Tanner v. Sinaloa Land & Fruit Co.

• Decision Date: 08 May 1913
• Docket Number: 2417
• Citation: Tanner v. Sinaloa Land & Fruit Co., 43 Utah 14, 134 P. 586 (Utah 1913)
• Parties: TANNER v. SINALOA LAND & FRUIT CO
• Court: Utah Supreme Court

134 P. 586

43 Utah 14

TANNER v. SINALOA LAND & FRUIT CO

No. 2417

Supreme Court of Utah

May 8, 1913

APPEAL from District Court, Third District; Hon. M. L. Ritchie Judge.

Action by H. S. Tanner, against the Sinaloa Land & Fruit Company, a corporation.

Judgment for plaintiff.Defendant appeals.

REVERSED WITH DIRECTIONS TO DISMISS THE ACTION.

N. V Jones, for appellant.

D. D Houtz, for respondent.

McCARTY, C. J. STRAUP and FRICK, JJ., concur.

OPINION

McCARTY, C. J.

Statement of Facts.

H. S. Tanner, plaintiff herein, and two other parties, C. D. Harding and J. M. Barlow owned and held an option on a tract of land containing 4,338 acres situate in the State of Sinaloa, Republic of Mexico.These parties, preparatory to forming a corporation to take over the land at a price that would insure them a profit of more than $ 13,000 on the deal, solicited and procured purchasers each of whom purchased a small equitable interest in the option referred to in the bill of exceptions as "acre interests."At the time these various parties subscribed for and purchased interests in the option, they, in connection with the promoters Tanner, Harding, and Barlow, signed a written agreement referred to in the bill of exceptions as the "subscription list" which, so for as material here, is as follows:

"It is understood and agreed that said 4,338 acres of land represents 4,338 undivided acre parts, and that each undivided acre part free from incumbrance shall cost the subscriber $ 5.50, 50 per cent. of said amount to be paid upon demand and the balance to be paid in 60 days from date of this agreement.The undersigned hereby agrees that upon the completion of the subscription to the above acre parts a corporation shall be organized to receive and hold title to above said land, also to develop or sell said land for the benefit of these subscribers.It is further understood that upon the completion of above said subscription a meeting of the subscribers shall be called to elect the officers of the corporation and determine the purposes of the organization and the general nature of the business to be transacted."

In July, 1908, a corporation, defendant herein, was organized.Each subscriber to the foregoing agreement thereby became entitled to have issued to him shares of the capital stock of the corporation in lieu of the interests purchased by him in the land mentioned.H. S. Tanner, plaintiff, was sworn as a witness and testified in part at follows:

"There were in the neighborhood of 50 subscribers (for acre interests in the land.)* * * The land was turned over at $ 5.50 an acre.The compensation received by Mr. (H. S.) Tanner, Harding, and Barlow was $ 3 per acre.We sold the land to the company (corporation) at a flat acreage rate.We were responsible for the turning over of the land to the company, and the company was responsible to us for $ 5.50 per acre."

The amount of the individual subscriptions for interests in the option varied from 10 to 300 "acre interests."Plaintiff retained 300 acre interests for himself, and when the corporation was formed he was made a director and also president of the company.Plaintiff, a short time after the incorporation of the company, was made its general manager.It appears that plaintiff, who is an attorney at law, assisted in preparing and drafting the articles of incorporation under and in pursuance of which the company became incorporated.Regarding the circumstances under which the articles of incorporation were prepared and drafted, plaintiff testified in part as follows:

"I don't know who it was that suggested that I prepare the articles, but it was suggested at the first meeting that I prepare them, * * * Submitted them to Mr. Jones (defendant's counsel herein), who was interested, to see if they suited him; and there were one or two provisions that he suggested some changes in; and also to Mr. Shipp (a stockholder in the corporation), * * * and he suggested some changes.I think Mr. Kimball likely made some suggestions.* * * Then I talked over these different provisions with various members, that is, the contemplated members of the company -- the stockholders -- to get their views * * * to see if the articles I had prepared met their views.And I drafted the articles some two or three times, and worked out the provisions in detail of different articles before they were finally acceptable to all concerned."

A short time after the company was organized and office rooms secured for the transaction of its business, plaintiff made out a bill of $ 250 against the company for legal services performed in preparing the articles of incorporation and placed the account on file with other bills of the company in the company's desk, and according to his testimony to which we shall refer later on, it was not presented to the company for more than three months thereafter.When the bill was finally presented to the company for payment, one of the board of directors was absolutely opposed to paying it.The other four directors, of whom plaintiff was one, neither allowed nor rejected the claim, and its consideration was postponed from time to time, and finally it was rejected by the board of directors and payment refused on the ground that it was not a proper charge against the company.The board of directors some time in August, 1908, during the time plaintiff was president, general manager and a director, adopted for use by the corporation in its business a certain contract which it copied from a form of contract that seems to have been in general use in the section of the country in which the company was carrying on its operations and doing business.This contract was designated in the bill of exceptions as "guaranteed harvest certificates."For services rendered in preparing this contract plaintiff charged the corporation $ 50.He did not present this claim to the company for payment until a short time before the commencement of this action.The company refused to pay the bill or any part thereof.Plaintiff, on cross-examination, testified concerning that transaction in part as follows:

"Q.Now, isn't it a fact that Shipp and Kimball (two of the directors, one of whom, Shipp, was an attorney at law) did more in the preparation of these harvest share certificates than you did?A.So far as the certificates are concerned, they did the supervision of them.I simply did the legal work.* * * Q. Didn't you in fact think out, shape up, and form this harvest share certificate?A.No, sir; I did not.They used a general form of that from some other company.I do not remember now which it was taken from.* * * I made no claim to the conception of the form of that draft or printing, whatever you call it, on that contract.It was the legal work.* * * Q.As a matter of fact, Mr. Tanner, didn't you substantially copy, or cause to be copied, the form almost verbatim of the Mexican Rubber Company for this certificate?A.I rather think so.Q.Well, I put in your hand this blank form of Mexican Rubber Company's harvest share certificate and ask you to examine it and see whether the face of the contracts are not the same with a difference of the names.A.It is practically the same.* * * Q. You were in the employ of this company--the defendant corporation--for a few months shortly after its organization and drew a salary as its manager, did you not?A.In the fall succeeding its organization I was manager and drew a salary of $ 100 a month as manager of the company for three months.Q.Did you ever make the presentation of either of these claims (referring to the claim for preparing the articles of incorporation and copying the contract mentioned) to the directors while you were manager and drew that salary?A.I did not.* * * Q.But no one ever promised to pay it (claim for preparing articles of incorporation), did they?A.No, sir."

Harding and Barlow, who were associated with Tanner in promoting the land deal, were called as witnesses for defendant and testified that it was expressly agreed between them and Tanner that no charges should be made against the prospective stockholders or the company when incorporated for any services rendered by them or either of them in organizing the corporation.And much evidence was introduced tending to show that plaintiff had but little, if anything, to do with the copying and the adoption by the corporation of the guaranteed harvest share certificates.This evidence was, in general terms, denied by plaintiff.The evidence, however, without conflict, does show that, after plaintiff, Harding, Kimball, Shipp, Jones and other prospective stockholders had decided upon the draft or form of the articles of incorporation, N. V. Jones employed at his own expense a Miss Dansie to copy (typewrite) them.

Some time in June, 1909, N. V. Jones succeeded Tanner as president and general manager of the company.The company, on or about November 1, 1911, levied an assessment of four dollars per share on its outstanding capital stock.This (the company's fourth assessment) was made payable December 6 1911.Plaintiff owned 101 shares of stock.His assessment was therefore $ 404.He made a demand on the company that his claims for legal services above referred to, amounted to $ 350, with interest thereon from August, 1908, be allowed, and that the same be paid by giving him credit for that amount on the assessment made on his stock.This the company refused to do, whereupon plaintiff commenced this action.Before the cause was tried plaintiff's stock was advertised, sold, and bought in by the company for the assessment.Plaintiff thereupon filed a supplemental complaint setting forth the facts leading up to and which culminated in the sale of his stock as above stated.The...