168 Mo. App. 287 | Mo. Ct. App. | 1913
Plaintiff alleges lie bought and paid for 150 shares of the capital stock of defendant corporation and that defendant delivered to him a certificate for 100 shares but refused to issue a certificate for the remaining fifty shares and converted them to its own use. The prayer of the petition is for the recovery of the value of the shares so converted. The answer is a general denial.
A trial of the cause resulted in a verdict and judgment for plaintiff in accordance with the prayer of the petition. Defendant appealed and argues, first, that the jury should have been peremptorily instructed to return a verdict in its favor.
The defendant is a fire insurance company, organized and incorporated in this State under the provisions of article 6, chapter 61, Revised Statutes, 1909. On April 2, 1910, the organization of the company reached the point where the incorporators became entitled to a preliminary certificate of incorporation and such certificate was issued to them on that date by -the Secretary of State under the provisions of section 7001, Revised Statutes, 1909, which declare that <?n the receipt of such preliminary certificate the corporators “shall be a body politic and corporate, and may proceed to organize in the manner set forth in their charter and to open books for subscription to the capital stock of the company and keep the same open until the whole amount specified in the charter is subscribed, but it shall not be lawful for such companies
These requirements were not fulfilled until October 17, 1911, on which date a final certificate was issued authorizing the corporators to transact business with the public as a fire insurance company. Prior to that time the activities of the incorporators had been confined to the organization of the company and their chief task had been to sell the treasury stock. The plans of the promoters contemplated that the capital stock should be 100,000 shares of the par value of ten dollars per share and that sales agents should be employed to sell the stock. To pay the commissions of these agents and to defray the expenses of the preliminary organization it was proposed to sell the stock at a premium in order that the corporation might begin business with an unimpaired capital. 20,000 shares were set apart for sale “to the directors and founders of the company” at $12.50 per share leaving a margin of $2.50 per share for the expenses and commission fund. It was proposed to distribute this stock among fifty different men of high reputation in the business world to be known as the “founders” of the company, and after such distribution had been effected, to place the remaining 80,000 shares on the market for sale to the general public at twenty dollars per share. Accordingly a general sales agent was employed by the promoters to sell the stock on commission and in his contract of employment it wa,s agreed that he would “set aside out of his commission twenty-five cents a share on each of the 80,000 shares of stock sold at twenty dollars a share and deposit same with the treasurer as a fund to be divided equally between the fifty founders when the sale of.the capital stock of the company is completed. The division of the said
This contract, therefore, provided for the creation of a fund which would amount to $20,000 when all of the 80,000 shares were sold by the agents and it was intended by the promoters and promised by the agents to persons solicited to become founders that this fund should be divided equally among the fifty founders so that each would receive $400 as a rebate on the purchase price of his stock. Consequently, a founder who subscribed for 400 shares paid $5000 for his stock and received it with the agreement of defendant to refund him $400 when all of the stock offered to' the public had been sold. In other words the inducement held out to a founder was that he would be permitted to obtain a block of stock for $4600, which would cost a general subscriber $8000.
• Further it appears that, doubtless, for the purpose of aiding the agents in procuring desirable founders the 20,000 shares were divided into blocks of fifty shares each and the agents were authorized in some instances to give a rebate agreement with the sale- of one of such blocks but were not authorized to offer any one founder more than a single rebate.
Plaintiff was solicited by agents thus employed to become a founder and on March 15, 1910, he subscribed for a block of fifty shares at $12.50 per share, or $625 for the block. He paid $125 (the amount of the premium) in cash and gave three notes in payment of the remainder of the price, due in two, four and six months. The sale was made on the condition that he was to have a founder’s rebate which, if he had made no further purchase of stock, would have reduced the cost of . his stock to $225. On March 19, at the solicitation of the agents, he purchased another block at the same price and he says on the same terms
The evidence of defendant differs in vital respects from that of plaintiff from which the foregoing statement is taken. According to the testimony of defendant’s witnesses it appears that defendant’s officers did not admit nor act on the statement of plaintiff that false representations had been made to him by the sales agents and that he had been promised a rebate on each block of fifty shares, nor did they agree to rescind the sale of the 300 shares. The subscription agreement was in writing contained the provision, that if plaintiff should “make default for thirty days after same becomes due in any of said deferred payments, this contract shall be returned to me and the company shall retain "all payments theretofore made as liquidated damages and the company may resell said stock.” The secretary testified that plaintiff urged other reasons for being released from the contract than his claim of fraud and that he told plaintiff that defendant would endeavor to resell the stock and if successful would return plaintiff’s three notes of $1000 each, but would not return the $750 note or its proceeds since it had been used for organization expenses. He promised, though, to give plain
On July 29, at a meeting "of the directors the following resolution was adopted: “Whereas, I. C. Van Noy heretofore subscribed for three hundred shares of the capital stock of this company, first series, as shown by subscription contract No. 1651, and whereas subsequently and in lien thereof E. L. Harrison, subscribed for one hundred shares of the capital stock of the company, first series, as shown by subscription contract No. -, and S. R. Hill subscribed for one hundred shares, first series, as shown by subscription contract No. 2480, and the Brown News Company subscribed for one hundred shares, first series, as shown by subscription contract No. 1846, all of which three latter subscriptions were made in lieu and in place of the stock subscribed by the said I. C. Van Noy.
“Therefore, be it resolved by the board of directors that the said I. C. Van Noy subscribéd for and the same is hereby canceled, and the said subscription by E. L. Harrison, S. R. Hill and the Brown News Company are accepted in place thereof, and the treasurer, of the company is directed to surender to I. C. Van Noy his three unpaid notes for $1000 each in exchange for his original receipt, and upon the fnrther condition that the first payment made by the said I. C. Van Noy upon said original subscription for said
Plaintiff paid his note of $750-to the bank May 18, 1910. On June 23, 1910, he executed and delivered to defendant a written assignment of the 300 shares of stock conditioned for the cancellation and return of his three notes of $1000 each. The notes were returned to him some time in the following August and the certificate for 100 shares of stock was -issued and delivered to him January 11, 1911. The evidence does not show that the board of directors gave the secretary of the company express authority to release plaintiff from his subscription t'o the 300 shares and to enter into a new contract to give plaintiff fifty shares for the note of $750. The prinicpal issue of fact in the case is whether the secretary assuming to have authority so to do, agreed to a rescission of the contract for the 300 shares and to issue to plaintiff a certificate for fifty shares in lieu of the note for $750. The evidence as a whole shows quite clearly that a serious controversy had arisen between the parties over the sale, that plaintiff was insisting he had been defrauded and that the secretary, while not admitting the charge, regarded and treated the case as one that should be adjusted and settled.
Indeed, both parties appear to have entertained the thought that a compromise should be made. According to the statement of plaintiff he was willing to pay a higher price for fifty shares of stock that he had paid for the other stock he had purchased, while the secretary admits he agreed to release plaintiff from the sale in the event defendant could resell the stock and to release him without loss if the resale could be made without additional expense. The contention of each party as to the terms of this compromise agreement is supported by substantial evidence and both are reasonable and plausible. The jury decided to accept plaintiff’s version of the transaction and in the
But it is argued the evidence fails to show that defendant’s secretary had authority to enter into a new contract on behalf of the corporation.
The three contracts for the purchase of stock entered into between plaintiff and the sales agents of the promoters of the corporation were made before the corporation received the first certificate which, as stated, was issued by the Secretary of State April 2, 1910, and being made before a corporate entity came into being, were contracts with the promoters which the corporation was not bound to accept as made in its behalf.
The rule is well settled that a corporation is not responsible for contracts entered into before it came into existence by promoters assuming to bind the company in advance. No principle of the law of agency is applicable to a case of this kind, as agency implies the existence of a principal. [Blackwell v. Adams, 28 Mo. App. l. c. 61; Davis v. Creamery Assn., 63 Mo. App. 477.] After becoming a legal entity the corporation has the option of adopting or repudiating contracts for'its benefit made by its promoters and the
Defendant became a corporate entity for the purpose of entering into contracts for the sale of its capital stock on April 2, 1910, when it received its first certificate (section 7001, R. S. 1909), and in accepting the benefits of the contracts its promoters had procured from plaintiff, it adopted those contracts as its own and took them with all their burdens and infirmities. If, as plaintiff contends, the last of those contracts, each of which was a distinct and independent transactions, was procured from him by false and fraudulent representations on which he relied under circumstances justifying such reliance, defendant took the benefits of that contract to plaintiff’s right of rescission on the ground of fraud. Plaintiff elected to exercise that • right and appearing at the principal office of defendant, expressed his purpose to the officer of defendant in ápparent charge of the office and demanded the return of his notes. That this officer communicated to the board of directors the substance of plaintiff’s complaint and demand is a fact about which there can be no real dispute and that the
In other words, if defendant told its agent to compromise the case with a conditional agreement to give plaintiff fifty shares of stock for his premium note and the agent exceeded the instructions by entering into an unconditional agreement, we say he was acting within the apparent scope of his real authority which was the authority to represent the corporation in compromising' a business controversy and defendant is bound by his act.
And, further, we hold that the evidence, as a whole, will support an inference that the secretary not only had apparent authority to compromise the case on the terms- of the settlement plaintiff states was made, but had real authority to make the settlement and that defendant purposely delayed the execution of the compromise agreement until after the maturity of the notes plaintiff gave for the purchase price of the
The demurrer to the evidence was properly overruled.
Objection is made to the instruction on the measure of damages but we rule that the instruction declares the only proper rule for application in a ease of this character. Another objection to the instructions has been fully answered in what we have said on the demurrer to the evidence. The cause was fairly tried and the judgment is affirmed.