157 P. 696 | Wyo. | 1916
Lead Opinion
The plaintiff in error as Trustee in Bankruptcy of the estate of the “Copper City Commercial Company,” which
Plaintiff alleged that the defendant subscribed for twenty-five shares of said stock of the par value of $100 each, and had paid for one share only. The defendant admitted having subscribed conditionally but not absolutely for such stock, in that he was to be permitted to turn in as payment for the stock subscribed for a lot and store building thereon in the town of Encampment to be used as company assets, and that he should not be liable on the subscription unless it was accepted on that condition. It is shown by the evidence that the word “conditional” was written by him after his signature on the subscription list, and it is further shown that at the time of the subscription Fry, who as organizer was circulating the subscription list of the company, gave this written statement of the conditions to Terwilliger, viz.:
“Encampment, Wyo., 6-26-1907.
“This is to certify that C. D. Terwilliger having this day signed the original subscription list of the 'Copper City Commercial Company conditionally for twenty-five shares of stock par value $2,500, it is understood that said company shall take in full payment for said 25 shares of stock lot 4, block 22, Townsite Grand Encampment, in full payment for said subscribed stock, and it is understood that he shall not be liable for said subscription unless the said company accepts same under said conditions.
“Said stock to be fully paid and non-assessable.
“W. B. Fry, Organizer.”
The company entered into possession and occupied the lot and store with this understanding from the organization un
“Special Meeting of the Executive Committee of the Copper City Commercial'Company. March nth, 1908. 5 p. m. W. B. Fry acted as chairman in the absence of J. J. Mona-han. C. D. Terwilliger acted as secretary.
“Moved and seconded that inasmuch as the deed to lot 4, block 22, in the Town of Grand Encampment, Carbon County, Wyoming, has not been delivered to the company in accordance with the original agreement, the President and Secretary of the company be and they are hereby instructed not to issue any stock of this company in payment therefor. Motion carried.
“Bill of C. D. Terwilliger rendered for rent for the store building at $37.50 per month from July 22nd, 1907, to March 22nd, 1908, with credit of $100 for payment of one share of stock originally subscribed for by the said C. D. Terwilliger, balance due, $200.
“Motion made and seconded that the bill be allowed and the manager be and he is hereby directed to pay the same in trade, pursuant to agreement to receive same in trade, and that receipt be given for payment of one share. Motion carried. (Signed) C. D. Terwilliger, Sec.
“(Signed) W. B. Ery, Chairman.”
This action was ratified at the annual stockholders’ meeting early in August, 1908; and after the Executive Committee meeting the company occupied the lót and store building upon a rental basis of $35 per month, up to November, 1908, the time of the bankruptcy proceedings by certain creditors and the appointment of Natwick' as trustee under the National Bankruptcy Law.
As already stated, it is claimed that Terwilliger subscribed for twenty-five -shares of the'capital stock at the par value of $100 per share'when solicited by one Fry, who was promoting the corporation. On July 12, 1907, the subscription list was' presented to the stockholders at a meeting when the following proceedings were had-: “On
The arrangement made authorizing the defendant in error to pay his subscription in property at a fixed value, and not to be otherwise liable, was satisfactory to the parties, and the corporation went into possession of the lot and store in pursuance of such understanding. It was an executory contract and by performance of conditions precedent could have been made into a binding contract. Neither of the parties did this. (Minneapolis Threshing Machine Co. v. John A. Davis (January 30, 1899), 40 Minn. no, 41 N. W. 1026, 12 Am. St. Rep. 701, 3 L. R. A. 796.) No deed to the property was delivered or demanded, and the stock was not issued; and in that situation the company finally concluded not to accept the subscription on the conditions named. The evidence shows certain reasons for this, and that it arose generally out of the desire of the company not to take the property or to issue the stock to the defendant.
Aside from this the amount of indebtedness and assets on March 11, 190&, is not shown. It cannot be said from the record that the act of that date was (1) one of insolvency, or (2) contemplated insolvency, and (3) within four months of the institution of the suit by creditors under the National Bankrupt Raw. The contract is mutual and executory. No preliminary steps were taken by either party as a condition precedent to enable him or it to maintain the suit. The right to maintain a suit is originally fixed by the parties, and when the conditions change so as to affect such right that fact must be judicially determined so as to determine the method of procedure. In the case here the suit is based upon the contract as originally made. Courts do not, nor can they, make or change or substitute contracts between the parties, and yet plaintiff will have accomplished that if permitted by this court to carry out his purpose as disclosed by his case. The agreement on March 11, 1908, in any event must be sustained unless made by the corporation when insolvent or in contemplation of insolvency or as an act of insolvency under the National Bankrupt Law. The evidence is insufficient to base the right to proceed upon either of these grounds.
If the right to make such new contract depended upon the question whether the corporation was in failing circum
Rehearing
on petition eor rehearing.
Counsel for plaintiff in error has filed a petition for rehearing in this case. The action was brought by the trustee in bankruptcy of an insolvent corporation to recover a sum alleged to be due from the defendant upon a subscription for stock, and the judgment in defendant’s favor was affirmed on the ground that the condition upon which the subscription was made had not been complied with on the part of the company; Justice Beard'concurring specially, on the ground that defendant’s only obligation was to convey certain property in consideration for the stock, and that as the stock had not been issued and the deed had not 'been demanded, the action was not maintainable.
It appeared that prior to the incorporation and organization of the.company the defendant signed the original subscription list for twenty-five shares of stock, adding after his signature the word “conditional,” and at the same time received from the organizer of the company, who circulated the subscription list, a written statement certifying to the fact that defendant had signed the list conditionally, and
The defendant was present at the organization meeting of the stockholders and voted 25 shares of stock, but no stock had been issued to him or to any one who had signed the list, and his subscription had not then been accepted. But the evidence shows, we think, that the other subscribers, or at least all who became stockholders, knew the terms and conditions of defendant's subscription, and that there was at least a tacit understanding that it would be accepted upon the said conditions, and that with that understanding the defendant participated in the meeting. He was selected and acted as secretary of that meeting, and was elected as one of the directors of the corporation then being organized. He was also present at the first meeting of the directors held on the same day and was elected secretary of the company. At that meeting the proceedings were had. with reference to his subscription, which are copied in the former opinion from the record of the meeting in the evidence, viz.: A motion was made and carried that 25 shares of stock be issued to the defendant “upon the delivery of a good and sufficient deed to lot 4, block 22, in the Town of Encampment, Wyoming, as per condition and agreement when he signed said subscription list; said deed to be accepted in full payment for said stock subscribed”; the lot thus described being the property offered by defendant as shown by the organizer’s written statement of the fact and conditions of the defendant’s subscription.
On the trial the defendant was called as a witness for the plaintiff and examined with reference to the company’s records, including the record of the first meeting of the directors, and upon cross-examination he testified that he had executed a deed of the lot to the corporation pursuant to the resolution referring to his subscription, but the deed does not appear to have been delivered.
It was contended on the original hearing that the subscription was not conditional, but a subscription on special terms as to payment; that it was accepted by the company at the time of its organization, and that the defendant then became liable to pay for the stock either in the property mentioned or in money; that having failed to convey the property he became liable upon his subscription for the par value of the stock; and that the action of the executive committee was invalid as against creditors as a release of the defendant’s liability to pay for the stock. It was also contended that defendant’s liability is shown by the fact that he voted the shares at the first meeting of the stockholders, accepted the office of director and secretary and member of the executive committee, and acted in those capacities, and that the company went into, possession of the property aforesaid and occupied it. The same contentions are -again made by the petition for rehearing and the brief in support thereof; and counsel states in the brief unqual-ifiedly the following proposition as settled law: That a
But we adhere to the view that this subscription was conditional. It was not only so specified on the subscription list, and in the written statement that it was conditional upon the company taking the property in full payment for the stock, but it was also provided that the subscriber “shall not be liable for said subscription unless said company accepts same under said conditions.” That is to say, the condition of the subscription was that the company shall take, the property in full payment, and that no liability shall be incurred by the subscription unless accepted on that condition, viz.: that the company “shall take” the property. In thus requiring that his liability be expressly limited, the defendant did what may pfoperly be done, as said in Thomp
That defendant’s subscription was intended as and understood to be one upon condition and not absolute is evident not only from the terms thereof as expressed in the writing aforesaid and the addition of the word “conditional” to the defendant’s signature on the list, but also from the terms of the motion referring to it adopted by the directors/ providing for issiting the stock only on delivery of a deed to the
“The first distinction to be noted is, as already suggested, that a conditional subscription does not make the subscriber a stockholder, nor render him liable on his subscription, until the performance of the condition or the happening of the specific contingency. On the other hand, a subscription on special terms is an absolute subscription, which makes the subscriber a stockholder and renders him liable as such from the time when his subscription is accepted, whether the conditions are performed or not. The special terms attached to a subscription are regarded as independent stipulations, the remedy for the breach of which is an action against the corporation for damages.”
In view of the language employed in stating the conditions upon which this subscription was made, and in the recorded action of the directors of the corporation thereon at their first meeting, it is clear to us that it was intended and understood that the subscription was conditional upon the property being taken by the corporation at the par value of the stock and in full payment therefor, and that there should be no liability on the subscription if that was not done. A similar subscription was considered in Junction Railroad Co. v. Reeve, 15 Ind. 236, cited in a note to Section 600 in Thompson on Corporations (2nd Ed.). The subscription in that case was for stock to be paid in real estate to be conveyed to the corporation within a stated period, but it was also provided by the subscription that if the company should not take the land at the price, the subscription was to be void. The court said:
“The subscription in question was clearly conditional; or rather it was a simple proposition to put in the land at the specified price, in case the company would take it at that price, otherwise the subscription was to be void.”
We do not agree with counsel’s contention that a subscription payable in property is uniformly held by the authorities to be a subscription on special terms. It is true that some text writers, referring generally to such a subscription, say that it is not, properly speaking, a conditional subscription, but an absolute subscription on special terms. (See Morawetz on Priv. Corp., 2nd Ed., Sec. 82.) But Mr. Cook, in discussing the subject of conditional subscriptions, says that any condition which can legally be performed or complied with by the corporation may be a condition to a subscription for stock. And that “the condition may be that payment 'shall be in labor or materials.” And again: “In general, however, subscriptions to the capital stock of a corporation may be conditional as to time, manner or means of payment, or in any other way not prohibited by statute, or the rules of public policy, and not beyond the corporate powers of the corporation to comply with.” (1 Cook on Stockholders & Corp. Law, 3rd Ed., Sec. 83.) Whatever may be the general rule with reference to the term to be applied to subscriptions payable in property, or their effect respecting the subscriber’s liability, we are convinced that the subscription before the court in this case was a conditional subscription, and that to hold otherwise would disregard the clear intention and understanding of the parties, as indicated by the written statement of the terms and- conditions of the subscription, and by the language of the motion adopted with reference to it at the first meeting of the directors. •
“The acceptance by the corporation of a conditional 'subscription is necessary to the formation of the contract. Until such acceptance the conditional subscription is but a continuing offer. After acceptance the subscriber is bound, until performance of the condition by the corporation, to await such performance; he cannot withdraw the conditional subscription after it has been accepted. It seems, however, that if the performance of the condition is delayed unreasonably by the corporation, the conditional subscriber will be thereby released from his obligation.” (Sec. 84.)' “A condition to a subscription for stock must be performed or complied with before the subscriber can be compelled to pay such subscription. * * * * A conditional subscriber is not a stockholder or member of the corporation until after the condition is performed. Whether qr not the condition has been performed is a question of fact. Performance may be proved by parol or by the records of the corporation.” (Sec. 86.) “Subscriptions payable in property are not subject to calls, and a demand for the property must be made by the corporation.” (Sec. 89.)
The rule is stated in Thompson on Corporations (2nd Ed.) as follows: “In cases of unconditional subscriptions the acceptance by the corporation renders the subscription binding. But in the very nature of the case this cannot be true as to conditional subscriptions; their binding effect depends ultimately on the performance of the condition. It is evident, therefore, that the mere acceptance of a conditional subscription is only in the nature of an agreement to entertain the proposition of the subscriber, and does not, without more, render the subscription binding. Some of the cases proceed upon the theory that there must be an
The validity of the condition is not questioned in this case, nor do we see any reason to doubt its validity. The* statute expressly authorizes the directors of any corporation of the kind here involved to purchase property neces
We were convinced when this case was decided, and remain of that opinion, that neither waiver of the condition nor estoppel is shown by the evidence, but that, on the contrary, the defendant participated in the organization meeting, accepted the office of director and secretary and acted in those capacities, with the understanding and expectation that the shares of stock conditionally subscribed for by him as aforesaid were -to be issued as full paid- stock in payment for the property offered by him. The delay resulting in the final action upon the subscription, shown by the resolution adopted in March, 1908, is explained by the testimony, which he referred to generally in the former opinion and will be more fully stated in this.
It is argued in the brief that when the defendant was allowed to vote the shares, and the company moved into and occupied the building, the company did all it was obligated to do, whereupon the defendant became the owner of said shares of stock and obligated to pay therefor in money or money’s worth, and that the company’s right to maintain an action on the contract was then complete. But if the defendant became a stockholder through the act of the com
The same witness.on being recalled as a witness for the defense again testified about that matter. His attention was called to the entry of January 1 in the ledger, and to an entry on the opposite side of the account showing a credit which balanced it, viz: “March 31, 1908, $2,700,” and was asked as to the latter entry this question: “What did that consist of?” He answered: “That was to balance that account when- the stock was turned back, when we decided not to take the store building.” He was then interrogated and testified as follows:
“Q. There was no cash passed, but simply a return of that stock? A. Yes, sir. Do you want me to explain what that $2,700 was for ? Q. You have explained that. * * * Q. Now, I believe you stated, Mr. Fry, in your examination for the plaintiff, that you considered this property, from the date of the organization of the company until March, as the property of the company? A. Yes, sir. Q. After that time, what did you consider it? A. We considered it the property of Mr. Terwilliger, and paid rent on it from then. Q. You considered before this meeting of March 11, 1908, that the company had fulfilled the conditions? A. Yes. Q. And thereby became the owner of the property? A. Yes. Q. You may explain, then, why
In our opinion the evidence must be understood as showing, either that the defendant had paid for the stock through the taking of the property by the company, leaving him obligated only to convey the legal title, or that the company declined to take the property for the stock, in which the defendant deemed it advisable to acquiesce, under the circumstances referred to. Under the former view, if the act of the executive committee in March, 1908, although ratified by the stockholders at the succeeding annual meeting, was invalid for any reason, the fact remains that no deed was demanded and no stock issued or tendered; and if a surrender of the property accompanied by a refusal to issue the stock was invalid as a fraud upon creditors the liability of the defendant, if any, would not be upon his subscription, or to pay for stock, nor would the action that was brought and is here to be determined on error be the proper remedy. But-we think the latter view, viz.: that the company declined to take the property and thereby fulfill the
We think it is fairly to be implied from the evidence, if not directly stated, that in offering the property and in acting upon the offer the thought or expectation was that it would furnish a suitable location and accommodation for the company’s business ;■ in other words, that if taken the property would be occupied and used as the company’s place of business. The objection to the property for that purpose that afterwards developed was not confined to the proposed new stockholders, but it appears that soon after the company began business some of the stockholders became dissatisfied with the conditions of the defendant’s subscription or the action taken thereon, which grew into a persistent
It is unreasonable to view defendant’s conduct as a waiver of the conditions to his subscription or as having estopped him from denying a liability .to pay in money the par value of the stock subscribed for. Finally, the matter was settled by the action taken by the executive committee in March, 1908. It appears that the resolution was drawn by the legal adviser of the company, who was also a stockholder; and we think it was intended as a refusal to take the property, and that such is its effect, when considered in connection with the facts and circumstances leading up to it, whereby the company failed to comply with the conditions of the subscription. Although some of the witnesses speak of turning back or canceling the Terwilliger stock as the object or result of the March resolution, that is not, strictly, a cor
'Counsel complains of the absence from the former opinion of any reference to a case, which, it is claimed, is on all fours with the case at bar, and sustains the contention that defendant is liable in this action. The case referred to is Singer, Nimick & Co. v. Given, 61 Ia. 93, 15 N. W. 858. Although it was not mentioned in the former opinion, it was not overlooked. We did not then and do not now regard it as a case on all fours with this case. It differs from this case upon the facts in at least two important particulars. If the subscription in that case was conditional, and the evidence on the subject seems to have been conflicting, the condition was that the amount subscribed be paid in buildings of the subscriber and his partner, but without expressly providing against liability, as was done in the case at bar, if the property was not taken. Again, although the corporation in that case went into possession of the property without a conveyance, and occupied it for a time, the company afterwards surrendered the same to the receiver of the defendant subscriber and his partner, and canceled the subscription. Thus, the property offered in payment was not the sole property of the defendant in that case, but it belonged to him and his partner, and the affairs of the partnership having gone into the hands of a receiver, and the property not having been conveyed to the company, the company surrendered the property to the receiver; evidently, it would seem, for the reason that the receiver had the better right to it. The court said that if the defendant had conveyed thé property, as he alleges he agreed to do, the company would have been, by that much, the more able
Prior to the commencement of this action an order was made in the United States District Court, wherein the bankruptcy matter was pending, authorizing the trustee to institute and prosecute the suit and expend therein a stated amount. It was suggested in the argument at the original hearing, and it is stated in the brief filed in support of the petition for rehearing, that by'said order, the United States Court held that the defendant was liable. We would not be inclined, ordinarily, to notice a proposition so entirely without merit, but its repetition in the brief now being considered indicates that counsel relies upon the order permitting the bringing of the suit and the expenditure of money in doing so as a decision contrary to the Conclusion of this court upon the facts of the case. Indeed, the brief states that by said order the court held, “under the facts of this case,” that the defendant was liable. It would be evident, without any showing as to such an order except that it was made, that the court making it did not decide the question to be ulitimatelv determined in the suit authorized to be brought, but only that the showing was sufficient to justify an order permitting the bringing of the suit. That would be evident from the nature of the proceeding. Such an order would not in any sense control or influence the .ultimate determina
A rehearing will be denied.
Concurrence Opinion
I concur in the conclusion arrived at on the ground that under the contract the only obligation assumed by defendant in error was to convey the lot to the company in consideration for capital stock of the company. No stock having been issued to him and no demand for a deed to the lot having been made, the present action cannot be maintained.
