62 Iowa 691 | Iowa | 1883
The plaintiff sets up two grounds for setting aside the contract fraud and failure of consideration. The fraud is alleged to consist in certain promises as to what the company would do, which promises it has not fulfilled. The failure of consideration is alleged to consist in the failure to fulfill the promises. The court found that the consideration of the subscription had failed, and decreed that the contract be canceled, and that the property which the plaintiff gave in payment for the stock be restored to him.
The companj-, as its name indicates, is a corporation organized for the manufacture of pumps and windmills. It is the owner of a patent right. The plaintiff is a mechanic. As such he entered into a contract with the company to manufacture for it one hundred pumps and windmills. While performing his contract with the company, he became desirous of acquiring an interest in the company; and the company having the power to issue more stock than had been subscribed, the plaintiff was allowed to take ¿wenty-four shares, of the nominal value of $2,400. He gave therefor property of the estimated value of $1,200, and the stock was issued to him as full-paid stock.
The contract for the manufacture of one hundred pumps and windmills was by mutual consent abandoned, and the company itself entered upon the manufacture, employing the plaintiff as master mechanic in the business, at a salary of $1,000 a year. The company, in proceeding with the business, incurred some indebtedness, though we think not a very large one. But, whether it was large or small, the company became somewhat embarrassed. It had never had much money, the stock which had been subscribed having been paid for in property. In view of the company’s embarrassment and want of success, the plaintiff became desirous of rescind
The record discloses some very objectionable conduct on the part of the original stockholders, but we cannot for this reason depart from the proper rules of law respecting the rights and liabilities of stockholders in incorporated companies.
However objectionable may have been the conduct of the original stockholders, and however worthy of condemnation, we are not able to see how it gives the plaintiff any rights as against the company.
Many considerations have been urged in this case which cannot properly be deemed to have any legal bearing upon it. Evidence was introduced upon both sides in regard to tbe value of the patent right. This evidence is conflicting. One witness testified that it is worthless, and two that it is valuable. But we do not deem the question a material one. It does not seem to be involved in the issues as made by the pleadings, and, besides, if the pleadings presented the question, we could not hold that it is material, unless the law is that whoever subscribes for stock in an incorporated company, which holds among its assets a patent right, may be released from his subscription and placed in statu quo, if the patent right proves upon trial to be worthless; and'no one would claim that that is the law.
Another thing urged upon our attention is the company’s lack of money. At the time the plaintiff subscribed for his stock, the company does not appear to have had much money,
Another thing urged upon our attention is, that no part of
Under the statute, articles of incorporation must fix the amount of capital stock, and notice of the amount authorized must be given to the world. Code, § 1063. The public has a right to assume, where the stock of a company has all been issued as full-paid stock, that it has been paid for in full in money, or in property at a fair .value. The mode of doing business adopted in this case has for its object to make a show of capital and responsibility not in fact possessed. But, while this might be ground for a proceeding in the interest of the public to wind up the company, it is not ground upon which the plaintiff can predicate his right to relief. He presents no such question in his petition, and, besides, he not only knew upon what basis stock had been subscribed and paid for, but he subscribed and paid for his stock upon the same basis.
We have said this much in regard to the questions discussed by counsel, which appear to us to be foreign to the issues
The plaintiff introduced evidence showing that the company appointed stockholders Evans and ITendric as a committee to negotiate with him. The stockholders alleged to have made the pi’omise in behalf of the company were Evans and "Walker. Two witnesses testily to the alleged promise, and three deny it.
We think that there was some talk, at least on the. part of certain stockholders, of procuring additional subscriptions to stock, and raising more money in that way. There is a little evidence tending to show that the original stockholders at one time contemplated advancing some money to the company for its use.
The plaintiff seems to have no theory whatever as to how the company was to obtain $10,000. Sometimes we might infer from the argument of his counsel that his theory is that the company already had the money, and that the only question was as to using it as working capital. At other times they deny that the company ever had any money.
If the company already had the money, then the question pertained merely to the mode of conducting the business. If it had not the money, it could obtain it only by giving an equivalent in some form. The failure to obtain it, then, was not' in our opinion a fraud, nor a failure of consideration of , the plaintiff’s contract of subscription to stock. If the company had borrowed $10,000, the plaintiff’s stock might have been worth more, and might have been worth less. If they were proceeding with a worthless patent, as the plaintiff claims, his stock would doubtless, by the ineurment of such indebtedness, have been worth less. Not only would the company have been obliged to repay it, but the plaintiff himself, as his stock was in fact only half paid, might per haps have been called upon for the balance. If the company
II. The appellee claims that the record was not certified
Reversed.