Cook v. Southern Columbian Climber Co.

Stockdale, J., delivered the opinion of the court. The bill of complaint in this cause was filed by eleven mem [126] bers of the Columbian Climber Company, a corporation under the laws of the State of Mississippi, domiciled at Utica, Miss., claiming to be the majority of said company, with the right to control it, against W. A. Cook and Z. Wardlaw, two other members of said company, as defendants, against whom relief is asked, and joining as defendants, in order that the right of all parties may be adjusted, M. F. Powell, G. W. Minims, Jr., J. M. Powell, and W. G. Patrick. The scope and purpose of the bill is to recover from said defendants, Cook and Wardlaw, certain moneys alleged to have been wrongfully retained by them, and to recover the same into the treasury of said company. The case as made by the bill of complaint is that the said defendants, Cook and Wardlaw, promoted a company, and induced complainants to embark therein, for the purchase of certain patents on a device or instrument named the “Columbian Climber” — something like a lifting jack; that said Cook and Wardlaw represented to complainants that the right to sell the instrument — the climber or lifting jack' — in the nine states of New Jersey, Delaware, Virginia, West Virginia, North Carolina, South Carolina, Georgia, Florida, and the District of Columbia could be bought from Melvin Cox, a citizen of Illinois, then in Utica, for $9,000, and no less, and Cox joined them in that declaration, and aided in forming the company, whereas, in point of fact, the said patent conferring the right to sell the said instrument in said territory, cost only $4,500, and the agreement between Cox and the defendants, Cook and Wardlaw, at the time they were forming said company on a basis of $9,000, that Cox was to get $4,500, and no more, for said patents; that said Cook and Wardlaw represented to complainants the price for said patents was $15,000, but that they had induced him, by their efforts, to come down to $9,000; that complainants subscribed to and took stock in said company upon the belief, based upon the representations to that effect by Cook and Wardlaw, that the real price to be paid Cox was [127] |9,000; that $9,000 was subscribed and placed in the hands of Wardlaw to pay to and settle with Cox; and that Wardlaw paid Cox $4,500, and he and Cook kept the balance, and divided it between them. The said defendants — Cook and Wardlaw — filed their answer, denying positively that they were promoters of said company, and denying that they deceived or defrauded complainants, or any of them; and state and set up that, long before the promotion of the Columbian Climber Company was thought of, Cook had agreed and bargained with Cox that he (Cook) should help Cox sell the territorial right to sell said lifting jack, and have for his services fifty per cent, of all sales; that Mississippi and Arkansas had been sold on that basis, and he had the right to sell the said states and the District of Columbia for $9,000, and have half the sum for his services, and that he took Wardlaw in with him, and promised to divide equally with him, and upon that basis they went to work to raise said company; they did not let anyone know that Cox was to get finally only $4,500 and they the balance; but they represented to complainants that Cox was to get the whole $9,000, and did get the whole $9,000, but did, as he had agreed to do, turn over to Cook all over $4,500, as commissions. The testimony in the case is voluminous for both parties, presenting some contradictory testimony, but no material differences as to main facts. The dispute is mainly as to the attitude of the said defendants, Cook and Wardlaw. Complainants contend that the said defendants, knowing that Cox was to get only $4,500 for the patents, and having represented to complainants that they, the said defendants, had induced said Cox to lower his price from $15,000 to $9,000 in the interest of the buyers,, and that complainants depended upon them to form said company on a true basis, and that complainants would not have subscribed had they known the truth (that Cox was to have but half the amount, and Cook and Wardlaw the other half), they (Cook and Wardlaw) having themselves subscribed on the list [128] that was carried around $1,000 each; therefore defendants were promoters of the conspiracy, and deceived and defrauded complainants, and they are entitled to relief. Defendants’ contention is that the price was, in fact, $9,000, and they paid over to Cox $9,000, and Cox gave them back $4,500 as commissions, and that they occupied no fiduciary capacity, and are not liable to deliver up the profits they made out of the transaction. There is an agreement of counsel in the record to the effect that Melvin Cox, the vendor of the patents, would, if present, swear that he would not have taken less than $9,000 for those states and District of Columbia. That, if true, involves the anomalous piece of history that a man would come from Illinois to Mississippi to sell patent' rights, and would absolutely refuse to take any less than $9,000 for certain territory, but would agree to give an agent $4,500 to sell it for $9,000, leaving to himself $4,500; that he would refuse to take $4,500 cash for a piece of property, while he was willing to give fifty per cent, to anyone who would sell it for $9,000, with all the risks intervening as to whether it could be sold or not. What reason could have induced Cox to so act is not disclosed. It could not have been that he wanted it to appear to the people that he had sold out for a larger price. He could have accomplished that by doing what he did do finally — inserted in the deed conveying these rights to the Columbian Climber Company, $30,000 as the consideration, and acknowledge the receipt of that amount. If that were not true, and Cox would have taken $4,500 for the said territory, then the company could have been formed on that basis, without concealment of any facts»; and there could be no other reason for representing to the subscribers that the territory would cost $9,000 than that Cook and Wardlaw might get- out of the other subscribers, without consideration, $4,500 in stock and money over and above the real cost of the territory, as profit to themselves for promoting the company. It depends upon the facts in proof whether the defendants, Cook [129] and Wardlaw, were in the attitude of promoters of the company, or were honestly selling what they had the right to sell without deception or fraud upon subscribers. The chancellor seems to have made careful examination of the case, and weighed the testimony, and rendered a decree, after due consideration, granting relief to complainants, and requiring defendants, Cook and Wardlaw, to account for and pay into the treasury of the Columbian Climber Company the profits they realized out of, the venture; and his judgment is entitled to weight. We do not find in this record any sufficient reason for disturbing the decree of the court below, except as to G. W. Mimms, Jr., and M. F. Powell. G. W. Mimms, Jr., bargained with defendant, Cook, for his stock, and paid Cook for it in lands. He does not appear to have aided in promoting the company, and does not demand any stock of the company. M. F. Powell did not subscribe for the stock herself. Her husband put her name on the list, to forward the scheme of getting up the company. She paid nothing for it, did not expect to pay anything for it, and does not claim it. The stock was to be given to her by Cook and Wardlaw. She had no part in getting up the company, and did not assist in defrauding anyone. The bill asks no relief against G. W. Mimms, Jr., nor M. F. Powell, but makes them parties, as it declares, simply that their rights may be adjusted. The decree of the court below is affirmed, except as to G. W. Mimms, Jr., and M. F. Powell, and the issuance of stock of said company to either of them is denied, and' as to them, the bill is dismissed, and the cause remanded, to be proceeded with in accordance with the views expressed in this opinion; the costs of this appeal in this court to be paid by appellants, except the costs accrued here on account of G. W. Mimms, Jr., and M. F. Powell, which will be taxed on ap-pellees.