Wing v. Credit Guide Co.

181 Iowa 370

• Court: Supreme Court of Iowa
• Decided: October 20, 1917
• Status: Published

Opinion

Weaver, J.

1. constituting: irregular issuance of corporate stock. The petition is drawn n. two counts. The first count is entitled in equity to compel the individual defendants A. H. E. Mathews, Helen E. Boggie and C. H. E. Boardman to return to the Credit Guide Company, a corporation, the sum of $1,250, alleged to have been withdrawn or appropriated from the corporate funds by the said defendants. The second count is entitled as at law, and seeks recovery of said sum of $1,250 as damages occasioned to the plaintiff by the fraud of said individual defendants in the sale to him of stock in said corporation.' Defendants having denied both claims, the issues were tried to the court without a jury. The court found that neither of the two claims sued upon had been sustained by the evidence, dismissed the petition and taxed the costs to plaintiff, who appealed.

The argument for appellant is directed entirely to the proposition that fraud was practiced upon the plaintiff, and that the stock was void as being issued in disregard of the statute. The claim of fraud rests entirely upon the testimony of the plaintiff, and may be reduced to the statement that he was induced to purchase $1,000 of the capital stock of the corporation by the representations made by defendants, to the effect that the total issue of stock ($2,000) represented actual payments to the corporation of that amount, when in fact such alleged payments had never been made. The preponderance of the evidence fairly shows that the exact and true financial condition and history of the corporation and the manner in which the stock subscriptions had been paid were fully revealed and made known to the plaintiff before he purchased and paid for the Boggie shares. The individual defendants had been the promoters of the company, had organized its business, and had for some time been endeavoring to get it upon its feet as a going concern. They gave their personal notes to a bank, which supplied the needed ready money, and became otherwise individually obligated, so that, at the time plaintiff appeared upon the scene, the total amount of the investments in the corporation was, in round numbers, $2,000. The stock was not in fact issued until the transactions hereinafter mentioned. At the time Miss Boggie’s interest was about to be transferred to the plaintiff, the matter of the advancements and payments made by the individual defendants did not fully appear on the books of the corporation, or at least it did not appear of record that the stock issued had thus been paid for. A corporate meeting was held, and the individual defendants delivered or deposited with the treasurer their several checks, aggregating $2,000, and stock to that amount was issued to them, and later on the same day, the same amount was checked back to them by the treasurer. As a part of the amount charged against the company consisted of outstanding obligations on which these defendants had become individually responsible, it was arranged that they should assume and pay such indebtedness, and the evidence tends to show that this has been done. It is this transaction which the plaintiff assails, on the ground that it was a mere sham to make it appear to him that the stock had been paid for in full when such was not the truth. But it is fairly shown that he was in no manner deceived, and that he knew the stock had been fully paid for in money advanced and furnished and in the personal assumption of liability for corporate debts, and that, if defendants were held to repay to the treasury the sum of $2,000 represented by the checks above mentioned, it would be, in effect, a double collection of the amount of their stock subscription.

The plaintiff is the party charging fraud, and the burden is upon him to establish it by a preponderance of the evidence. In this we think he has failed, and the preponderance of the evidence is in fact with the defendants, that he was in no manner misled by any representations on their part. Repeatedly, as a witness, he reiterates the statement that the one thing he complains of is the misleading effect of the apparent payment of $2,000 into the treasury on the day the stock was issued. Yet he concedes that, if not present at the meeting at which all this was done, he was was present immediately afterwards, and was given the written minutes of the meeting, showing not only the deposit of the $2,000, but also its immediate withdrawal. It is quite impossible that he should have been deceived, and the trial court did not err in refusing him a recovery.

2. Corporations : certificates of stock: issuance in payment for money advancements : legality. This is not a case coming under the ban of the statute which prohibits the issue of stock for other than a money payment of the subscription, except upon permission given by the state executive council. The money had been' paid to or for the corporation, though the stock had not yet been formally issued, and there is nothing in the language or intendment of the statute which forbids recognition by the corporation of payments and expenditures so made in its behalf, or the issuance of its stock to the amount thereof.

There is no good ground for a reversal, and the judgment below is — Affirmed.

Gaynor, C. J., Preston and Stevens, JJ., concur.