Eastburn v. Grove

Opinion by Tkexler, J., The agreement we are asked to construe reads in part as follows: “To the Organization Board for the Proposed Banking Institution; I subscribe for fifteen shares of the capital stock in a financial institution to be organized by you according to law and agree to pay for’same by monthly payments as called for by your organization board or the directors......Each share sold shall be is [365] sued at $55, of wliich par value is $50, and $5 a subscribed premium, is for undivided profits, parts of Avhich you may use for an organization fund to purchase boohs, checks and supplies and pay legal and other expenses incident to organization and for securing the bank’s capital, and you are hereby authorized anil empowered to use this subscription for the purchase of such charter as may be desired by the organization board, a quorum of which is authorized to act as my attorney in fact in all affairs relating to securing subscriptions, organization and the apportionment of shares.” There was a note following the agreement that stated, “Please pay $5 a share when subscribing, making check payable,” etc. The efforts to form the corporation came to naught. The consideration upon which the plaintiff parted with his money failed. Unless something to the contrary appeared in the contract of subscription, he was therefore entitled to receive back from the organizers the money paid by him. As Avas said in Hudson v. West, 189 Pa. 491, “They received the plaintiff’s money in consideration that they would form a company and give him stock therein......and they did nothing of the kind. They certainly cannot keep the plaintiff’s money in those circumstances. Their want of success in the formation of the company is no concern of the plaintiff, and it is no defense in this action.” See Lieb v. Painter, 42 Pa. Superior Ct. 399; Cook on Corporations, 6th Ed., Page 563; 10 Cyc. 265. If the agreement allows the sum subscribed or an indefinite part thereof to be used for the purposes of organizing the company, the subscriber cannot recover back in an action at laAv any part of the amount subscribed, but his remedy is a bill in equity for an accounting, but we are led to the conclusion that only the $5 referred to therein as “a subscribed premium” was available for the expenses of organization. ' Evidently the par value of the shares was to remain intact, and only the five dollars Heated as undivided profits Avas to [366] be used for expenses. The words “parts of which” refer to the nearer antecedent substantive, i. e., “the subscribed premium” of five dollars. The use of the plural “parts” has no significance as five dollars standing alone can be divided into parts as readily as the sums five dollars and fifty dollars considered together. The intention was that parts of the five dollars might be used from time to time as occasion demanded.. The five dollars Avas a separate fund, and the promoters in their expenditures Avere limited to it. We find nothing in the agreement which authorized the promoters of the enterprise to exhaust, or eArnti to consume in part, the amount specifically subscribed for capital stock. In the absence of an agreement to the contrary the promoters must bear the loss consequent to the collapse of the enterprise. The assignments of error are overruled and the judgment is affirmed.