Minneapolis Threshing Mach. Co. v. Davis

• Decision Date: 31 January 1889
• Citation: 41 N.W. 1026,40 Minn. 110
• Parties: MINNEAPOLIS THRESHING MACHINE CO. v DAVIS.
• Court: Minnesota Supreme Court

40 Minn. 110

41 N.W. 1026

MINNEAPOLIS THRESHING MACHINE CO.vDAVIS.

Supreme Court of Minnesota.

Jan. 31, 1889.

(Syllabus by the Court.)

1. A subscription by a number of persons to the stock of a corporation, to be thereafter formed by them, constitutes-First, a contract between the subscribers themselves to become stockholders when the corporation is formed, upon the conditions expressed in the agreement, and as such it is binding and irrevocable from the date of the subscription; second, it is in the nature of a continuing offer to the proposed corporation, which, upon acceptance by it, becomes as to each subscriber a contract between him and the corporation.

2. A promoter of a proposed corporation, who solicits and procures stock subscriptions, is the agent of the body of the subscribers to hold the subscriptions until the corporation is formed, and then turn them over to it without any further act of delivery on the part of the subscribers. Hence a delivery of a subscription to such promoter is a complete delivery, so that it becomes eo instanti a binding contract as between the subscribers.

3. Where a person subscribes to the stock of the proposed corporation, and delivers the subscription to such promoter, and other persons, without notice of any oral condition attached to such delivery, also subscribe to the stock, and pay the same in, and in reliance on the subscriptions the corporation is organized, engages in its business, expends large sums of money, and contracts liabilities therein, such person, when sued for installments due on his stock subscriptions, will not be allowed to defeat a recovery by showing that he attached a secret oral condition to the delivery of his subscription to the promoter.

Appeal from district court, Hennepin county; LOCHREN, Judge.

Action against John A. Davis to recover installments due on his subscription to the capital stock of the Minneapolis Threshing Machine Company. The action was tried without a jury before LOCHREN, J., who found as a conclusion of law that defendant never became a subscriber to the capital stock of plaintiff, and that he was not indebted to plaintiff, and judgment was ordered in accordance therewith. From an order denying a new trial plaintiff appeals. The subscription paper referred to in the opinion as Exhibits “A” and “B,” and upon which this action is based, is as follows: “Memorandum of agreement made and entered into between the undersigned, citizens of Minneapolis, Minn., each for himself, parties of the first part, and John S. McDonald, of Fond du Lac, Wisconsin, party of the second part: the party of the first part, in consideration of the party of the second part moving his plant and machinery to the city of Minneapolis, to enter into the manufacture of threshing machines, horse-powers, and engines, and for the purpose of forming a joint-stock company to engage in the manufacture of the aforesaid threshers and other machinery, *** with a capital stock of $250,000, the aforesaid citizens of Minneapolis, parties of the first part, hereby subscribe to and severally agree to take and pay for, in cash, the amount of capital stock set opposite their respective names in a company to be organized as aforesaid for the purposes aforesaid. And the said John S. McDonald hereby agrees that whenever the amount subscribed, exclusive of his own, shall reach the sum of $190,000, he will subscribe to said capital stock the further sum of $60,000, payable in the manner specified in a certain proposition signed by him and attached hereto. The conditions upon which said subscriptions are made are as follows, to-wit: ‘First. No subscription is to be binding until the sum of $250,000 is subscribed, including the subscription of John S. McDonald. Second. The $190,000 subscribed by the citizens of Minneapolis to the capital stock aforesaid it is understood and agreed is to be paid in payments as follows, as soon as the company is organized. *** The undersigned subscribe the amounts set opposite their respective names on condition that all the works of the company shall be located at Junction City, Hennepin county, Minnesota. JOHN A. DAVIS, $5,000,’ [and others.]” Proposition made by John S. McDonald referred to in the annexed memorandum: “The said John S. McDonald is to subscribe for $60,000 of the capital stock as follows: *** JOHN S. MCDONALD.”

C. M. Pond and James O. Pierce, for appellant.

Ferguson & Kneeland, for respondent.

MITCHELL, J.

This was an action to recover installments due on subscriptions to stock of the plaintiff. The facts fully appear from the findings of the court in connection with Exhibits A and B attached to the complaint. Those material for present purposes are that, a scheme having been started to organize a manufacturing corporation with $250,000 capital, whose works should be located at Junction City, near Minneapolis, and one McDonald having proposed that if the citizens of Minneapolis would subscribe$190,000 to the capital stock he would subscribe the remaining $60,000, one Janney, a promoter, but not a subscriber to the stock of the proposed corporation, acting as a voluntary solicitor, having with him the subscription paper, (Exhibits A and B) about April 1, 1887, proceeded to canvass for subscriptions to the stock of the proposed corporation on the terms and conditions embodied in the paper. He first applied to defendant, who subscribed $5,000 of stock. Afterwards, and about the same date, other citizens respectively subscribed to the stock, on the same paper, to the aggregate amount, including defendant's subscription, of $190,000, of which over $65,000 has been paid into plaintiff. Thereupon McDonald, in accordance with his proposition, subscribed the remaining $60,000, which he has paid up in full. All the conditions expressed in the written subscription (Exhibit A) having been fully performed and complied with, the proposed corporation was afterwards, about April 25, 1887, organized, and these subscriptions to its stock delivered over to it. The corporation, acting in good faith upon such subscriptions, including that of defendant, expended large sums of money in locating and constructing its works, and entered into large contracts, and incurred liabilities to the amount of over $75,000. During all this time, the corporation had no notice or knowledge of any condition being attached to defendant's subscription other than those expressed in the subscription paper itself. Neither is it found or claimed that any of the other subscribers to the stock had any such notice or knowledge. Defendant was not present at the organization of the corporation, and never attended or took part in any of its meetings, and had no notice or knowledge that...