Pittsburg Min. Co. v. Spooner
| Decision Date | 25 April 1889 |
| Citation | 74 Wis. 307,42 N.W. 259 |
| Parties | PITTSBURG MIN. CO. v. SPOONER ET AL. |
| Court | Wisconsin Supreme Court |
OPINION TEXT STARTS HERE
Appeal from circuit court, Dane county.
Action to recover the sum of $70,000, brought by the Pittsburg Mining Company against Phillip L. Spooner, Jr., Frank W. Oakley and Alexander H. Main. A demurrer to the complaint was sustained, and plaintiff appeals.
LYON, J., dissenting.Tenney, Bashford & Tenney and John W. Olin, for appellant.
H. W. Chynoweth and Gregory, Bird & Gregory, for respondents.
This action was brought by the Pittsburg Mining Company against the respondents for the purpose of recovering from said respondents $70,000 of money had and received by the defendants for the use of the appellant company. The material allegations of the complaint are:
(1) That in February, 1887, the defendants conceived the idea and agreed together to promote the organization of the plaintiff corporation for the ostensible purpose of carrying on the business of mining iron on the Gogebic range, so called, in the state of Michigan, but for the real purpose of cheating those who might deal with said corporation, and by so doing enrich themselves.
(2) That in pursuance of such scheme the defendants obtained for the purpose of purchase or temporary control a mining option on said range, conferring the right to prospect, explore, and mine for iron on a tract of land described in the complaint. This option was owned by certain parties named in the complaint, and the price demanded by them for it was $20,000, and no more.
(3) That, having obtained the control of such option for the purposes of the corporation, the defendants proceeded to obtain subscriptions to the capital stock of the proposed corporation, to raise the money to buy it; that to induce subscriptions to said capital stock the defendants falsely and fraudulently represented to divers persons, and to all persons who became and now are stockholders in said corporation, that the price demanded by the owners of said option was $90,000, and that it could not be bought for less; that the defendants were themselves desirous of buying it, but were unable pecuniarily to pay so much money, but desired to organize a corporation to purchase it; that they would themselves become stockholders in the corporation to the extent of their ability to pay for the same; that there was no speculation in the purchase price; that the defendants were making nothing out of it,--not even their expenses, unless the corporation saw fit to reimburse them,--except what all stockholders would make alike through the operation of the proposed corporation in mining the ores covered by said option.
(4) The defendants also represented that for the purpose of the successful operation of the business of mining on said tract of land it would be necessary for the corporation to raise the sum of $100,000 in money,--$90,000 for the purpose of purchasing the option from the owners thereof, and $10,000 to be put in the treasury of the company for the purpose of developing the mines.
(5) In furtherance of said fraudulent scheme the defendants drew up, and by said fraudulent representations procured to be signed, a subscription paper, of which the following is a copy:
(6) The complaint then alleges that this subscription paper was signed by a large number of persons, agreeing to take shares in a sufficient amount in the whole to cover the entire proposed stock of the projected corporation, to-wit, $1,000,000.
(7) Immediately after said stock had been all subscribed, and on the 21st day of March, 1887, the defendants organized a corporation in conformity to the laws of this state, under the name of the “Pittsburg Mining Company,” now the plaintiff in this action. The defendants were the only original incorporators; and on the 22d day of March, 1887, the first meeting of said corporation was held at Madison, in this state. All the defendants were present at such meeting. The defendant Spooner was elected president, and the defendant Main treasurer. That about the time of said meeting, and in furtherance of said fraudulent scheme, the defendant Main, with the advice and procurement of the other defendants, Spooner and Oakley, but in the joint interest of all of them, subscribed for the entire stock of said corporation, viz., $1,000,000, except one share each of $25, which were taken by the defendants Spooner and Oakley; and thereupon at the same meeting, by the unanimous vote of the defendants as sole corporators and directors, the following resolution was adopted, viz.: “Resolved, that in accordance with the subscription of A. H. Main to the capital stock of said company, the president and secretary hereof issue to him, or to such person or persons as he may direct, and in such number of shares as he may direct, all of the said stock, except two shares thereof, one of which is held by said Phillip L. Spooner, Jr., and the other by said F. W. Oakley; the said stock to the said Main to be issued as paid up in full, in consideration of his making and delivering to the president of the said corporation, for the said corporation, an assignment in writing, duly executed, of an option which he now owns on the north half of the southwest quarter of section eleven, (11,) township forty-seven, (47,) range forty-five (45) west, Ontonagon county, Michigan.”
(8) It is further alleged in the complaint that none of the stock subscribed for by said Main was ever issued to him, except the sum of $25,000 now held by defendant Main. That although he conveyed to the corporation the mining option before mentioned in nominal payment for all of the stock of said corporation, neither the defendant Main nor any of the defendants ever had or held any valuable interest in said option above the price of $20,000, which had to be paid to the owners thereof. That, said option having been procured and being held by the defendants, or by the defendant Main for them, as promoters and trustees of said corporation, whatever value or interest they possessed or could possess therein inured to and was the property of said corporation, when formed, without advance in price or other conditions; and it is futher alleged that $20,000 was the full value of said option.
(9) The complaint further alleges that the defendants, in furtherance of their fraudulent scheme, after said subscriptions were obtained, caused said option to be conveyed to said Main without any consideration; then caused the corporation to buy it from him for substantially its entire capital stock, caused the agreement to take shares in the projected company, as hereinbefore set forth, to read as an agreement to take them of said Main and pay him for them, instead of the company, and then issued the shares so subscribed for to the several persons who, by the agreement aforesaid, had agreed to take them; and collected from them the sum of $100,000, paid the owners of the option $20,000 for the same, kept $10,000 in the treasury of the company, and fraudulently converted the remaining $70,000 to their own use, in violation of their duty to the company, as its promoters, trustees, and directors; whereby the plaintiff has sustained a loss of $70,000.
(10) The complaint further alleges that in procuring control of the said mining option, in organizing the corporation, securing subscriptions to the capital stock, collecting moneys thereon, paying for said option to the owners thereof, having it conveyed to the defendant Main, and by him to the plaintiff corporation, and in all other matters touching the organization of the plaintiff corporation, and the purchase of said option, the defendants became and were the promoters, agents, and trustees of the plaintiff, and, while so acting, they could not, in law, by any pretext, pretense, or contrivance gain any personal profit or advantage over the plaintiff, or make any valid contract with it to its prejudice, and to further their individual advantage.
(11) It is further alleged in the complaint that the amount paid to the owners of said option by the defendants in behalf of the plaintiff was the sum of $20,000; that the amount was obtained by the defendants from the corporation on the fraudulent pretext that such payment was $90,000, $70,000 of which the defendants have diverted from the company, and fraudulently appropriated to their own use, and for this amount they are jointly indebted to the plaintiff as for so much money had and received to its use, and the plaintiff demands judgment for the said sum of $70,000, with interest and costs.
To this complaint the defendants demurred, and allege as grounds of demurrer: (1) That the plaintiff has not legal...
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Henderson v. Plymouth Oil Co.
... ... See, also, Ehrich on Promoters , ... § 125, Section 14, note 60; ... Pittsburg Mining Co. v. Spooner , 74 Wis. 307, 42 ... N.W. 259, 17 Am. St. Rep. 149; Macey Co. v. Macey , ... ...
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