Natwick v. Terwilliger
| Decision Date | 16 October 1916 |
| Docket Number | 823 |
| Citation | 24 Wyo. 253,157 P. 696 |
| Parties | NATWICK v. TERWILLIGER |
| Court | Wyoming Supreme Court |
ON PETITION FOR REHEARING.
Counsel for plaintiff in error has filed a petition for rehearing in this case. The action was brought by the trustee in bankruptcy of an insolvent corporation to recover a sum alleged to be due from the defendant upon a subscription for stock, and the judgment in defendant's favor was affirmed on the ground that the condition upon which the subscription was made had not been complied with on the part of the company; Justice Beard concurring specially, on the ground that defendant's only obligation was to convey certain property in consideration for the stock, and that as the stock had not been issued and the deed had not been demanded the action was not maintainable.
It appeared that prior to the incorporation and organization of the company the defendant signed the original subscription list for twenty-five shares of stock, adding after his signature the word "conditional," and at the same time received from the organizer of the company, who circulated the subscription list, a written statement certifying to the fact that defendant had signed the list conditionally, and that it was understood that the company should take in full payment for the stock a certain town lot, and that he should not be liable for said subscription unless the company should accept the same under said conditions. (See former opinion, 157 P. 696, 697.)
The defendant was present at the organization meeting of the stockholders and voted 25 shares of stock, but no stock had been issued to him or to any one who had signed the list, and his subscription had not then been accepted. But the evidence shows, we think, that the other subscribers, or at least all who became stockholders, knew the terms and conditions of defendant's subscription, and that there was at least a tacit understanding that it would be accepted upon the said conditions, and that with that understanding the defendant participated in the meeting. He was selected and acted as secretary of that meeting, and was elected as one of the directors of the corporation then being organized. He was also present at the first meeting of the directors held on the same day and was elected secretary of the company. At that meeting the proceedings were had with reference to his subscription, which are copied in the former opinion from the record of the meeting in the evidence, viz.: A motion was made and carried that 25 shares of stock be issued to the defendant "upon the delivery of a good and sufficient deed to lot 4, block 22, in the Town of Encampment, Wyoming, as per condition and agreement when he signed said subscription list; said deed to be accepted in full payment for said stock subscribed"; the lot thus described being the property offered by defendant as shown by the organizer's written statement of the fact and conditions of the defendant's subscription.
On the trial the defendant was called as a witness for the plaintiff and examined with reference to the company's records, including the record of the first meeting of the directors, and upon cross-examination he testified that he had executed a deed of the lot to the corporation pursuant to the resolution referring to his subscription, but the deed does not appear to have been delivered.
By a resolution adopted on March 11, 1908, by the executive committee, quoted in the former opinion, the president and secretary were directed not to issue any stock to the defendant in payment for the lot aforesaid, "inasmuch as" the deed thereto had not been delivered to the company in accordance with the original agreement, and it was provided that rent should be paid the defendant for the use of the building by the company. It is stated in the former opinion that the evidence shows certain other reasons for that action, and that it was the result generally of the company's desire not to take the property or to issue the stock to the defendant upon his subscription, and before concluding this opinion those reasons will be stated more in detail, for they tend to explain what was intended by the resolution aforesaid, and the ground for the statement in the former opinion that by said action the company finally concluded not to accept the subscription on the conditions named.
It was contended on the original hearing that the subscription was not conditional, but a subscription on special terms as to payment; that it was accepted by the company at the time of its organization, and that the defendant then became liable to pay for the stock either in the property mentioned or in money; that having failed to convey the property he became liable upon his subscription for the par value of the stock; and that the action of the executive committee was invalid as against creditors as a release of the defendant's liability to pay for the stock. It was also contended that defendant's liability is shown by the fact that he voted the shares at the first meeting of the stockholders, accepted the office of director and secretary and member of the executive committee, and acted in those capacities, and that the company went into possession of the property aforesaid and occupied it. The same contentions are again made by the petition for rehearing and the brief in support thereof; and counsel states in the brief unqualifiedly the following proposition as settled law: That a condition in a subscription to the capital stock of a corporation by which the subscriber agrees to pay in labor or property is a condition subsequent, and the subscriber becomes a stockholder immediately upon the organization of the company. Aside from the rule that in a subscription like the one at bar an acceptance by the corporation is essential to constitute it a contract at all, which is not recognized by the proposition as stated by counsel, we are of the opinion that such a subscription may be so made as to entitle it to be called and construed as a conditional subscription. It may not be very material whether the subscription in this case be considered as a conditional subscription or one on special terms, for if the latter an acceptance by the company would be necessary, whereupon the subscriber's liability would be governed by the special terms, and he would not be liable to pay for the stock in money except in case of a refusal or inability on his part to convey the property. And we are of the opinion that the evidence does not show a refusal by the defendant to convey, but, on the contrary, a conclusion by the company not to take the property, to which the defendant assented because of a determined opposition to taking the property that had developed among the stockholders.
But we adhere to the view that this subscription was conditional. It was not only so specified on the subscription list, and in the written statement that it was conditional upon the company taking the property in full payment for the stock, but it was also provided that the subscriber "shall not be liable for said subscription unless said company accepts same under said conditions." That is to say, the condition of the subscription was that the company shall take the property in full payment, and that no liability shall be incurred by the subscription unless accepted on that condition, viz.: that the company "shall take" the property. In thus requiring that his liability be expressly limited, the defendant did what may properly be done, as said in Thompson on Corporations in these words: "If a subscriber desire to make his liability depend upon the performance of some stipulations by the corporation, it is very easy for him to do so in express terms." The author was there discussing the rule for determining the real meaning of a contract of subscription made upon a condition subsequent, and had stated what is of course the law that as in the construction of conditions in other contracts the intention of the parties is to be ascertained. (1 Thomp. on Corp., 2nd Ed., Sec. 632.) And that the intention of the parties is the controlling question is stated elsewhere in the work cited. (Secs. 626, 627.) And by other text writers. Mr. Cook says in the section cited that In a case often cited in support of this rule it is held that whether a condition be precedent or subsequent "is a question purely of intent; and the intention must be determined by considering not only the words of the particular clause, but also the language of the whole contract as well as the nature of the act required and the subject matter to which it relates." And applying that rule a subscription for stock was held to be upon a condition precedent, because so intended and understood by the parties, and that the condition was to be strictly performed before the subscriber could be held liable. (Bucksport & Bankor R. R. Co. v. Brewer, 67 Me. 295.)
That defendant's subscription was intended as and understood to be one upon condition and not absolute is evident not only from the terms thereof as expressed in the writing aforesaid and the addition of the word "conditional" to the defendant's signature on the list, but...
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