Planters' & Merchants' Independent Packet Co. v. Webb

• Decision Date: 04 June 1908
• Citation: 156 Ala. 551,46 So. 977
• Parties: PLANTERS' & MERCHANTS' INDEPENDENT PACKET CO. v. WEBB.
• Court: Alabama Supreme Court

46 So. 977

156 Ala. 551

PLANTERS' & MERCHANTS' INDEPENDENT PACKET CO. v. WEBB.

Supreme Court of Alabama

June 4, 1908

Appeal from Circuit Court, Mobile County; Samuel B. Browne, Judge.

Action by the Planters' & Merchants' Independent Packet Company against B. A. Webb. From a judgment for defendant plaintiff appeals. Reversed and remanded.

The tendencies of the evidence are sufficiently set forth in the opinion of the court. At the request of defendant the court gave the following charges: "(1) If the jury believe from the evidence that defendant did not subscribe for or agree to pay for stock in the Planters' & Merchants' Independent Packet Company, then the jury must find a verdict for defendant. (2) If the jury believe from the evidence that Webb took no part in the formation of the enterprise which did culminate in the plaintiff company, and that in December 1903, he told Tunstall to take his name off the paper he had signed, then the jury must find for the defendant."

McAlpine & Robinson, for appellant.

Fitts Leigh & Leigh, for appellee.

DENSON J.

This is an action of assumpsit by the Planters' & Merchants' Independent Packet Company, a corporation, against B. A Webb, to recover $1,000, alleged to be due as a subscription by the defendant (appellee) to the capital stock of the plaintiff. The case was before this court at a previous term, and on that appeal it was held that the complaint stated a good cause of action, and a judgment sustaining demurrers thereto was reversed. On remandment of the cause, trial was had on the merits, resulting in verdict and judgment for the defendant, and the plaintiff again appeals.

The defendant, along with others, signed a subscription list which reads as follows: "We, the undersigned, hereby subscribe for the number of shares of the capital stock of 'Independent Packet Company,' set opposite our names. Capital $20,000." Defendant subscribed for 10 shares, $1,000; and it is on this subscription the plaintiff bases its right of recovery. The subscription was made in the latter part of the year 1903--in October of that year, as the evidence tends to show. The corporation was not organized until June, 1904, and was organized under the name of "Planters' & Merchants' Independent Packet Company." On the former appeal it was held that "the signing of the subscription paper is an implied promise to pay the subscription," and that an agreement reading as the one here does may be enforced by the corporation subsequently formed. Planters' & Merchants', etc., Co. v. Webb, 144 Ala. 666, 39 So. 562. The soundness of that decision is not brought in question by the present appeal.

The defendant insisted, in the court below, that the venture represented by the subscription list which he signed in the latter part of 1903 was wholly abandoned; next, that, whether it was abandoned or not, he withdrew his subscription some time before the corporation was organized as a corporation. The evidence for the defendant shows that in December, 1903, he instructed Tunstall to take his name off the subscription list, and told him he would have nothing else to do with it (the enterprise). It also tends to show that Tunstall was in control of the subscription list, or that it was in his office, and shows without conflict that Speith, Tunstall, and defendant originated the scheme to form the corporation--that their names are first on the subscription list, each for 10 shares ($1,000). A further tendency of the evidence is that the venture was abandoned. The plaintiff's evidence tended to show that there was no abandonment of the venture and that the defendant never withdrew his subscription. There is a further tendency in the plaintiff's evidence to show that defendant recognized the binding force of his subscription after the organization of the corporation, and that he was present at the meeting when the corporation was organized.

The affirmative charge, with hypothesis, requested by the plaintiff in writing, was refused by the court. The main proposition underlying this request is whether or not a subscriber to the capital stock of a proposed corporation--an organized corporation--has a right to withdraw and revoke his subscription before the corporation is organized. We shall not undertake a review of the many decisions and text-writers on this subject. In respect to it our own court, speaking through Stone, C.J., has said: "An agreement to take shares in a corporation to be afterwards formed, while it may be, and often is, a binding contract, for the breach of which an action may be maintained, is, by force of the mere agreement, in no sense a subscription of stock. Something more must be done before it can be affirmed that the subscription is a completed contract. Till a charter is obtained, or incorporation otherwise perfected, such agreement is a mere offer, or it is an option revocable or not, as the nature of the agreement may determine. The terms of the offer, and the consideration it rests on, may render it binding and irrevocable, or a failure to withdraw such offer, even when in its nature it is revocable, until it has been accepted by actual incorporation, may so bind the offerer that he cannot afterwards withdraw it. When it rests on a valuable consideration, such as a promise for a promise, then, as a rule, it becomes an irrevocable option, provided incorporation according to the terms of the offer is perfected within a reasonable time. This would constitute the offerer in substance a stockholder. So, if an offer, which has no valuable consideration to rest on, be permitted to stand until it is accepted by incorporation according to its terms, this, it seems, would be an irrevocable subscription of stock." Knox v. Childersburg Land Co., 86 Ala. 180, 5 So. 578; Foundry, etc., Co. v. Hall, 121 Mass. 272; Katama Land Co. v. Jernegan, 126 Mass. 156; Boston, etc., Co. v. Wellington, 113 Mass. 79; Russell v. Bristol, 49 Conn. 251; Odd Fellows, etc., v. Glazier, 5 Har. (Del.) 172; N.H. Cent. R. Co. v. Johnson, 30 N.H. 390, 64 Am. Dec. 300; Connecticut, etc., Co. v. Bailey, 24 Vt. 465, 58 Am. Dec. 181.

In a well-considered opinion, the Supreme Court of Maine, through Walton, J., has aptly expressed what we conceive to be the correct doctrine. It is in accord with our case, supra, and we here transcribe a part of the opinion as delineating our views: "The right of subscribers to the capital stock of a proposed corporation to withdraw their subscriptions at any time before the organization of the corporation is completed has been affirmed in several recent and well-considered opinions. The right rests upon the impregnable ground of the legal impossibility of completing a contract between two parties, only one of which is in existence. There can be no meeting of the minds of the parties. There can be no acceptance of the subscriber's proposition to become a stockholder. There can be no mutuality of rights or obligations. There can be no consideration for the subscriber's promise. * * * If the subscriber's promise to take and pay for shares remains unrevoked till the organization of the proposed corporation is effected, and his promise has been accepted, then we have all the elements of a valid contract--competent parties, mutuality of duties and obligations, a valid...