19 Cal. 219 | Cal. | 1861
Lead Opinion
Field, C. J. and Cope, J. concurring.
This was a bill filed by the plaintiff for the specific performance of a certain agreement made in Hew York between the plaintiff and the defendants, Gordon and Bond, on the fourth of April, 1856. The agreement provided for the formation of a company, to be called the “ San Francisco Sugar Refining Company,” to consist of 1,000 shares of stock, of the nominal value of one hundred dollars per share. This agreement provides that one-third of the stock, or three hundred and thirty-three and one-third shares, were to be issued to J. B. Bond or his assigns, upon him or them paying
The agreement proceeds: “ one-third, or three hundred and thirty-three and one-third shares of said stock, are to be issued to Nathaniel Chater or his assigns, upon him or their executing two notes—one of $6,250 to J. B. Bond, collaterally secured by one hundred and twenty-five shares of stock, having two years to run, bearing two per cent, per month interest; and another of $6,250 to George Gordon, collaterally secured by one hundred and twenty-five shares of stock, having the same time to run, and bearing the same interest—and the said Chater is also to transfer back to the company eighty-three and one-third shares of stock into the common stock of the company.
“ It is agreed that the two hundred and fifty shares of stock thus given back to the company shall be sold only by a majority vote of the company, and J. B. Bond guarantees to the extent of the note of said Chater held by him, ($6,250) that from one hundred and twenty-five of the shares he will raise the sum of $12,500, as needed, and George Gordon guarantees to the extent of the note of said Chater held by him, that he will, on one hundred and twenty-five shares, also raise the sum of $12,500.
“And it is further agreed, that the shares not sold belonging to the common stock of the company, as above recited, shall, if it be not. found necessary to sell them, be divided equally among the-three parties hereto, but not until the company’s works have been in operation for at least twelve months.
“ It is agreed that George Gordon shall organize the company in San Francisco by taking out articles of incorporation according to law, and that the first Trustees shall be Charles W. Bond, Nathaniel Chater and George Gordon.
“Each certificate of stock to be signed by two Trustees and countersigned by the Secratary.
“ The stock of N. Chater to be issued to him as herein provided on the execution of the agreement to manage the works, a memorandum of which agreement is made simultaneous with this.
“ The said Gordon and Chater agree that, to the extent of the interest which they may control, they will vote for the said Bond to act as agent of the company in San Francisco, attending to the commercial affairs of said company there, for which service he shall receive a salary of $1,800 per annum.”
Afterwards, another agreement was made, of the same date, as follows:
“ Whereas, N. Chater has induced the said Bond and Gordon to enter into the organization of a company in San Francisco for the purpose of sugar refining and its collateral branches; and the said Bond and Gordon do so on the representation of said Chater and on his promise to manage the same for five years, and to retain his interest therein during that time, and upon his further representation that he can skillfully manage a sugar refinery; with a view of engaging the services of said Chater, the said Bond and Gordon, by an agreement of even date herewith, have agreed to set apart to said Chater two hundred and fifty shares of the capital stock of the company, at the rate of fifty cents on the dollar of the par value of the shares, and to take therefor the notes of said Chater, (two, and $6,250 each) having two years to run, collaterally secured by the two hundred and fifty shares, and also to give the said Chater one-third of the reserved or paid back shares which may not be sold, as provided for in agreement of this date made between the present contracting parties.
“ Now the said Chater agrees with and to the said Gordon and Bond, (which agreement they make for the company they propose to form, and with the understanding that they shall be at liberty to transfer the said agreement to the company when it shall be formed)*232 that he, the said Chater, will proceed to San Francisco and there superintend the erection of the sugar refinery and construct the same as he may be directed by the company, with regard to location, cost and extent, and get the same into working order; and that after the same is in order he shall superintend the business of sugar refining for the said company for the period of five years from the date of first of May, 1856 (eighteen hundred and fifty-six).
“ That he shall engage in no other business during the period of his engagement with this company, but devote his entire time to the business of the company during the time he is manager.
“And the more effectually to secure the performance by him, the said Chater, of this agreement, he hereby agrees that during the period of his engagement above named of five years, he will not dispose of such of his shares of stock in the company (or sell or transfer them) as he may have been enabled to pay for out of the dividends made upon the stock issued to him, and the said Chater agrees that the stock shall be issued to him with such restrictions as shall prevent him selling it during the above named period.
“ He, the said Chater, also agrees with the said Bond and Gordon that the dividends declared from time to time upon the stock issued to him shall go to the payment of the notes hereinbefore referred to.
“ The said Bond and Gordon undertake that the proposed company shall, in consideration of the premises, agree to pay the said Chater the yearly salary of $3,000, in monthly sums of two hundred and fifty dollars per month, to commence at the time the works go into operation, and shall also pay him the monthly sum of one hundred and fifty dollars, during the time his services may be required in erecting the works prior to commencing operations, and up to the time of commencing operations.
“ That said Chater also agrees, that if at any time the company become dissatisfied with his management, they may remove him without prejudice to this agreement, in which event his yearly salary of $3,000 shall cease and determine, but he, the said Chater, shall not be at liberty to engage in California in the business of sugar refining, either for himself or for others.
“ Interest on the notes given by said Chater to commence on the first day of September of this present year.
*233 “ It is agreed that said Bond, and the said George Gordon, shall ^procure for the said Chater, within sixty days of being notified by him of his readiness to pay the notes herein specified, the said notes and collaterals, though the notes shall not have matured, and that in the event of the said Gordon and Bond respectively failing to procure the said notes, the interest upon same shall from such date be reduced to one per cent, per month.
“ It is further agreed, until dividends shall have been declared by the company of sufficient amount so that those due on the stock of said Chater, hypothecated to secure said notes, shall be sufficient to pay the interest due and accruing monthly on those notes, that the company shall advance to said Chater the interest so upon due until the maturity of the notes as a loan to him.
“ The said Gordon and Chater agree, that to the extent of the interest which they may control, they will vote for the said Bond to act as agent of the company in San Francisco, attending to the commercial affairs of said company there, for which service he shall receive a salary of $1,800 per annum.”
We have given the agreement at length, as it would require as much space to give its substance as that occupied by the copy.
Chater, afterwards, on the seventeenth of October, 1856, was seized with paralysis, and was rendered incapable of attending to the business.
The notes mentioned in the agreement as those to be made by the plaintiff were never given, nor, so far as appears, demanded.
The defense seems to rest principally upon the point that these notes were not made as contemplated by the agreement; that the plaintiff, therefore, did not comply with the contract on his part, and consequently has no right to insist on performance by defendants ; that one of the principal, if not the leading, inducements to the contract was the rendition of the services of the plaintiff, and that the failure to render these, though caused by his sickness, was a failure of the consideration of the agreement; and that the agreement was that of the individual members or stockholders, Gordon and Bond, and not of the corporation.
The appellants’ argument seems to proceed upon the idea that Gordon and Bond were the principal parties in this company and to
This view distinguishes this case from mere executory agreements through a performance of the terms of which a party becomes entitled to property, of which class Green v. Covillaud (10 Cal.) and the other cases cited by appellants, are examples. Here Chater
2. We think there is nothing in the point that the rendering of plaintiff’s services for the five years was a condition precedent to the vesting of the plaintiff’s title to the stock. Nothing in the agreement so declares. The provision for the employment of plaintiff as superintendent seems to be an independent term of the agreement. He was to get a salary of $3,000 per annum for his services as such, which does not seem to be entirely consistent with the idea that these services entered into and constituted a part of the general consideration of the agreement which was the basis of the association. It is very true that the reputed or supposed skill of the plaintiff in the proposed business may have been a motive for proposing to take or accept him as a partner in a new and hazardous enterprise of this sort; but this is a very different thing from making the rendition of his services an indispensable requisite to any claim to the profits or business, and his contracting that, despite of all accidents or casualties, he would render the services or lose his interest; or in other words, insure his life, mind and health for five years, or forfeit everything except the salary already earned. The more reasonable interpretation of the contract is, that the services, advice, etc., of such a man were of value to this company in this untried scheme, and that to carry it on they were as willing as himself to take the risk of natural or accidental causes which might disable him from prosecuting the business of superintendent, and that for his contribution to the capital of the company, his stock was considered as good security. This construction is strongly fortified by the provision that if the company became dissatisfied with his management they might discharge him, thereby stopping his pay as superintendent; but it was stipulated in this connection that
Moreover, if the rendition of these services was a consideration of the vital importance to the contract now pretended, it is not apparent why, in case of his misconduct or mismanagement, the consequence should be confined to the mere loss of the place and the wages, with an express reservation in favor of the interest he held under the other parts of the agreement.
Such an agreement as that supposed would be very unequal, if we suppose that Chater had the qualifications evidently attributed to him at the time of the forming of the agreement. It could scarcely be supposed he would be willing to leave New York— where he was residing—to come to San Francisco to be discharged at any time, thus losing his wages as superintendent, and then without wages to wait for five years before he could get anything on the contract; or in case of sickness or death, after inaugurating the business and giving his assistance in getting it under way, should lose, for himself or family, everything for which he had made sacrifices in migrating to this State.
It is much more reasonable to suppose, as well from the nature of the case and surrounding circumstances as from the language of the contract, that the services of Chater were considered equal to the money, or money and credit of Bond and Gordon, in' starting a new enterprise of this sort, especially when he was to draw no profits and be entitled to no interest in the business until after he
3. We think that this agreement, made by these stockholders, Bond and Gordon, who really represented the interests and persons afterwards incorporated, and whose agreement was only in anticipation of the formation of the corporation, and for its benefit, and was carried out by it, and recognized by it, bound the defendants.
4. Other points need not be noticed; for the provision for the salary of Chater as superintendent, being independent of his interest as stockholder, it is not necessary to go into any inquiry in this place of the failure, or of the consequences of a failure on his part to fulfill his obligations as such.
A speedy remedy, however, was left by the contract to the corporation for any failure, for any cause, to discharge his duties, by his dismissal.
Decree affirmed.
Hepburn & Dwinelle, on petition for rehearing.
I. The Court takes no notice of the objection that the decree of the Court below gives three hundred and thirty-three and 'one-third shares of the stock to Chater, when, by the agreement, he was only entitled to two hundred and fifty shares.
The agreement provides that if any of these shares belonging to the common stock of the company shall remain unsold, and “ if it shall not be found necessary to sell them,” such remaining shares shall then be equally divided among the three parties to the contract.
The contingent interest of Chater in this unsold portion of this common stock, together with the two hundred and fifty shares apportioned to him, were to be held to guarantee the performance of his contract.
Nevertheless, the decree compels the company to issue to Chater the eighty-three and one-third shares, which he, in common with Bond and Gordon, was not to be entitled to, except in a remote con
The company have either sold these shares, or they have not. If they have sold them, then the contingency on which Chater was to be entitled to them never happened ; and if they have not sold them, they should not have been assigned to Chater, but held subject to a final account, so as to ascertain whether or not it would be “ necessary to sell them.” In either case the decree is erroneous.
II. The Court, it is respectfully submitted, have not given due consideration to the vital question, that the corporation was not bound.
The whole reasoning of the opinion is founded on the assumption that the agreement and the corporate act give Chater a right to one-third of the stock as against the corporation. We take ground against this position, and propose to show: 1st, that neither the agreement nor the act of incorporation gave Chater any rights whatever against the corporation; 2d, that the corporation could be bound, only by adopting or becoming a party to the agreement, and that the evidence shows it never did adopt or become a party to the agreement.
1. As to the agreement and the act of incorporation.
The corporation was organized and took effect under the Act of April 14th, 1853, and we contend that Chater got no rights against the corporation in virtue either of the act of incorporation or the agreements.
By the Act of April 14th, 1853, a corporation is born on the filing of a “ certificate of incorporation,” which also creates shares of capital stock by simply declaring their number and amount. These remain until by-laws are formed which direct the mode and condition of their transfer. They do not vest in a private person
By the agreement, Chater, Gordon and Bond, so far from making themselves partners with each other in a manufacturing enterprise, were simply contracting with each other to get somebody else, an entirely distinct individual, to carry on the business. They, Bond, Chater and Gordon, were not to refine sugar, but another person— a body corporate yet to be born according to California law—was to do it, and the thing they were agreeing to do was to give birth to this individual, and give him capital to work with.
They might or might not be members of this body corporate ; for the issue of stock in it, which was to give membership, was to be made to “ them or their assigns upon either they or their assigns paying ” certain amounts of money to the corporation—upon here meaning after, or upon condition.
The certificate of incorporation was taken out on the twenty-fourth of July, 1856, in San Francisco. It was done by Chater) Gordon and C. W. Bond. At the time, James B. Bond was in New York, where he has been ever since, and where he is still; and he has never owned one share in the stock of this company. The act of incorporation was made by others than the parties to the New York agreements; that the company was a stranger to the agreements when they were made, and the act of incorporation in nowise changed its position or affected its liability.
The first agreement says: “ The stock of N. Chater to be issued to him on the execution of an agreement to manage the works, a memorandum of which is made simultaneous with this.”
There is no direct proof that the corporation ever adopted the New York agreements, nor is there any act or acts of the company which show an adoption or ratification.
As Chater, under the agreements, was entitled to his stock on the execution of his notes and the execution of the contract for personal service, the fact that he neither executed the notes, nor the contract, nor got the stock, shows that there must have been some reason for it; either that he backed out, or that the company refused to come in.
But it may be said, he was an organizing trustee. So was C. W. Bond, but neither he nor Chater were stockholders, and the law did not require them to be. The act of signing and filing a certificate of incorporation vests no stock, nor any right thereto, in the organizing trustees. The trustees for the first three months are only organizing machines necessary to form a company by which shares of stock may be created and issued.
But it may further be said that he was employed by the company at the works. The proof is distinct that this was as foreman and not as chief, and that Gordon was chief. The Court itself has said that “ the provision for the salary of Chater as superintendent is independent of his interest as stockholder.” With equal reason may it not be said that the payment of his salary as foreman “ is independent of his interest as stockholder.”
To be told of the agreement between Gordon, Bond and Chater, is to be told of a transaction between Gordon, Bond and Chater, and them only. New stockholders could not imagine that the corporation, which never contracted with Chater, would be sued for one-third of its property, on an agreement made before its existence with one, and only one, of its stockholders; and that judgment would go against it without evidence as to whether Gordon, Bond or the corporation had any stock to issue, or whether assignees or new corporators owned it all, or what additional capital had been created, and what additional stock had been sold.
Heydenfeldt, Contra.
Each of the three parties forming the corporation was entitled to an equal one-third of the stock, three hundred and thirty-three and one-third shares; but eighty-three and one-third shares of the shares of each were to be reserved and not issued, to be used by the corporation if a contingency should arise—that is, should be sold—but if not sold, these to be equally divided between the three not sooner than twelve months after the works have been in operation.
The answers do not pretend that it was ever necessary to sell this reserved stock, or that it ever was sold, so that Chater’s claim remains undiminished to the entire one-third of the stock. If it should turn out in taking the account which has been ordered, that any of this reserved stock was necessarily sold, if it is not too late, the Chancellor below might, upon the report coming in, make the allowance, but there is absolutely nothing in relation to that matter which this Court can act upon.
Rehearing
Field, C. J. and Cope, J. concurring.
We propose to notice only two points made by the appellants on their petition for rehearing. The first is that as to the alleged error in the decree below, that Chater was entitled to three hundred and thirty-three and a third shares of the stock, when by the agreement he was only, at most, entitled to two hundred and fifty shares. As to the eighty-three and a third shares, a part of the common stock of two hundred and fifty shares, it was provided that, after being issued to the respective holders, (one-third to each) they were to be given back to the company, and sold only by a majority vote of the company, and that the shares not sold, belonging to the common stock of the company, shall, if it be not found necessary to sell them, be divided equally among the three parties, but not until the
2. It is next insisted that we erred in holding that this agreement bound the corporation. That point was barely suggested on the oral argument, and in the learned and able briefs of the counsel. ISTo great stress seemed to be laid on it. We gave it no very elaborate consideration, for we really supposed—erroneously, perhaps— that the counsel placed but little reliance upon it. The argument now on this point is very full and very ingenious, but as applied to the facts of this record is not sound.
Every opinion, as Chief Justice Marshall well observes, must be considered with reference to the particular facts upon which it is made; for it is impossible so to use language as that general expressions apply in every instance with the same meaning to every condition of facts. We asserted no such doctrine as that, by force of a secret agreement between the original corporators in a commercial corporation, whether made before or after the Act of Incorporation, the stock issued by the corporation to innocent parties without notice of the agreement could be charged or affected by it. There was no ease before us for the application of such a principle. But the right to incorporate for such a purpose as that here is a statutory right, which is free to everybody. The rights in the
■ If on taking the account, it should appear that Chater is not entitled to anything, but that the corporation is so indebted as to make it inequitable for him to receive his shares, the Court below,
With these modifications, the decree is affirmed and the cause remanded.