Morgan v. Landstreet
| Full Citation | Morgan v. Landstreet, 109 Md. 558, 72 A. 399 (Md. 1909) |
| Decision Date | 20 January 1909 |
| Citation | 72 A. 399,109 Md. 558 |
| Parties | MORGAN et al. v. LANDSTREET. |
| Court | Maryland Court of Appeals |
Appeal from Circuit Court, Baltimore County; N. Charles Burke Judge.
Action by John H. Morgan and another, receivers of the Maryland Storage Company of Baltimore City, against Fairfax S Landstreet. From a judgment for defendant, plaintiffs appeal. Affirmed.
Argued before BOYD, C.J., and BRISCOE, PEARCE, SCHMUCKER WORTHINGTON, THOMAS, and HENRY, JJ.
Stuart S. Janney and Joseph C. France, for appellants.
Benjamin A. Richmond and Edgar H. Gans, for appellee.
This action was brought in the circuit court for Baltimore county by John H. Morgan and Frank B. Smith, receivers of the Maryland Storage Company, a corporation, under the laws of Maryland, duly adjudged to be insolvent, against Fairfax S. Landstreet, to recover the sum of $30,000, being the amount of the defendant's written subscription, made June 10, 1907, for 600 shares of the capital stock of said company of the par value of $50 per share. The proceeding was by way of attachment against the defendant as a nonresident, who entered a voluntary appearance in the summons case. The short note contained one count for money due on account stated, and a special count on the contract of subscription. The defendant filed the two general issue pleas in assumpsit, and third plea, "that the subscription mentioned in the plaintiffs' declaration was subject to a condition precedent, that said subscription was not to be binding on the defendant until all of the original capital stock of the said Maryland Storage Company was duly subscribed, and that subscriptions were never obtained for all of said original stock, and said condition precedent never complied with, whereby the defendant's subscription never became effective or binding." The plaintiffs joined issue on the defendant's first and second pleas, and to the third plea filed two replications: First, that said subscription was not subject to the condition precedent pleaded; and, second, that the defendant by his acts had waived any and all defense on account of the alleged fact that all of the original capital stock of the Maryland Storage Company was not subscribed. The defendant joined issue on the first replication to the third plea, and as to the second replication rejoined that he had not, by his acts, waived any defense on account of the alleged fact that all of the said original stock had not been subscribed. And the plaintiffs joined issue by way of surrejoinder on the defendant's rejoinder to the plaintiffs' second replication to the defendant's third plea. It thus appears that the fact of the subscription was admitted, and also that no part of the same has been paid, and under the pleadings two questions only were in issue: First, whether the contract of subscription was subject to the condition precedent pleaded; and, second, if so, whether such condition had been waived by the acts of the defendant. At the close of all the testimony on both sides of the case the defendant moved to strike out certain items of testimony which had been admitted subject to exception, and the plaintiffs moved to strike all the testimony adduced at the trial which tends to qualify the written subscription, whether contained in the defendant's own statements or in his letters offered in evidence, or in the testimony of the witnesses Timanus and Brady, also defendant's statement of what he told Timanus as to taking the last $30,000 of stock, when he (Timanus) had secured the balance, and also what he said, either to Redwood or Brady, as to any subscription to be made to this stock by the Western Maryland Railroad. Both these requests were refused. The plaintiffs then offered five prayers, all of which were rejected, and the defendant offered three prayers, of which the second and third were rejected, and the first was granted, as follows: "The court instructs the jury that by the uncontradicted evidence in the case the stock of the Maryland Storage Company authorized by its charter was never fully subscribed, and their verdict must be for the defendant, there being no evidence in the case legally sufficient to estop the defendant from setting up the defense of partial subscription to stock" --thus withdrawing the case from the jury. The rejected prayers will be set out by the reporter. The defendant excepted specially to the plaintiffs' second prayer on the ground that there was no evidence that defendant subscribed to any increased capital stock of the storage company, and not its formative or original stock, and this special exception was sustained; all of these rulings being embraced in the single exception taken.
A brief statement of the history of the case will throw material light upon the situation, before going into the law applicable to the case.
The storage company was incorporated under the laws of Maryland November 18, 1904, to carry on a forwarding and warehouse business, there being 7 directors, and the authorized stock being 3,000 shares of the par value of $50 each. Mr. Timanus was then president of the storage company, and Mr. Landstreet was then vice president of the Western Maryland Railroad Company. This company had recently established a tidewater terminus at Port Covington, and one of the principal objects of the organization of the storage company was to secure the storage business incidental to the new tidewater terminus. This appears in Mr. Timanus' letter of July 1, 1904, to Mr. Landstreet as vice president of the railroad company. On November 17, 1904, Timanus, learning that the railroad was about to acquire the possession of Brown's Wharf on the north side of the harbor of Baltimore city, proposed to Landstreet to take a lease of the warehouse then on that wharf. This permitted, without further cost for building, a small active business, requiring 9 or 10 clerks and laborers, and doing a business of about $1,800 a month. He testified they were trying to get the railroad company or Landstreet interested in the storage company. No agreement was reached in the matter of the lease until June 12, 1906, when a lease of Brown's Wharf was executed for five years, containing a covenant on the part of the storage company to erect a storage house on York street, to be completed, if possible, by January 1, 1907. At that time there was no actual subscription by Landstreet, either for the railroad company in his own name, or for any other individual. In May, 1905, the charter was duly amended so to increase the number of directors from 7 to 9. In July, 1906, a stockholders' meeting was called for the purpose of increasing the capital stock from $150,000 to $250,000, and the number of directors from 9 to 12. It appears from the minutes of that meeting that stockholders were present representing 65 shares of stock, that being more than two-thirds of the whole number of shares then issued, and that these voted to increase the amount of capital stock and the number of directors as above proposed. These proceedings, however, were abortive, both because the requisite notice was not properly addressed to the stockholders, and because the proposed amendment was not acknowledged and recorded, as required by sections 51, 52, 55, art. 23, of the Code.
In May 1907, Landstreet resigned as vice president of the railroad company; and Brady, vice president of the storage company, testifies that at that time he asked him when he would sign a subscription, as some who had subscribed would not pay until they felt sure of his subscription, as he had resigned from the railroad company, and he said he would let him hear in a few days. Later he told Landstreet they wanted him as a director. On June 10, 1907, he signed the subscription, and consented to be elected a director. At that time there were 10 directors elected and serving, being 1 more than the charter allowed. Landstreet never qualified as director, and never attended any stockholders' or directors' meeting. At the date of his subscription Brady testifies there were subscriptions, including Landstreet's, of about $101,000, and no greater amount was ever subscribed. Mr. Morgan, one of the receivers, testified, from the books and papers that came into his hands as receiver, that at that time $40,000 had been paid in on subscriptions, about $36,000 unconditional subscriptions unpaid, including Landstreet's $30,000, and some conditional subscriptions unpaid; the whole amounting to about $101,000, as stated by Brady. On July 1, 1907, there being then only $76,000 unconditionally subscribed, including the $30,000 of Landstreet, the directors resolved to build the York street storage house at a cost not to exceed $145,000. The York street lot was subject to two mortgages, aggregating $51,000, and the building contract called for an expenditure of $136,000. The lot sold for barely enough to cover these mortgages. Brady, in the latter part of July, 1907, tried to induce Landstreet to go to see the building then started, but he declined to go. In September, 1907, he asked Landstreet for a payment on the subscription, and he told Brady that, under the business and financial conditions existing, they ought to hold off the work, and Brady explained they had gone too far to stop. Later, and early in October, Landstreet did go with Timanus and Brady, and examine the work in progress, and he said he thought it was a good building. Brady did not then ask for any payment, and did not hear Timanus ask for any, and Brady never afterwards saw him on that subject. Timanus testified that he asked Landstreet several times, in the summer and fall of 1907, for payments on account, and his answer was that money was hard to get, and once in September, 1907, he said he was not liable, and would not...
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