Wright Bros. v. Merchants & Planters Packet Co.

Smith, C. J., delivered the opinion of the court. Appellee instituted this suit in the court below to recover from appellants the sum of five hundred dollars, alleged to have been subscribed by them to its capital stock prior to its organization. In addition to the general [510] issue, appellants filed several special pleas, one of which, set up that they had withdrawn their subsohiption to the capital stock of appellee, and notified the promoters thereof, prior to appellee’s organization as a corporation, to which plea a demurrer was interposed and sustained. This demurrer should have been overruled, for the reason that, in the absence of a special agreement to the contrary, supported by a valuable consideration, a subscription to the capital stock of a corporation, thereafter to be organized, is nothing more than an offer of a specific sum to the use of the corporation when it comes into existence, and therefore, under familiar principles of law, may be withdrawn at any time before the organization of the corporation. While there are authorities to the contrary, this view is in accord with the great weight thereof and of reason, as will appear from an examination of 1 Thompson on Corporations (2 Ed.), sec. 518; 1 Cook on Corporations, section 167; Planters’ & Merchants’ Independent Packet Co. v. Webb, 156 Ala. 551, 46 South. 977, 16 Ann. Cas. 529; Bryant’s Pond, etc., v. Felt, 87 Me. 234, 32 Atl. 888, 33 L. R. A. 593, 47 Am. St. Rep. 323, and authorities cited in note thereto; Hudson Real Estate Co. v. Tower, 156 Mass. 82, 30 N. E. 465; 32 Am. St. Rep. 434; Wallace v. Townsend, 43 Ohio St. 537, 3 N. E. 601, 54 Am. Rep. 829. While this question seems not to have been heretofore presented to this court for decision, the rule as herein announced was evidently understood to be the correct one by the judges who composed the high court of errors and appeals when the case of Hayne v. Beauchamp, 5 Smedes & M. 515; was decided; for Judge Sharkey, in delivering the opinion therein, used the following language: “But it is insisted that a distinction is to be taken between those cases in which the subscription is made to an existing corporation, and a mere subscription in view of a subsequent charter. True, there is a distinction. In the latter case tlie subscription, or the undertaking is not always ob [511] ligatory; in the first it is,” etc. And Judge Clayton, in his dissenting opinion, said: ‘ ‘ Before the hank went into operation, and incurred liabilities, he [referring to a subscriber to its capital stock] might have withdrawn; to permit him to do so afterwards would, in my apprehension, violate some of the elementary principles of law and justice. ’ ’ It may be that the eleventh instruction requested by appellant was properly refused by the court, for the reason that it submitted to the jury a question of law, instead of one of fact, as to which we express no opinion; but the principle announced therein is correct, for “it is well settled by the authorities that a subscription to the stock of a proposed corporation cannot be enforced unless a de jure corporation is completed, and this fact is shown by the evidence. It is a reasonable conclusion in cases of this character that the subscriber intended to become a stockholder in a legally organized corporation, or, in other words, a de jure corporation, and not in a corporation defectively organized and existing as a corporation by a species of sufferance.” 1 Thompson on Corporations (2 Ed.) sec. 272. Appellee’s second instruction ought not to have been given, for the reason, among others, that it declared upon a written contract, and by this instruction was permitted to recover upon a contract which the court held would arise by implication, from the fact that one of the members of appellants’ firm attended a preliminary meeting of appellee’s prospective stockholders and voted therein. It does not appear from the evidence that the ownership of stock in corporations, either in general, or in corporations of the character of the one here in question, was within the scope of appellant’s business; nor does it appear that C. Gr. Wright was authorized by the other member of the firm to subscribe to appellee’s capital stock, if he in fact did so subscribe. Consequently, he alone, in any event, can be held liable therefor. Reversed and remanded.