Davis & Co. v. Dumont

Miller, J. The demurrer admits the material allegations of the count in the answer demurred to. The question, therefore, is whether these facts constitute a defense to the plaintiffs’ cause of action. In other words, do these facts show that the contract sued on was obtained from the appellants through the fraud of the plaintiffs % In our opinion, if these facts are true, it is clear that a fraud of the grossest character has been perpetrated in the procurement of the obligation sued on. Appellees, however, insist that the case falls within the holding in First National Bank, etc. v. Hurford & Bro., 29 Iowa, 579. It was there held that in an action to recover on a subscription to aid in the construction of a railroad, wherein fraud in obtaining the subscription, and failure of consider [55] ation, were pleaded by tbe defendant, tbe declarations of a person made at a public meeting where the subscription was made, who was not shown to have been authorized to speak for the company or those representing it, were not admissible in evidence. In that case the authorized agents of the railroad company make a written proposition to the citizens from which they had not varied and had not authorized any one else to do so ; and the declarations sought to be given in evidence were those of one citizen made in a meeting of citizens held for the purpose of considering the written proposition, and made in the absence of the agents of the company and without their knowledge or consent. The case before us is clearly distinguishable from that ease. The fraud here alleged consists in a scheme to which the plaintiffs were parties and its object was by false and fraudulent representations 'to procure for themselves, from the citizens of Marion, $25,000 in donations of money, which they would be unable to procure by telling the truth, and being that sum in addition to what is necessary under a profitable contract to do the grading of the road to Marion, more than sufficient for that purpose having already been secured. The facts alleged show that the instrument sued on never had any legal existence or binding force by reason of the fraud practiced in its procurement. It is urged on the part of the appellee that since appellants made no objections to the binding force of the instrument until the work of grading the road by plaintiffs has been completed, they are estopped from setting up the fraud now. It is sufficient answer to this position to remark that it does not appear that the plaintiffs incurred any expense or assumed any duty or obligation on the faith of this and the other similar subscriptions obtained under the same circumstances. On the contrary, it is alleged that the money previously secured for the grading of the road was more than sufficient for the purpose; that a large sum of money could be made by taking the contract to do the grading for the amount already secured, together with what the construction company agreed to pay, all of which [56] plaintiffs received, and that the plaintiffs were fully paid for the grading of the road, under then* contract, without any knowledge by the railroad company of these fraudulent subscriptions. The plaintiffs, therefore, are in no manner prejudiced by appellants’ failure to object before the work was completed. The ruling of the circuit court in sustaining the demurrer was erroneous and its judgment is reversed.