Farmers' Lumber Co. v. Luikart

• Citation: 256 P. 84,36 Wyo. 413
• Decision Date: 24 May 1927
• Docket Number: 1388,1325
• Parties: FARMERS' LUMBER CO. v. LUIKART [*] ; LUIKART v. FARMERS' LUMBER CO
• Court: Wyoming Supreme Court

256 P. 84

36 Wyo. 413

FARMERS' LUMBER CO. v. LUIKART ^[*] ;

LUIKART v. FARMERS' LUMBER CO

Nos. 1325, 1388

Supreme Court of Wyoming

May 24, 1927

APPEAL from and ERROR to District Court, Fremont County; JAMES H BURGESS, Judge.

Action by the Farmers' Lumber Company against E. H. Luikart. Judgment for plaintiff, and defendant appeals and brings error. Cases disposed of together on appeal.

Modified and Affirmed.

A. C Allen and O. N. Gibson, for appellant, and plaintiff in error.

The filing of a counterclaim for equitable relief converted the action into a suit in equity; Sutherland Code, Pl. & Pr. Sec 1157; 35 C. J. 174; Oil Co. v. Bank, 260 U.S. 235; Taylor v. Brick Co., 66 O. S. 360, 64 N.E. 428. Proof of sale of all of the stock was a condition precedent to recovery upon any stock subscription; 4723 C. S. 35 Cyc. 1347; 1 Cook on Corp. (6 Ed.) Sec. 83, p. 316; Edwards v. Johnson, 23 Wyo. 384; 2 Fletcher 1562. Every subscription is upon implied condition that no liability occurs until all stock is subscribed for; 14 C. J. 538; 2 Fletcher 1562; 1 Cook on Corp. (6th Ed.) Sec. 176. Only bona fide subscriptions are considered; 11 Fletcher 1371; Bank v. Cook, 25 Iowa 111; Lumber Co. v. Clark, (Ore.) 203 P. 588. Ordinarily a corporation may not subscribe for shares in another company; 2 Fletcher 1199; People v. Trust Co., 130 Ill. 277; De La Vergne v. Institute, 175 U.S. 58. An ultra vires subscription cannot be counted; 14 C. J. 543; Harvester Co. v. Jefferson, (Minn.) 74 N.W. 149; Berry v. Yates, 24 Barb. (N. Y.) 199; Hotel Co. v. Gilmore, (Wash.) 32 P. 1004; Belfast Ry. Co. v. Cottrell, 68 Me. 185. Withdrawn or cancelled subscriptions cannot be counted; 2 Fletcher 1577; Ry. Co. v. Sullivan, 57 Ga. 240; McCully v. Pittsburg Ry. Co., 32 Pa. 25. Directors have no power to consent to withdrawal, release or cancellation of subscriptions, except under certain conditions; 14 C. J. 621. Consent of the stockholders is usually required; 14 C. J. 623; 2 Fletch. 1433. Several of the alleged subscriptions were not such as to entitle them to be counted in determining appellant's liability; 14 C. J. 542; 2 Fletch 1376, 1578. Where particular acts are ordinarily beyond the power of a corporation, no presumption is indulged in favor of their validity; Frye v. Bank, 10 Ill. 332. Where a statute prohibits an act, but makes exceptions, a party desiring to avoid the statute must show himself within the exception; Mear v. Hutchinson, 134 F. 266; Schlemner v. Ry. Co., 205 U.S. 1; 37 C. J. 1244. Amendments to pleadings, to conform to the evidence, are permissible; 31 Cyc. 371; Ry. Co. v. Goss, (Ark.) 123 S.W. 390; Crook v. Ry. Co., (Ky.) 209 S.W. 859; Doyle v. Miles, (Colo.) 219 P. 1068. The withdrawal of other subscriptions precluded recovery; 2 Fletcher 1427; Fruit Co. v. Cool, (Cal.) 40 P. 542. Withdrawals may ratify a release; Brick Co. v. Winson, (Cal.) 151 P. 425; 14 C. J. 623.

Brome & Brome, for respondent.

The construction placed upon the contract, by the signers, should prevail and appellant should not be permitted to avoid his obligation, for the reason that he or any other subscriber refused to comply with their agreement; Edwards v. Johnson, 23 Wyo. 390. Subscription books are evidence to show who are subscribers; 2 Fletcher 1243; Shich v. Co., 44 N.E. 49. Every requirement of the subscription contract was complied with; proof of an oral subscription is binding; Rutenbeck v. Hohn, 121 N.W. 700; McCoy v. Exposition, 57 N.E. 1043; 14 C. J. 544.

A. C. Allen and O. N. Gibson, for plaintiff in error.

There appearing to be some question as to whether the action of the trial court, in overruling the motions for new trial on the grounds of newly discovered evidence, can be considered on appeal under Chapter 392, where such motion was filed subsequent to the notice of appeal, proceedings in error were taken without waiving any of the rights of plaintiff in error upon the pending appeal or assignments of error therein; we are not aware that this question of practice has ever been considered by this court; in State v. Grandbouche, 32 Wyo. 88, there was no bill of exceptions; in case of doubt, it is proper to seek review by both methods; 3 C. J. 343, 352, and 346. Points and authorities, in our brief on appeal, are referred to and adopted.

Before POTTER, Justice, BROWN and RINER, District Judges. POTTER, Justice, and BROWN, District Judge, concur.

OPINION

RINER, District Judge.

These two cases, the one under the direct appeal statute, and the other a proceeding in error, are before this Court to obtain review of a judgment of the District Court of Fremont County rendered against one E. H. Luikart, hereinafter referred to as the defendant. Both cases, therefore, can and will be disposed of together.

The action wherein this judgment was had was brought by the Farmers Lumber Company, a corporation organized under the laws of Wyoming, hereinafter mentioned as the plaintiff, to recover from the defendant the unpaid balance of his subscription for five thousand dollars of the capital stock of the plaintiff corporation. The defenses interposed were substantially that the subscription had been obtained by fraudulent representations and that the full amount of the capital stock of the plaintiff had not been sold. Defendant's answer also contained a counter-claim seeking to recover a five hundred dollar initial payment on his subscription, which was alleged to have been paid by his agent without authority. Upon the conclusion of the trial the court found for the plaintiff and rendered a judgment in its favor for $ 6067.38, as claimed.

In the course of the trial below the defendant, though at first denying that such authority existed, after being shown a letter written by him to his agent, directing the latter to make the five hundred dollar payment on his stock subscription, admitted that he had authorized such payment to be made. In the argument before this Court it was conceded by defendant's counsel that he could not recover on his counter-claim for this amount, and consideration of that matter may be laid aside.

On direct examination, testifying concerning the alleged representations made to him at the time he signed the stock subscription list, and which he claimed induced him to make his subscription, defendant said:

"Mr. Keating told me they were organizing a lumber company, fifty thousand dollars capital stock, and that company would be managed by one S. L. Cleaves, who was then manager of the Diamond Lumber Company at Riverton, --Cleaves had been engaged to run this company, --and that Keith of Casper would be buyer and teach them the business, that is, Keith and Mr. Rohlff, Oscar Rohlff."

And on cross-examination he testified:

"The only mention that was made was that Mr. Cleaves would run the company there at Riverton, and Mr. Keith would be the active buyer and be sort of adviser of the business, I think it was also discussed that Mr. Keating would be president and that Mr. Rohlff would go in as secretary."

On rebuttal, Mr. Keating, after denying that the defendant had correctly stated matters with respect to representations by Keating to defendant as to the organization of the Lumber company, testified:

"Q. You may tell the Court as you recall them just how the transaction came up that gave rise to the organization of this company.

A. Why, I wasn't doing anything and he was very anxious to get into some line of business, so he proposed this lumber company, and then he asked Mr. Rohlff and I to go down and see Earl Warren, which we did, and from that time the organization of the lumber company started. Mr. Warren said he had a piece of property to start lumber company and we came back and I asked Mr. Luikart to draw up subscription list and we signed this up in the back room of the bank.

Q. Did you make any representations?

A. So far as I was concerned I never solicited stock. I didn't know any one there, I did not know Mr. Nicholson at that time.

Q. Did you solicit Mr. Luikart?

A. No, sir, no one, except Mr. Kopp afterwards.

Q. Did you make any representations to Mr. Luikart about Mr. Cleaves?

A. Yes, I told him I thought we could get Cleaves to be manager; in fact I went right over to see him."

This witness also testified:

"Q. Mr. Keating, did you ever make representations to Mr. Luikart with regard to this organization that was untrue?

A. No, sir, I had nothing to do with the Keith Lumber Company, in fact had nothing to do with the subscription list, Delfelder got Nicholson, and Warren got Madden of the James Graham ranch and Mr. Fuller and Mr. Arnold and Mr. Deardorff and Dr. Tonkin."

It appears from the record that neither Cleaves nor Keith were employed by the company, although there is testimony that the former helped at first in the purchase of lumber for the company.

It is insisted by the defendant that he could and did rescind his subscription agreement on account of these claimed fraudulent representations. From the testimony above quoted it is apparent that there was a conflict of the evidence to some considerable degree, and in that view of the matter the finding of the trial court should not be disturbed. Hester v. Smith, 5 Wyo. 291, at 295, 40 P. 310.

It also appears from the record that at the time defendant signed the stock subscription the organization meeting of the plaintiff had not been held, no officers had been selected, and of necessity no contracts of employment had or could have been made. A fair analysis of the already quoted testimony of defendant and Keating alike discloses that the statements made by the latter to the former when the subscription was signed dealt with the future conduct of the company's affairs, that is to say, they were promissory only in their...