Harris v. Ashdown Potato Curing Ass'n
| Decision Date | 14 June 1926 |
| Docket Number | (No. 50.) |
| Citation | 284 S.W. 755 |
| Parties | HARRIS v. ASHDOWN POTATO CURING ASS'N et al. |
| Court | Arkansas Supreme Court |
Appeal from Circuit Court, Little River County; B. E. Isbell, Judge.
Action by Mary J. Harris against the Ashdown Potato Curing Association and others. Judgment for defendants, and plaintiff appeals. Reversed and remanded for new trial.
Seth C. Reynolds, of Ashdown, for appellant.
Du Laney & Steel and Shaver, Shaver & Williams, all of Ashdown, for appellees.
Appellant instituted this action against appellees, who are numerous residents of Little River county, Ark., to recover on two promissory notes, executed in the name of Ashdown Potato Curing Association, for borrowed money, it being alleged in the complaint that appellees had voluntarily associated themselves together under that name, without forming a corporation, for the purpose of engaging in the business of curing and preserving potatoes; that appellees were copartners in the business; and that the money for which the notes were executed was borrowed for the purpose of operating the business. There were originally about 60 defendants, and some of them defaulted, and judgments against them were rendered in favor of appellant, and the cause was continued as to three of the defendants. The remainder of the defendants filed answers denying the allegations of the complaint with respect to the formation of a partnership and denying that they were in anywise liable on the notes in suit. On the trial of the case the court directed a verdict in favor of two of the appellees, P. S. Davis and J. R. Wood, and the trial jury returned a verdict in favor of the other appellees.
Each of the notes in suit was for the sum of $1,000, signed by the Ashdown Potato Curing Association by the president and secretary, and were indorsed by four of the defendants against whom judgments by default were taken below. One of the notes was executed to appellant, and the other to her husband, O. Harris, who assigned it to her. The sum of $200 has been paid on one of the notes, and nothing on the other one.
In the early part of the year 1920 a movement was started, for the purpose of encouraging the growing of sweet potatoes, to form some kind of an association to build and operate a potato curing house, so that sweet potatoes grown by local farmers could be properly prepared and held for market. Pursuant to this effort there was circulated a subscription list with the following caption:
The list was circulated by George M. Johnson, who was then engaged in farm demonstration work in that county, and he secured a large number of signatures. He testified at the trial of the cause as to the authenticity of those signatures, but there is a conflict in the testimony as to whether some of the signatures were properly authorized. Opposite each name on the list there was a specification of the number of bushels that each signer agreed to put in the house. Each of the subscribers was expected to pay in advance the amount indicated in the subscription list, or to execute a note to the association for the amount. There is testimony that a number of persons who did not sign the list either paid to the association an amount to be applied on stock or gave notes. Several of the appellees who did not sign the subscription list made payments or gave notes.
Appellant introduced testimony tending to establish the fact that there were several meetings of the subscribers for the purpose of organizing the association and providing for the construction of a potato house and its operation. The first meeting was held on May 22, 1920. A temporary organization was made, and the name of the association was selected. A committee was also appointed to "locate and purchase a site for the building and ascertain the cost, of erecting a suitable building." At another meeting on June 5, no business was transacted except to add another individual to the committee appointed at the former meeting. The meeting to complete the organization was held on August 9, 1920, and at that meeting a certain instrument in writing, designated as "Articles of Association," was formally adopted, and the board of directors and other officers were selected to operate the business. There is a conflict in the testimony as to whether all of the appellees attended this meeting, or, rather, as to which ones attended. It is undisputed, however, that certain of them attended the meeting, and also that certain of the appellees did not attend. These articles of association were never filed for record, and no steps were taken towards incorporating the association until at least a year thereafter and after the indebtedness involved in this litigation had been incurred. There is a conflict as to whether these particular articles were ever filed at all, the contention of appellant being that the effort to incorporate a year later related to another association and not to the one formed as indicated above.
The officers selected at the meeting referred to above proceeded to make arrangements to carry out the plan, and they borrowed money and executed the two notes in suit. They built the curing house, and it was operated for a time but did not prove a success.
It is undisputed that the association known as Ashdown Potato Curing Association was not incorporated; that no steps were taken to effect a legal incorporation of the association; that it did not constitute a corporation either de jure or de facto (Rainwater v. Childress, 121 Ark. 541, 182 S. W. 280); and that money was borrowed from appellant and her husband and the notes in suit executed therefor by those who were selected to manage the business of the association. The notes were executed on the same day, September 20, 1920, and the money borrowed was used in the construction of the curing house. The case made in the trial below is thus stated in the light most favorable to appellant for the purpose of determining whether or not there was error in the proceedings below.
The principal issues of fact in the trial below related to the intention of the subscribers, whether it was to form a corporation or a partnership, and whether appellees, or any of them, participated in the operation of the business.
There are several assignments of error in regard to the court's ruling in excluding testimony offered by appellant. The court admitted testimony to the effect that the articles of association adopted at the meeting on August 9, 1920, as originally printed and presented, contained in several places the words "corporation" and "incorporation," and that by consent of all present those words were erased and the word "association" interlined in substitution thereof. Appellant attempted to show by witness Johnson, who testified concerning these erasures and interlineations, that the changes were made for the purpose of showing that a partnership was intended to be formed, and not a corporation. Counsel asked the witness whether he knew why the word "corporation" was stricken out and the word "association" interlined, and the answer of the witness was that they wanted "to have an association in the nature of a partnership and not a corporation." The court excluded this testimony, and exception was duly saved. The same thing substantially occurred in the testimony of other witnesses, and the ruling of the court was the same. It was competent to prove anything that the parties said or did in the formation of the association in order to determine what the nature of the association was, and it was, of course, competent to show that the words indicating an attempt to form a corporation were erased from the articles adopted and another word substituted which did not express unmistakably such an intention, but could be construed in the light of all the circumstances as an intention to form an unincorporated association. It would have been competent also to prove what was said and done in the meeting when these changes were made, but the testimony of the witnesses does not go that far. The statement of the witness Johnson was merely his own conclusion as to what the intention of the parties was, and the court properly excluded that statement. Appellant offered to prove by another witness that a vote was taken at the meeting as to whether they would form a corporation or merely an unincorporated association, and the court excluded that testimony. This was error, for, as before stated, appellant had the right to prove any fact or circumstances tending to show the intention of the parties in the formation of the association.
The defense in this action is that there was never any intention to form a partnership, but that, on the contrary, the intention was to form a corporation, and that appellees, or at least some of them, did not, either directly or indirectly, participate in the operation of the business — that they merely signed subscription lists and took stock in a corporation which was never incorporated, and that ...
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