Kirkup v. Anaconda Amusement Co.
| Decision Date | 11 April 1921 |
| Docket Number | 4309. |
| Citation | 197 P. 1005,59 Mont. 469 |
| Parties | KIRKUP v. ANACONDA AMUSEMENT CO. |
| Court | Montana Supreme Court |
Appeal from District Court, Deer Lodge County; Geo. B. Winston Judge.
Action by John T. Kirkup against the Anaconda Amusement Company. From judgment for plaintiff and order denying new trial defendant appeals. Judgment and order reversed, and cause remanded, with directions.
John W James, W. H. Trippett, and Rodgers & Rodgers, all of Anaconda, for appellant.
Kremer, Sanders & Kremer and John A. Groeneveld, all of Butte, for respondent.
This is an action for damages for alleged breach of contract. From the contract, which is made a part of the complaint, it appears that it was entered into on the 26th day of July, 1915, between A. Mandoli and May Amy Mandoli, as parties of the first part, and John T. Kirkup, the plaintiff herein, as party of the second part. The terms of the contract are substantially as follows: It was agreed between the parties that a corporation should be formed to be known as the "Anaconda Amusement Company," with a capital stock of $55.000, divided into 5,500 shares of the par value of $10 each; that the first parties, the Mandolis, should sell to such company, after its incorporation, two certain lots situated in the city of Anaconda and receive as consideration therefor 1,350 shares of the capital stock of the corporations so to be organized. It is provided in the contract that the remaining 4,150 shares of the capital stock of the company should be sold at par by the plaintiff, Kirkup, less a commission and promoter's expense of 10 per cent. of the par value of the stock; the moneys arising from the sale of the stock, less commission, to be used in the erection of a theater building upon the lots so to be conveyed by the Mandolis to the corporation. Further it was agreed that the proceeds of the sale of the stock should remain intact in bank in the name of the corporation until the sum of $37,350 was realized, at which time the party of the second part, the plaintiff Kirkup, was to be entitled to the remaining 415 shares of the capital stock of the company, whether sold by him or not; specifically that after the sum of $37,350 had been realized from the sale of the stock for the purpose of constructing the theater building, Kirkup was to have the option to sell the remainder of the stock at par and take the proceeds thereof for his commission or to have stock issued for his own use and benefit representing the remaining authorized capitalization of the company.
From the second amended complaint it appears that the defendant company was incorporated as contemplated in the contract and 1,350 shares of its capital stock were issued and delivered by the corporation to the Mandolis, in consideration whereof a deed for the lots described in the contract was executed and delivered to the defen ant company; and thereafter the plaintiff devoted his time and attention to the sale of the remaining 4,150 shares of the unissued capital stock of the corporation pursuant to such contract, until on or about the 1st day of April, 1916, at which time there had been sold 770 shares, the money for which had been paid to and received by the corporation and stock certificates by it issued. It is alleged that the defendant corporation was advised of and gave recognition to the plaintiff's contract with the Mandolis until on or about the 15th day of April, 1916, at which time it refused to further acknowledge the contract and declared it at an end. It is averred:
"That it was agreed and understood by the terms of said contract that the party of the second part, plaintiff above named, should proceed to sell the said 4,150 shares of the capital stock of the Anaconda Amusement Company at the price of $10.00 per share, and that the said Anaconda Amusement Company should receive therefor the amount of $37,500, and it was further agreed and understood that ten per cent. of the sale price of said stock, to wit, $4,150, should be retained by the said party of the second part for his commissions on the sale of said stock and all expenses in connection with the organization and promotion of said company and the sale of the said stock, including attorney's fees, printing, advertising and fees of incorporation; or, at plaintiff's option, he was to receive 415 shares of the capital stock of the Anaconda Amusement Company upon the sale of $37,500 of the par value of said stock."
In an endeavor to plead a novation or an assumption of the contract so as to hold the defendant liable in damages for a breach thereof, allegation is made in plaintiff's complaint as follows: "That immediately after the organization of the Anaconda Amusement Company the said defendant corporation acted with this said plaintiff in an endeavor to carry the purpose of said contract into effect; that the said defendant corporation had knowledge of said contract and did receive money from the said plaintiff and did issue its stock therefor under the terms of said contract, and did agree with plaintiff to comply with the terms and conditions of said contract and upon the sale by plaintiff of said 4,150 shares of the capital stock of the said defendant at the price of $10.00 per share, 10 per cent. thereof, to wit, $4,150, should be paid over and delivered to the said plaintiff for his commissions on the sale of said stock and all expenses in connection with the organization and promotion of the said company and the sale of said stock, including attorney's fees, printing, advertising and fees for incorporation; that the said defendant corporation did accept the benefits of said contract; that the said defendant corporation did agree to said contract and did recognize the said plaintiff as being entitled to the benefits to enure to him under the terms of said contract up to and including the 1st day of April, 1916, at which said time the said defendant corporation advised this said plaintiff that it would receive no further money from him for the sale of stock after the 15th day of April, 1916, and did advise said plaintiff that he was not entitled to receive any sum of money whatsoever from said defendant corporation and that he was not entitled to receive any stock whatsoever from the said defendant corporation."
The defendant interposed a demurrer to such complaint, alleging that it does not state facts sufficient to constitute a cause of action; that there is a defect of parties in that A. Mandoli and May Amy Mandoli should have been parties to such action; and, further, that the complaint is ambiguous upon the ground, among others, that it cannot be determined therefrom whether or not there has been a novation of the contract and the Anaconda Amusement Company substituted in place and stead of A. Mandoli and May Amy Mandoli; that the complaint leaves it ambiguous as to whether plaintiff was to receive the sum of $4,150 or 415 shares of the capital stock of the company; and, further, that the complaint is unintelligible and uncertain for the same reasons. The demurrer was overruled and the defendant filed its answer. Issues being joined, the case was tried to a jury, defendant's motions for nonsuit and for a directed verdict were denied, and the trial resulted in a verdict in favor of the plaintiff wherein his damages were assessed at $4,150, without interest. Judgment was entered in favor of the plaintiff for the amount of the verdict, together with costs. The appeal is from the judgment and from an order denying defendant's motion for a new trial.
Twenty-one specifications of error are assigned, but one of which will require consideration, from our view of the case, in order to dispose of it on its merits, namely: Did the court err in overruling defendant's demurrer to the second amended complaint? This question is presented by the twenty-first assignment of error.
Clearly, the contract sued upon and for breach of which damages are sought is not the contract of the defendant, and it cannot be held liable thereon unless an assumption of its terms and obligations is pleaded and proven or a novation affirmatively shown to exist.
It is contended by plaintiff's counsel that the contract made the basis of this action is a promoter's contract and, in consequence, that different principles should be applied, i e., that the usual contract law relating to novation and substitution has been abrogated as regards promoters' contracts. From an examination of the authorities we do not agree with plaintiff's contention. It has been held by many of the courts that whenever the promoters of a corporation, in advance of its incorporation, enter into a contract intended to inure to the benefit of the company to be organized, and the company, after coming into being, recognizes, assumes, and takes the benefit of such a contract, it will be bound to perform it, on the familiar principle of the law of contracts that one who adopts the benefits of an act which another volunteers to perform for him or in his behalf is bound to take the burdens with the benefits. But none of the authorities go to the extent of holding that a contract between individuals, even though promoters of a corporation and for its supposed benefit, shall become the contract of the corporation thereafter formed and enforceable against it, independent of affirmative action taken in recognition thereof by the corporation itself. It is our opinion that a promoter's contract, as such, cannot upon any theory, ipso facto by the incorporation of the company in contemplation, become the contract of the corporation. The legal entity itself must act in its corporate capacity before it shall be held liable, and it cannot assume the obligation of an ultra vires contract made by its promoters,...
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