Pozorski v. Gold Range Commonwealth Corp.

SiebecKeb, J. The plaintiff seeks recovery for the breach of this contract. It is alleged that the representations therein made concerning the ownership of the mining property, with stated improvements, that it was a corporation with a paid-up capital stock of the stated amount, and that its properties were free from indebtedness, were false; and that by reason of such false representations and defendants’ failure to advance to plaintiff the money as agreed in the contract, for the purpose of paying the expenses of himself and a mining engineer to make examination of the mining property, plaintiff suffered damages by being prevented from earning the commission he was to receive for making sale of the corporate bonds and in using the avails thereof for constructing mills on this property under the terms and conditions of' the written contract. The trial court sustained the defendants’ demurrer to the complaint upon the ground that the material [599] parts of the agreement were fraudulent in their nature and against the public policy of the state, and that a court would not therefore lend its aid to enforce the contract. It is well established that contracts in violation of the common law or the statutes are void, and that parties thereto will not be given the aid of courts to enforce claims arising thereunder, because the law does not permit that such a contract be made the foundation for the enforcement of a legal right. Melchoir v. McCarty, 31 Wis. 252; Pearson v. Kelly, 122 Wis. 660, 100 N. W. 1064. The stipulations of this contract pertaining to the sale of the bonds of the corporation are that the plaintiff and his associate have the right on their part to sell the corporate bonds secured by a first mortgage or trust deed, in which plaintiff was to be the trustee, and that all the money realized from the sale of such bonds was to be received and held by the plaintiff as trustee. It was further agreed that the plaintiff was to purchase and erect machinery for a mill, to make such other improvements of the mining property, or to pay existing debts against the corporation, incurred in the acquisition of. the property, as in his judgment he should deem proper for a profitable operation of the properties, or he might make such expenditures to obtain patents on the properties from the United States; and the plaintiff and his associate were to “have a lien on all of the property of the said corporation, real and personal, prior to the lien of the said trust deed or mortgage hereinbefore referred to and prior to any other in-cumbrances on the said property, to secure the payment to the parties of the second part of an amount equal to the amount received by the said 8. J. Pozorski as proceeds from the sale of any bonds.” This is an agreement by the corporation to pay plaintiff and his associate for their services an amount equal to the sum realized from the sale made by them of the corporate bonds, and that they should have such [600] a lien that they would be tbe first to be paid out of tbe proceeds of tbe bonds or out of tbe property into wbicb tbe proceeds might bave been converted. It is in effect an agreement to pay plaintiff and bis associate out of tbe avails of tbe bonds sold and out of tbe company’s other property an amount equal to the face value of such bonds. Tbe effect of tbe contract is that tbe plaintiff obtains a first lien upon tbe proceeds of tbe bonds sold or tbe avails thereof, in machinery or other property, wbicb would enable him to apply tbe money realized from tbe bonds to pay himself and associate for negotiating them and for investing tbe proceeds in machinery to operate this mine. In substance it is an arrangement by wbicb plaintiff was to advance to the corporation money realized on its bonds and to be secured the repayment thereof as compensation for services rendered to tbe whole amount be has realized. In other words, plaintiff, as trustee, is in this circuitous manner made tbe owner of tbe funds received by him from tbe sale of bonds, and whatever part of such funds be should advance to tbe company would be secured by a first lien on all of tbe corporation’s property. In legal effect, this treats him as tbe owner of tbe proceeds of tbe bonds, with an obligation to advance such sums as may be required for tbe equipment and operation of tbe mine, and 'in case tbe mine fails to produce sufficient to repay such sum be retains an interest in tbe property, acquired by tbe money be so advanced to tbe corporation, to make good to him tbe amount so advanced. Under these conditions tbe corporation does not actually receive tbe proceeds of tbe bonds, but only a conditional promise that it shall ‘be paid such proceeds if plaintiff’s undertaking to operate tbe mine shall produce an income sufficient to pay double tbe amount realized from tbe sale of tbe bonds, and in tbe event that tbe mine does not produce such an income tbe corporation never would receive tbe proceeds of tbe sale of tbe bonds. Under such circumstances tbe plaintiff would retain them under bis claim of [601] lien provided in tbe contract. This violates sec. 1153, Stats. (1898), which provides: “No corporation shall issue . . . any bonds or other evidence of indebtedness except for money, labor or property estimated at its true money value, actually received by it, equal to seventy-five per cent of the par value thereof, and all . . . bonds issued contrary to the provisions of this section . . . shall be void.” We consider that the arrangements between the plaintiff and the corporation and the other defendants, as embodied in the contract before us, do not operate so that the corporation will actually receive seventy-five per cent, of the par value of the bonds in either money, labor, or property, as provided in this section of the statutes. The contract is therefore a violation of this statute and hence void. It contravenes the law and public policy of the state, and plaintiff cannot rely on it to enforce an alleged legal right. Melchoir v. McCarty, 31 Wis. 252, and decisions of this court wherein it is cited. It is unnecessary to consider other grounds of alleged illegality of this contract which were suggested in argument, nor the question whether plaintiff’s alleged damages are purely speculative and prospective losses such as are not recognized in the law. By the Gourt. — The order appealed from is affirmed.