Hunnewell v. Willow Springs Canning Co.

Rombauer, P. J. — The plaintiffs seek to recover a judgment against the' defendants upon the following state of facts: That, in the spring of 1889, they sold to the Willow Springs Canning Company a bill of lumber, which was used by the canning company in the construction of a building which was necessary to, and was afterwards used in connection with, its business; that a portion of the purchase money for the lumber remained due and unpaid; that the canning company was organized as a joint-stock company for the purpose of canning and selling fruit and vegetables; that the defendants were stockholders in the company, and were liable as partners for the debts of the concern. The cause was submitted to a jury, and the finding and judgment were for the defendants. On this appeal the only complaints made relate to the action of the court in giving and refusing instructions. Before we examine the particular, assignments of error, it would be better to refer briefly to the law — 248 — of joint-stock companies as applicable to the particular question presented by this record, so that what we may say concerning the instructions will be the more readily understood. The universal law, both in this country and England, is that the shareholders of a trading company are liable as partners for the debts of their company. Martin v. Fewell, 79 Mo. 401; Frost v. Walker, 60 Me. 468; Hedge & Horn’s Appeal, 63 Pa. St. 273; Taft v. Warde, 111 Mass. 518; Bodwell v. Eastman, 106 Mass. 525; Pettis v. Atkins, 60 Ill. 454; Abbott v. Smelting Co., 4 Neb. 416; Wells v. Gates, 18 Barb. 554; 1 Beach on Private Corporations, sec. 167; Parsons on Partnership, 451; Bates on Partnership, sec. 72. The only distinctions between a trading company and an ordinary co-partnership are that the capital of a joint-stock company, organized for trading purposes, is usually divided into shares, and a transfer of a portion of the shares without the consent of the other stockholders, or the death of a shareholder, does not work a dissolution as it would in an ordinary co-partnership, unless it is so stipulated in the articles of agreement. As to what facts are sufficient to show membership in such a company, so as to create a partnership liability, the authorities are not in accord. It has been held that, if the party sought to be charged signed the subscription paper,and paid assessments on the shares, it is sufficient. Perring v. Hone, 4 Bing. 28; Frost v. Walker, supra. But this is denied by the supreme court of Pennsylvania in Hedge & Horn’s Appeal, 63 Pa. St. 273, where the court held that, in addition to the subscription and the payment of assessments, the party must have acted as a member or director by attending meetings, etc. The decision of the court in the case last cited rests chiefly on the principle, that the co-partnership relation results from — 249 — voluntary contract, and not from a community of property interests. Therefore, the court argued that a ■subscription and the payment of the first deposit, without more, did not constitute a partnership; that “this left the contract executory, and that it could only become executed by acts of participation. It was said by Judge Agnew, who delivered the opinion of the ■court: “Now, what is a subscription to shares for the purpose of forming a joint association, to prosecute ■any work or matter of business'? When the first subscriber signs his name he is unquestionably not a partner, for there is no other on the paper; when the second subscribes, the partnership is not formed, for it is expected that others will subscribe. When the whole number of shares contemplated have been subscribed, the relation of partnership still is not formed, for until the subscribers enter upon their project nothing is done to effectuate their common purpose. ’The subscription is but an act or declaration of the intention of the subscriber to become a partner, and is ■executory only. The thing itself yet remains to be done.” The supreme court of Maine in the case of Frost v. Walker, supra, took a somewhat different view. It there appeared that the defendants had subscribed for stock in the New England Express Company, an unincorporated joint-stock company, and had paid assessments on the shares. It also appeared that the company had entered actively on the business for which it was organized. The court, after referring to the authorities which hold that a mere subscription is sufficient, said: “But it is not necessary in this case to decide whether an unconditional.subscription for shares will alone make the subscriber liable as a partner, for these defendants not only subscribed for shares, but actually paid one or more assessments upon them; and — 250 — we cannot doubt that, by thus contributing to the-actual working capital of the company,, they became-entitled to share in its profits, if any should be made, and as a legal consequence became partners in the-concern, and liable as such to its creditors.” We are of the opinion that the doctrine of the Maine-court ought to be adopted under certain conditions. If it appears that the company organized actually engaged in the proposed business, under circumstances-not prohibited by the articles of association, each subscriber or contributor to the funds of the company,, who becomes such with intent to participate in the profits, becomes chargeable as a partner. An unexplained contribution or subscription is evidence of such intent. In case of a subscriber, actual payment of his subscription, in whole or in part, is not essential to make him chargeable as a partner, unless the right to-participate in the profits is made dependent by the articles upon the antecedent payment of his subscription in whole or in part. This result is unavoidable, if we apply to these organizations the law of partnerships and corporations, as far as the same is properly applicable to them. And we also think that proof that a, party was a member of the board of managers or-trustees, or that he participated in the meetings of the company, is sufficient without proving ownership of shares. Taft v. Ward, 111 Mass. 518. The defendants’ second instruction reads: “The court instructs the jury that, the liabilities of members of voluntary associations not being derived from any partnership relations, no liability would attach for the payment of this debt from the mere fact of membership ; and, before any of these defendants can be bound' or-held for the payment of this debt, it must be shown by the plaintiffs that such defendants authorized the — 251 — making of the debt, or afterwards ratified the making of, or agreed to pay, the same.” It will be readily perceived, from what we have-said, that this instruction is wrong; for the liability of a member of a trading association for the debts of such a concern does result from a partnership relation. This-instruction is only applicable to membership in social, political, educational or charitable organizations, where-the liability of a member for debts rests solely on the ground of principal and agent. This principle was-applied by this court in Richmond v. Judy, 6 Mo. App. 465, in which the court held that, where a committee to conduct a political campaign is sued for advertising bills, the members are liable only for the acts which they have authorized or ratified. So, in Pennsylvania. (Ash v. Guie, 97 Pa. St. 493), the court decided that, where a committee of a Masonic lodge is appointed to-borrow money to construct a building, only those of the committee were individually bound for the money so borrowed, who authorized or ratified the act. This instruction proceeds upon an erroneous conception of the law, and was necessarily prejudicial. The defendants’ fifth instruction which the court gave is drawn upon the same theory, and that is that they could only be held for the price of the -lumber, which they admitted had been purchased by A. D. Pease, who was a shareholder, and who had also been selected as general superintendent, by showing that they either authorized the purchase or afterwards ratified it. As we have already shown, this instruction would have been correct, if the defendants had been stockholders of a social club, or some association not organized for profit. But not so in this case. If the act of Pease was within the scope of the partnership business, the defendants are bound. The instruction ought to have been refused. — 252 — The jury were told in the third instruction, given at the request of the defendants, that the mere act of signing the subscription paper, without more, was not sufficient to create membership, which, we think, properly declared the law, when taken in connection with the plaintiffs’ second instruction, which reads: “The court instructs the jury that all of the defendants, who subscribed for shares in the Willow Springs Canning Company with the intention of becoming members thereof and for sharing in the profits of the business of the company, are, in law, as to third parties dealing with said company, members thereof.” Some of the other instructions asked by the plaintiffs are faulty, but the objections are apparent, and will doubtless be remedied on another trial. The evidence, as presented by this record, is insufficient to bind some of these defendants. The bill of exceptions shows that the subscription list and the record of the meetings of the company were read in evidence. The stenographer states in his transcript that this documentary evidence could not be found, and for this reason he was unable to make a complete transcript. We will therefore reverse the judgment, and remand the cause for further proceedings against all the defendants. Judge Bond concurs. Judge Biggs concurs in the result.