Lincoln Shoe Manuf'g Co. v. Sheldon

• Decision Date: 05 March 1895
• Citation: 62 N.W. 480,44 Neb. 279
• Parties: LINCOLN SHOE MANUF'G CO. v. SHELDON.
• Court: Nebraska Supreme Court

44 Neb. 279

62 N.W. 480

LINCOLN SHOE MANUF'G CO.

v.SHELDON.

Supreme Court of Nebraska.

March 5, 1895.

Syllabus by the Court.

1. A manufacturing corporation sued Sheldon on an instrument in writing signed by himself and others, as follows: “For value received, we, the undersigned subscribers, hereby bind ourselves to purchase the number of shares of stock set opposite our respective names in the Lincoln Shoe Manufacturing Company, at fifty dollars per share; one-fourth of the amount so subscribed * * * to be paid when the foundation of the building is laid, one-fourth when the building is under roof, and the balance on call of the directors.” Sheldon demurred to the petition, on the ground that it did not state a cause of action. Held:

(1) That, by the contract in suit, Sheldon became a subscriber to the capital stock of the manufacturing company.

(2) That Sheldon's contract was not a contract to purchase stock of the corporation.

(3) And, if it had been, the manufacturing company's measure of damages would be the contract price of the stock, it having tendered the stock to Sheldon before suit brought.

2. Where a vendee refuses to perform, the vendor has either of two remedies: He may keep the property made the subject of the contract, and sue the vendee for damages for a breach of his contract, and in such case his measure of damages will be the difference between the contract price of the property and its actual value at the date of the vendee's breach of the contract; or the vendor may tender the property made the subject of the contract to the vendee, and then, in a suit upon the contract, the vendor's measure of damages will be the contract price of the property.

3. In this state the legislature does not by a special act charter a corporation, but all corporations are formed under general laws; and these laws and the articles of incorporation adopted in pursuance of and in conformity with such laws constitute the charter of a corporation of this state.

4. The fact that all the stock authorized by the articles of incorporation of a manufacturing company formed under sections 37-39, c. 16, Comp. St. 1893, entitled “Corporations,” has not been subscribed, is not a defense to a subscriber for part of such stock, when sued on his contract of subscription, if 10 per cent. of the stock of such manufacturing corporation has been subscribed.

5. Livesey v. Hotel Co., 5 Neb. 50,Hale v. Sanborn, 20 N. W. 97, 16 Neb. 1, and Hards v. Improvement Co., 53 N. W. 73, 35 Neb. 263, distinguished.

Error to district court, Lancaster county; Hall, Judge.

Action by the Lincoln Shoe Manufacturing Company against F. L. Sheldon. Judgment for defendant, and plaintiff brings error. Reversed.Thos. C. Munger, for plaintiff in error.

Pound & Burr, for defendant in error.

RAGAN, C.

The Lincoln Shoe Manufacturing Company brought this suit to the district court of Lancaster county against Frank L. Sheldon. The petition, so far as material here, was in words and figures as follows:

“The plaintiff complains of the defendant, and alleges that the plaintiff is a corporation duly organized and incorporated under the laws of the state of Nebraska for the purpose of manufacturing, selling, and dealing in boots and shoes of every description and kind and character, and to deal in all branches common to that line of trade, and, to that end, to own all necessary real-estate buildings, machinery, and appliances necessary for said business, and having a capital stock of $100,000, divided into 2,000 shares, of $50 each, of which more than ten per cent. has been subscribed.

(2) That the said plaintiff corporation was organized under the general laws of the state of Nebraska relating to manufacturing corporations, as well as that relating to corporations in general, as found in sections 37-39, 123-144, c. 16, Comp. Laws Neb. (Comp. St. Neb. 1893), and became organized and incorporated on the 10th day of February, 1890, and ever since has been, and is, and was at the time hereafter mentioned, a corporation in fact, and conducted and carried on business as such corporation.

(3) On the 22d day of March, 1890, and for the purposes of manufacturing and dealing and buying boots and shoes, and for the purposes named in the first paragraph of this petition, and in consideration of the advantages thereof and of each other's subscriptions, the defendant, with other persons, became a subscriber to the capital stock of the plaintiff by severally executing and delivering to the duly-authorized representatives and agents and officers of the plaintiff company the following agreement, in writing: ‘For value received, we, the undersigned subscribers, hereby bind ourselves to purchase the number of shares of stock set opposite our names in the Lincoln Shoe Manufacturing Company, at fifty ($50) dollars per share; one-fourth of the amount so by us subscribed, respectively, to be paid when the foundation of the building is laid, one-fourth when the building is under roof, the balance on call of the directors. In consideration of the building being erected on the west half of the northeast quarter of section twenty-eight (28), town ten (10), range six (6), along the line of the Lincoln and Northwestern Railroad. Witness our hands, on this 22d day of March, 1890.’

(4) That the defendant signed and delivered the said above agreement, and placed the number of shares opposite his name for which he subscribed, to wit, the number of 50 shares, for which he subscribed, and thereby agreed to take the number of 50 shares, each share being of the par value of $50, and agreed to pay the plaintiff therefor the sum of $2,500, as required by law and the terms of said agreement.

(5) That there was subscribed with the defendant greatly in excess of ten per cent. of the said amount of capital stock, as specified by the charter; and, after the amount of ten per cent. of the capital stock had been subscribed, the plaintiff company commenced operations, and adopted rules, and began the erection and equipment of a building for the purposes of the company, and made preparations for the business of manufacturing and dealing in boots and shoes, and bought material, and acted under their charter and as an incorporation, and after as before the subscription of the defendant.

(6) The plaintiff company was formed on the 10th day of February, 1890, and the articles of incorporation were duly filed the same day, a true copy of which are hereto attached, and marked ‘Exhibit A,’ and made a part of this petition. The plaintiff accepted the subscription of the defendant, and proceeded with the work and business of its charter and organization. A board of directors was chosen, and the other officers necessary to the corporation, and provided by its charter, were elected and qualified. By and on the 10th day of June, 1890, the foundation of the building in which the operations of the company were to be carried on was laid; and on the 1st day of September, 1890, the said building was erected and under roof. This building was the same building referred to and set forth in the agreement as set forth in paragraph 3 of this petition, and was so founded and erected and roofed on the land described, and along the railway named in the agreement, as above set forth. And the sum of one-fourth of the said amount so agreed by the defendant to be paid became due on the 10th day of June, 1890; and the one-fourth part also became due on the 1st day of September, 1890; and the plaintiff company requested and duly demanded the payment of the said sums, and offered to deliver and tendered the certificates of stock to defendant before the beginning of this action, and now offers to deliver them to defendant, amounting in all to the sum of $1,250 (twelve hundred and fifty dollars).

(7) The plaintiff has performed all the conditions precedent in said agreement on its part. The defendant has not paid the said sum, or any part thereof, and the plaintiff therefore prays judgment against the defendant for the sum of $1,250, as aforesaid, with interest thereon at the rate of 7 per cent. from the 1st day of June, 1890, on half the amount due, and from the 1st day of September on the other half due, and costs of suit.”

To this petition, Sheldon interposed a demurrer, the grounds of which were that the petition did not state facts sufficient to constitute a cause of action. This demurrer the court sustained, and rendered a judgment dismissing the manufacturing company's petition, to reverse which it has prosecuted to this court a petition in error.

Two arguments are relied upon here to sustain the judgment of the district court:

1. The first contention is that the contract of Sheldon made the basis of this suit is an agreement to purchase certain shares of stock of the manufacturing company, and not a subscription to the stock of such company; and that the measure of the manufacturing company's damages is the difference in the actual value of the stock and the price which Sheldon agreed to pay for it at the date of the breach of his contract; and, since the petition does not allege what the value of the stock was at the date Sheldon refused to take it, that it does not state a cause of action. Is the contract of Sheldon a contract to purchase stock in the manufacturing company, or is it a contract of subscription to the capital stock of such corporation? Whether one or the other is a matter of construction for the court, and to be determined from the intention of Sheldon, gleaned from the contract itself and the law in force applicable to the subject-matter of the contract. The manufacturing company is a corporation organized under chapter 16, Comp. St. 1893, entitled “Manufacturing Companies.” Section 37 of that chapter provides that, whenever any number of persons associate themselves together for the purpose of engaging in the business of manufacturing, they shall make a certificate specifying the amount of...