Ogden Clay Co. v. Harvey

• Decision Date: 29 January 1894
• Citation: 9 Utah 497,35 P. 510
• Court: Utah Supreme Court
• Parties: OGDEN CLAY COMPANY, RESPONDENT, v. W. H. HARVEY, APPELLANT

35 P. 510

9 Utah 497

OGDEN CLAY COMPANY, RESPONDENT, v. W. H. HARVEY, APPELLANT

Supreme Court of Utah

January 29, 1894

APPEAL from a judgment of the district court of the fourth district and from an order refusing a new trial, Hon. James A. Miner judge. The opinion states the facts, except the following:

These calls were not made, so far as the record shows, in accordance with section 2375 of Compiled Laws of 1888 noticed in Gary v. Mining Co., supra. That article provides for calls by the board of directors, but the call is denominated an assessment.

The complaint alleged the incorporation under articles of agreement, the subscription thereto by defendant for twenty shares of the par value of $ 50, the resolution of the meeting of stockholders, the calls in accordance therewith by the board of directors, and the balance due from defendant. The answer set up specifically the facts under which the defendant claimed he was not bound, to-wit: that he only signed a subscription paper for a corporation which was never formed, and on that subscription he was not bound to the plaintiff corporation; that he paid in on this subscription paper the sum of $ 360; that certain promoters of the corporation took the said subscription paper and attached the same to certain articles of agreement, but said pretended articles were never signed by any one; that he never ratified any acts of the plaintiff corporation, but always repudiated all connection therewith.

The instructions of the court were as follows, omitting formal parts:

"If the jury believe, from the evidence in this case, that the defendant Harvey and the other defendants signed the following memorandum of agreement to the effect: 'We, the undersigned, subscribe and agree to pay the sums set opposite our names, in the manner and at the time hereinafter agreed upon by the subscribers hereto, to the capital stock of the Ogden Clay Company. The object of said company is to erect a plant in the city of Ogden for the purpose of manufacturing common pressed brick, drain tile, clay shingles, stone ware and sewer pipe.' And that thereafter the said memorandum was attached to such other written articles as are required by the statutes of this Territory--which has been read in your hearing--to be made and filed with the probate clerk of this county and with the secretary of the Territory to constitute a corporation under the laws thereof, and that the articles so attached conformed to the memorandum of agreement in respect of the objects and purposes of the corporation as to capital stock and otherwise, then in such case the signing by the defendants of such memorandum would be authority to such promoters to attach such memorandum to such other articles required by the statutes in such cases, and the defendants would be bound by their signatures the same as if the whole paper had been completed and made up at the time of such signing.

"If the jury find that at the time this suit was brought the agreement of incorporation had not been subscribed by the defendant Harvey, or that the capital stock was placed at a different sum than stated in the preliminary subscription paper or that in any other material respect the plaintiff company was not organized in the manner provided by law and in conformity to the terms and conditions of the subscription paper, your finding must be for the defendant--that is, the defendant Harvey--unless you also find from the evidence that the defendant Harvey waived his right to insist upon such a legal organization, or assented to the organization as incorporated. These instructions apply to both defendants.

"If you find from the evidence that the defendant Harvey signed a subscription paper for a proposed corporation as shown in this case, when it was stipulated and agreed that the capital stock should be forty-five thousand dollars, and you further find that without the knowledge or consent of Harvey, said proposed company was organized with a capital of one hundred thousand dollars, this will release the said Harvey from his subscription, unless you further find he acquiesced or assented to the organization as subsequently altered and organized. And if you should find that he made a payment on his subscription and received stock, without knowledge that a company had been organized with a capital of $ 100,000, but that immediately afterwards when he did hear first of it, he repudiated the company as organized, then the fact that he made a payment and received stock, while in ignorance of said change in the capital stock will not bar or estop the said Harvey from taking advantage of said unauthorized alteration in the capital stock, if it was so; and to hold him to this company, you must find that he had knowledge of the change and acquiesced in it, and the burden of proving this is on the plaintiff. But if you find that Harvey did acquiesce and assent to the incorporation with knowledge of the facts, and continued to do so afterwards, it is too late for him to repudiate the company as organized or to shake off his responsibility to pay, which he had previously recognized--if he had done so--and agreed to by his own acts--if he did so.

"A waiver is a voluntary act and implies an election of a party to dispense with something of value, or to forego some advantage, which he might at his option have demanded or insisted on. So a waiver is also defined to be and is an intentional relinquishment of a known right, and there must be both knowledge of the right and an intention to relinquish it. Acting with and acquiescing in the organization as incorporated, or receiving his stock or making payments of assessments after incorporation, with knowledge of the facts will estop either of the defendants from setting up the defense made. Ratification, acquiescence or assent may be shown by acts of the parties, and is a question for the jury to determine under all the facts and circumstances of the case. Again, ratification is either express or implied. Express ratifications are those made in direct terms of assent. Implied ratifications are such as the law presumes from the acts of the party, as, for instance, if Peter buys goods for James, and the latter, knowing the fact, receives them and applies them to his own use, that would be a ratification. By ratifying a contract or act a man adopts the agency altogether, as well what is detrimental as what is for his benefit. As a general rule the principal has the right to choose whether he will adopt the unauthorized act or not. But having once ratified the act, upon a full knowledge of all the material circumstances, the ratification cannot be revoked or recalled, and the party becomes bound as if he had originally authorized the act.

"The ratification of a lawful contract by one party has a retrospective effect and binds the person ratifying from its date, and not only from the time of ratification, for ratification is equivalent to an original authority. So if this party took part in the organization of the company and the incorporation thereof, and participated in the proceedings and urged the incorporation and performed any act after its completion, receiving benefit therefrom, and afterwards ratified what was done by the corporation, then he is bound by his acts and cannot retreat or back out from the obligation. You see all this is dependent upon the evidence in the case; it depends upon what you find the facts to be in the case, as you are the judges of these facts. Now gentlemen, you will take this case and give it such consideration as is due; consider the facts and circumstances in all their bearings and all their parts; give each witness such credit as you think he is entitled to in the case; take the papers of exhibits in the case on the question of whether Mr. Harvey signed that or ratified the act of this corporation. You may take into consideration the question as to whether he signed the receipt of stock, for it is a question as to whether he did or not.

"Determine whether he signed the receipt that has been introduced in evidence in this case. That is a fact also for the jury."

The evidence showed the articles of agreement, closing up with an attesting clause not signed, and then on the next page the following: "We, the undersigned, hereby subscribe and agree to pay the sums set opposite our names in the manner and at the times hereinafter agreed upon by the subscribers hereto to the capital stock of the Ogden Clay Co.; the object of said company is to erect a plant in the City of Ogden for the purpose of manufacturing common, pressed brick, drain tile, clay shingles, stoneware and sewer pipe. Paid up capital, $ 45,000." Then followed a long list of names and amounts, among them the defendant Harvey's, for $ 1,000, then an acknowledgment and certificate. The evidence was conflicting on several matters in regard to meetings, but witness Harvey, the defendant, admitted receiving the stock and signing the single paper quoted above.

Affirmed.

Messrs Dey and Street, for the appellant.

The rule of estoppel does not apply to a suit brought by the corporation against a stockholder upon a subscription, made with a view to organization and preliminary thereto, where other acts are required by law as a condition precedent to the exercise of corporate powers. Williams v Association, 26 Ind. 310; Indianapolis Co. v. Herkimer, 46 Ind. 145; 2 Morawetz on Corp. sec. 738; Cook on Stock, sec. 186. The laws of Utah provide certain requirements for a valid incorporation; an agreement signed by each of the incorporators stating the name of the association, names and places of residence of stockholders, the time of duration, the business agreed upon, place of general business, amount of stock subscribed by each...