Plains Iron Works Co. v. Haggott

• Decision Date: 05 January 1920
• Docket Number: 9439.
• Citation: 68 Colo. 121,188 P. 735
• Parties: PLAINS IRON WORKS CO. et al. v. HAGGOTT.
• Court: Colorado Supreme Court

188 P. 735

68 Colo. 121

PLAINS IRON WORKS CO. et al. v. HAGGOTT.

No. 9439.

Supreme Court of Colorado, En Banc.

January 5, 1920

On Motion for Rehearing, April 5, 1920.

Error to District Court, City and County of Denver; H. P. Burke Judge.

Suit by Warren A. Haggott against the Plains Iron Works Company, and others. Judgment for plaintiff, and defendants bring error.

Reversed and new trial granted.

Allen and Scott, JJ., dissenting.

William H. Gabbert and Charles C. Barker, both of Denver, for plaintiffs in error.

E. M Sabin and Greeley W. Whitford, both of Denver, for defendant in error.

DENISON J.

The defendant in error brought suit below against the Plains Iron Works Company and others to recover $10,000 in money and to enforce specific performance of an agreement to give him 250 shares of stock in said company, all as a 'commission' or compensation for services. The suit was also upon two claims, assigned to him by one Hallman and one Gaiser, for 25 shares each of said stock, for services alleged to have been rendered by them. The decree required the defendant company to pay the $10,000, with interest, and required defendant Hubbell to transfer to plaintiff 299 shares of the stock on the three claims. The court found generally the truth of the complaint, and made specific findings. Defendants bring error.

The defendant McConney had an option on the property of the F. M. Davis Iron Works, insolvent, in the hands of a receiver, and the complaint alleges that----

'It was agreed between the said McConney and the said Haggott that, should the plaintiff undertake to interest parties with sufficient capital to organize a corporation with a capitalization of $250,000 to take over the property of the said F. M. Davis Iron Works Company at the purchase price of $85,000, he, the said plaintiff, should receive as consideration therefor 10 per cent. of the capital stock of said corporation so organized, and $10,000 in cash to be paid by the persons capitalizing said corporation, or the said persons so capitalizing said corporation were to cause said corporation to adopt and ratify said agreement, and if said agreement should be adopted and assumed by said corporation, then said persons were no longer to be personally liable therefor; and it was also agreed that the said McConney was likewise to receive the same compensation and the same amount of stock and to be paid in the same manner as the plaintiff.'

'It was also agreed that, upon the payment of the purchase price of $85,000 for the property of the said the F. M. Davis Iron Works Company by the persons to be procured to furnish the funds and to undertake the enterprise, all of said property should be transferred to said the Plains Iron Works Company, which was the corporation proposed to be organized for the purpose of taking over said the F. M. Davis Iron Works Company property, in consideration of the whole of its capital stock of $250,000 being issued therefor, for distribution as should be agreed upon, 10 per cent. of which stock should then be given to said Hagott and 10 per cent. thereof to said McConney for the considerations aforesaid.' We do not decide the question whether the transactions upon which this action is founded were such that plaintiff is not here with clean hands. We shall treat the complaint as if the words 'undertake to interest' read 'succeed in inducing.'

It is this contract between McConney and Haggott, as set up in the complaint, on which the judgment (as to Haggott's services) against the Plains Company is based. It was not in writing. Haggott procured one Tully, since deceased, and defendants Hubbell and Lowe, to provide money to take over the Iron Works for $85,000, and the payments were thus made according to the terms of the option. He relies on this as the performance of the consideration for the compensation or commission for which he sues. These is evidence that Hubbell, Tully, and Lowe agreed that plaintiff should receive the $10,000 and stock according to his contract with McConney. The defendant corporation was formed, pursuant, as plaintiff claims, to this agreement, the option was assigned, and March 21, 1916, the Iron Works property was conveyed to it, and one share each issued to the five directors. June 19, 1917, shares were issued, 249 to McConney, held by Hubbell as trustee, and the remaining shares to Hubbell as trustee for various parties.

The complaint alleges that the Plains Company adopted and assumed the McConney-Haggott contract; but defendant's counsel contend that no adoption or assumption of the contract by the company is shown by the evidence, and that therefore the judgment against it is erroneous. No express assumption by the Plains Company is shown, but the plaintiff relies upon the familiar principle that when a contract is made by promoters or others, to be performed by a corporation not yet formed, such corporation, when formed, is bound by such contract, if, with knowledge, it accepts the benefits thereof, and claims that the defendant company, knowing all the facts, accepted the option and property, and is therefore bound to carry out the contract.

There is here no contract purporting to be a contract between McConney and Haggott on the one side and the unborn corporation on the other, as in some cases--e. g., Bommer v. Am. Spiral Co., 81 N.Y. 468. Nor is there evidence of any agreement between Haggott and Tulley, Lowe, and Hubbell that the company should do anything or become liable on the contract between them and him; there is alleged simply an agreement that they would give him $10,000 and 250 shares of stock, or cause the company to assume that obligation, in which case they should be exonerated. The testimony is that it was agreed that Haggott 'should receive,' or it was 'understood that he should have,' etc. The sole reliance of plaintiff, then, for a judgment against the Plains Company, must be on the implied assumption, and that will not avail him.

If a corporation, when formed, accepts the benefits of a contract previously made in its name or for its benefit, under such circumstances as to...