Ramsey v. the Thompson Manufacturing Company,

• Decision Date: 30 May 1893
• Citation: 22 S.W. 719,116 Mo. 313
• Parties: Ramsey, Appellant, v. The Thompson Manufacturing Company, et al
• Court: Missouri Supreme Court

22 S.W. 719

116 Mo. 313

Ramsey, Appellant, v. The Thompson Manufacturing Company, et al

Supreme Court of Missouri, Second Division

May 30, 1893

Appeal from Greene Circuit Court. -- Hon. W. I. Wallace, Judge.

Reversed and remanded.

White & McCammon for appellant.

(1) The allegations of the petition and the evidence show such fraud and misrepresentation on the part of the Thompson Manufacturing Company and its promoters, in obtaining the plaintiff's subscription and his property in payment for the same, as to entitle him to relief prayed for. The rule that, whatever fraud creates, justice will destroy, applies to subscriptions for stock in a corporation. Wells v Jones, 41 Mo.App. 1; Morawetz on Private Corporations [2 Ed.], secs. 105 and 106; 2 Morawetz on Private Corporations [2 Ed.], sec. 839; Thompson on Liabilities of Stockholders sec. 142 and 143; Upton v. Tribilcock, 91 U. S. Rep 55; Manufacturing Co. v. Wheeler, 6 American and English Corporation Cases 420; Thompson v. Bank, 3 Am. St. Rep. 824. (2) Plaintiff's subscription having been made upon, and his property conveyed in pursuance of, a contract, conditional, and the conditions of said contract having never been performed on the part of the corporation, there was such a failure of consideration as to entitle plaintiff to recover. To defeat his recovery the corporation would have to show the performance of all the conditions of the contract. 1 Morawetz on Private Corporations [2 Ed.], sec. 79; Haskell v. Worthington, 94 Mo. 460; Waite on Insolvent Corporations, sec. 608; Thompson on Liability of Stockholders, sec. 186 and sec. 190; Jewett v. Railroad, 10 Ind. 539; Chase v. Railroad, 38 Ill. 215; Railroad v. Crosswell, 5 Hill 503. (3) The law requires that a corporation organized as the one in question, shall have all of its capital stock bona fide subscribed and one-half thereof paid up in lawful money of the United States. Revised Statutes, 1889, sec. 2768. This is a prerequisite to the existence of a corporation; it is a condition precedent, the performance of which must be shown, before any subscriber for stock is liable on the subscription, and the non-performance of it will entitle such subscriber to recover what he has paid. Wells v. Jones, 41 Mo.App. 1; Ins. Co. v. Ganzhorn, 2 Mo.App. 205; Haskell v. Worthington, 94 Mo. 571; Railroad v. Schwartz, 53 Cal. 110; Hale v. Sanborn, 20 N.W. 97; Scofield v. Thayer, 105 U. S. Rep. 143; 2 Beach on Private Corporations, sec. 535; Doris v. Sweeney, 60 N.Y. 463; 2 Morawetz on Private Corporations, sec. 845; 1 Morawetz on Private Corporations, sec. 81. (4) A failure to perform such conditions may be set up even if it questions the validity of the corporation itself; and a subscriber may avoid a subscription even to the extent of showing that the corporation was never properly organized. 2 Morawetz on Private Corporations, sec. 778, note; Haston v. Railroad, 16 Ind. 279; 2 Beach on Private Corporations, sec. 731; 1 Morawetz on Private Corporations, sec. 74; Schierenberg v. Stephens, 32 Mo.App. 327; Shloss v. Trade Co., 87 Ala. 411. (5) The plaintiff did not waive his right to demand the performance of the conditions by the payment of his subscription, or by accepting a certificate of stock. Jewett v. Railroad, 10 Ind. 539; Railroad v. Rowland, 9 A. (Pa.) 929; Cook on Stockholders, sec. 181; Hale v. Sanborn, 20 N.W. 97; Haskell v. Worthington, 94 Mo. 572; Turnpike Co. v. Lock, 8 Mass. 268; Parker v. Thomas, 19 Ind. 220; Mills v. Abbott, 63 Mass. 423; Thompson on Liability of Stockholders, sec. 120; Cook on Stockholders, secs. 88 and 89; Railroad v. Stewart, 41 Pa. St. 54. (6) The matters set up in defendant's answer showed no defense to plaintiff's cause of action and the evidence introduced in support of the same was irrelevant. The court could not adjudicate the rights of the third persons. Boyer v. Hamilton, 21 Mo.App. 520; Moon v. Ivers, 83 Mo. 29; Reid v. Mullins, 48 Mo. 344.

Heffernan & Buckley for respondents.

(1) Although evidence may have been improperly excluded, yet if it is apparent that such exclusion could in no reasonable view of the case affect the appellant's rights, the judgment should not be reversed. Kent v. Meltenberger, 15 Mo.App. 480; Brown v. Wright, 15 Mo.App. 407; Spiva v. Coal and Mining Company, 88 Mo. 75; State v. Lambert, 21 Mo.App. 307; State ex rel. v. Leland, 82 Mo. 265. (2) Although the court may have proceeded erroneously and irregularly, if the judgment is evidently for the right party it will not be reversed. If, in this case, the court, instead of excluding the evidence, had considered it all, the finding and judgment necessarily would have been the same. Bridge Co. v. Ring, 58 Mo. 491; Hedecker v. Ganzhorn, 50 Mo. 154; Anderson v. Shockley, 82 Mo. 255. (3) Unpaid shares or balances are as much a part of the capital stock as a sum that has been already realized, and aside from the funds on hand they often constitute the only resources of the company. They are debts due to it, the payment of which can be enforced by its officers. 13 Wis. 61; 62 U.S. p. 351; Thompson on Stockholders, sec. 10; Thompson on Liabilities of Officers, p. 397; Waite on Insolvent Corporations, secs. 141 and 148 to 150. (4) The contract of subscription merged all prior and contemporaneous negotiations, and parol testimony is not proper to alter and vary it. Thorp v. Ross, 4 Keyes, 536; Riley v. Brooklyn, 46 N.Y. 444; Westcott v. Thompson, 18 Id. 363; Morton v. Woodruff, 2 Id. 153; Vam Keller v. Shulting, 50 Id. 108; Mayor v. Ins. Co., 3 Abbott's Court of Appeals Decisions, 251; Railroad v. Eastman, 34 N.H. 124; Railroad v. Stewart, 41 Pa. 54; Railroad v. Bailey, 24 Vt. 465; Railroad v. Patrick, 2 Keyes, 256. (5) The fraudulent representations of the projectors of the company could not affect the subscription or release the subscriber. Oglevie v. Ins. Co., 22 How. U. S. 380; Railroad v. Dudley, 14 N.Y. 336; Kelsey v. Oil Co., 45 Id. 505; Bank v. Church, 29 Conn. 137; Graff v. Railroad, 31 Pa. 489. (6) It is no defense to an action on a stock subscription that the defendant was induced to subscribe by the false representation that certain of his neighbors and friends had agreed to take stock in the corporation. Haskell v. Worthington, 94 Mo. 560; Waite on Fraudulent Conveyances, sec. 540; Chetlain v. Ins. Co., 86 Ill. 220. (7) The certificate of incorporation bears date of May 19, 1888. Corporate existence dates from the time of filing the copy of the articles of association with the secretary of state. Revised Statutes 1889, sec. 2492; Mining Co. v. Richards, 95 Mo. 110.

Burgess J.

OPINION

Burgess, J.

-- This is an action by plaintiff against defendant company, a corporation, to recover back $ 200, paid by him in money, and to reinvest in him the title to a lot in the city of Springfield, Missouri, which he conveyed to one G. A. Frizzell, trustee, for the use and benefit of the corporation in payment of stock which he had subscribed to it, and which subscription, the payment of the money, and the execution of the deed to the lot in payment thereof, he alleges, were obtained by fraud and fraudulent misrepresentations. The allegations in the petition, leaving out the formal parts, are as follows:

"Plaintiff for amended petition states that the defendant, the Thompson Manufacturing Company, is a corporation duly organized under the laws of the state of Missouri."

That the defendants, Willis H. Thompson, J. H. Pomeroy, G. A. Frizzell, E. G. H. Kirst and J. M. Phillips, on or about day of , 1888, entered into and formed a conspiracy for the purpose of organizing a bubble company, whose ostensible and nominal purpose was to establish, in the city of Springfield, Missouri, a manufacturing plant and manufacture children's carriages, children's wagons, wooden and willow ware, hobbies, swings, jumpers, hammocks and so forth; but for the real purpose of cheating and defrauding the plaintiff and other citizens of the said city of Springfield. That in pursuance of their fraudulent scheme and design, as aforesaid, the defendants made and presented to the plaintiff a contract and agreement of subscription to the said company, which contract and agreement is in words and figures as follows, to-wit:

"'We the undersigned representatives of the Thompson Manufacturing Company, propose to establish in the city of Springfield, Missouri, a manufacturing plant for the purpose of manufacturing children's carriages, children's wagons, wooden and willow ware, hobbies, swings, jumpers, hammocks, etc., etc. And we further propose to locate the said manufacturing plant in the city of Springfield, Missouri, on the following terms and conditions, to-wit:

"'We propose to file articles of incorporation of the Thompson Manufacturing Company, with a capital stock of $ 100,000 divided into two thousand shares of the uniform par value of fifty dollars ($ 50) each, with a paid capital stock of fifty per cent. of the entire capital stock in accordance with the laws of the state of Missouri, and we further propose to the citizens and business men of the city of Springfield, that in consideration of their subscription for stock in the said plant to the amount of twenty thousand dollars ($ 20,000), or four hundred shares of fifty dollars ($ 50) each, payable as follows, to-wit: Ten per cent. of said subscription payable on or before thirty days after date of obligation, and ten per cent payable four months after date of obligation, and ten per cent. payable seven months after date of obligation, ten per cent. payable ten months after date of obligation, and ten per cent. payable thirteen months after date of obligation, and the balance of said subscription to be paid in upon call by the board of directors of the said Thompson Manufacturing...