Pacific Mill Co. v. Inman, 80 P. 424

Pacific Mill Co. v. Inman

80 P. 424 | Or. | 1905

Mr. Justice Bean

delivered the opinion of the court.

From the bill of exceptions it appears that “the plaintiff introduced evidence tending to prove all the allegations of its complaint,” unless the fact that it had collected on the new subscriptions to its capital stock but $5,500 in September, $187.50 in October, $&,437.'50 in November, and $4,875 in December, 1901, shows such a failure to comply with the contract as authorized the defendant to repudiate it, and required the court to grant the motion for nonsuit.

There, may be substantially three kinds of covenants or promises in a contract: first, such as are independent of each other; second, such as are mutual and concurrent, and are to be performed at the same time; and, third, promises or covenants which are conditional and dependent, the performance of one depend*359ing upon the performance of the other. In the character of contract first suggested, one party may bring an action against the other for a breach without averring and proving performance on his part. But in the other two, where the. contract is entire, and the covenants go to the whole consideration, the plaintiff must show a performance, or that he was ready and offered to perform, before he can maintain an action against the. other for a breach of the contract: 9 Cyc. 719. It is often difficult to determine the nature and character of the respective covenants of parties to a contract, and this difficulty has given rise to much ajiparent confusion in the decided cases. The early adjudications turn wholly upon the technical language of the contract. But the modern rule is that the contract should be construed according to the intention of the. parties as gathered from its context and the good sense of each case. The question is one of construction, and, when the intention of the parties is not clearly expressed or is doubtful, certain rules- of interpretation are applicable. One of these is that where the contract contains several separate .and independent covenants, not covering the. whole ground of the contract, and it has been executed or performed in part by one of the parties, a covenant of his going only to a part of the consideration, a breach of which may be paid for in damages, will be regarded as independent, performance of the contract as divisible, and he may maintain an action for a breach thereof by the other party without proving performance of such covenant: Note to Pordage v. Cole, 1 Saund. 320; Clark, Contracts, 653. Mr. Parsons, in speaking of this question, says that “if the supposed condition covers the whole ground of the contract, and cannot be severed from it or from any part of it, a breach of the condition is a breach of the whole contract, which gives to the other party the right of avoiding or rescinding it altogether. But where the supposed condition is distinctly separable, so that much of the contract may be performed on both sides, as though the condition were not there, it will be regarded as a stipulation, a breach of which only gives an action to the injured party55: 2 Parsons, Contracts (9 ed.), *527.

*3601. Now, applying these rules to the case in hand, and bearing in mind the principle that the intention of the parties is to govern, the. solution is easy. There is no stipulation in the contract, express or implied, that the defendant’s obligation or liability was dependent upon the prior payment of the amount of the new stock subscriptions, or that any part of them should be paid in before the defendant should be required to begin the performance of the contract on its part. The language of the contract on this point is not happily chosen, but it seems to us that its purport is that plaintiff stipulated and agreed that it would procure bona fide subscriptions from its present stockholders and directors and other parties for $23,000 of the new stock issue, and that such subscription should be paid for in one, two, three, and four months, as might be called by the directors, from and after September 1, 1901. But there is no statement that the payment of such subscriptions was a condition precedent to performance by defendant. The contract on the part of the plaintiff consisted of several distinct items, such as increasing its capital stock, merging its planing mill into the. new enterprise, securing land for a lumber yard, contracting with the railway company for the delivery of lumber from the dock to the yard, securing bona fide subscriptions for $23,000 of the capital stock, etc., and completing the details of such items by September 1, 1901, and notifying the defendant of that fact. Now, the plaintiff, relying upon the contract, proceeded at considerable expense and trouble to do all this, except collecting the entire amount due on the subscriptions to its capital stock; and, for the. purposes of this ease, it must be assumed to have performed all the other conditions on its part in good faith. The entire payments on such subscriptions were not to be made until December 1, 1901, and it can hardly be supposed that the parties contemplated that defendant should not perform any of the covenants on its part or begin such performance until that time. The mere default of the plaintiff in collecting the assessments in full, as levied, did not justify the defendant in repudiating or canceling the contract.

The stock subscriptions were prima facie valid and collectible, and constituted assets of the corporation. After the plaintiff, *361relying on the contract, changed its business, enlarged its capital stock, and incurred liabilities, the defendant ought not to be permitted to repudiate and cancel it, in the absence of an express and clear stipulation entitling it to do so. If it had been intended that the entire amount of the new subscription should be paid into the treasury of the plaintiff before compliance witli the contract by the defendant, it would, .no doubt, have been so provided. This was not done, nor was any claim made by defendant during the protracted negotiations between it and the" plaintiff, or at any time prior to the repudiation of the contract, that such was the understanding or agreement of the parties. Indeed, the entire dealings of the parties show to the contrary. The first letter from the plaintiff to defendant inviting it to cooperate in the establishment of a lumber yard said that the proposed subscription for the increased stock should be called as “the same might be needed,” and the argument used by the defendant in its letter to the plaintiff of August 27th, asking for a modification of the contract so that alternate cargoes of lumber should be paid for in cash, was that, even under the modification suggested, “we will pay for all our stock by the time the other subscribers would have paid for about one half of theirs,” and-“in this way our firm will not pay for their stock in full much before the other subscribers pay for theirs.” Under date of September 11, 1901, the plaintiff wrote the defendant that “75 per cent of the stock subscribed for here will be paid in by the time we get our first lumber,” and again, on the 7th of October, that fifty per cent of the stock subscriptions had been called, and that it was the intention of the directors to call the balance “soon in order to have all the stock fully paid up by the-time the lumber guaranteed you is received.” This correspondence shows that both parties understood that lumber was to be shipped by the defendant to plaintiff in pursuance of its contract before the stock should be paid for in full. The motion for nonsuit on the ground suggested, therefore, was not well taken, and should have been overruled.

2. This disposes of all the questions strictly arising on this appeal, although there were others urged by the defendant’s counsel. The bill of exceptions recites that the plaintiff gave *362evidence tending to support all the allegations of its complaint, and therefore necessarily showed full performance on its part, except in the matter of collecting the amounts due on the stock subscription. The defendant, however, argues that the motion for a nonsuit was properly sustained, because one of the subscriptions purports to have been made by the Honolulu Investment Co., and there was no proof of its organization, or of its power to subscribe for stock in the plaintiff corporation; that the money paid'on the stock subscription was not used by the plaintiff in accordance with the contract between it and the. stockholders; that one of the stockholders had repudiated his contract, and refused to pay any amount thereon; and that plaintiff failed to show that all the subscriptions were bona fide. It is quite doubtful whether any of these questions are properly before the court. None of them appear from the bill of exceptions proper, and it is not clear that the court ought to go through a great mass of testimony attempted to be made a part of the bill of exceptions by mere reference to ascertain whether a positive and direct statement of a fact in the bill is erroneous. But however that may be, none of the questions proposed were .sufficient to justify the .motion. The proof is that the subscriptions to the capital stock are all genuine, and that all the subscribers have made a payment thereon, except one, and he refused solely because the contract between the defendant and the plaintiff was not being carried out. The subscription of the Honolulu Investment Co. was made by one purporting to be an officer of the corporation. The first assessment has been paid, and the subscription has never been repudiated. The defendant had knowledge thereof in October, 1901, when it was furnished a list of the subscribers, and again through the agent whom it sent to Honolulu' to examine into the condition of affairs. Notwithstanding this knowledge, it made, no objection to the subscription or its validity, and therefore it impliedly admitted its genuineness: McCoy v. World’s Columbian Expo. 186 Ill. 356 (57 N. E. 1043, 78 Am. St. Rep. 288).

3. The charge that the money paid by the stockholders was not used by the corporation in accordance with the contract of subscription is controverted, but the defendant cannot refuse to *363perform its contract on that account. The question is one between the stockholders and the corporation, or between the corporation and its officers. There is no provision in the contract between plaintiff and defendant that the money derived from the. increased stock subscriptions should be kept intact. When it was paid in, it became an asset of the corporation, and subject to its disposal. If its officers have misapplied, wrongfully wasted or dissipated it, the defendant and the corporation are not without remedy, but it is no excuse for the defendant’s refusal to abide by its agreement.

The judgment is reversed, and the cause remanded for a new trial. Reversed.