Smith v. Parker
| Decision Date | 15 January 1897 |
| Docket Number | 17,836 |
| Parties | Smith v. Parker |
| Court | Indiana Supreme Court |
Rehearing Denied May 25, 1897.
From the Hendricks Circuit Court.
Affirmed.
S. M Shepard, Brill & Harvey and McBride & Denny, for appellant.
E. G Hogate and J. L. Clark, for appellee.
The circuit court sustained a several demurrer to each of the two paragraphs of the complaint for want of sufficient facts, and the plaintiff refusing to amend or plead further, and standing upon his complaint, the court rendered judgment for the defendant.
The substance of the first paragraph of the complaint is as follows: The plaintiff complains of the defendant and says that on March 9, 1886, he obtained letters patent of the United States for an improvement in flour scoops and sifters; that afterwards, on April 26, 1887, Elmer E. Smith (a son of his plaintiff), Alfred Welshans, Elisha H. Hall and Chester F. Hall, organized a corporation under the laws of Indiana, for the purpose of manufacturing and selling flour scoops and sifters, strainers, etc.; that the capital stock of said company was fixed at $ 5,000.00; afterwards said company which had adopted the name of "The Smith Manufacturing Company," made a contract with plaintiff whereby it was agreed, that the said company should have the right to manufacture flour scoops and sifters and other articles, under the said letters patent, so issued to this plaintiff, and as a compensation for such right and license, the company agreed to, and did issue to this plaintiff, paid up stock in said company, of one-fourth of the capital stock of said company, and by such agreement, was to and did thereafter, until, as otherwise hereinafter stated, pay to this plaintiff, as a royalty on each and every article made, or parts thereof made under said letters patent, one cent each on flour scoops and sifters, strainers, etc.; that the Smith Manufacturing Company commenced doing business immediately after such contract, and, although said company had limited means and small capital it succeeded in building up a large and rapidly growing business, and but for said limited means would have been able to have greatly enlarged its business; and thus matters stood until about the first of July, 1888, when the defendant, seeing the business was a prosperous one, and desiring to get control of the same, purchased the shares of capital stock owned by said Welshans and the two Halls. At the time of said purchase, plaintiff individually owned tools used in said business of the value of $ 400.00; that plaintiff had owing to him on a contract for manufacturing said articles for said company the further sum of $ 500.00; that when said defendant had purchased said shares of stock, and got an insight into its business, he represented to this plaintiff, that he, defendant, had plenty of means, and could command money in sufficient quantity to run said business upon a large scale, and, thereupon, defendant falsely and fraudulently represented to plaintiff that if plaintiff would consent to the formation of a new company and would assign his said patent to said new company, absolutely, and forego his, plaintiff's rights to royalties on articles manufactured under said patent, and would put in said tools and materials then on hand, and release his claim for money due on said contract with said old company, that they would form and organize a new company under the name of the William Smith Company, of Danville, Indiana; and if that was done defendant could and would furnish the new company with all the money it might require to make it a large and prosperous business, and this plaintiff having but little means, and being desirous of increasing said business, and relying upon the representations of said defendant, and fully believing that said defendant would furnish said new company means in abundance to run such business upon a large scale, thereupon plaintiff at the special instance and request of said defendant joined in the organization of the William Smith Company, of Danville, Indiana, as a corporation, under the laws of the State of Indiana, with a capital stock of $ 10,000.00 of which $ 2,000.00 was issued to plaintiff, and defendant received of such capital stock $ 5,000.00.
Thereupon, plaintiff, relying upon such representations, did on July 7, 1888, assign his said letters patent to said William Smith Company; that immediately after such new company had been organized, defendant induced Frederick Neiger to purchase $ 1,000.00 of said stock, and Mrs. Dempsey $ 1,000.00; a Mr. Crabb $ 5,000.00 and a Mr. Ferree $ 50.00; said Crabb was then and there the father-in-law of said defendant, and said Ferree was a brother-in-law; so that in the family of said defendant there was a controlling interest in said capital stock of said new company, and that at the first annual meeting of the stockholders of said company, this plaintiff was purposely omitted from the directory of said company, and the said family combination took possession of all the principal official situations in said new company, and thereafter controlled and managed the said affairs of said new company, built a factory on credit, bought other patents on royalty, and run things as far as possible on credit, yet, notwithstanding the business was making money and doing a prosperous business, by reason of the expense of taking in other manufactures, and by the mismanagement of said defendant, Parker, and his failure to furnish money of his own to put into the business, said new company became insolvent. Defendant found in the course of the management of the business that said patents were valuable, and he determined to wreck said company and become the sole possessor of said patents, and to that end he studiously, fraudulently, and persistently refused to put in any money to run said business, but in every possible way sought by withholding his money so to embarrass said business as would, and finally did, result in the disaster to said business of said company. Afterwards, at the March term of the Hendricks Circuit Court for 1890, said Parker and others, filed in said court a petition for a receiver of said new company, and said Parker by virtue thereof had said business sold by a receiver, and said defendant, Parker, became the purchaser of the assets of said company, and the owner of said letters patent. And plaintiff says that by reason of said wrongful and fraudulent conduct of said defendant, the plaintiff has been deprived of said patent, which was and is valuable, and the use and benefit thereof; has lost his tools and materials so put in, and money so owing to said plaintiff by said old company, and is damaged thereby in the sum of $ 50,000.00, wherefore, etc.
The theory of this paragraph, as counsel on both sides agree, is an action for damages caused by fraud. It is contended by the appellee's counsel, in support of the ruling of the court below, that the fraud or misrepresentation which affords a ground of...
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