Collins v. Morgan Grain Co.

Citation16 F.2d 253
Decision Date15 November 1926
Docket NumberNo. 4933.,4933.
PartiesCOLLINS v. MORGAN GRAIN CO., Inc.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

James H. Raley, of Pendleton, Or., Richard W. Montague, of Portland, Or., and William I. Brobeck, Herman Phleger, and Maurice E. Harrison, all of San Francisco, Cal., for plaintiff in error.

William S. Andrews, of San Francisco, Cal., and Harry L. Raffety, Merwin Rankin, and David C. Pickett, all of Portland, Or., for defendant in error.

Before GILBERT and RUDKIN, Circuit Judges, and NETERER, District Judge.

RUDKIN, Circuit Judge.

This was an action by a corporation to recover a balance due on a stock subscription. There is little controversy over the facts. In the latter part of 1920, one Morgan, a grain dealer of San Francisco, conceived the idea of forming a corporation to take over the grain business then conducted by certain operators on the Pacific Coast. With this object in view, he consulted Collins, a grain operator in Oregon and the Pacific Northwest, and Sibley and Anderson, American managers for Wills & Sons of London, and proposed that Wills & Sons, Sibley, Anderson, Collins, and himself take stock in the proposed corporation. The proposition was looked upon with favor by Wills & Sons, and they directed their American managers to proceed to New York and meet one of their directors, to discuss the matter with Morgan. A conference was held in New York, attended by Morgan, Sibley, Anderson, and a director of Wills & Sons, and as a result of this conference Morgan wired Collins concerning the matter. The telegram is not in the record, but in response thereto Collins wired Morgan, agreeing to take $25,000 in stock in the proposed corporation, payable in installments.

Upon receipt of this message, Wills & Sons agreed to subscribe for 1,260 shares, Anderson and Sibley for 10 shares each, and Morgan for 625 shares, of the par value of $100 each. Sibley and Morgan then returned to San Francisco, and while at Chicago, on their return, two additional subscriptions were taken, one for 50 shares, the other for 25 shares. After the return of the parties to San Francisco, the Morgan Grain Company was organized under the laws of the state of Delaware, and Morgan became president of the company. Morgan reported to the board of directors that he had secured subscriptions to the capital stock as above detailed. The subscriptions were accepted by the board and a call of 25 per cent. was made. The call was paid, and certificates issued to the several stockholders for the number of shares paid in full. Thereafter a certificate for the remaining shares subscribed by Collins was tendered, but he refused to accept the certificate or to pay the additional subscription. This action followed.

Upon the trial in the court below the defendant offered to prove that, before the organization of the corporation or the acceptance of his offer to subscribe, he met Morgan and Sibley in San Francisco and informed Morgan that he withdrew his subscription, that if Morgan would consent to its cancellation he would subscribe for and take $5,000 of stock in the corporation, and that Morgan agreed to this. The court below ruled that this evidence was incompetent, and directed a verdict for the plaintiff. The judgment on the verdict is now before us for review.

The principal assignment of error is based on the ruling of the court excluding testimony tending to prove a revocation or cancellation of the subscription before the corporation was formed, and before the offer was accepted. Agreements to subscribe for stock of corporations to be formed in the future may assume different forms, with different results. For example, if an individual, acting singly and without co-operation with others, offers to take stock in such a corporation, all the authorities agree that the offer may be rescinded or revoked at any time before the corporation is formed and the offer accepted; this upon the familiar principle that it takes two parties to make a contract, and that, if one is not bound, the other is not, in other words, that a mere unaccepted offer cannot in the nature of things constitute a binding contract.

Again, such an agreement may assume a double aspect, as where a number of persons agree to form a corporation and to subscribe to its capital stock. Such an agreement constitutes a contract as between the subscribers themselves, operative at once, and it likewise constitutes a continuing offer to the proposed corporation, which, upon acceptance, becomes as to each subscriber a contract between him and the corporation. Some of the authorities hold that contracts of the latter class are irrevocable without the consent of all the parties thereto; but there is usually found in such cases some element of estoppel, which does not exist in the case at bar. But, without attempting to distinguish the present case from the cases so holding, we deem it sufficient to say that the cases relied on are not supported by the weight of authority.

"According to the weight of authority, a subscription may be withdrawn at any time before it is accepted by the corporation, whether made before or after the formation of the corporation, for the reason that until such acceptance there is no binding contract, because, until then, there is no agreement and no mutuality of object, and hence no consideration, and, in the case of subscriptions made before...

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2 cases
  • Vizcaino v. Microsoft Corp.
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • 24 Julio 1997
    ...be revoked by giving specific notice to the offeree at any time prior to acceptance or substantial performance. Collins v. Morgan Grain Co., 16 F.2d 253, 255 (9th Cir.1926), cited with approval in 1 Arthur L. Corbin & Joseph M. Perillo, Corbin on Contracts, § 2.18, at 217 n. 7 (rev. ed.1993......
  • Ingram v. Fidelity-Phoenix Fire Ins. Co.
    • United States
    • U.S. Court of Appeals — Eighth Circuit
    • 15 Noviembre 1926

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