Starkweather v. Eddy

PLUMMER, J.

Plaintiff had judgment in an action brought to recover the sum of $1,250 and also to recover 50,000 shares of the capital stock of the Minarets Mining Company. From this judgment the defendant appeals.

The record shows that the Minarets Mining Company was, at the date of the trial, a corporation, and had been such since the fifteenth day of November, 1916; that the plaintiff was engaged in the prosecution of mining upon certain mining premises belonging to him; that during the year 1917 the plaintiff engaged in negotiations with the Minarets Mining Company for the transfer to said mining company of the mining premises belonging to the plaintiff, for and in consideration of the sum of $5,000 in cash and 150,000 shares of the capital stock of the defendant corporation; that the defendant was the organizer and promoter of the defendant corporation and had received therefrom 100,000 shares thereof in his own name and 50,000 shares thereof in the name of his wife; that in consideration of the transfer by the plaintiff to the corporation of the premises above mentioned, the defendant, as the promoter and organizer of said corporation, had promised and agreed that he would undertake to raise a working capital of $10,000 for said corporation and also the $5,000 to be paid to the plaintiff, as above mentioned, as part of the consideration for the transfer by him of his property to said corporation; that the defendant stated and represented to the plaintiff that in order for him to succeed in raising such money it would be necessary to pay a commission, either of stock or cash, as might in particular cases be arranged with parties through whom cash subscriptions should be obtained, and that the commissions would be at the rate of twenty per cent, and that the defendant would pay the same out of his large holdings in the corporation; that is, that a stock commission of twenty per cent would be paid out of the 150,000 shares belonging to the defendant; that thereafter the de

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fendant represented and stated to the plaintiff that it was impossible t.o carry out the undertaking in full, and that he would be unable to pay or provide the corporation the means of paying plaintiff the agreed cash consideration of $5,000 for the transfer of plaintiff’s property, in addition to the shares of stock to be issued to the plaintiff in said corporation, and that the defendant could not pay the cash commissions on stock sales, whereupon the plaintiff agreed, at the defendant’s instance and request, that one-half of all moneys received by him from said corporation as said purchase price of his property, might be used by defendant for such purpose, should it be found necessary to so use it, and also that plaintiff, at defendant’s special instance and request, on account of defendant’s alleged inability to raise the money he had undertaken and agreed to do, agreed that the plaintiff would accept from the corporation $2,500 in full satisfaction of its undertaking to pay him $5,000 for the transfer of property herein referred to; that thereafter the defendant represented to the plaintiff that 150,000 shares of the treasury stock had been subscribed and paid for in accordance with the previous agreement between the defendant and the plaintiff, and that it was necessary for plaintiff to assign and set over, out of his stock holdings, shares necessary to pay such stock commissions of twenty per cent thereon; that the plaintiff had no information or means of obtaining information as to what it had done, and implicitly trusted in the truth of defendant’s statements, and relying thereupon, acted upon them, and did transfer and set over to the defendant a certificate of stock for 50,000 shares of plaintiff’s interest in said corporation. The plaintiff further alleges that out of the $2,500 received by the plaintiff from the corporation, upon the representations of the defendant that it was necessary for him to use the said sum of $1,250 thereof in payment of commissions, turned over to the defendant and paid to the defendant the sum of $1,250. The plaintiff further sets forth that the defendant did not use such $1,250 in the payment of commissions, as represented by him, but obtained and used the same for his own personal advantage and benefit. The complaint also further sets out that the defendant had not used the stock assigned to him for promotion purposes in payment of stock commissions for the sale of treasury stock,