Negley v. Hagerstown Manufacturing, Mining & Land Improvement Co.

⁶⁹³ The appellee company was incorporated in February, 1890, and the appellant subscribed for three hundred shares of the par Value of twenty dollars per share; but was to pay only fifty per cent, thereof in full of his subscription. At the time he subscribed he was not in funds with which to make payment in cash, and accordingly an arrangement was entered into between him and the company to the effect following: He made application to the company for the loan of three thousand dollars, the repayment of which he proposed to secure by the hypothecation of thirty shares of the capital stock of the Hagerstown Iron Works and the three hundred shares of the appellee’s stock for which he offered to subscribe. This proposal was accepted by the appellee on April the twenty-ninth, eighteen hundred and ninety, and on the following day the appellant subscribed for the three hundred shares of stock. Subsequently the thirty shares of the Iron Works stock were transferred to a certificate in the name of the appellee and the certificate was delivered to the appellee’s secretary, who then made out in the name of the appellant. a certificate for three hundred shares of the appellee’s stock.

These two certificates, together with the written contract embodying the terms of the proposal and acceptance, were placed in an envelope and sealed up and retained by the appellee company. The loan, or more properly speaking what is called a loan, made by the appellee to the appellant was to be repaid in five years with interest. In point of fact no money was actually furnished by the appellee to the appellant, and though the transaction purported in form to be a loan, it was in reality an acceptance by the company of his subscription with a delivery by him of the Iron Works stock and the shares subscribed for as collateral for the payment of the sum due on that subscription. In less than a year afterwards the Hagerstown Iron Works went into liquidation and sundry sums were from time to time paid by it to the appellee on the thirty shares of stock transferred by the appellant to the appellee as collateral.

The total amount thus paid reduced the sum due by the appellant to the appellee for the three ⁶⁹⁴ hundred shares of stock subscribed for by him, to eight hundred and thirty-seven dollars and eighty cents. The last named amount was the balance of the three thousand dollars remaining due on May the seventeenth, eighteen hundred and ninety-two. After the expiration of the five years at the end of which the alleged loan was payable, the appellant filed a bill on the equity side of the Circuit Court for Washington County against the appellee, wherein he charged that he had been induced by misrepresentations contained in a certain