Hennessy v. Griggs

• Decision Date: 01 April 1890
• Parties: Hennessy v. Griggs et al.
• Court: North Dakota Supreme Court

1 N.D. 52

44 N.W. 1010

Hennessy

v.Griggs et al.

Supreme Court of North Dakota.

April 1, 1890.

Syllabus by the Court.

Three parties-G., E., and H.-formed a copartnership under the name of “The Dakota Gas & Fuel Company.” The copartnership articles provided that the partnership capital should be $50,000,-G. to furnish $5,000, E. to furnish $10,000, and H. $10,000,-the remaining $25,000 to be held by G., to be by him negotiated, and raised from outside parties; and, further, that all profits should be divided between the parties in proportion to the capital furnished and held by each, and on the basis of a capital of $50,000, and that, as soon as might be, said parties should incorporate under the same name, for the same purposes, and all the partnership effects should be assigned to the corporation, and that the capital stock should be not less than $50,000, and should be held and divided among said parties in the same proportion as the capital of said copartnership. Held, (1) that the articles contemplated that the capital to be furnished as specified should be actual capital, and that parol evidence to show that said capital was to be nominal only was properly disregarded; (2) that plaintiff, H., having joined with G. and E. and two other parties in executing and filing articles of incorporation, whereby they became a body corporate under the name and for the purposes provided in the copartnership articles, as between said parties, and under the copartnership articles, the existence of the corporation worked eo instanti the dissolution of the partnership, and that, although the articles of incorporation provided for five incorporators, instead of three, and fixed the capital stock at $100,000, yet, as H. was one of the incorporators, he is conclusively held to have assented thereto, and cannot be heard to say that the corporation so formed is not the corporation provided for by the copartnership articles, particularly when such changes could in no manner affect his interest in or control over such corporation; (3) that, while H. was a necessary party to a transfer of the firm property to the corporation, yet a transfer thereof by G. and E. cannot, in equity, be avoided by H. because he wrongfully refused to join therein; (4) that, as all the capital stock of the corporation would belong to the same parties who furnished the firm capital, and in the same proportion, it was competent for said corporation to assess its capital stock for an amount sufficient to pay the debts incurred by the firm in procuring the property that was transferredto the corporation, so long as such assessment was less than the amount that each party was originally required to furnish under the copartnership articles, none of said parties having actually paid in their firm capital, and said parties would not be entitled to said stock without paying such assessment; and plaintiff, H., would not be entitled to paid-up non-assessable stock unless he had paid in the full amount as required by the copartnership articles.

Appeal from district court, Grand Forks county; C. F. Templeton, Judge.

Action in equity by Thomas Hennessy against Alexander Griggs, Jacob S. Eshelman, and the Dakota Gas & Fuel Company. The decree dismissed plaintiff's complaint, and he appeals.

J. H. Bosard, R. E. Noyes, W. P. Landon, and P. J. McLaughlin, for appellant. Cy. Wellington, for respondent.

Bartholomew, J.

On November 26, 1886, and as a result of certain parol negotiations theretofore had, the plaintiff, Hennessy, and the defendants Griggs and Eshelman, entered into a written agreement of copartnership, as follows: “This contract of copartnership, made and entered into between Alexander Griggs, J. S. Eshelman, and Thomas Hennessy, all of the city of Grand Forks, county of Grand Forks, and territory of Dakota, witnesseth: That the parties aforesaid have, and by these presents do, enter into and form a copartnership under the name and style of the ‘Dakota Gas and Fuel Company.’ The principal place of business of said copartnership shall be the city of Grand Forks; and the nature of the business to be transacted shall be the manufacture and sale of gas and coke, also dealing in and selling of fuel of all kinds. The capital of said copartnership shall consist of $50,000,-Alexander Griggs to furnish $5,000; Thomas Hennessy, $10,000; and J. S. Eshelman, $10,000; the remaining $25,000 to be held by Griggs, to be by him negotiated and raised to and from certain persons in St. Paul, Minn. It is further agreed that Alexander Griggs shall be the general manager of said copartnership, and, as such, authorized to bind the same in all business transactions, and sign the name thereof to all contracts within the scope of the aforesaid contemplated business, and in the name of the said copartnership to purchase all necessary real estate whereon to erect suitable buildings and appurtenances for the manufacture of gas and coke, and for storing and selling fuel of all kinds. That the profits, if any, of said copartnership shall be divided pro rata according to the capital furnished and held by each member thereof; it being understood and agreed that such division shall be based on a capital of $50,000, and the amount of $25,000 shall be taken into account, to the full amount thereof, in making such division. And it is further agreed that the said copartnership, as soon as may be, shall proceed to incorporate under the laws of Dakota, and by the corporate name of Dakota Gas and Fuel Company, for the purposes hereinbefore set forth, and when such incorporation is complete the said copartnership shall assign, transfer, and set over to said incorporation all property, both real and personal, and all its rights, contracts, interests, and accumulations; and, in order to carry the same into effect, the said Griggs and Eshelman and Hennessy are hereby authorized, so far as may be necessary, to make such assignment and transfer in the name of said copartnership. The capital stock shall be at least 500 shares of $100 each, to be held and divided among the parties hereto in the same proportion as the capital of said copartnership. In witness whereof the said parties have hereunto set their hands this 26th day of November, 1886. Alex. Griggs. Thomas Hennessy. J. S. Eshelman.”

Under this agreement, the copartnership proceeded to obtain from the city of Grand Forks the necessary franchise for the construction and maintenance of a gas plant, and also a contract for lighting said city for a term of years, and contracts with various private parties; and in the summer of 1887 they began the work of erecting suitable buildings and tanks upon certain land, the title to which was in the defendant Griggs, and of laying gas-mains, erecting posts, and doing generally whatever was necessary to constitute a gas plant; the plaintiff, Hennessy, who was a skilled plumber and gas-fitter, acting as superintendent of said works. On October 17, 1887, said hennessy, Griggs, and Eshelman, with William Budge and W. J. Murphy, executed and acknowledged certain articles of incorporation, which were duly filed, and the said parties became a body corporate as the Dakota Gas & Fuel Company; said corporation being formed to carry on the business begun by said copartnership, and succeeding to all the rights thereof. The capital stock of the company was $100,000, divided into shares of $100 each. After the formation of the corporation, Griggs, without the knowledge and consent of plaintiff, conveyed to said corporation the land on which the gas-works had been erected, and which was valued at $3,000; and on November 15, 1887, Griggs and Eshelman, without the consent of plaintiff, pretended to convey to said company all the property and effects of the copartnership by assignment in writing, as follows: “Whereas, by the terms of the articles of copartnership of the Dakota Gas and Fuel Company, made and entered into on the 26th day of November, A. D. 1886, by and between Alex. Griggs, Thomas Hennessy, and J. S. Eshelman, as members thereof, it was stipulated and agreed ‘that, as soon as may be, the said copartners shall proceed to incorporate under the laws of Dakota, and by the...