Marysville Electric Light & Power Co. v. Johnson

De Haven, J. This is an action brought by the plaintiff against the defendant upon the following agreement, alleged to have been signed by him and others: “ For the purpose of forming a corporation to have for its object the furnishing of the incandescent system of electric lighting to those who may desire the same, and to provide the funds for the purchase of the necessary plant, we, the undersigned, hereby subscribe for stock to the amount set opposite to our respective names. Amounts to be due and payable upon the formation of the company and the issuance of the stock.” The complaint alleges that the agreement was made and signed in contemplation of incorporating the plaintiff for the purpose of carrying on the business therein stated, and that thereafter it was duly incorporated under the laws of this state, by the defendant and the other persons signing said agreement. It is further alleged “ that said corporation, this plaintiff, succeeded to and acquired all the rights of said subscribers, and each of them, to the amounts so subscribed ” under the said agreement, and that plaintiff has issued its stock to the subscribers, and tendered to the defendant the amount of stock subscribed for by him, and that he has refused to pay for the same. It is also alleged that plaintiff “ duly made,” at different times, calls for fifteen, sixty, and twenty-five per cent of the amounts so subscribed by the defendant and others. The court below sustained a demurrer to the complaint, upon the ground that the facts therein stated are not sufficient to constitute a cause of action. This ruling of the court presents the only question to be considered by us at this time. 1. The agreement above set out is certainly valid; the corresponding promises of the other signers, and the common object sought to be accomplished by all the parties to it, constitute a sufficient consideration for the promise of defendant; and upon the formation of the plaintiff corporation by the persons signing the agreement, and plaintiff’s acceptance of the agreement, the defendant became bound to take and pay for the number — 547 — of shares subscribed for by him. (Athol Music Hall Co. v. Carey, 116 Mass. 471; Red Wing Hotel Co. v. Frederick, 26 Minn. 112; Hughes v. Antietam Mfg. Co., 34 Md. 316; International Fair and Exposition Ass’n v. Walker, 83 Mich. 386.) And it is not material to the right of the plaintiff to maintain this action that it is not expressly named in such agreement as the promisee. The agreement is to be construed according to the evident intention of the parties to it. It just as clearly appears that it was the intention of all the parties that the promise of each should inure to the benefit of the corporation when formed as if such intention were expressly declared; and therefore, in legal effect, the promise of defendant was to pay to the plaintiff corporation when organized. The corporation really represents the parties to the agreement; it was brought into existence by them as an agent to carry on the business named in the agreement, and through which they were to secure the benefits to arise from their mutual and corresponding promises. There is no difference in principle between the above contract signed by the defendant in this case, and that construed by the supreme court of Massachusetts in the case of Athol Music Hall Co. v. Carey. 116 Mass. 471. In that case the agreement was, that the parties signing it would form a corporation, and»“ pay to the treasurer of the corporation the amount of the several shares ” subscribed for, and, in speaking of such an agreement, the court said: “ In agreements of this nature entered into before the organization is formed, or the agent constituted to receive the amounts subscribed, the difficulty is to ascertain the promisee, in whose name alone suit can be brought. The promise of each subscriber ‘to and with each other is not a contract capable of being enforced, or intended to operate literally as a contract to be enforced, between each subscriber and each other who may have signed previously, or who should sign after-wards, nor between each subscriber and all the others collectively as individuals. The undertaking is inchoate and incomplete as a contract until the contemplated or — 548 — ganization is effected, or the mutual agent constituted to represent the association of individual rights in accepting and acting upon the proposition offered by the several subscriptions. When thus accepted, the promise may be construed to have legal effect according to its purpose and intent and the practical necessity of the case, to wit, as a contract with the common representative of the several associates.” In Ashuelot Boot and Shoe Co. v. Hoit, 56 N. H. 548, certain persons signed the following paper: “The undersigned mutually agree that they will take and pay for the number of shares set against their respective names in the capital stock of a corporation to be organized under the general statute of New Hampshire, for the purpose of manufacturing boots,” etc. Immediately following the names of those signing this agreement, the defendants in that action signed the following: “ We, the undersigned, agree to pay in cash a gratuity of one thousand dollars.” The plaintiff in that case was subsequently incorporated by the persons who had subscribed the above- agreement to take its stock, and brought the action to recover the gratuity of one thousand dollars agreed to be paid by the defendants therein, and the court held that the action could be maintained, although the plaintiff was not named in the written promise of defendants to pay such gratuity, nor was it in existence when defendants signed the same. The court said: “ The agreement was on the one part by the subscribers to the stock, of whom the plaintiffs are the successors, or rather, with the plaintiff, —for the understanding and agreement was that the subscribers to the stock should unite and form the plaintiff corporation, — and on the other part by the defendants.” So in this case, the agreement between the parties signing it was, in legal effect, that they would form the plaintiff corporation, and pay to it, as their common representative, the amount by them subscribed for its stock, and the plaintiff is therefore authorized to sue upon such agreement as a contract made for its benefit. — 549 — 2. The averments of the complaint in regard to the assessments or calls made by plaintiff upon those signing the agreement do not add any strength to it, and may be disregarded as surplusage. There is in the complaint an entire failure to state any facts showing that the plaintiff had the right under the statute to make assessments or calls in the amounts named, and it is evident that the action is not to recover assessments upon the subscribed capital stock of the plaintiff, but upon the agreement above set out. Section 332 of the Civil Code, so far as the same applies to corporations like the plaintiff, declares: “ 3STo one assessment must exceed ten per cent of the amount of the capital stock named in the articles of incorporation, except in the cases in this section otherwise provided for, as follows: 1. If the whole capital of a corporation has not been paid up, and the corporation is unable to meet its liabilities or to satisfy the claims of its creditors, the assessment may be for the full amount unpaid upon the capital stock; or if a less amount is sufficient, then it may be for such a percentage as will raise that amount.” The respondent insists that if plaintiff is entitled to recover upon defendant’s subscription to its capital stock as contained in the agreement under consideration, it cannot demand the full amount subscribed, unless the same is presently needed to meet its liabilities or to satisfy the claims of its creditors; and that as the complaint fails to show such a necessity, or that the plaintiff corporation is making an equal demand upon all the subscribers, the demurrer was properly sustained. This action, however, as we have seen, is not one brought under the. statute to recover assessments upon the subscribed capital stock of the plaintiff, but is upon the agreement above set out, and that provides that the amount subscribed is “ to be due and payable upon the formation of the company and the issuance of the stock,” and in this respect the agreement is similar to that considered by this court in West v. Crawford, 80 Cal. 19, and — 550 — in relation to which the court, in its opinion by W orks, J., said: “Here is a positive agreement on the part of the parties who subscribed to this stock to pay a fixed and certain sum of money at a certain time to a certain party. It is clear from the contract itself that it was not the intention that the liability to pay the sum of money named should in any way depend upon an assessment being made by the corporation after its organization. This is quite clear from the fact that the payment is fixed so soon after the organization of the company that such an assessment and its enforcement would have been impossible.” So in this case, the agreement of defendant was to pay the amount of his subscription upon the formation of the company and the issuance of its stock, and not as the same might be called for under section 332 of the Civil Code, above quoted; and the agreement being a valid one, and this action being one to enforce it, the measure of defendant’s liability is fixed by its terms, and not by the section of the code referred to. The case of California Sugar Mfg. Co. v. Schafer, 57 Cal. 396, cited by respondent, is not in conflict with the conclusion we have reached upon this point. There the agreement was to take shares at five dollars each, “ one dollar per share to be paid at the time of subscribing; and one dollar more per share every thirty days thereafter, until the whole five dollars shall be paid into the treasury, in case it is required.” The agreement in that case was made after the plaintiff therein was incorporated; the promise to pay the balance remaining after the first payment was not absolute, as is that of defendant here, but was conditional, and necessarily contemplated that calls should be made upon all alike, and no more should be collected from any one than his proportion, and the court construed the same as having been made with reference to the statute, which declares the circumstances under which corporations may by assessment call for payment of the full amount of their subscribed capital stock. — 551 — 3. It is lastly claimed by the respondent that the complaint does not show that the defendant was named in the articles of incorporation as a subscriber for the stock of plaintiff, and that therefore the complaint is insufficient under the rule announced in Monterey etc. R. R. Co. v. Hildreth, 53 Cal. 123. It is sufficient to say upon this point that the complaint does not show that plaintiff’s articles of incorporation failed to state that defendant was a subscriber to, or the amount of his subscription to, its capital stock. It is therefore good as against a general demurrer. If, in the articles of incorporation, the offer of defendant to subscribe for shares of its stock, as contained in the agreement sued upon, was rejected, and the defendant thereby excluded as a share-holder, the fact must be shown by answer. Such a defense, if it exists, does not arise upon the face of the complaint in this action. Judgment reversed. Sharpstein, J., and McFarland, J., concurred.