Hughes v. Campbell

EvaNS, C. J.

Tbe notes in suit all bear date of March 20, 1922. When they were given, a contract was in contemplation, which was not actually executed until April 18, 1922. It is the contention of the defendants that the subsequent contract qualified their liability upon the notes, and that it created a trust and a trustee for the collection of the notes, and that it rendered the notes payable from a specified source, and not otherwise; in short, that neither the plaintiff nor his assignors, who are payees of their respective notes, are entitled to maintain an action thereon. The contract thus relied on was as follows:

“Exhibit !A’

“Memorandum of Agreement.

“This article of agreement entered .into this 18th day of April, 1922, by and between Mr. C. B. Campbell and O. M. Woodward, of Crestón, Iowa, parties of the first part and Mr. C. S. Rex, D. Davenport, M. D. Smith, H. L. Tramp, Adam Begg, Scott Skinner, J. W. Reynolds, O. S. Barber, of same place and M. J. Wade of Iowa City, Iowa, N. W. Reed of Ot-tumwa, Iowa, and J. J. Hughes of Des Moines, Iowa, parties of the second part, witnesseth — that the parties of the first part being now stockholders in the C. B. Campbell Company of Crestón, Iowa, the same being a corporation organized and operating under the laws of the state of Iowa and desiring to buy the stock belonging and now held by the said second parties of the said C. B. Campbell Company and the said second parties desiring to sell their stock in the above mentioned company to the said first parties, it is therefore hereby agreed by and between the parties of the first part and the parties of the second part that as soon as possible the dividend declared by the C. B. Campbell .Company and payable on or before February 15, 1922, be paid to the stockholders of record as of that date and that the said parties of the first part Mr. C. B. Campbell and Mr, O. M. Woodward purchase the stock held in the C. B. Campbell Company from the parties of the second part at its par value and in the amounts of each individual’s holdings which are as follows, C. B.' Rex 15 shares of the par value of $1,500.00, M. D. Smith 10 shares of the par value of $1,000.00, D. Davenport 10 shares of the par value of $1,000.00, H. L. Tramp 15 shares of the par value of $1,500.00, Adam Begg 18 shares of the par value of $1,800.00, Scott Skinner 10 shares of the par value of $1,000.00, J. W. Reynolds 15 shares of the par value of $1,500.00, O. S. Barber 15 shares of the par value of $1,500.00, M. J. Wade 5 shares of the .par value of $500.00, N. F. Reed 10 shares of the par value of $1,000.00, J. J. Hughes 5 shares of the par value of $500.00 and that the said first parties give in payment for the same their promissory notes due in one year from date drawing 7% annual interest payable at the First National Bank of Crestón, Iowa, in the amounts equalling the par value of each of the holdings of the parties of the second part and in addition the parties of the first part hereby agree to deposit with the parties of the second part their certificates of stock held by them in the said company and equalling in par value to their promissory notes above referred to, properly assigned, as a collateral security for their promissory notes given in the purchase of stock from the parties enumerated and referred to as parties of the second part. It is further agreed to by the parties of the first part the said C. B. Campbell and the said O. M. Woodward that they will restrict themselves to a salary of not more than $50.00 per week each, while these notes are in effect and unpaid in order to more quielcly enable them to redeem and pay off the said notes given for the purchase of stock above referred to and both parties to this agreement hereby designate Mr. M. D. Smith, president of the First National Bank of Crestón, Iowa, as a trustee to receive all payments from the parties of the first part and to distribute in equal proportion the sdme to the parties of second part in accordance with each one’s holdings.

“Signed this 18th day of April, 1922.

“C. B. Campbell

“O. M. Woodward

“Parties of the first part.”

“Signed by above parties of second part.”

The one material question presented by the defense is that of the proper construction of the foregoing contract. We have italicized certain portions of it as above set forth, which clearly indicate the construction which should be put upon it, so far as it relates to tbe defense presented under it. Tbe notes sued on are absolute promises to pay on or before one year. Tbe contract made additional provisions wbieb were clearly intended for the benefit of tbe payees of tbe notes, and which clearly contemplated an acceleration of payment even before due, by tbe application of expected profits from tbe operation of tbe corporation. It will be noted from tbe recitals of tbe contract that tbe defendants Campbell and Woodward acquired from their eo-stock-bolders all tbe stock of the corporation. Tbe notes in suit were a part of those given by these defendants for stock purchased from tbe respective payees. Tbe contract pleaded contemplated that tbe profits of tbe corporation as a going concern, over and above $50 per week for each of tbe defendants, should be promptly applied pro rata upon ■ payment of tbe promissory notes given by tbe defendants to tbe selling stockholders. Smith was appointed as trustee to receive such profits and distribute the same pro rata. No profits were ever paid into bis bands. Up to tbe time that tbe notes fell due, no dollar bad been paid upon them. There is nothing in tbe contract which restricted tbe .liability of tbe defendants on tbe notes, or that qualified tbe form of such liability. Furthermore, it appears from tbe evidence that tbe corporation ceased to be a going concern even before tbe notes became due. All its property was transferred to another, and further business was all transacted in tbe name of tbe individual defendants, and not in that of tbe corporation. Tbe contract appointed a trustee, it is true. But tbe trust hoped for never came into bis extended bands. He was a trustee without a trust. We deem tbe defense wholly without merit. The plaintiff was clearly entitled to the judgment awarded.

Tbe judgment of the district court is, accordingly, affirmed. —Affirmed.

Stevens, Faville, and Yermilion, JJ., concur.