Coleman Hotel Co. v. Crawford
| Decision Date | 21 March 1928 |
| Docket Number | (No. 903-4806.) |
| Citation | 3 S.W.2d 1109 |
| Parties | COLEMAN HOTEL CO. v. CRAWFORD.<SMALL><SUP>*</SUP></SMALL> |
| Court | Texas Supreme Court |
Critz & Woodward, of Coleman, for plaintiff in error.
Dibrell & Snodgrass and W. Marcus Weatherred, all of Coleman, for defendant in error.
A number of citizens of the city of Coleman were desirous of organizing a corporation, with a minimum capital stock of $50,000, for the purpose of building and operating a modern hotel in said city. In order to consummate such purpose the following subscription agreement was prepared and signed by the interested parties, viz.:
Among those signing such subscription was the defendant in error, opposite whose name was the amount of $5,000. After obtaining subscriptions in excess of the amount required, a meeting was held at which all subscribers were present. At this time the site for the proposed hotel was selected, which was a lot just across the street from the business store owned and operated by the defendant in error. It appears that defendant in error assented to the selection of this location. At the same meeting arrangement was made for the appointment of a committee to act as trustees to handle the matter of incorporating the hotel company, this committee consisting of the defendant in error and six others.
At one of the several meetings of the subscribers, and before the filing of articles of incorporation, it was decided to rent the hotel, when constructed, for a stipulated rental. It seems that defendant in error strongly objected to this, his complaint being that the rental under such arrangement would be insufficient and that the hotel so operated would be a financial failure. Shortly thereafter he attempted to withdraw his subscription by giving written notice, and upon demand refused to pay the same in accordance with the terms of the agreement.
Later, those interested duly filed articles of incorporation as contemplated by the subscription agreement. The application for the charter showed an authorized capital stock of $80,000 fully subscribed, and $41,770 duly paid in in cash. The affidavit accompanying the articles of incorporation listed defendant in error's subscription of $5,000 as being part of the authorized capital stock of said corporation. After the charter was filed, the corporation thus formed brought this suit against defendant in error to recover the amount of his stock subscription.
At the close of the testimony offered by plaintiff in error, the trial court peremptorily instructed the jury to render a verdict in favor of defendant in error. Upon appeal the Court of Civil Appeals (290 S. W. 810) concluded that the subscription agreement did not constitute a valid contract, and affirmed the judgment of the trial court.
The undisputed evidence shows that defendant in error gave notice of the withdrawal of his subscription before the formation of the corporation, and at a time when no expenses had been incurred on account of the enterprise. The record does not disclose any cause justifying defendant in error's withdrawal of his subscription unless the agreement by which it was made does not constitute a valid and binding contract. The question, therefore, is squarely presented whether such subscription agreement constitutes a valid contract from which a subscriber could not withdraw without the unanimous consent of the other subscribers.
It may be stated at the outset that there is considerable conflict in the authorities on this question. The courts which refused to enforce such subscription agreements, as a rule, base their holdings either upon the proposition that such agreements are without sufficient consideration to constitute a binding and enforceable contract, or upon the supposed want of sufficiency of parties to the agreement.
We are not impressed with the soundness of either of these reasons for declining to sustain such agreements as valid and enforceable ones. We think the better view is expressed by the authorities holding that a subscription agreement by a number of persons to the capital stock of a corporation to be thereafter formed by them constitutes a contract between the subscribers themselves to become stockholders when the corporation is formed on the condition expressed in the agreement, and, as such, is binding and irrevocable from the date of subscription. Bohn v. Burton-Lingo Co. (Tex. Civ. App.) 175 S. W. 173; Belton Compress Co. v. Sarg Saunders, 70 Tex. 699, 6 S. W. 134; McCord v. Southwestern Sundries Co. (Tex. Civ. App.) 158 S. W. 226; Steely v. Texas Improvement Co., 55 Tex. Civ. App. 463, 119 S. W. 319, 324; 1 Cook on Corporations, §§ 71 and 72, 169; 1 Thompson on Corporations, §§ 760, 761, 763, 766, 514; Minneapolis Threshing Machine Co. v. Davis, 40 Minn. 110, 41 N. W. 1026, 3 L. R. A. 796, 12 Am. St. Rep. 701; Businessmen's Association v. Williams, 137 Mo. App. 575, 119 S. W. 439; Nebraska Chicory Co. v. Lednicky, 79 Neb. 587, 113 N. W. 245; Clapp v. Gilt Edged Mines Co., 33 S. D. 123, 144 N. W. 721; Utah Hotel Ass'n v. Madsen, 43 Utah, 285, 134 P. 577; First Nat. Bank v. Hizer, 189 Wis. 359, 207 N. W. 688; New Lindell Hotel Co. v. Smith, 13 Mo. App. 7; George v. Harris, 4 N. H. 533, 17 Am. Dec. 446; Christian College v. Hendley, 49 Cal. 347; Berkeley Divinity School v. Jarvis, 32 Conn. 412; Higert v. Indiana University, 53 Ind. 326; Edinboro Academy v. Robinson, 37 Pa. 210, 78 Am. Dec. 421; 14 Cyc. 512, § 766.
When several parties agree to contribute to a common object which they wish to accomplish, the promise of each is a good consideration for the promise of others. The Supreme Court of this state has frequently upheld contracts sustained only by the mutual promises of the parties thereto. James v. Fulcrod, 5 Tex. 512, 55 Am. Dec. 743; Flanders v. Wood, 83 Tex. 277, 18 S. W. 572; Texas Seed, etc., Co. v....
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