
    W. H. Stevens, Trustee, Appellee, v. Ottumwa Cold Storage & Ice Company, Appellant.
    BONDS: Requisites and Validity — Want of Consideration — Proof. Proof of want of consideration for corporate bonds ought to be decidedly clear, when they were issued under unanimous consent of all the stockholders, and under the supervision and approval of the state authorities having control over such matters.
    
      Appeal from Wapello District Court. — D. M. Anderson, Judge.
    February 8, 1918.
    Suit in equity to foreclose mortgages. The defendant is a corporation, and executed the mortgages as such. The first mortgage was for $50,000, and the second for $25,000. Each purported to secure an issue of bonds, respectively, of like amount. One bond for $1,000 had been paid before suit. The defense interposed was that the bonds were void for want of consideration. The trial court found that no want of consideration was shown as to the first mortgage. It found, also, a failure of consideration as to the second mortgage, to the extent of $10,000. It entered a decree for the plaintiff for $64,000 and interest. The defendant appealed, and the plaintiff filed a cross-appeal.
    
    Affirmed.
    
      J. J. Smith, for appellant.
    
      C. W. Whitmore and F. Q. Orelup, for appellee.
   Evans, J.

The plaintiff, appellee, has filed certain motions to affirm, tendering therein a waiver of his own appeal for the purpose of such affirmance. The motions were submitted with the case. The nature of the motions is such as to render the reading of the record necessary. An examination of the full record satisfies us that the defendant has no fair ground to complain of the .decree of the trial court. It is more satisfactory to us, therefore, to dispose of the case briefly on its merits than to deal with the motions, which are somewhat complicated. The defendant corporation is a successor in interest and organization to a former corporation, known as the Ottumwa Brewing and Ice Company. This latter company had operated for many years as a brewery, and had an extensive physical property in the city of Ottumwa. In February, 1913, through certain proceedings had, the Ottumwa saloons and brewery were closed. This resulted in an assignment for the benefit of creditors on the part of the brewing company. For many years, this company had carried an indebtedness of $50,000, represented by an issue of bonds, which was secured by a mortgage upon all its plant. Certain of its stockholders, being six in number, acquired all its stock and all its outstanding bonds. The district court ordered a sale of the property by the assignee, providing in the order that the outstanding bonds of the company should be accepted from any bidder as the equivalent of cash, and providing further that no bid should be accepted for less than the full amount of the bonds, plus certain other estimated outlays. The property sold for $53,000. It was bought by the six men who were the owners of all the stock and the owners of all the bonds, at the stated bid of $53,000. They thereupon organized the present defendant corporation, which took over all the property of the former brewing company. The same men, known in the record as the syndicate, took the entire issue of stock. They also issued bonds to the amount of $50,000, in lieu of the bonds and mortgage formerly existing upon the brewing company. Later, a second issue of bonds for $25,000 was ordered, and a mortgage given to secure the same. These issues of bonds and the execution of the mortgages to secure the same were done by the unanimous vote of the stockholders. Compliance also was had with the statutory requirements pertaining to -the approval of the executive council, both as to the issue of stock and as to the issue of bonds. The property was carried for some time as dead property. A considerable expense was incurred in its proper maintenance. A salaried person was kept in charge of it. Repairs had to be made and insurance maintained. There were also some subsidiary companies connected with the larger company, and owned by the same stockholders. These were organized with a view of attempting to utilize particular parts of the idle property. For instance, a part of the property had been leased, some years before, to one Dennis, who operated the same as an ice company. The use of the property for such purpose required a considerable outlay on the part of Dennis, in equipping the same with proper facilities for storing and handling ice. The lease with Dennis provided that, at' the expiration thereof, Dennis should have the right of removal of all such improvements and equipment as should be put on by him, unless the lessor should exercise the option of purchasing such equipment at actual cost. The actual cost of the equipment was about $10,000. At the expiration of such lease, the owners of the defendant corporation deemed it to their interest to purchase the equipment for $10,000, rather than to allow a dismantling of it. This investment of $10,000 represents a part of the consideration for the $25,000 bond issue. In addition thereto, there was much outlay by these stockholders for legitimate purposes, all of which they prorated among themselves in proportion to their interest, and the sum total was included in the bond issue. The case is wholly a fact case. The record is voluminous, and the facts’ could not be fully discussed with any degree of detail without undue length of opinion, which could serve no permanent interest. The burden is upon the defendant to prove the failure of consideration. No question of fraud or false representation is made in the issues, although there is a claim of that kind made in the argument of appellant. The plaintiff is trustee for the bondholders. These bonds failed to circulate in the money market, and. they are owned and held by the stockholders who caused their issue. There was much testimony heard at the trial upon the subject of the value of the property of the plant. Evidence on behalf of the defendant appellant was to the effect that such property was worth from §35,000 to §40,000 only; whereas evidence on behalf of the plaintiff shows the same to have had a value of more than §200,000. There is something to be said for both views, wide apart as they are. The property was not a going concern. This, of itself, would greatly depreciate its market value as a whole. How- much it would depreciate it would be, to some extent, a matter of guesswork. If the property could be utilized advantageously, it could fairly.be said to be worth approximately what it would cost to reproduce it. On this theory, the larger values were, perhaps, not greatly exaggerated. But the difficulty was to utilize it. Its cost, therefore, was not a criterion of its value. It was like a ship cast upon the land. It would cost as much to build it there as to build it anywhere. But its value in such a idace could not be measured by the cost of building it there. And so this ship of the brewing company found itself in a dry place, and the question of value became largely a question of salvage. We do not deem the question of great materiality, so far as it bears upon the question of consideration for the bonds.

The bonds and mortgages having been issued with the consent of all the stockholders, and with the approval of the executive council, and in compliance with the statutes of the state, their validity ought not to be lightly assailed. Tf the same stockholders had continued to hold their stock, and if they were interposing this defense in the name of the corporation, it would present a rather ludicrous situation. Has the corporation improved its position for the purpose of defense by the change of the stockholders? The situation created lent itself to the possibility of fraud in the sale of the stock. If fraud was perpetrated, there is abundant remedy for that. None is pleaded here. It appears in the evidence that the syndicate disposed of all their stock to one Fullington, in a’land trade. No concealment or deception on their part is claimed in that trade. The property of the corporation was visible. The transfer of the entire issue of stock was practically a transfer of the property. Fulling-ton indisputably knew that the property was mortgaged for $75,000 to secure the bond issues of the corporation for the same amount. Fullington had no fears in the trade. What he gave in exchange was an option to purchase 12,000 acres of stump land in Louisiana, at $8 per acre. The transaction was well characterized by the trial court as a “trade of elephants.” The bigger the elephant, the larger the cost of maintenance. According to appellant’s showing, Fulling-ton appears to have disposed of some of this stock advantageously, -and perhaps fraudulently. The present president of the corporation became such by the investment of $17,000 in 8,000 shares of the stock. It is an appalling fact, if true, and we should not deal lightly with it, if it were before us for appropriate relief. But the fact has nothing to do with the question whether there was a consideration for the bonds,, and the court cannot permit itself to be deflected by it from the real issue. We have said enough to indicate the general nature of the facts and the controversy. We think the defendant got all that it was entitled to in the decree below, by a reduction of the recovery to the extent of $10,000.

Plaintiff’s appeal will be treated as waived by his tender. The decree below will be affirmed on both appeals.

—Affirmed.

Preston, C. J., Ladd and Salinger, JJ., concur.  