124 Iowa 361 | Iowa | 1904
The action was originally brought by Pendleton, as trustee for Manix & Co., to compel the Harris-
Whereas, Harris-Emery Company, a corporation of Polk County, Iowa, desires to retire all of the preferred stock of said corporation now outstanding, as it may do under its said articles of incorporation; and,
Whereas, E. S. Pendleton holds in his own right and name one hundred and twenty-five (125) shares of Class ‘ A * of the preferred stock, represented by certificates as follows: Certificate No. 33, five shares Certificate No. 16, five shares;
Now therefore: In Consideration of said Pendleton waiving all rights as the holder of said stock to said stock as preferred over the common stock of this corporation, said Harris-Emery Company hereby agree to allow said stock to stand as it now is and not to retire the same as long as held and owned by said Pendleton.
In. llarch, 1901, Erankel and Emery entered into an agreement by which the former secured an option on the purchase of- 782 shares of common stock, constituting a majority of the common stock of the corporation, the price to be the book value on January 15, 1901 and a bonus of a specified sum. During the negotiations leading up to the execution of the instrument of option, the status of the Pendleton stock as common or preferred was discussed as bearing on the question of the book value, and the facts were disclosed to Erankel on which Emery based his claim that this stock was common, and not preferred, in view of the waiver. In the option contract this clause is found:
Eifth. The said Emery in order to induce the sale of said stock has represented and guaranteed. * * * (c) That the capital stock of said company now outstanding is sixteen hundred and twelve shares, and not more, of which fourteen hundred and eighty-two shares are common stock, and the remainder preferred stock.
It is conceded that in this guaranty the Pendleton stock was considered common stock, and that, if in fact it was preferred stock, the guaranty was to that extent untrue. When Erankel exercised his option of purchase under this contract, the following instrument was executed, and the sum of $1,600 was paid to Reynolds as therein provided:
Whereas, Jacob S. Emery has this, day sold to the Erankels seven hundred and eighty-two shares of common stock of the Harris-Emery Company under a guaranty- that the whole amount of common stock in. said corporation is fourteen hundred and eiglity-two shares, and
Whereas, in said guaranty said stock of E. S. Pendleton is guaranteed to be common stock.
Now, it is agreed that said Jacob S. Emery shall deposit with Arthur Reynolds $1,600 to be held by said Reynolds, for the benefit of the persons who may ultimately be entitled thereto under the contracts between the parties when it is determined whether said stock is common or preferred. „
„ M. Erankel,
Jacob S. Emery.
Received $1,600 above referred to April 16, 1901.
Arthur Reynolds.
It is the contention of counsel for Erankel that, notwithstanding the waiver, and for reasons hereafter to be more fully set out, the Pendleton stock was in fact preferred stocky that the book value of the common stock was less by about $2 per share than it would have been, had the Pendleton stock been in fact common stock, as guaranteed; and that Erankel is therefore shown to be entitled to recover the sum of $1,600 thus deposited with Reynolds. Counsel for Emery contends, on the other hand, that the Pendleton stock was in fact common stock, and that, even if it was, technically, preferred stock, notwithstanding the waiver, Erankel has shown no damage resulting from the untruthfulness of the guaranty, inasmuch as the guaranteed dividends paid on preferred stock have not exceeded those which were in fact paid on common stock, and therefore Emery is entitled to the fund.
Our conclusion is that Erankel has not established his right to recover any part of the $1,600 deposited with Peynolds, and that judgment should have been rendered for Emery for the entire amount of the fund. The decree of the trial court will -be modified accordingly, and Emery may have judgment for the entire amount in this court, or in the lower court, as he may elect.— Modified and affirmed.