125 Iowa 101 | Iowa | 1904
And the said Iowa Company further proposes and agrees to sell within said counties above named twenty-five (25) miles of hedges and to cause the plants to he used in the construction'thereof to be set, such sales and planting to be free of charge or expense to said Cedar Valley Hedge & Wire Fence Company, and to assign and turn over to said Cedar Valley Company the contracts taken for said twenty-five miles of fence, all without charge or expense to the said Cedar Valley Company, on or before the planting season of 1895.
And whenever the said Cedar Valley Company shall' have been incorporated, and its stock ready for issuance, the said Iowa Company consents and agrees that two thousand dollars ($2,000), face value, in notes received by said Iowa Company from the sale of the stock of the said Cedar Valley Company or four thousand dollars ($4,000), face value, of the stock of said Cedar-Valley Company shall be turned over to the treasury of the said Cedar Valley Company for its use and benefit, as said Cedar Valley Company may elect; provided, that if notes be selected, they shall be assigned without recourse.
It is further agreed by the said Iowa Hedge & Wire Fence Company, and by each of the subscribers hereto, that all notes, checks, drafts, or moneys given in settlement for the respective subscriptions hereto made, shall be turned over and held hy John T. Hamilton as trustee until after the articles of incorporation of said company shall have heen duly filed, its officers elected and the stock hereto subscribed for shall have been duly issued and delivered, and that thereupon all notes, checks, drafts or moneys paid to said John T. Hamilton as trusteé shall be turned over to the said Iowa Hedge & Wire Fence Co. or its representatives. It is further agreed by the said Iowa Company and the subscribers hereto that the several subscriptions for stock hereto made shall not be binding until the full amount of the stock of the
It is further agreed that each subscriber to the instrument shall be entitled to receive two dollars ($2.00) of the stock of said Cedar Valley Company, paid up and nonassessable, for each dollar of his subscription.
It is also further agreed that as soon as all the stock of said Cedar Valley Company shall have been subscribed for as herein before stipulated, the said Iowa Company will make a deed to the said Cedar Valley Company covering all patents owned by the Iowa Companv, pertaining to the planting, plashing and constructing hedge and wire fence, in, to and for the counties of Linn, Benton, Iowa, Johnson and Jones.
Think of receiving $2 in stock, subsequently changed to $3, for every dollar to be paid, and this in a company possessing contracts pledging the payment of $2,000.00 more than ten per cent, of the face value of the stock. The generosity of the proposition is apparent upon a moment’s reflection. The articles of incorporation were to be procured without charge. The country about Cedar Rapids was to be beautified by the planting of honey locust hedges without expense to the new company. The contracts under which the farmers should agree to pay $1 per rod, in four equal annual.installments, for these “ fences that never die,” were to be delivered to the new company gratuitously. Notes of the subscribers to the amount of $2,000 or $4,000 for stock in the new company were to be turned over to it as a present. As though this were not enough, the promoters of the scheme assured the subscribers that notes executed for stock would unquestionably be paid from the profits arising from the business of the new company before they matured, and that, in any event, these would not be transferred, and ample time would be given for their payment.
“ The best laid schemes o’ mice an’ men Gang aft agley
And lea’e us naught but grief and pain Hor promised joy.”
Contrary to expectation, the farmers made no contributions for their benefit, and therefore profits did not accrue to the subscribers. The notes remain unpaid. They were not retained by the promoting company, but transferred to the plaintiff, which, posing as an innocent purchaser, now seeks to enforce their collection. The point most strenuously urged is that the notes were taken in the ordinary course of business, without notice and for value. But we think the issue as to notice was for the determination of the jury. The claim of plaintiff is that those sued on were
Indeed, there is much in this record to justify the conclusion that a part of the scheme <?f the officers of this bank in organizing the Iowa Hedge & Wire Fence Company was to have the bank receive the notes of subscribers to the stock of local companies as an innocent purchaser. (1) Four of the bank directors, constituting its discount committee, helped organize the company, with Leon Bailey, the chief promoter, and, presumably, Duvall and Johnson, his zealous assistants, became directors, of the new company; (2) the company was practically without capital, for the promoters of it began borrowing of the bank as early'as in December, 1894, before the operations in Iowa had fairly begun; (3) if the cashier’s first statement is to be accepted, the arrangement for the loan -was made not with the board of directors, but with the three promoters, and entered to their individual credit, and paid out on their checks; (4) this was with the express understanding that the payment should be made not by the company, but by money, or secured in notes taken by the promoters in consideration of stock in local companies to be organized. Apparently, the discount committee of the bank was dealing with the promoters, rather than the new company, and the latter was but a subterfuge to be made use of only when necessary in carrying out the scheme of obtaining the money or notes of subscribers for the stock in local companies to' be organized. If these promoters may be said to have been carrying out the design of this committee, representing the bank, with others, in procuring the notes, and such a finding has support in evidence, then the bank was charged with notice of any infirmities incident to their procurement, even though its officers may have been without personal knowledge of the method pursued.
Doubtless the members of the committee did not hatch
That is, he must satisfy you by said evidence that said note was procured by fraud and misrepresentation, with intent to cheat and defraud defendant,- or that plaintiff, in concert with others, confederated together to procure said note by said means, or that the consideration for said note has failed. If defendant has satisfied you that the n'otes were procured by said means, or that the consideration therefor has entirely failed, then you will be warranted in finding for the defendant.
The instruction is wholly inadequate. The record is complicated, and many defenses pleaded. The jury was left to search for the particular facts claimed to constitute the fraud charged. When it is stated that the answer, with amendments, avers that the entire enterprise, from its first inception, was fraudulent; that the defendant’s note was procured from the trustee upon the false representation that all the stock' had been subscribed for, and that his signature to the subscription papel and notes was procured by falsely representing that one Hamilton had paid for his stock, when he had given but half price; and that this was in pursuance of a general plan to obtain subscriptions upon such misrepresentations and deceit — the force of this criticism will be appreciated. See State Bank of Indiana v. Cook, 125 Iowa, 111.
III. On the former trial the court gave the following instruction:
On appeal it was condemned. State Bank of Indiana v. Gates, 114 Iowa, 323, which was followed upon the reversal of a former judgment in this case. Our notion has not been altered by its repetition on the second trial. In the first place, even if the Iowa Hedge & Wire Fence Company did promise not to negotiate or transfer the note, this would not, alone, afford a defense against a purchaser with notice, unless it should also be found that the maker also had a defense to it as against the payee.
Because of the failure to fairly submit the issues raised by the pleadings, and the repetition of an error condemned on the former appeal, the judgment must be reversed.