Mantle v. Jack Waite Mining Co., Ltd.

• Decision Date: 23 September 1913
• Citation: 24 Idaho 613,135 P. 854
• Parties: LEE MANTLE, Respondent, v. JACK WAITE MINING COMPANY, LIMITED, a Corporation, Appellant
• Court: Idaho Supreme Court

135 P. 854

24 Idaho 613

LEE MANTLE, Respondent, v. JACK WAITE MINING COMPANY, LIMITED, a Corporation, Appellant

Supreme Court of Idaho

September 23, 1913

CORPORATIONS-DELINQUENT ASSESSMENTS-SALE-EVIDENCE-MOTION FOR JUDGMENT ON PLEADINGS.

1. Where several parties as promoters enter into a contract with the owner of mining property for the purchase of certain mining claims, and the promoters and the owner of the mines agree that a corporation will be formed by the promoters and stock will be issued and sold with a fixed capital, and that the owner of the mine will transfer the claims to the corporation after organization, and that the stock will be nonassessable until the promoters had paid 25 cents a share for the stock, and the owner accepted $33,000 worth of stock on the option, and the owner deeds the property to the corporation, which accepts the conveyance and ratifies and affirms the contract and accepts the benefits and conditions of the acts and contract of the promoters, and stock is sold and issued to a purchaser with full knowledge of the transaction, such purchaser may maintain an action for the enforcement of the contract made by the promoters and ratified and affirmed by the corporation.

2. Where a corporation is organized under the laws of this state, and ratifies and affirms a promoters' contract as to assessments, such corporation is bound by the terms of the promoters' contract which provides "that the stock issued to us shall be subject to assessment up to 25 cents per share prior to any assessment on any other stock issued by the aforementioned company, until we have paid a total of 25 cents per share, when all the stock of the company will be subject to the assessment at the same time and on the same basis," and such assessment up to 25 cents is not paid and an assessment is levied against the general stock of the corporation, such latter assessment is void.

3. Sec 2758, Rev. Codes, which provides that the notice of sale of stock in a corporation when published in a daily newspaper must be published for ten days, excluding Sunday and legal holidays, previous to the day of sale, and sec. 2764, which provides that the notice of assessment may be extended from time to time for not more than thirty days by order of the directors, and no such order is effectual unless notice of such extension or postponement is appended to and published with the notice to which the order relates construed with sec. 2765, which provides no assessment is invalidated by a failure to make publication of the notices nor by the nonperformance of any act required in order to enforce the payment of the same; but in case of any serious error or omission in the course of proceedings for collection, all previous proceedings except the levying of assessment are void, and publication must begin anew, provide the procedure in the sale of stock of corporations.

4. Sec 2764, Rev. Codes, wherein it is provided, "but no such order is effectual unless notice of such extension or postponement is appended to, and published with, the notice to which the order relates," is mandatory, and by a failure to comply with the same the sale is void.

APPEAL from the District Court of the First Judicial District for Shoshone County. Hon. W. W. Woods, Judge.

An action to enjoin the sale of stock of a corporation. Judgment for respondent. Affirmed.

Judgment affirmed and costs awarded to the respondent.

A. G. Kerns, for Appellant.

Sec. 2766, Rev. Codes, is mandatory in its provisions that no action must be sustained to recover stock sold for delinquent assessments, upon the ground of illegality in the assessment, illegality or defect in the notice of sale or in its publication, or defect or illegality in the sale, unless the party seeking to maintain such action first pays or tenders to the corporation, or the party holding the stock sold, the sum for which the same was sold, etc. The complaint did not show such a tender of payment and therefore did not state a cause of action. (Burnham v. San Francisco Fuse Mfg. Co., 76 Cal. 26, 17 P. 939.)

Corporations act only by resolution of their governing board when duly assembled, or by action of duly constituted agents within their authority. (10 Cyc. 265, 760.)

"A corporation is not liable on contracts of promoters until adopted." (1 Thompson on Corporations, 484--490.)

The admissions or declarations of the stockholders of the appellant company in signing the statement called by the plaintiff a promoters' contract do not bind the corporation. (1 Cook on Corporations, secs. 11, 48; 3 Cook on Corporations, secs. 709, 726.)

"The promoter, though he purport to act on behalf of the projected corporation and not for himself, cannot be treated as agent because the nominal principal is not then in existence; and hence when there is nothing more than a contract by a promoter, in which he undertakes to bind the future corporation, it is generally conceded that it cannot be enforced." (1 Thompson on Corporations, sec. 91.)

A corporation is a distinct entity, to be considered separate and apart from the individuals who compose it, and is not to be affected by the personal rights, obligations and transactions of its stockholders; and this whether said rights accrued or obligations were incurred before or subsequent to incorporation. (Moore etc. Hardware Co. v. Towers Hardware Co., 87 Ala. 206, 13 Am. St. 23, 6 So. 41; Morawetz on Private Corporations, 227-234, 547-549; Hawkins v. Mansfield G. M. Co., 52 Cal. 513, 13 Morr. Min. Rep. 581; Gent v. M. & Mut. Ins. Co., 107 Ill. 652; Penn Mut. Co. v. Hapgood, 141 Mass. 147, 7 N.E. 22.)

James A. Wayne and John P. Gray, for Respondent.

The corporation was estopped by its acts and representations and by the contract of the promoters which it had in its possession, and which the corporation through its officers had presented to Mr. Mantle, from levying an assessment upon his stock until the stock of the promoters had been paid up to the sum of 25 cents per share. The assessment was therefore absolutely void, and no tender of the assessment was necessary, the corporation never having acquired jurisdiction to sell the stock. (Herbert Kraft Co. v. Bank of Orland, 133 Cal. 64, 65 P. 143.)

Sec. 2766 refers only to a case brought by a stockholder to recover back stock which has been sold, where the sale is irregular, and not where the corporation had by its contract or act divested itself of the power and authority to levy an assessment. (Wall v. Basin Min. Co., 16 Idaho 314, 101 P. 733, 22 L. R. A., N. S., 1013.)

This court has held in Corcoran v. Sonora Mining & Milling Co., 8 Idaho 651, 71 P. 127, 60 L. R. A. 283, that the assessment and sale of stock in a corporation is a proceeding to enforce a forfeiture, and that the statute in such a case must be strictly adhered to, both in the levy and collection of the assessment; and clearly this was not done in this case. (San Bernardino Inv. Co. v. Merrill, 108 Cal. 490, 41 P. 487.)

Time was made the essence of this option, but even in the absence of a provision to this effect, it was within the power of Mantle to forfeit the option at that time and retain all payments made thereunder. (Settle v. Winters, 2 Idaho 215 (199), 10 P. 216; Durant v. Comegys, 3 Idaho 204, 28 P. 425.)

STEWART, J. Ailshie, C. J., and Sullivan, J., concur. SULLIVAN, J., Dissenting.

OPINION

STEWART, J.

This action was commenced on December 6, 1911, in the district court of Shoshone county by the respondent, Lee Mantle, against the appellant, Jack Waite Mining Company, Limited, to restrain and enjoin the appellant company from selling 75,750 shares of stock of the respondent for the amount of an assessment of two cents per share, levied October 14, 1911, and made payable November 18, 1911, and providing for the sale of delinquent stock on the 7th of December, 1911, to pay delinquent assessments.

Issues were formed and trial was had and on April 3, 1913, judgment was entered for plaintiff setting aside the sale of said stock and declaring the sale null and void, and decreeing a certain so-called promoters' contract to be a valid and binding agreement upon the defendant corporation.

The facts as found by the trial court are as follows: Prior to November 1, 1909, Lee Mantle, of Butte, Montana, was the owner of the Bullion, the Croesus, seven-eighths of the Mantle Fraction and thirteen forty-eighths of the Lucky Boy mining claim, known as the Jack Waite property, in Shoshone county. On November 1, 1909, Mantle entered into a lease and agreement giving to Patrick Burke an option to purchase for the sum of $ 187,000, which said sum was to be paid by said second party in the amounts and upon the dates following: On or before November 1, 1909, $ 11,500; on or before January 21, 1910, $ 15,000; on or before March 21, 1910, $ 30,000; on or before August 21, 1910, $ 60,000; on or before February 21, 1911, $ 70,500. It was provided that the deed should be placed in escrow with the First National Bank of Butte to be delivered upon the full payment of the purchase price. The option contained a provision as to making time the essence of the agreement. This is as follows:

"Time is the essence of this agreement and any failure on the part of the said second party to do or perform any term, covenant or agreement, to be by him kept or performed under the terms of the above and foregoing lease, or any failure of the said second party to pay the said purchase price for the said mining interests hereinabove described in the lease and option hereinbefore contained within the time and in the amounts hereinabove stated, shall at once terminate said lease and said option and all the rights of said second party hereunder, it being expressly understood...