Hendrix v. Academy of Music

• Court: Georgia Supreme Court
• Writing for the Court: HALL, Justice.
• Citation: Hendrix v. Academy of Music, 73 Ga. 437 (Ga. 1885)
• Decision Date: 07 February 1885
• Parties: HENDRIX v. THE ACADEMY OF MUSIC.

73 Ga. 437

HENDRIX v. THE ACADEMY OF MUSIC.

Supreme Court of Georgia.

February 7, 1885

September Term, 1884.

1. If a written subscription for stock was, or appeared to be complete within itself, a subscriber could not go outside of it, so far as concerns the conditions upon which the subscription was made; but where the writing does not purport to contain all the stipulations of the contract, parol evidence is admissible to prove other portions thereof not inconsistent with the writing.

( a. ) A subscription in these words, " We, the undersigned, hereby subscribe for the amount of stock opposite our names, and agree to pay the same in four quarterly installments, viz., February 15, April 15, June 15 and August 15, for the purpose of forming a company to erect an academy of music," was, on its face, an incomplete agreement. It was entirely silent as to the location and nature of the structure, whether the company was to be a joint stock company or an incorporation, what amount was necessary to accomplish the object sought, and as to the mode and method of raising the necessary fund to complete and equip the building, the specific purposes for which it was to be used, and the way in which its business was to be conducted.

( b. ) It will not do to assume that the contract is merged in the charter subsequently obtained. Whether the agreement, as understood by the parties thereto, is embodied in that charter, is the point in dispute, which can only be determined by testimony, which was rejected.

2. In 57 Ga. 240, after a charter had been obtained, it was held that the subscriber contracted with reference to the charter that the number of shares to be subscribed, or the whole capital stock necessary to do the contemplated business constituted an important element in the contract, and that if the amount fixed by the charter had not been subscribed, or having been subscribed, subscriptions had been released so as to reduce the capital stock materially, without the consent of the subscriber, his subscription could not be enforced against him.

3. It makes no difference that a subscription was made in anticipation of the formation of an incorporated company. Where the capital stock is fixed at a given sum, divided into shares of a certain amount each, the whole amount of the capital stock must be fully subscribed before an action will lie against a subscriber to recover assessments levied on the shares of stock, unless there is a clear provision in the contract to proceed with the accomplishment of the main design with a less subscription than the entire amount of the capital specified, or there is a waiver, either express or implied, of the condition precedent; and whether or not there has been such a waiver, is a question for the jury.

( a ) The pleas in this case, taken as a whole, constituted a good and legal defence, which should have been submitted to the jury, and it was error to strike them.

Corporations. Stock. Charters. Contracts. Evidence. Pleadings. Fraud. Waiver. Before Judge SIMMONS. Bibb Superior Court. April Term, 1884.

Reported in the decision.

HILL & HARRIS, for plaintiff in error, cited on points decided, Thompson L. S., §120; Morawetz §§275, 265, 276, 287, 290; Code, §2857; 10 N.Y. 550; 7 Sim., 337; 1 Milne & C., 650; 17 N. Y. Sup'r Ct., 56; 30 Ala. 92; 8 Neb. 99; Code, §3802; 2 Whart. Ev., §§927-8; 36 Ga. 669; 68 Id., 448; 19 Ind. 214, 242; 15 Id., 80; Morawetz, §§299, 309; 30 Ala. 92; 3 Dill., 496; 17 Tex. 560; 29 N. J. Eq, 188; Code, §§ 2634, 3173, 3177, 1003; 36 Ga. 669; 34 Md. 318; 24 Barb., 518; 6 Cush., 50; 31 Md. 39; 24 N.Y. 150; 6 Bush., 443; Fox Dig., 55, 57, 61; Redf. Rwys., §§18, 51; Ang. & Ames, 528; 57 Ga. 240; Green's Brice's Ult. Vir., 153 and cit.; Hale vs. Sanborn, Reporter, Vol. 18, No. 15, p. 472 and cit.; 17 Ga. 515; Morawetz, 133, 259; 3 Add. Contr., §1342; 6 Bing., 776; 1 B. & Cress, 142; Lindley Part., 133; Wood Part., 1215 n, 1214 n; Story Part., 86-7; 27 Md. 645; 39 Me. 571; 40 Id., 172; 41 Id., 512; 14 N. H., 543; 32 Id., 363; 6 Pick., 23, 45; 9 Id., 187; 10 Id., 142; 2 Gray, 277; 8 Id., 596, 303; 8 Id., 110; 9 Id., 423; 13 Metc., 311; 2 Hull, 504, 510; 9 Mich. 269; 61 Me. 384; 35 Iowa 118; 5 Mees. & W., 2.

R. W. PATTERSON, for defendant, cited 16 Abb. Pr., N. S., 34; 32 Miss. 348; 43 Conn. 86; 6 Ind. 379; 49 Vt. 29; 20 Ohio St. 199; 34 Me. 369; 9 Fla. 299; Code, §2757; Morawetz, §269, note 3 and cit.; 54 Ga. 289; Morawetz, §§307, 290, 371, 372, 312, 313, 403, 405, 33, 18, 20; 69 Ga. 751; Ang. & Ames Corp., 523; Bliss Code Pl., 246; 4 Hun (N. Y.), 292; 12 Gray, 244; 56 Ga. 230; 44 Id., 597; 32 Id., 291; 3 Hawkes, 520; Abb. Dig. Corp., 815, 807; 25 Ga. 534; Code, §§1684, 1688; 13 Allen (Mass.), 29; 9 Mass. 423; 3 Ala., N. S., 650; 25 Mo. 547; 41 Md. 583; Field Corp., 151, 152.

HALL Justice.

The Academy of Music, a corporation, brought suit against the defendant to recover from him a subscription for forty shares of its stock, at $25 per share, aggregating $1,000. The subscription was taken prior to the proceedings incorporating the company, and under the following agreement:

" We, the undersigned, hereby subscribe for the amount of stock opposite our names, and agree to pay the same in four quarterly installments, viz.: February 15th, April 15th, June 15th and August 15th, for the purpose of forming a company to erect an Academy of Music."

By the terms of the charter, which was granted by the superior court of Bibb county, the capital stock of the company was fixed at $50,000, to be divided into two thousand shares.

Under the general law, a corporation created by the court cannot commence to exercise the privileges conferred by its charter until ten per cent of the capital stock is paid in. Code, §1676, sub-section 3. By subsection 2 of the same section of the Code, one of the fundamental conditions upon which such a charter may be granted is that the application therefor shall state " the amount of capital to be employed by the persons making the application actually paid in."

To this suit the defendant filed various pleas, all of which, except the general issue, were, upon motion, stricken by the court. The defendant sought, under the plea of non assumpsit, to give in evidence the facts set forth in the special pleas which had been stricken, but upon objection it was rejected, and the plaintiff, by the direction of the presiding judge, had a verdict. The defendant made a motion for a new trial, on many grounds, which was refused.

If the judgment striking all the special pleas was correct, there was no error in any of the subsequent proceedings in the cause, and the motion for a new trial was properly overruled; in short, the entire merits of the defence were covered by the judgment ordering it to be stricken.

Among the pleas thus stricken were severed to this effect: that the defendant subscribed for the stock in advance of the application for the charter; that his subscription was upon the express condition that the whole amount of the capital stock should be taken before the company should commence operations, and that the academy should be erected only by the subscribers' money; that while the agreement to which he subscribed did not set forth these facts, it was only an incomplete agreement, and showed upon its face that it did not embody all the terms of the contract; that the charter applied for and obtained required some of these conditions; that it was, in fact, fraudulent, not only on this account, but because of positively false representations made in the application therefor, among others, that one-tenth of the capital stock had been paid in, which amounted to $5,000, when, in fact, a much less sum had been paid; that only twenty-five thousand dollars, or one-half of the capital stock, had been subscribed; that on that amount and the property to be purchased, mortgages and bonds had been issued and negotiated, and the money arising therefrom, and not that arising from subscriptions, was used in the purchase of the ground and the erection of the building, and the interest of the stockholders was thereby imperilled and sacrificed to the holders of these bonds and mortgages, who were themselves stockholders; that divers subscribers to the stock had been released; that defendant subscribed on the faith of their names; that he never consented to their release, and had no knowledge that they had been so released; that he gave no consent to the arrangement by which bonds and mortgages were issued to raise money to erect and complete the building; that he was never consulted about the charter, and had no notice, actual or constructive, of the application therefor; that the law was disregarded, in various particulars, as to the filing of the petition in office, as to the publication of notice of the application for the same, and in divers other respects; and he insisted that the plaintiff was operating under a void charter, and had no right or authority to maintain a suit against him for the amount of stock he had subscribed.

These facts were set forth in quite a number of pleas, but were by reference united in one plea. Each one and such as had a bearing upon its particular subject might not of itself have constituted a complete answer to the plaintiff's suit, but it formed a part of the entire transaction relied on to defeat the action, and, with the others, we think constituted a good defence.

It may be conceded that the charter itself, on account of the failures to conform strictly to the requirements of the law in its procurement, was irregular and erroneous, though not void; and further, that its validity could not be called in question in this collateral and indirect manner. Yet the facts out of which these objections grew have an important bearing...