Housley v. Feilchenfeld Co.

Mr. Justice Mack delivered the opinion of the court. It has been held in this state that a subscription to an increase of capital stock before the same has been authorized by a vote of the stockholders is a nullity. Wolf v. Chicago Sign Printing Co., 233 Ill. 501. Whether, in addition to authorization by the stockholders a full compliance with the statutory requirements by the filing of a certificate with the Secretary of State and recording the same, is a condition precedent to the validity of a stock subscription, need not now be determined. Assuming in this case without deciding it, that by the oral arrangement between the plaintiff and the president of the defendant company a binding contract to subscribe for and to allot stock was made by the parties, it is clear that such contract was not for seven shares but for thirty shares. It was specifically for part of the increased stock, the total of which was to be 100 shares. Whether or not a subscription to an increase of stock is like a subscription to the original stock, conditioned upon the total amount being bona fide subscribed for, is a question on which the authorities are in conflict, the weight of authority being to the effect that there is no such condition. As the Supreme Court of the United States says in Aspinwall v. Butler, 133 U. S. 595, at page 607: “There was no express condition that the individual subscription should be void if the whole $500,000 was not subscribed, and in our judgment there was no implied condition involved to that effect.” But at page 608 the court proceeds: “There may be cases in which equity would endeavor to protect subscriptions to stock where a large and material deficiency in the amount of capital contemplated has occurred, but such cases would stand on their own circumstances.” In that case, ninety-two per cent of the increase, had been subscribed for and certificates therefor had been issued. In the present case, the transaction was not consummated by the delivery of the certificate, the company for all practical purposes abandoned its business, and the directors unanimously, at a meeting, decided that the plaintiff should not be deemed a stockholder and that his money should be returned to him. The proof of the verbal decision of the directors was proper, notwithstanding the fact that a document purporting to contain minutes of the meeting, and which contained no record of this decision, was offered, especially as the document did not on its face purport to contain the complete minutes of the meeting. 3 Cook on Corporations, sec. 714. Under these circumstances, no rights of creditors being involved, we are of' the opinion that the case falls within the exceptions stated by the Supreme Court of the United States. Moreover, in our judgment, there is an implied condition to a subscription to the stock that the increase shall at least be substantially subscribed for, and while the compliance with this condition may well be waived by the payment of the purchase money and the acceptance of a certificate, if it be not waived it may be insisted upon and after a reasonable time for compliance therewith the subscription may be rescinded and money paid in part payment thereof, or as a deposit therefor, recovered back. The judgment will therefore be affirmed. Affirmed.