Owens v. Wagner

Pattison, J., delivered the opinion of the Court. Thirty or more years ago, the appellant, R. Bowie Owens, was professor of electrical and mechanical engineering at the University of Nebraska. At that time, the appellee, Herbert ⁶⁷³ A. Wagner, now president of Consolidated Gas Electric Light & Power Company of Baltimore, was developing a single phase motor, and in connection therewith he called npo-n the appellant for assistance or advice. They became friends, and for some years thereafter they met frequently at conventions.

Later their paths diverged. The appellant for twelve years taught engineering at McGill University, and served for fourteen years as secretary of the Barstow Research Foundation at Franklin Institute, Philadelphia. lie retired from professional life in 1925, and formed a corporation called the Fox Hall Farms, Tnc. Its capital consisted of two hundred and fifty shares of preferred stock, par value $100, and two hundred and fifty shares of common stock with no par1 value. Colonel Owens, the appellant, turned over to the corporation a farm in Anne Arundel County about fifteen miles from Annapolis, which he had bought from his grandfather’s estate,'of an appraised value of $15,000, in exchange for the common stock.

Of the preferred stock, fifty shares were sold to Alfred Harrison, and a like number to Ralph Mojeska, each paying therefor the sum of $5,000. Five other shares of the preferred stock were sold to General Squires for the sum of $500. Colonel Owens personally bought eighty shares of preferred stock for $8,000, and fifty shares of the same for $5,000 for a trust, he being the trustee. The corporation was formed with the object and purpose of conducting a nursery.

In March, 1929, Colonel Owens happened to meet Mr. Wagner at luncheon in one of the hotels in Baltimore City. They recognized each other, and their friendly relations were renewed. The appellant told the appellee his life story since their separation years before, including the fact that he had formed the corporation mentioned, and was at that time living at the farm upon which he was conducting the nursery. The two men saw each other frequently thereafter, and on one of these occasions the appellant told the appellee, as stated by the latter, that he had “issued some stocks to some of his friends from whom he borrowed money but that he could not ⁶⁷⁴ seem to get any more money and he needed a little help — he wanted me to go down to see the place, which I eventually did.

It was then in March.” Speaking of ’Colonel Owens, Mr. Wagner said: “He did not know anything about business of any kind, the transaction of business, and that is why he wanted to lean on me for advice to help him and tO' further finance the proposition.” On April 2nd, 1929, Mr. Wagner gave to Colonel Owens a check for $1,000, which, upon the request of the latter, was made payable to Fox Hall Farms, Inc. This check was carried by Colonel Owens to the secretary of the corporation, and the latter was requested to issue a certificate for ten shares of the preferred stock of the corporation to him (R. Bowie Owens). This was done the following day, April 3rd, 1929. On April 18th, the certificate for the ten shares so issued to Colonel Owens was canceled and upon his direction a certificate for ten shares of the stock was issued to Mr. Wagner. This certificate the appellant carried to Mr. Wagner’s office and delivered to his secretary, Mr. Sharrett.

On April 2nd, 1929, after the delivery of the check of $1,000 to Colonel Owens by Mr. Wagner, the former delivered to the latter two certificates, one for eighty shares of preferred stock, and the other for two' hundred shares of common stock, in the Fox Hall Farms, Inc., which stock he had caused to be put in the name of Mr. Wagner. On April 24th, 1929, six days after the delivery of the ten shares of preferred stock issued to Mr. Wagner, and twenty days after the eighty shares of preferred and two hundred shares of common stock had been left with him, Mr. Wagner gave to Colonel Owens a writing signed by him, which is as follows: “Memorandum in Reference to Stock of the Eox Hall Farms, Inc. “On April 2, 1929, there was handed to me by Colonel R. B. Owens 80 shares of Preferred and 200 shares of Common stock of Fox Hall Farms, Inc., issued in my name. “This stock is now endorsed by me in blank and will be held by me as agent for Colonel R. B. Owens for his sole interest and subject to his order. ⁶⁷⁵ “A copy of this memorandum has been delivered to Colonel Owens. “[Signed] Herbert A. Wagner. “Witness: Harry A. Sharrett. “Date: April 24, 1929.” Mr. Wagner, after advancing at different times to' the corporation an amount aggregating $6,000, refused to advance more money in the reorganization of the corporation. ■Some months after April 24th, 1929, Mr. Wagner advanced to Colonel Owens the sum of $300' to reimburse the latter for certain personal expenditures in connection with the Maryland Academy of Musie, for which Colonel Owens gave him his promissory note. This note, or the renewal of it, was not due at the time of the filing of the bill in this case, and did not become due until May 15th, 1932. In the fall of 1929, Mr. Wagner became ill and was unable to look after his business affairs for a period of several months.

His secretary, Mr. 'Sharrett, upon being told that the corporation was going to mortgage its land to raise additional money, insisted that a mortgage be given to Mr. Wagner to secure the advancement of the said $6,000, which was done. This mortgage was subsequently paid in full. Thereafter Colonel Owens demanded the return to him of the two hundred shares of the common and the eighty shares of the preferred stock of the Fox Hall Farms, which he had left with Mr. Wagner on April 2nd, 1929. Mr. Wagner refused to' return the stock until Colonel Owens, had paid to' him the amount of the check of April 2nd, 1929, $1,000, with interest, which he regarded as a loan, as well as the personal loan to Colonel Owens of $300.

After this refusal, Colonel Owens demanded of Mr. Wagner, as the record holder, though not the actual holder, of the stock, a proxy for said stock in order that he might vote it at the following annual meeting. This demand was likewise refused. Whereupon the bill in this case was filed. The bill prayed (1) that Mr. Wagner be ordered to' issue a proxy to Colonel Owens authorizing the latter to- vote the two hundred shares of common stock standing in the name of ⁶⁷⁶ Herbert A. Wagner; and (2) that Mr. Wagner be ordered and decreed to return to Oolonel Owens properly indorsed for transfer the certificates for the eighty shares of preferred stock and the two hundred shares of common stock which had been left with Mr. Wagner on April 2nd, 1929, as above mentioned.

As disclosed by the answer, Mr. Wagner issued and delivered to Oolonel Owens said proxy after the filing of the bill, and the same was voted, as alleged therein, at a meeting of the stockholders, February 6th, 1932, for the election of the directors of the corporation. Evidence was heard upon the bill and answer filed, and the court, by its decree of February 20th, 1932, dismissed the bill and decreed that the cost be equally divided between the parties. This disposition of the cost, it was said, arose from the fact that the defendant had failed to issue tire proxy to vote the stock when he should have done so. It is from the order or decree so passed by the court that this appeal was taken.

The decision in this case depends upon the determination of the questions, (1) Was the check, delivered to Colonel Owens by Mr. Wagner, dated April 2nd, 1929, for $1,000, payable to the Fox Hall Farms, Inc., a loan to Oolonel Owens, or was it in payment of ten' shares of the preferred stock of that corporation, purchased by Mr. Wagner? and (2) If it was a loan from Mr. Wagner to Colonel Owens, were the eighty shares of preferred stock and the two hundred shares of common stock of the corporation left with Mr. Wagner a pledge for the payment of that loan, or for the payment of it and the said personal loan of $300 to Colonel Owens ? It is contended by Colonel Owens that the $1,000 check, dated April 2nd, 1929, payable to the corporation, and on that day delivered to him, was in payment of ten shares of the preferred stock of the corporation, which Mr. Wagner had agreed to purchase; while it is contended by Mr. Wagner that the check was not given in payment of any stock purchased by him, but was a loan to Colonel Owens or the corporation; and that the eighty shares of preferred stock ⁶⁷⁷ and the two hundred shares of common stock were left with him as a pledge for the payment of said indebtedness of $1,000, as well as any future loans that might thereafter he made to Colonel Owens or the corporation. Upon the issue whether or not the $1,000 cheek was. a loan from Mr. Wagner to Colonel Owens or the corporation, the latter testified that, on one occasion when he called on Mr. Wagner, he named to him those who had subscribed to the corporation stock and the amounts subscribed by them, and he also told Mr. Wagner of the corporation’s need of money to continue the operation of the nursery. In reply to a request from Colonel Owens for financial aid and assistance in connection therewith, Mr. Wagner asked if $1,000 would help him, and he said it would.

Without going more fully into the conversation, as related by the appellant, he further testified that Mr. Wagner then and there agreed to subscribe $1,000 to the stock of the corporation, and in payment therefor gave Colonel Owens his check for that amount, payable to the corporation. Colonel Owens delivered this check to Mr. Hall, the corporation’s secretary. He was not clear in his recollection whether ho directed Mr. Hall to issue the stock to him, although Mr. Hall said he did. The latter, thinking it should be issued to Mr. Wagner, wrote Colonel Owens suggesting that the stock he made out in the name of Mr. Wagner.

The appellant, however, testified that the meaning of Mr. Hall’s letter was not clear to him, hut a few days later, when he discovered the mistake he had made in not having the stock made out to Mr. Wagner, the certificate to him was canceled and a new one issued in the name of Mr. Wagner. The new certificate was then delivered to Mr. Wagner’s secretary, who, it seems, was intrusted by Mr. Wagner with much of the details of his dealings with Owens and the Fox Hall Farms, Inc., and who subsequently became the treasurer of the corporation. This certificate remained in the custody of Mr. Sharrett, Mr. Wagner’s agent, through all the subsequent dealings between Mr. Wagner and Colonel Owens, and it is still so held, so far as the record discloses. Mr. Wagner testified that Colonel Owens came to him, and, ⁶⁷⁸ after telling him of his troubles and the corporation’s need of money to continue the nursery business, asked him for financial aid or assistance, and said that he had stock that could be sold.

Mr. Wagner said he did not want to buy any stock: that he did not care to become personally interested in the