Mt. Pleasant Coal Company v. Watts
| Decision Date | 11 March 1926 |
| Docket Number | 12,421 |
| Citation | 151 N.E. 7,91 Ind.App. 501 |
| Parties | MT. PLEASANT COAL COMPANY ET AL. v. WATTS |
| Court | Indiana Appellate Court |
Rehearing denied May 21, 1926. Transfer denied June 12, 1930.
From Putnam Circuit Court; James P. Hughes, Judge.
Action by Francis M. Watts against the Mt. Pleasant Coal Company and others. From a judgment for plaintiff, the defendants appealed.
Affirmed.
Henry W. Moore, Charles E. Henderson, Perry A. Douglass, Rawley & Baumunk and Corwin & Gillen, for appellants.
Donald Baker and Hays & Murphy, for appellee.
OPINION
Action by appellee against appellants to recover damages for a breach of a verbal contract entered into between him and the individual appellants, under which contract appellee agreed to assign a 30-year coal lease that he owned on lands in Vigo County to a corporation to be organized and formed by them.
It is averred in the complaint that under said contract said individual appellants, on or about September 1, 1922 promised and agreed with appellee that, if he would assign said lease, they would form a corporation with a capital stock of $ 25,000, issued and paid up, and would set aside and allot to appellee one-sixth of the capital stock of said corporation, and would issue to him, in consideration of the assignment of said lease, $ 2,000 of the capital stock of said corporation, and would advance to him a sufficient sum of money, without interest, for him to purchase the balance of his one-sixth interest in said corporation, on the condition that he should pay his said balance of said corporate stock out of the dividends accruing on all his stock, and by paying $ 2 per day out of his salary as mine boss and superintendent of the proposed mine to be opened and constructed. They and each of them further agreed, in consideration of such assignment of such lease to the proposed corporation, to employ appellee as mine boss and superintendent of said mine at $ 8 per day steady employment during the remainder of his natural life.
In consideration of such verbal contract, appellee, on September 9, 1922, assigned his coal lease to the Mt. Pleasant Coal Company, which lease was accepted by such company, and it constructed a mine on the land covered by the same, and has been operating thereunder ever since said assignment.
Appellant Mt. Pleasant Coal Company, through its duly authorized officers and directors, had knowledge, at the time of the assignment of said lease, of the contract that the individual appellants, as promoters, made with appellee to obtain the assignment of said lease, and appellant company thereby fully ratified, adopted and confirmed the promises and agreements of the individual appellants made to appellee prior to the incorporation of said company, and, by reason thereof, the corporation became jointly liable on said contract with the individual appellants.
All the appellants breached and violated said contract by refusing to issue to appellee any of the stock in the company and by refusing to advance appellee money to purchase such stock. Appellants, after said corporation was organized, and after the mine was fully completed, on January 13, 1923, in pursuance of said promise of life employment, employed appellee as mine boss and superintendent of said company, and, on March 13, 1923, discharged him as such mine boss and superintendent without any cause whatsoever.
There was a general denial by each of appellants and an affirmative paragraph by the coal company, in which two written contracts were set up, the first applying to the employment of appellee in superintending the sinking of the shaft and erecting the tipple of the mine of the company, and the second employing appellee as mine boss of the mine for the period of one month after it was completed. To the affirmative paragraph of answer, appellee filed a general denial and also an affirmative reply, in which he admitted the execution of the first contract, but alleged that the second contract was void by reason of the fact that he was induced to sign it without reading it because of fraud and false representations on the part of appellants' attorney and appellant Scott, at a time when a confidential relationship existed between appellee and said attorney, and appellee and said Scott. The reply further alleged that the second contract was obtained by said fraud in the furtherance of a conspiracy among all appellants to defraud appellee of the rights, benefits and consideration promised him under the terms of the verbal contract set forth in his complaint.
Appellants separately and severally demurred to the complaint, which demurrers were overruled. Appellant coal company also demurred to the second paragraph of reply, which demurrer was overruled.
There was a trial by jury, which resulted in a verdict against appellants for $ 10,000, on which, after appellants' motion for a new trial and their motion in arrest of judgment were each overruled, judgment was rendered, from which this appeal.
Appellee contends with apparent earnestness that the appeal should be dismissed because the judgment in the trial court was against Eugenia R. Wilson, administratrix of the estate of George R. Wilson, deceased, while the assignment of errors names "Virginia" R. Wilson, administratrix of the estate of George R. Wilson, deceased, as one of the appellants. But the discrepancy was harmless. It is clearly the result of some inadvertence, and there is not even a suspicion with the court that the parties so named are not one and the same. We hold that the names are idem sonans.
Appellants say that the court erred in overruling each of their separate and several demurrers to the complaint, and argue that the alleged promises of the individual appellants to have the corporation, to be organized in the future, issue to appellee $ 2,000 worth of its capital stock, if ratified by the corporation as alleged, became the promise of the corporation, and the individual promisors were released from any and all obligation therein, citing, as Indiana authorities to sustain their contention, Davis, etc., Mfg. Co. v. Hillsboro Creamery Co. (1894), 10 Ind.App. 42, 37 N.E. 549; and Davis, etc., Mfg. Co. v. Booth (1894), 10 Ind.App. 364, 37 N.E. 818. But neither of these cases is in point. Each case holds only that, under the facts there stated, the corporation was not liable, while the first case holds that the individual subscribers were each liable to the extent of his subscription, and the second holds that a complaint based on a several contract that proceeds upon the theory of joint liability is insufficient on demurrer.
The rule that must control under the averments of the complaint herein is thus stated in 14 C. J. 269:
"Of course promoters of a corporation are personally liable on contracts which they have entered into personally, even though they have contracted for the benefit of the projected corporation, and although the corporation has been formed and has received the benefit of the contract, and they are not discharged from liability by the subsequent adoption of the contract by the corporation when formed, unless there is a novation or other agreement to such effect."
This rule of law was quoted with approval by this court in Hilgemeier v. Bower Mfg. Co. (1923), 81 Ind.App. 191, 139 N.E. 691. As the rule is plainly stated in the face of the opinion, and as appellants' petition to transfer to the Supreme Court was denied, the law in harmony with such rule seems to be settled in this state. Had there been a novation, a different question would be presented. Van Vlieden v. Welles (1810), 6 Johns. (N.Y.) 85.
Appellants next contend that the alleged promise of the individual appellants to loan money to appellee, without interest, with which to pay for stock in the corporation to be organized in the future, and to be paid back at the rate of $ 2 per day from appellee's wages, was an individual promise which the corporation under its charter had no power to ratify as alleged, and that such act would be ultra vires, citing Agar v. Pagin (1906), 39 Ind.App. 567, 79 N.E. 379; and Breinig v. Sparrow (1907), 39 Ind.App. 455, 80 N.E. 37. The first authority cited concerns school corporations, and has little if any bearing on the question here involved. The second is an unfortunate citation by appellants, for it states the rule to be that if a corporation makes a contract which is merely ultra vires and not illegal, and others have thereby been induced to expend money, the corporation will be bound by its contract. Appellee cites this case as an authority to sustain his contention that appellants cannot escape liability on the ground that the contract was ultra vires, even if it were so. Other authorities recognizing the same rule are: Bedford Belt R. Co. v. McDonald (1897), 17 Ind.App. 492, 46 N.E. 1022, 60 Am. St. 172; City of Valparaiso v. Valparaiso Water Co. (1903), 30 Ind.App. 316, 65 N.E. 1063; Franklin Nat. Bank v. Whitehead (1898), 149 Ind. 560, 49 N.E. 592, 39 L. R. A. 725, 63 Am. St. 302.
But it is argued that a corporation is not bound by a promoter's contract even though it receives the benefit thereof. It may be conceded that if the promoter's contract was not made primarily for the benefit of the corporation, and if the corporation does not adopt it or promise to perform it, there would be no liability on the part of the corporation to perform. But where, as here, the promoters of a corporation make a contract in the interest of the contemplated corporation, if such corporation when organized recognizes and adopts it, it then becomes the contract of the corporation. Davis, etc., Mfg. Co. v. Hillsboro Creamery Co., supra. As was...
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