Murry v. Monter

Decision Date01 October 1936
Docket Number5688
Citation60 P.2d 960,90 Utah 105
CourtUtah Supreme Court
PartiesMURRY v. MONTER et al

Appeal from District Court, Fifth District, Juab County; Le Roy H Cox, Judge.

Suit by R. J. Murry against L. J. Monter and another. From an adverse judgment, the defendants appeal.

REVERSED and REMANDED, with directions.

H. A Smith, of Salt Lake City, for appellants.

C. N Leatherbury, of Eureka, for respondent.

FOLLAND Justice. ELIAS HANSEN, C. J., and EPHRAIM HANSON and MOFFAT, JJ., WOLFE, Justice, concurring.

OPINION

FOLLAND, Justice.

This is a suit for specific performance of a contract made between plaintiff and the defendant L. J. Monter, a promoter of the Tintic Prince Mining Corporation, wherein plaintiff agreed to convey an interest in certain mining claims in consideration of 120,000 shares of stock in the corporation. On the organization of the corporation, plaintiff conveyed his interest in the mining claims and thereafter received 60,000 shares of stock. By this suit he seeks to recover an additional 60,000 shares. From a judgment in favor of plaintiff and against the defendants, jointly and severally, defendants appeal.

Murry, Monter, and R. E. Marsell located certain mining claims in the year 1931 which were conveyed by them to the defendant Tintic Prince Mining Corporation at the time of its incorporation in June of 1933. On May 10, 1933, the following agreement was signed by Murry and Monter:

"R. J. Murry, of Eureka, Utah, hereby agrees to make, execute and deliver unto L. J. Monter, or his assigns, upon the date of the incorporation of the Tintic Price Mining Company, in consideration of the transfer to said R. J. Murry of One Hundred Twenty Thousand (120,000) shares in the Tintic Prince Mining Company upon its organization, a good and sufficient deed for conveying and assuring to the said L. J. Monter, free from incumbrances, all his right, title and interest, estate, claim and demand, both in law and equity, as well in possession as in expectancy of, in, or to that certain portion, claim and mining right, title, or property on that certain vein or lode of rock containing precious metals of gold, silver and other minerals situated in the Tintic Mining District, County of Juab, and State of Utah, and described as follows, to-wit:

"Seven mining claims; namely the Green Back, The Green Back Number 1, The Little Bill, and the Little Bill, Numbers 1, 2, 3, and 4. These claims cover most of the southeast quarter of Section 33, Township 9 South, Range 3 West of the Salt Lake Meridian. "Signed this 11th day of May, 1933."

It will be noted the agreement is silent respecting the total number of shares for which the company will be organized. On June 26, 1933, the articles of incorporation of the Tintic Prince Mining Corporation were executed by Monter, Murry, Marsell, Dorothy Monter, and H. A. Smith as incorporators. At the same meeting Murry, Marsell, and Monter made and executed a deed conveying their interest in the mining claims to the corporation. The deed recited a consideration of $ 10 and other valuable consideration, "receipt of which is hereby acknowledged." The articles of incorporation provided for 1,000,000 shares of stock, 300,000 of which were to be issued to the incorporators in the several amounts subscribed by each, and of which R. J. Murry subscribed 60,000. The articles recited that, "the subscription to the capital stock herein made, amounting to 300,000 shares, is fully paid by the transfer to the corporation of all right, title and interest of the subscribers hereto in and to the following quartz lode mining claims," naming the claims so conveyed. It further recited: "that concurrently with the signing of these articles of incorporation, the locators of said mining claims have executed to this corporation a deed conveying all of their rights in and to said claims to the corporation." Mr. Murry was present at the incorporation meeting. There was testimony to the effect that one of the incorporators made the statement that it had been contemplated to have a 2,000,000-share corporation, but for certain reasons this would be cut in half and only 1,000,000 shares authorized, and consequently the incorporators would subscribe for and have issued to them only one-half the number of shares originally contemplated, but that each would have the same proportion of stock in the corporation; that the articles were in typewritten form; and that a copy was in the hands of the plaintiff Murry, and that they were read in his hearing. Murry testified he signed the articles and the deed, and that he made no claim for more than 60,000 shares of stock at that meeting or at any meeting of the board of directors of which he was a member, but that in September or October of 1933 he mentioned the matter to Monter, who told him that he "didn't have it coming"; that on March 23, 1934, he wrote a letter to L. J. Monter demanding 120,000 shares of stock. Up to that time no stock had actually been issued or delivered to any of the stockholders. Monter, responding to Murry's letter, sent Murry 60,000 shares of stock and notified him that because the corporation was organized for 1,000,000 instead of 2,000,000 shares, as contemplated when the original agreement was entered into, he was entitled to only 60,000 shares. Murry retained the stock and a short time later commenced this suit.

Plaintiff's contention is that the contract was made with Monter, acting as a promoter for the corporation, and the corporation having accepted Murry's deed and having taken and retained possession of the mining claims, it thereby ratified his contract with Monter and is obligated to perform the contract by the delivery of 120,000 shares of stock. Defendants' defense is that by signing the articles of incorporation wherein he subscribed for only 60,000 shares of stock and in effect agreed to transfer his interest in the mining claims in consideration of 60,000 shares, followed by actual execution and delivery of the deed, Murry made a complete new contract with the corporation covering the same subject-matter as the previous contract with its promoter and inconsistent therewith; that by reason thereof there was a rescission, a waiver, and abandonment of the original contract; and that the rights of the parties are measured by the later contract which had been completely discharged by delivery of the stock. Defendants further urge that by retaining the 60,000 shares of stock after being advised that he was entitled to that number and no more, which stock was accepted and retained, an accord and satisfaction was effected and plaintiff is now precluded from asserting any right to additional stock. It is admitted that L. J. Monter was a promoter of the corporation and that the interest in the mining claims owned by plaintiff was conveyed by him to the corporation, and that the corporation received the conveyance, took possession of the property, and now retains possession thereof.

The general rule of law is that promoters who undertake to organize a corporation cannot bind the corporation by their contracts and agreements made before the corporation is organized. Tanner v. Sinaloa Land & Fruit Co., 43 Utah 14, 134 P. 586, Ann. Cas. 1916C, 100; Wall v. Niagara Mining & S. Co., 20 Utah 474, 59 P. 399, 401; 1 Thompson on Corps. (3d Ed.) § 106; 4 Cook on Corps. (8th Ed.) § 707. But that the corporation after incorporation may accept and adopt such a contract which thereupon becomes its own contract, which may be enforced by or against it. Wall v. Niagara Mining & S. Co., supra. The rule is succinctly stated in 4 Cook on Corps. (8th Ed.) § 707, p. 2894:

"A corporation accepting the benefits of the contract of its incorporators must accept the burden, and a promoter's contract which has been ratified or adopted by the corporation, or the benefits of which have been accepted by the corporation with knowledge of such contract, may be enforced against it."

The corporate liability where the corporation accepts and retains the benefits of a promoter's contract is on the theory of implied contract or of...

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    ...general rule, corporations and limited liability companies cannot be held liable for the acts of those who form them. Murry v. Monter, 90 Utah 105, 60 P.2d 960, 962 (1936) ; see also Bishop v. Parker, 103 Utah 145, 134 P.2d 180, 181 (1943) (holding that unless contract for preorganization s......
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