Business Men's Ass'n v. Williams

• Decision Date: 11 May 1909
• Citation: 119 S.W. 439,137 Mo. App. 575
• Parties: BUSINESS MEN'S ASS'N v. WILLIAMS.
• Court: Missouri Court of Appeals

119 S.W. 439

137 Mo. App. 575

BUSINESS MEN'S ASS'N v. WILLIAMS.

St. Louis Court of Appeals. Missouri.

May 11, 1909.

1. CORPORATIONS (§ 76) — SUBSCRIPTION TO STOCK — CONSIDERATION — MUTUAL PROMISES.

Where several subscribe to stock in a corporation to be thereafter organized, the promise of each is a sufficient consideration for the promises of the others at common law.

2. CORPORATIONS (§ 174) — STOCKHOLDERS — NATURE OF RELATION.

The relation of stockholder and corporation arises from and exists in contract.

3. CORPORATIONS (§ 174) — ORGANIZATION — RATIFICATION OF INSUFFICIENT CONTRACT.

Though there be no valid and enforceable contract of subscription in the first instance, the relation of corporation and stockholder may arise from acts and conduct of the parties which evince to a certainty a meeting of the minds to that end upon a sufficient consideration; and such acts may amount to a ratification of a prior insufficient contract or may invoke those principles which preclude a denial of the relation in the interests of justice.

4. CORPORATIONS (§ 76)—ORGANIZATION—INSUFFICIENT ORIGINAL SUBSCRIPTION—RATIFICATION BY SUBSCRIBER.

Though an original subscription to stock in a corporation to be organized be irregular and unenforceable as such because of failure to comply with statutory or other conditions, payment of either a part or the whole of the subscription after the corporation is organized will operate as a ratification by the subscriber of the irregular subscription, in the absence of fraud, on the theory that its acceptance binds the corporation to respond to him in the capacity of stockholder, and he is thereby estopped from denying the obligation on his behalf.

5. CORPORATIONS (§ 76) — ORGANIZATION — PARTICIPATION BY SUBSCRIBER — ESTOPPEL TO DENY REGULARITY OF SUBSCRIPTION.

Where a person subscribed to a preliminary paper containing subscriptions to stock in a proposed corporation and therein appointed the first board of directors to represent him as they saw fit in the formation of the corporation, and the board did so represent him, he was estopped to deny the regularity of the preliminary subscription, though he was not present at the meeting and did not participate in the organization of the company.

6. CORPORATIONS (§ 76) — ORGANIZATION — VALIDITY OF SUBSCRIPTION.

Where a subscription paper stipulated that a proposed corporation should be capitalized for $25,000, or for such less amount as the association of subscribers might decide upon, the fact that the corporation was capitalized for only $2,500 did not invalidate the subscription.

7. CORPORATIONS (§ 90) — SUBSCRIPTION TO STOCK—ACTIONS—NECESSITY FOR TENDER OF STOCK.

It is no defense to an action by a corporation on a subscription to stock that the corporation has not delivered or tendered the certificate of stock, since it is the contract of subscription, or ratification of and estoppel to deny an irregular contract of subscription, which brings forth the relation of stockholder and corporation, and the certificate itself amounts to no more than evidence of the stockholder's right to participate in the corporation.

Appeal from Louisiana Court of Common Pleas; David H. Eby, Judge.

Action by the Business Men's Association against R. H. Williams. Judgment for plaintiff, and defendant appeals. Affirmed.

Pearson & Pearson, for appellant. Robt. H. May, for respondent.

NORTONI, J.

This is a suit seeking to enforce the obligation of a stockholder in plaintiff corporation. Plaintiff recovered, and the defendant appeals.

It appears that the defendant and a large number of other business men, citizens of the city of Louisiana, Mo., had associated themselves together into a voluntary association known as the "Business Men's Association." The object and purpose of this voluntary association were to enhance the business interests of the city and induce important concerns to locate therein. This voluntary association received a proposition from the Wells-Fargo Shoe Company to the effect that if the association would procure the ground, erect a suitable building thereon, and donate the same to that company, it would open a shoe factory in the city of Louisiana which would employ a considerable number of persons. To effectuate this proposition, the members of the Business Men's Association set about to procure its incorporation into a company for the purpose of receiving title to the grounds contemplated, erecting the necessary building thereon, and donating the same to the shoe manufacturer mentioned. With this end in view, the defendant executed the following preliminary paper purporting to obligate him to take $20 worth of stock in the proposed corporation. A large number of other persons, some of whom were his associates in the voluntary association, and others who were not, subscribed likewise to the same end. The subscription paper to which defendant subscribed is as follows: "Louisiana, Mo., September 2, 1905. I hereby agree to take twenty dollars worth of stock in a corporation to be formed by the Business Men's Association of Louisiana, Mo., the capital stock of which is to be $25,000, or such less sum as the said association may decide upon, for the purpose of purchasing a site in said city, or adjacent thereto, and erecting thereon a suitable building, with appurtenances for a shoe factory. Certificates of stock to be issued me by said proposed corporation when formed, for the amount of my paid-up subscription. I agree to pay ten dollars of said amount in cash on demand, and the balance in installments of two dollars per month to the persons to be named as the first board of directors of said proposed corporation, and I hereby authorize and empower said proposed board of directors to represent me and vote my stock as they may see proper in the formation of such corporation; and, on compliance with the requirements of said association by the persons or corporation occupying said shoe factory building, the stock which I may hold shall become the property of said persons or corporation occupying the same, whenever said board of directors may order."

About 10 days after this subscription was executed, to wit, September 12, 1905, a meeting of the Business Men's Association (that is, the voluntary association) was held for the purpose of moving toward the incorporation thereof. The defendant did not attend the meeting, however. At the meeting mentioned it was agreed by those present that the incorporation should be effected under the name of "Business Men's Association," the capital stock to be $2,500, and 25 members of the voluntary association were selected as incorporators thereof. Immediately thereafter the incorporation was had in pursuance of the plan marked out at the meeting mentioned. Twenty-five members of the association subscribed and acknowledged the articles of association as contemplated by our statutes (section 1312, 1313, Rev. St. 1899 [Ann. St. 1906, pp. 1065, 1066]), and such further proceedings were had as resulted in the incorporation of the plaintiff company in due form of law, in pursuance of the sections referred to, and section 1314, Rev. St. 1899. As stated, the defendant did not personally attend the preliminary meeting referred to, nor did he subscribe to or acknowledge the articles of association. Whatever interests the defendant may have had as a proponent touching the matter of becoming a stockholder in the corporation were represented in the organization of the company by the 13 of his associates who were selected and named in the articles as the first board of directors of the incorporated company. After the company was duly incorporated, the defendant paid $10 of the amount subscribed by him on the preliminary paper to the plaintiff's board of directors. He refused to pay the additional $10 thereafter, for the reason, as alleged by him, that he was not obligated to do so by having signed the articles of association or otherwise brought himself strictly within the terms of the statute pertaining to the organization and incorporation of the company.

The defendant insists that the paper he executed amounted to no more than an unauthorized preliminary paper which was not contemplated by the terms of the statute, to be an essential prerequisite to the formation of a manufacturing or business incorporated company. It is argued that, unless he subscribed and acknowledged the articles of association mentioned in the statute (section 1312, 1313, and 1314), the relation of stockholder and corporation did not arise between him and the plaintiff, and therefore this action may not be maintained thereon.

We are cited to, and the rule announced touching the organization of a railroad corporation in, Sedalia, etc., Ry. Co. v. Wilkerson, 83 Mo. 235, is invoked to sustain this argument. In the view we have taken of the case, it will be unnecessary to decide whether the rule of that case is controlling here in respect to the organization of a manufacturing or business corporation, under another and distinct statute. It may not be out of place, however, to say that there is a notable distinction in respect of the requirements of the statutes touching the organization of incorporated manufacturing or business companies, as will appear by reference to sections 1312, 1313, and 1314, and the requirements touching the organization of a railroad company, to be found under the provisions of section 1034, Rev. St. 1899 (Ann. St. 1906, p. 897), under which the Wilkerson Case was decided. Section 1034, touching the matter of railroad companies, authorizes not less than five persons to form a corporation for the purpose of constructing and operating a railroad. Among other things, that section says: "Each subscriber to said articles of association shall subscribe thereto his name, place of residence and the number of shares of stock he agrees to take in said company." After having recited this and several other requirements...