Defendants appeal from a judgment rendered against them and in favor of plaintiff upon their promissory note in the sum of $3,500, dated February 28, 1931, and payable one year thereafter. It was the contention of defendants that they had been released from the note and that plaintiff agreed to take and had taken in lieu thereof the obligation of an Idaho corporation known as the Smoot Compressed Air Valve Company to pay said sum, and had agreed to accept and had accepted shares of its stock and certain bonds known as Dominion Reindeer Products First Mortgage bonds as security for the payment of the $3,500.
The principal assignments of error attack the findings of the lower court on the ground that they are not supported by the evidence. The findings referred to in substance are: That defendants have not paid said note nor any *Page 47 part thereof; that plaintiff did not agree to release nor did he release the defendants or any of them from their liability as makers of said note; that plaintiff did not agree to accept nor did he accept nor did he receive the Reindeer bonds as security for the obligation; and that plaintiff did not agree to accept nor did he accept the Smoot Compressed Air Valve Company as debtor in lieu of said defendants or any of them.
In an action such as this, if there is substantial evidence to support the lower court's findings, they 1 must be upheld. We do not pass upon the weight of the evidence.
The Sim-Plist Spray Company, in which all parties except the defendant H.A. Smoot were formerly interested, was in the hands of a receiver. The defendants borrowed the $3,500 from plaintiff and purchased from the receiver certain patent rights and equipment pertaining to a spray machine, for the purpose of organizing a company to be known as the Motor Compressed Air Company to manufacture and sell the spray. Plaintiff was to be interested in the new company and was also to receive from defendants certain shares of their stock as security for the payment of his note. The organization was never completed, the shares never delivered, and, of course, they were worthless.
The Smoot Compressed Air Valve Company was a corporation organized in Idaho by the defendant H.A. Smoot, one W.B. Jacobs, also formerly interested in the Sim-Plist Company, and one D.S. Gill. A man by the name of Eric Krussman was interested in this company though not a signer of its articles. Krussman was the owner of the Reindeer bonds. This corporation was organized subsequent to the time of the attempted organization of the Motor Compressed Air Company for the purpose of manufacturing and selling the spray.
The theory of the defense is this: In order to organize the Idaho corporation for the purpose indicated, it was necessary *Page 48 to get the defendants Mosses, Jackson, and Romney released from the note and their interest in the patent rights and equipment transferred to Smoot, and Jacobs, who would assume the obligation until the new corporation was organized, at which time they would in turn transfer those rights and that equipment to that corporation, which would assume the obligation and give plaintiff the bonds and stock as security. Defendants contend that plaintiff agreed to this, that he released the Mosses, Jackson, and Romney for the obligation of Smoot and Jacobs, and subsequently released all defendants for the Smoot Compressed Air Valve Company obligation.
Smoot and Jacobs entered into the following contract with each of the defendants Mosses, Romney, and Jackson. We set out only one of these contracts for reference as they are identical:
"That, whereas, party of the second part has an undivided interest in a certain patent No. 1751709, dated March 25, 1930, originally issued to Frantz F. Nielsen, Rea H. Nielsen and James R. Nielsen, covering a certain invention, consisting of a motor spraying attachment for liquid sprayers together with improvements thereon, and other machinery and personal property mentioned in a certain bill of sale from the Intermountain Association of Credit Men dated March 3, 1931, to H.A. Smoot, John Jackson, E.H. Moss, G.R. Allena and D. Ray Moss, and
"Whereas, it was the intention of the undersigned, together with certain other persons to incorporate a company to own and manufacture said machinery and other articles, and
"Whereas, as a part of the transaction leading up to the proposed incorporation of said company the undersigned together with certain other persons signed a certain note of $3500.00 to Martin Muehl dated Feb. 28 — 1931, and incurred certain other obligations and expenses in connection with said proposed corporation and otherwise, and
"Whereas, parties of the first part propose to incorporate a company in the State of Idaho and are willing to assume and pay off all *Page 49 of the obligations, including said $3500.00 note, owed by the undersigned and/or others whose names appear on said note in consideration of the assignment of all of the interest of second party in said invention and other personal property.
"Now, therefore, in consideration of the sum of $1.00 in hand paid by each party to this agreement to the other, receipt of which is hereby acknowledged, other valuable consideration and the covenants and agreements herein contained to be kept, it is hereby covenanted and agreed between the parties hereto as follows, to-wit:
"1. In consideration of the agreement of first parties to pay or cause to be paid the said $3500.00 note to Martin Muehl, together with any and every other obligation for which second party is personally or jointly liable, incurred in the proposed organization of the aforementioned corporation or otherwise in connection with the handling, and/or development of the aforementioned invention, second party agrees to sell, assign, transfer and set over to first party all of his right, title and interest of every name and nature in and to the aforesaid patent and invention, or improvements thereto and any remaining part of the personal property mentioned in said bill of sale of March 3, 1931.
"2. In consideration of the transfer to said first parties of said interest of said second party as hereinbefore set forth, first parties agree to pay or cause to be paid the said note of $3500.00 to said Martin Muehl, together with any and every other obligation or claim incurred in the proposed incorporation of the aforementioned company or in the handling, manufacture, disposition or otherwise of the invention and/or machines aforementioned, agreeing to hold second party harmless and without liability from every such claim of whatsoever nature. Second party's interest in said invention, patent and other personal property shall pass to first parties only upon the payment in full of the aforementioned note of $3500.00 and other obligations.
"In witness whereof, the parties hereto have set their hands and seals the day and year first hereinabove written.
"W.J. Jacobs "H.A. Smoot "Parties of the First Part "E.H. Moss "Party of the Second Part
"Witnesses: "Gaskell Romney" *Page 50
Smoot, Jacobs, and plaintiff Muehl entered into the following contract:
"It is further agreed by H.A. Smoot, W.B. Jacobs and Martin Muehl, that as soon as the company is organized, that they will use their very best efforts to develop and do everything humanly possible for the new company's best interest. It is further agreed that after the organizations expenses have been paid, and the operating expenses from month to month are paid, that 40 per cent out of each dollar that the company takes in, either from the sale of its products or the sale of its securities, (if it sells any), will be turned over to Martin Muehl and that the above mentioned gentlemen also mutually agree that Martin Muehl will be paid as soon as it is humanly possible to do so.
"It is further understood that Martin Muehl will hold $5,000.00 worth of first mortgage 7 per cent bonds as previously stated and that in addition to that, and for his consideration and interest in the business, he is to receive $5,000.00 worth of common stock in the new company that is now being organized. This agreement will also act as mutually agreed by the above gentlemen, to turn all patents and *Page 51 patents applied for and patents pending, over to the officers of the newly organized company. The patents, patents applied for, and patents pending, will now, after the signing of this agreement, be the property of the newly organized company, known as the Smoot Compressed Air Valve Company.
"It is also understood that this agreement is entirely of a mutual understanding with the three gentlemen and it is signed with their full knowledge and understanding, believing that it is for the very best interests of the newly proposed company and their own interests, and that a copy of this agreement be held by each of the above named parties.
"H.A. Smoot "W.B. Jacobs "Martin Muehl
"Witness "E.J. Merrill
"State of Idaho, County of Bannock, ss.:
"On this 20 day of Nov. 1931, before me, the undersigned, a Notary Public in and for the said county and state, personally appeared H.A. Smoot, W.B. Jacobs, and Martin Muehl, all of Farmington, Utah, Rockland, Idaho and Salt Lake City, Utah, respectively, known to me to be the persons whose names are subcribed to the within instrument, and acknowledged to me that they executed the same.
"In witness whereof, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. Ezra J. Merrill, Notary Public for Idaho, residing at Pocatello, Idaho therein.
"[Seal.] Com Exp July 20, 1934."
As we read these contracts, we are impressed with the fact that they do not of themselves clearly show the intentions of the parties. They must be considered in 2 the light of the other evidence in the case both oral and documentary.
If, as defendants contend, that at that time in the course of the transactions when the contracts of November 16th had been signed and exhibited to plaintiff, the defendants other than Smoot were released from the obligation of the note, then this view of the evidence must be the only practicable view to take of it for us to reverse the lower court's findings to the contrary. But there is evidence supporting *Page 52 the view adopted by the lower court. Plaintiff denied any such agreement. The contract of November 19th in its recitals says that Martin Muehl agreed to release, not that he has released, those parties. Plaintiff did not return the note. And other evidence might be cited. This contention then must fail for the reason indicated.
Defendants contend that plaintiff promised to release the defendants in consideration of the promise of Smoot and Jacobs to organize the Idaho corporation and secure the $3,500 obligation with the Reindeer bonds and stock in that new company. The following quotation as taken from the contract of November 19th might lead to such a conclusion: "* * * and being that Martin Muehl mutually agreed to release these parties off of the note, H.A. Smoot and W.B. Jacobs have hereby agreed with other associates to incorporate a company * * * H.A. Smoot and W.B. Jacobs have further agreed to secure Martin Muehl for the $3500.00 due him by furnishing as security, etc." But the recitals in the contract with reference to the fact that those other parties have now released their interest in the patent and patents applied for would indicate that the promise to release meant nothing. This may also be said of its provisions for immediate transfer of those patent rights to the Idaho corporation. The contracts of November 16th made no provision for the transfer of title upon merely a promise to release defendants. Thus the lower court might well find against this contention of defendants.
There is another angle to the case upon which defendants lay considerable weight. That is this: They say the contracts had become executed as plaintiff had received the stock of the Idaho corporation and had received the Reindeer bonds. The evidence is in conflict as to whether or not he received the Reindeer bonds. Plaintiff denied that to be the fact. His receipt does show the receipt of the stock, but again we find an uncertainty in the contract of the 19th, as to whether or not the stock was intended as a security for the $3,500 obligation, or whether it was consideration to him for an *Page 53 interest he claimed in the patent rights and equipment. Apparently throughout the transactions between the parties it was contemplated that plaintiff should be interested, not only in the first corporation which they attempted to organize, but in the Idaho corporation. The evidence disclosed that he did work upon the spray machine, made certain improvements thereon, and sought a patent upon those improvements. Under such circumstances the delivery to him of the stock in a new corporation might well be considered a consideration for his interest in the property of the corporation, and not a delivery of stock as security for the payment of the obligation.
We believe we have set out sufficient to indicate that this is not a case in which the evidence supports only the defendants' theory. Apparently the lower court, judging from its opinion rendered at the time of the decision, felt that although it was possible to reason the case out, as have defendants, it was highly improbable that such was the intention of 3 the parties. That court had the opportunity of listening to the witnesses and considering their intelligence and their experience in life; he was in a far better position than are we to determine whether or not the parties as they entered into these contracts reasoned as astutely as do their counsel.
The lower court rejected the introduction of the articles of incorporation of the Motor Compressed Air Company. This was assigned as error. In view of the fact that it was conceded that the organization of that company was not completed and its stock was not delivered as security for the note, 4, 5 we can see no merit to the thought that it was prejudicial. Objection was raised to the lower court's permitting the introduction of a letter from the Secretary of State of the State of Idaho showing that the Smoot Compressed Air Valve Company had not paid its fees and was in effect a defunct corporation at the time of the trial. Suppose this had not been introduced. Would it have made any difference in the decision? Apparently *Page 54 not, as there was plenty of evidence to support the lower court's findings, and we are not justified in assuming it was prejudicial without some indication of that fact. All through the case there is to be found considerable evidence of failure by the parties to accomplish what they set out to do; so the fact that, in the eyes of the law, the corporation had lost its standing, is of little importance.
There are other errors assigned which we do not believe are of sufficient weight to discuss.
The judgment of the lower court is affirmed. Costs to respondent.
EPHRAIM HANSON, and MOFFAT, JJ., concur.