Kennebec Hous. Co. v. Barton

• Decision Date: 13 December 1923
• Citation: 122 A. 852
• Parties: KENNEBEC HOUSING CO. v. BARTON.
• Court: Maine Supreme Court

122 A. 852

KENNEBEC HOUSING CO.

v. BARTON.

Supreme Judicial Court of Maine.

Dec. 13, 1923.

Report from Superior Court, Kennebec County, at Law.

Separate actions by the Kennebec Housing Company against Charles H. Barton, Henry J. Collins, Ernest L. Gove, Edward L. Grondin, and Edmond D. Noyes, respectively. On report of evidence submitted to referee. Judgments for plaintiff.

Argued before CORNISH, C. J., and HANSON, PHILBROOK, DUNN, MORRILL, WILSON, and DEASY, JJ.

Harvey D. Eaton, of Waterville, for plaintiff.

Bradley, Linnell & Jones, of Portland, for defendants.

MORRILL, J. These actions are based upon five contracts of the defendants individually to pay for shares of stock in the plaintiff corporation. They were before us on a former occasion (122 Me. 374, 120 Atl. 56), presented upon exceptions by defendants to a ruling accepting the report of a referee who had found for the plaintiff, basing his findings upon the issue of fraud and deceit. The cases are now presented to us upon a report of all the evidence submitted to the referee, for such final judgment as the law and the evidence require.

The pleadings of each defendant present eight distinct defenses, stated as follows:

(1) That defendant never subscribed for nor promised to pay for any shares in the plaintiff company.

(2) That the signature of said defendant was procured and affixed to said subscription card by fraud and misrepresentation on the part of the plaintiff company, its agents and servants, and the defendant as soon as he learned of the same notified the plaintiff company through its officers and agents that he withdrew his subscription.

(3) That the defendant subscribed to said shares of stock on certain conditions to be performed by the plaintiff, which conditions were conditions precedent to any liability on the part of the defendant, and which have not been performed by the plaintiff.

(4) That a radical and fundamental change was made by the plaintiff without the consent of the defendant in the character of the original enterprise by which the defendant became released from any promise.

(5) That the enterprise undertaken by the plaintiff was a total failure.

(6) That the affairs of the plaintiff have been recklessly and negligently managed by it, its directors and officers, by reason of which all subscribers will lose all money invested in said enterprise.

(7) That the plaintiff through its directors and officers has made several agreements to release other subscribers from their subscriptions, and although a vote was passed to enforce by legal action every unpaid subscription, only five suits were brought and entered in court; whereas, many others have failed and refused to pay their subscriptions and no action has been taken against them.

(8) That the defendant's promise to take shares, if any, was without any consideration.

Upon examination of the entire record which is now before us for the first time, it is apparent that none of the defenses relied upon in support of the former exceptions are tenable. The fifth and sixth specifications are manifestly unsound as defenses and are apparently abandoned; the seventh is without support in the record. We will first consider the first, third, fourth, and eighth grounds of defense.

The plaintiff was organized under the general laws of this state by eleven associates residing in Waterville, on November 28, 1919. The purpose of the corporation was:

"To acquire and hold real estate and manage, improve, lease and sell the same, having in view especially the increase and improvement of housing facilities in Waterville, Winslow, Vassalboro, Benton, Fairfield, and Oakland, Maine."

The capital stock was fixed at $200,000, of which $6,500 was subscribed at the meeting of organization. The organization of the corporation resulted from activities of the Waterville Chamber of Commerce and was "a sort of community affair," as characterized by Mr. Noyes, one of the defendants. Early in January, 1920, a concerted effort was made by the officers of the corporation to obtain subscriptions to the capital stock. Notice was given in the local newspaper, and a prospectus was issued over the names of the officers. The subscriptions now in controversy were solicited and obtained by two of the directors, Mr. Libby and Mr. Staples, and each was in the following form:

"Kennebec Housing Company.

"Pledge Card.

"I agree to purchase ten shares of stock of the Kennebec Housing Company.

"Par value, $100. Total $1,000. 25 per cent. to be paid 10 days from date, and the balance as voted by the board of directors when needed.

"Dated Jan. 13th, 1920.

"Sign here: C. H. Barton."

Although the word "purchase" is used in this instrument, it is not to be construed as a sale, but as a subscription to the capital stock. Lincoln Shoe Mfg. CO. v. Sheldon, 44 Neb. 279, 62 N. W. 480; Wickwire v. Warner ( Sup.) 174 N. T. Supp. 811; Ottawa, etc., Railroad Co. v. Black, 79 Ill. 262; Shipman v. Portland Const. Co., 64 Or. 1, 21, 128 Pac. 989. It was so understood by the parties, and counsel for defendants apparently so contends.

But the instrument is not a mere naked subscription; it is a contract made between the corporation soliciting the subscription and the signer who expressly promised unconditionally to pay for the stock at its par value. The obligation of the signer of such an instrument, as distinguished from the obligation of a mere subscriber, without an express promise to pay, must be considered as settled. In the latter case—

He "assumes only the obligations imposed by law on such subscriber. He is understood to have agreed to assume a certain percentage of the responsibility of the enterprise, on condition that the amount of the responsibility be made certain and the remaining percentage be assumed by responsible parties. * * * But a person may in his subscription, voluntarily assume any other obligations not forbidden by law. He may waive any and all of the conditions implied by law in a naked subscription. He may impose other conditions, or he may promise payment for his shares without any condition. His promise, once made, will be binding, there being in such cases sufficient consideration in the obligation of the company to deliver the shares. * * * In such cases, the express promise is to be enforced by an action thereon, and not by an action on a promise implied by law only." S. & A. Railroad Co. v. Kinsman, 77 Me. 370.

In the instant cases the promises were unconditional, and the promisors cannot now invoke conditions; the actions are upon the express promises to pay, and not on promises implied by law, and may be maintained as upon other express promises.

It is strenuously insisted that the contracts in question had not been accepted, and that therefore the element of mutual assent and consideration in each case is wanting. But acceptance may be Inferred (K. & P. Railroad Co. v. Jarvis, 34 Me. 360, 362), and the record discloses sufficient evidence from which acceptance by the corporation, if necessary, may be inferred. In fact, however, the offer came from the corporation; it voted to open subscriptions for stock; It appointed a committee to solicit subscriptions; it incurred liabilities relying upon prospective subscriptions; its officers issued an authorized prospectus of the undertaking and published it in the local paper for the purpose of obtaining subscriptions; it solicited the participation of each defendant in the enterprise, and each defendant accepted the offer of shares, and expressly promised to take and pay for a specified number. The elements of mutual assent and consideration were present, and the contract was complete when the so-called "pledge card" was signed and delivered to the solicitor authorized to...