186 Iowa 971 | Iowa | 1919
The Iowa Mercantile. Company was organized in April, 1915, and in September, 1916, it was placed in the hands of a receiver, and found to be insolvent. In April, 1916, about five months before the appointment of the receiver, the corporation or its alleged agents secured from the defendant in this case his subscription for shares of its capital stock, to the par value of $1,500. For this amount he gave his two promissory notes, neither of which was paid when the proceedings for a receivership were begun. Thereafter, the receiver 'began this action to recover the amount of said subscription.'
At the outset, and by amendment to his petition, he declared in separate counts upon the subscription contract and also upon the notes; but before final submission, the action upon the notes was withdrawn or dismissed, and the demand for a recovery was left, to rest upon the original subscription agreement.
The defendant admitted making the subscription, and pleaded and sought to prove that it had been obtained from him by the fraud and false representations made to him by the corporation and its agents, with respect to its business and its financial condition. The plaintiff demurred to the answer, stating as the only ground thereof that the alleged fraud in the procurement of the subscription constituted
For some reason, judgment was not entered at once on the demurrer, and thereafter, a jury was empaneled, and the receiver, as a witness in his own behalf, testified to his appointment, and to the fact that he found the corporation to be insolvent, and that the stock subscribed by defendant had not been paid for.
In defense, the defendant offered to prove the fraud and false representations alleged in the answer; but all evidence as to the negotiations between him and the corporation and its agents, the representations made by them, and the truth or falsity thereof, was excluded on the objection above stated, that none of these xnatters may be pleaded or proved as against the receiver. Upon this state of the record, a verdict was directed for the plaintiff, and judgment entered accordingly. •
As we have already notedf'ffinf decision had not yet been announced when this ease was tried below, and the extent to which the so-called “English rule” governed the liability of subscribers to corporate stock had not been definitely settled or limited in this state. The judgment appealed from has the support of many authorities; but, as the question was still, to some extent, an open one in this jurisdiction, we have felt justified in adopting the rule which seems most in harmony with sound principle.
It follows that the defendant’s exceptions to the rulings of the trial court must be sustained, and the cause remanded for further proceedings in harmony with this opinion. The judgment appealed from is reversed, and the directed verdict is set aside. — Reversed,