76 W. Va. 1 | W. Va. | 1915
The defendant, Schenk, having refused to pay assessments on an informal subscription by him to preferred stock of The Windsor Hotel Company, a corporation, made before the articles of incorporation had' been issued, was proceeded against by a statutory motion for judgment for the amount of the unpaid 'assessments, aggregating $4500.00'. Denying the validity of the subscription, because not made in the statutory form, the defendant interposed numerous " pleas, some of which were rejected, and, trial by jury having been waived, 'the court tried the case, found for the defendant and rendered judgment accordingly.
' On the 12th day of August, 1912, the promoters of an enterprise having for its purpose the erection of a large modern hotel gave a banquet to certain citizens of Wheeling, at which the purpose and plans of a prospective corporation, to be known as The Windsor Hotel Company, were discussed and subscriptions to the capital stock thereof solicited. Among those in attendance, was the defendant who expressed his willingness to subscribe. On the following day, a paper was presented to him, bearing the subscription of E. B. Carney for 500 shares. Mr.^Sghenk added his for 50 shares and thereafter many additional subscriptions were secured, making an aggregate of 1750 shares, or more. The paper signed by the defendant reads as follows: “We, the undersigned, hereby subscribe for the number of shares set opposite our names of the Cumulative Seven Per Cent. Preferred Stock in The Windsor Hotel Company, at par value of $100.00 per share to be paid for at the call of the Board of Directors.” Though the subscriptions were numerous, only five persons
While the constating articles of a corporation are prescribed, and the rights of stockholders defined, by law, the courts in most jurisdictions hold preliminary contracts of subscription to the capital stock of corporations may be made in
Though our statutes prescribe the manner of creating and organizing corporations, with a considerable degree of minuteness, they are wholly silent on the subject of antecedent informal subscriptions or agreements to organize corporations. The right of individuáis to bind themselves to form a corporation, or take stock in a corporation to be formed by others, if any, is not nullified by any terms of the statute. Being one for the execution of a lawful purpose, an agreement to organize a corporation, or to take stock in one, seems to fall within the broad liberty of contract allowed by general law, unless expressly or impliedly prohibited by statute. Even in those states in which it has been held that a subscription can be made only in the statutory mode, the ground of the decisions is that the statute either expressly or impliedly prohibits a subscription in any other form. This view necessarily implies the validity of the subscription and the right to make such a contract, unless the statute denies it. In all those jurisdictions in which subscriptions made in advance of organization of the corporation are held valid and binding, the right is directly affirmed.
Not less apparent than the legal right to take prelimary subscriptions, is the utility of the procedure. The procurement of articles of incorporation and the organization effected under them involve labor and expense. Hence it is both advantagous and desirable, to have a guaranty of the success of a proposed organization before entering upon it. This is-no more than an ordinary business precaution, the right to which ought not to be denied in the absence of a legal prohibition thereof.
As the subscription involved here was not revoked in any manner prior to the organization of the corporation, it is unnecessary to enter upon any inquiry as to whether or not it was revocable. The subscriber expressed no dissatisfaction with his proposal, if such it was, and did not signify any intention to withdraw it, until after the corporation had been organized and the first assessment made against him. Even then, he made no express revocation. He did nothing more
On the contract of subscription so completed, whether regarded as a contract among the subscribers for the benefit of the corporation or as a continuous offer to subscribe, accepted by the corporation, the statute gives a right of action for the
From the conclusion just stated, it manifestly results that the subscription is a conditional one. It is not a contract merely for the payment of money to the corporation, but one also for admission of the subscriber into the corporation as a stockholder. To avail itself of the promise to pay the money, the corporation or the incorporators must comply with this condition. The law contemplates and guarantees participation by the stockholders in the organization of the corporation. After the certificate of incorporation has been issued and before organization, or election of the board of directors, additional shares of stock may be disposed of under the superintendence of such persons as those holding the majority of the shares may appoint. Sec. 16, ch. 54, Code, serial sec. 2909; See. 23 of ch. 53, Code, serial sec. 2856. No reason is perceived why those holding a majority of the shares subscribed for in the certificate, may not accept, on behalf of the corporation, the subscription made before issuance thereof. Having the power to take subscriptions for new and additional stock, they certainly have the lesser power to accept subscriptions already made in an informal manner, and, if they desire to hold such informal subscriptions, it is their duty to accept them and thus admit the new subscribers into the corporation, and afford them an opportunity to take part in the organization. They are not technically stockholders
Having misapprehended the law applicable to the subject and, in consequence thereof, misconstrued the contract of subscription, the incorporators of The Windsor Hotel Com
None of the pleas interposed specifically sot up non-compliance with this condition, as matter of defence, but the procedure adopted for recovery of the subscription is an informal one, and plea No. 1 denies, in general terms, that there is any thing due from the defendant on account of the matters set forth in the notice. This is tantamount to a plea of non-assumpsit or nil debat and raised the general issue. The notice does not reveal the antecedent character of the subscription, but it appears by the- evidence adduced in support of the motion. Had the notice fully stated the nature of the subscription, it would have been necessary to have averred" compliance with the condition and then to have proved performance thereof. An absolute and unconditional subscription having been averred, as the ground or basis» of the motion, and the proof having disclosed a conditional one, as well as nonperformance of the condition, no right of recovery has been shown. The notice could probably be amended, Kunst v. Findley et als., 73 W. Va. 152, 80 S. E. 136, but, in view of the evidence, an amendment would avail nothing.
For the reasons stated, the judgment complained of will be affirmed.
Affirmed.