to be paid out of the purchase price; that certain improvements are to be made as per 'plans and specifications' submitted; and contains these provisions:

(1) That appellant had paid $28,000 as part of $115,000, purchase price.

(2) Balance of consideration to be paid, the $25,000 of bonds to be deposited with N.W. Harris & Co. to be paid by them as directed by Cressler. When they have been paid, $20,000 in addition to be retained by them 'until the improvements hereinbefore referred to are completed in said plant by Cressler.'

(3) After payment of the bonds, Cressler shall receive the balance of the consideration except the $20,000 above specified to be held until improvements are made.

(4) Moloney 'shall then be entitled to receive the said stock' controlling the company as of January 1, 1899. All outstanding indebtedness on that date to be paid by Cressler. Moloney thereafter to receive all benefits and bear the burdens.

(5) ' * * * That the stock hereinafter referred to is placed with the agreement in the vaults of N.W. Harris & Co. as an escrow, to be delivered and the legal title of which to pass to the said Moloney when the said Cressler receives all of the consideration hereinbefore mentioned in manner and form as hereinbefore stated.'

(6) Cressler to liquidate indebtedness owing and to receive moneys earned prior to January 1, 1899.

(7) Instrument executed in triplicate, 'one to be deposited with the stock as aforesaid,' the parties retaining the other two.

The bill further averred:

The furnishing of an abstract of title, which, being submitted to said N.W. Harris & Co., resulted in objections to the title. Appellant, as attorney, was instructed by Cressler to render the service necessary to clear the title. Such service was reasonably worth $600.

Cressler was unable to pay the $25,000 bonds. They were paid by Moloney, at Cressler's request, principal and interest, $27,708.95. He was put to large expense in carrying out this request, which, with the reasonable value of his services as attorney in that behalf, amounted to $500.

After paying the $28,000, and before effecting the $100,000 loan, said N.W. Harris & Co. informed appellant that the gas company was forbidden to mortgage its property, and that the contemplated loan could not be made; but that such loan might be effected by organizing another corporation under a different law, which, when consolidated with the old company, could execute the mortgage to secure such loan. Thereupon Cressler advised Moloney to take the steps necessary to accomplish such purpose, and this was done. Moloney's expense in doing this was $175, the value of his services, $1,000.

The loan of $100,000 was accordingly effected August 15, 1899, and thereupon Moloney deposited with N.W. Harris & Co. the $20,000 to be paid for the improvement account as stated. Harris & Co. paid out of this for improvements which Cressler should have paid, $10,332.15, leaving in their hands $9,667.85.

Moloney, on August 15, 1899, paid Cressler $20,000, and August 18, $15,000 both on account of the purchase price and in reliance upon the agreement to improve the plant.

Moloney also collected outstandings of the company for which he is entitled to a reasonable collection fee.

Cressler failed to make the improvements necessary to put the plant in a first-class condition. Moloney expended for that purpose $16,000.

Cressler falsely represented to Moloney at the time the sale was negotiated that 21 miles of new mains had been laid within six years then last past, whereas in truth there were but 17 miles, 8 of which were not new, laid within six years, but in fact old and had been laid nearly forty years. His representations respecting the size of mains were false, many of such mains being much smaller than stated. He falsely represented the inlet and outlet connections to be eight inches, when in fact they were six; that the water gas machinery had a capacity of 150,000 feet per 24 hours, when it did not exceed 90,000. Moloney relied upon these representations which Cressler knew to be false, and has been damaged $15,000.

Cressler failed in his agreement to improve the plant and put it in a first-class condition by July 1, 1899. Much of the machinery was not of the quality specified, nor was it installed until more than two years after July 1, 1899. The holder to be erected was not properly constructed, having the defects detailed in the bill. The damage to appellant by reason thereof is set at $5,000.

Pursuant to the 'supplemental agreement' of March 22, 1899, the stock certificates were placed in the hands of N.W. Harris & Co. 'in escrow to be delivered to your orator upon your orator's payment of the purchase price of said stock. ' That such stock is now in their hands. 'That your orator has paid the full purchase price of said shares of stock and has frequently demanded said certificates from said N.W. Harris & Co., and from said Cressler, but that said N.W. Harris & Co. as well as said Cressler refuses to deliver the same to your orator.'

The bill concludes:

'And your orator further says that in justice and

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