Read v. Memphis Gayoso Gas Co.

• Citation: 56 Tenn. 545
• Parties: S. P. READ v. THE MEMPHIS GAYOSO GAS COMPANY.
• Decision Date: 30 April 1872
• Court: Supreme Court of Tennessee

56 Tenn. 545

S. P. READ

v.THE MEMPHIS GAYOSO GAS COMPANY.

Supreme Court of Tennessee.

April Term, 1872.

FROM SHELBY.

Appeal in error from the judgment of the 1st Circuit Court, September Term, 1870. C. W. HEISKELL, J.

HUMES & POSTON, MORGAN, JARNAGIN & FRAYSER for appellant.

THOMAS W. BROWN, GANTT, WADDELL & MCDOWELL for appellee.

NICHOLSON, C. J., delivered the opinion of the Court.

The Memphis Gayoso Gas Company sued S. P. Read in the Circuit Court of Shelby county “for $300 on subscription in and to the Memphis Gayoso Gas Company of stock made by the defendant, which said subscription for said sum of money was made and due before institution of this suit; and said sum, with interest, is still due and unpaid.” Issues were made upon the pleas, one of which was, a failure of consideration, and another, non assumpsit.

The cause was tried at the September Term, 1870, of the First Circuit Court of Shelby, when there was a verdict and judgment for the plaintiff for $353. After motions in arrest of judgment and for a new trial were overruled, defendant appealed in error to this Court.

It appears from the bill of exceptions that on the 23d of May, 1866, the Legislature of the State passed an Act incorporating John Donovan and seven others, “under the name and style of the Memphis Gayoso Gas Company, with all the rights, powers, and privileges conferred upon the Edgefield Gas Light Company.” This latter company was incorporated by the same Act, by the first section of which “the company is established with a capital of $25,000, which may be increased, from time to time, to $300,000, and the capital stock shall be divided into shares of $50 each; and by the sixth section A. V. S. Lindsley and others were appointed to open books to receive subscriptions to the capital stock of said company; and as soon as $25,000 are subscribed, may hold an election for directors, and organize said company.

It appears that on the 27th of October, 1866, stock was subscribed amounting to about $30,000, defendant being a subscriber for twenty shares, amounting to $1,000. The subscribers whose signatures were made to the subscription paper agree to subscribe the number of shares and amounts respectively set opposite their names of the capital stock of the Memphis Gayoso Gas Company, etc., and agree to pay the same as it may be called for under said charter, and by the rules of said company.

On the 30th of November, 1866, after subscriptions to an amount exceeding $25,000 had been made, the subscribers met and elected the directors of the company, who proceeded to complete its organization by the election of a president and secretary.

It appears that defendant was represented in the meeting of stockholders for organization, and that his stock was voted by proxy, and that he was voted for as one of the directors, but was not elected. At the election of directors for organization more stock was represented and voted than $25,000. The subscription by defendant of $1,000 made the amount then subscribed $25,500, and about $5,000 more was afterward subscribed before the election of directors, all of which was voted in the election.

No calls for payments on stock had been made prior to December 12, 1866, when the Board of Directors passed the following resolution:

“ Resolved, That the president and secretary be requested to open books of subscription to the amount of six hundred thousand dollars ($600,000), and that said books be kept open for thirty days, unless the said amount be sooner subscribed, and that all subscribers be required to pay ten per cent of the amount of their subscriptions when said subscription books are closed, and the balance in installments, as shall be called by the Board of Directors.”

It is proper here to state that on the 4th of December, 1866, prior to the adoption of this resolution, the Legislature had amended the charter of the Memphis Gayoso Gas Company by authorizing the president and directors to increase the stock in the company to a sum not exceeding one million of dollars ($1,000,000). It appears that during the thirty days for keeping the books open for additional subscription, the amount subscribed, including the original subscriptions, was about one hundred and fifty thousand dollars($150,000), and at the end of the month the books were closed.

The call of ten per cent in the order of December 12, 1866, was not paid by many of the new subscribers, and by none of the old ones, but it was never revoked or declared void.

On the 17th of September, 1867, a call of ten per cent. was made by the directors, and on the 6th of November, 1867, the directors, at an informal meeting, authorized the president to make such call on the stock subscribed as may be necessary for carrying on suits of the company, and do such other acts as, in his judgment, are for the interest of the company. On the 7th of November, 1867, the president made a call of twenty per cent., which was published in a newspaper, and signed by the president and secretary officially.

The suit was brought to recover the two calls of ten per cent. and twenty per cent., made on the 17th of September, 1867, and the 7th of November, 1867, neither of which defendant had paid.

It was proved by plaintiff that at a meeting of the Board on the 26th of October, 1869, he reported his action in calling twenty per cent. under the resolution of November 6, 1867, and that the same was approved, though this does not appear on the minutes of the Board.

The first ground relied on for reversal, to which we will direct our attention is, that the court erred in overruling the motion in arrest of judgment. It is said that the declaration is defective in not stating what the subscription was, what calls had been made, and that payment had been demanded. The averment in the declaration is, that plaintiff sues defendant for $300 on a subscription in and to the Memphis Gayoso Gas Company, of stock made by defendant, which said subscription for said sum of money was made and due before the institution of the suit. If it be conceded that the promises in a subscription are conditional, and are governed by the charter, when it is averred that such subscription has been made for the amount sued for, and that it was due before suit, the fair legal intendment of the language is, that the defendant has failed to pay the amount due according to the terms and conditions of the charter, and therefore that the amount sued for is due. The averments convey a reasonable certainty of meaning, and show a substantial cause of action. This is sufficient under section 2884 of the Code.

But, in the next place, the defendant took no exception to the sufficiency by demurrer. He went to trial under the general issue, and even if the cause of action was defectively stated, it was too late after verdict to raise the objection. In such case we will presume that the defects in the averments have been supplied in the proof. 2 Hum., 419;4 Hum., 306; 2 Sneed, 191.

It is insisted in the next place that the defendant is not liable to pay the two assessments sued for, because, although his subscription made up the full amount of $25,000, yet before the assessment the directors had fixed the amount of the capital stock, first, at $300,000, and then at $600,000, and no legal assessment for the general purposes of the corporation could be made until the amount so fixed by the directors had been bona fide subscribed.

No principle of law is better settled than that the subscription for stock in a corporation is to be governed by the terms and conditions contained in the charter which gives it a corporate existence. From this general principle it is a necessary sequence that in all corporations in which...