Rhoades v. McDowell

PARDEE, J. Blake McDowell as receiver for the Akron Prospect Company, commenced this action in the Summit Common Pleas to recover on the unpaid balance due upon a stock subscription made by J. Perry Rhoades to .the Company. Said cause was presented to the trial court upon the amended petition of McDowell, the amended answer and cross petition of Rhoades, and the reply of McDowell. McDowell alleged said Company was insolvent and that its assets consisted only of Rhoades’ and others unpaid stock subscriptions, and that it was necessary to collect such money due thereon to pay debts. Rhoades in his amended answer set up several defenses, including a general and specific denial, and further that the stock subscription was obtained by fraud and by the terms of the subscription, damages occurring by breach of contract, would be determined, upon default of the subscriber to be 20% of the total price for the stock, any surplus to be returned to the subscriber; and as he had paid more than 20% it was averred, he was released from further liability. Rhoades also filed a cross petition asking for relief and appointment of a master commissioner, etc. McDowell, by way of reply denied all this and replied further that after this contract the company contracted debts upon the faith and credit of the stock subscriptions, and that Rhoades is estopped to allege fraud, etc. Before the ease- came on for trial, the cross petition was withdrawn and the case remains one of law. When the case came on for trial upon the pleadings, as hereinbefore indicated, motions were made by both parties for a judgment on the pleadings and the court rendered judgment in favor of McDowell. In this court, Rhoades complains of this judgment, and asks for a reversal. The Court of Appeals held: 1. There is a well recognized distinction between the avoidance of liability upon a subscription for stock conditionally delivered and the avoidance of liability upon a stock subscription obtained by fraud-which distinction is clearly pointed out in the case of Martin, Trustee, v. Steinke, 4 Abs. 38; 22 O. App. 119. 2. In that case, the defense was based upon a conditional delivery of a stock subscription and there was no evidence that any liabilities were created by the company after the date *168 of the subscription in reliance thereon. In the case of a conditional delivery of a stock subscription, there is no contract until the happening of a future event, whereas in cases where the stock subscription is obtained by fraud, the subscription is valid until rescinded and repudiated by the subscriber. Attorneys — Mottinger & Evans for Rhoades; Amos. H. Engleback and C. T. Grant for McDowell; all of Akron. 3. In this case, the judgment which was rendered in the trial court was upon the pleadings, and the motion which was made for said purpose bears a close resemblance to and is in the nature of a general demurrer; in fact, it is in substance both a demurrer and a motion. This motion, like a demurrer, raises only questions of law, and is aimed directly at the substance and not at the form of the pleadings. In considering this motion, _ the pleadings should be liberally construed in favor of said defendant. 4. Although separate motions for judgment were made by the plaintiff and the defendant, and were pending before the trial court at the same time for decision, the admissions thereby made by the defendant could not be considered by the court in passing upon the motion made by the plaintiff, and vice versa; and the court having overruled the motion of Rhoades, the admissions made by him for that purpose could no longer be considered by the court for any purpose. 5. Fraud was alleged in Rhoades’ answer and if these affirmative allegations were proved' before the jury, a complete defense to the action would be established, unless Rhoades was estopped from setting up said claim against the plaintiff in his representative capacity as receiver of said corporation for the benefit o'f its creditors. 6. These allegations of fraud, for the purpose of the motion, were admitted to be true by the plaintiff, and the allegations of the cross-petition did not militate against or modify them in any way. This, then, presented a question of fact to be determined by the jury upon evidence offered, which question of fact the court was incompetent to determine. 7. The affirmative facts of alleged estoppel set up and relied upon in the reply, were as a matter of law, denied, and being denied the court of course could not pass upon them over the objection by Rhoades, for it is a well recognized rule that where issue is joined upon a single material proposition a judgment upon the pleadings cannot be rendered. Judgment therefore reversed. (Washburn, PJ., and Funk, J., concur.)