Court Opinion

ID: 6580172
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:37:39.435138+00
Date Added: 2024-06-11T15:57:14.914675
License: Public Domain

Park, C. J.,
(dissenting.) The defendant subscribed for ten shares of the capital stock of the plaintiff corporation upon the express condition that the remaining stock sufficient for the construction of the plaintiffs’ road, (amounting to more than five hundred thousand dollars,) should likewise be subscribed by other parties. This appears by the charter of the company and by the resolution adopted by the corporators pursuant to authority vested in them by the charter, and by the estimated expense of constructing the road referred to in the resolution.
Now, the case finds that the condition annexed to the defendant’s subscription was never fulfilled, unless the subscription of Myers & Co. for six thousand shares of stock was a proper subscription. It follows, therefore, that the question whether or not the defendant is liable to further assessment, depends upon the question whether the subscription of Myers & Go. was in accordance with the l'esolution of the corporators. It must be conceded that the resolution called for subscriptions payable in cash, and cash only. It was so held by this court upon a similar question in the case of New York, Housatonic & Northern R. R. Co. v. Hunt; 39 Conn., 75. The court say:—“That proviso contemplated subscriptions payable in money, by installments to be regularly called in by the directors. The defendant had a right to expect and require that subscriptions like his own to the amount of $500,000 should be made, before he should be liable for further installments after'the first.” The question then is, was the subscription of Myers & Co. of more than one-half of the capital stock of the plaintiff corporation, a cash subscription? This seems a strange inquiry in view of the facts of the case. It was not understood by either of the parties to be payable in cash ; but, on the contrary, it was expressly agreed that fifty per cent, of the subscription should be paid to Myers & Co. for work and materials to be furnished hv them in constructing the road. Previous to this time Myers & Co. had entered into a parol contract with the plaintiffs, wherein it *103was agreed that they should have the contract to construct the road and furnish all the materials for it, and that they should subscribe for six thousand shares of the capital stock and take one-half thereof in part payment for their claim; and the parties met at this time to consummate the agreement. Myers & Co. subscribed for the six thousand shares of stock, and they and the plaintiffs executed the contract for constructing the road. These transactions were embraced in the agreement and they constitute substantially one transaction, made so by the mutual and concurrent undertakings of the parties. What matters it then that the subscription of Myers & Co. preceded the execution of their contract for doing the work, when it appears that they subscribed for the stock pursuant to their agreement to do so, relying upon the promise of the company to fulfill their part of the parol contract. A deeds his farm to 0. pursuant to a parol agreement for an exchange of farms. Does it make any difference that M’s deed is executed first in the order of time ? Both transactions could not well take place at the same time. One would naturally precede the other; and it matters not which occurs first, so long as both are agreed to be done, and each is made the consideration of the other. So here, Myers & Co. desired to secure the contract for constructing the road. The company were equally desirous that their stock should be taken. Hence the parol agreement providing for both, and making each transaction when performed the consideration of the other, and rendering it of no importance which first occurred in the order of time. How then can this subscription be called a cash subscription ? Could the plaintiffs demand cash? That is the criterion. Could they have demanded cash if they had refused to execute the contract of Myers & Co. for doing the work ? It is obvious it could not have been done; for to do so would have been perpetrating a fraud on Myers & Co., who had subscribed for the stock in reliance on the promise of the plaintiffs to execute the contract. This is too plain for controversy.
But it is said that the parol agreement should be laid out of the case, on the ground that when parties commit a contract to writing all previous negotiations and parol agreements on *104the same subject are presumed to be merged in the written contract. But the difficulty is, the parties in this case never committed or attempted to commit their parol agreement to writing. What was done by them was done simply in performance of their parol agreement. ' In that agreement Myers & Co. promised to subscribe for the stock, and they did it according to the promise. In the same agreement the company promised to execute a contract to Myers & Co. by which they should do the work and furnish the materials, and they did it in accordance with their promise. It is true that in their subscription Myers & Co. did not state that the stock subscribed for would be paid in work and materials; and a third party ignorant of the parol agreement between the parties, and ignorant of the contract in relation to doing the work, might infer that the stock would be paid for in cash. But the parties to the transaction understood how it was to be paid, and they were bound to the mode of payment as much as they would be if the subscription had stated it. And the contract in relation to doing the work and furnishing materials refers to the subscription, and states how it would be paid. The whole contract does therefore appear in writing, and leaves no room for the claim that there is conflict between the parol agreement and what was afterwards done by the parties in fulfillment of it. It matters not in which document the fact appears, whether it appears in the subscription, or in a separate instrument referring to it and made a part of it.
But it may be said that, inasmuch as the subscription itself does not state the fact, other subscribers of stock might be misled by it, and be induced to pay installments wrongfully. Such was the case with the defendant in one instance; and it would be only repeating the wrong, it seems to me, if we should declare this subscription payable in cash contrary to the agreement. But if this subscription was a fraud on the other subscribers, inasmuch as the plaintiffs were parties to the fraud, the defendant has the right to declare it void to the extent of his interest; and in that case the condition of his subscription has not been fulfilled. The plaintiffs, being parties to the subscription, must take it in the one form or in *105.the other. If it was a fraud, then it was void so far as the defendant is concerned. If it was otherwise, then they must take it, as it was in fact, as a subscription payable in part by work and materials; and in either form, the condition of the defendant’s subscription has not been fulfilled. It is no answer to say that the defendant’s subscription was made while the company was in the hands of the corporators. The company came into existence by the act of incorporation. The act declared the corporators to be a body politic and corporate. This gave it life, and it has been in existence ever since. When the company was afterwards organized, its management passed from the original corporators into the hands of the directors, and that was all. The corporation itself continued the same.
In the case I have cited one Miller made a contract with the railroad company to construct their road and receive part payment for the same to the amount of $800,000 in stock. It was contended that this agreement made him virtually a subscriber to that amount. The claim was made, for the same purpose as here, that the condition of the defendant’s subscription had been fulfilled, and that if was therefore a valid subscx’iption. But the court held that Miller was xxot a stock subscriber within the meaning of the proviso. It is difficult to see any substantial difference between the two cases. Miller agreed to do work and receive $300,000 of stock ixx part payment for the same. Myers & Co. subscribed for $300,000 of stock, and agreed to construct the i’oad and furnish materials, and receive pax-t paymeixt for the same in the stock subscribed. The stock was agreed to be transferred to them in part payment as the work should progress. They were nominally subscribers to the stock; and this seems to be all the difference in the two cases.
It is said in the case of Miller, that he was in no sense a stockholder until the stock was earned and received in payment for work perfonned. The same is true here. Myers & Co. had no claim to the stock any farther than as it was eax'nod and received in payment for work done; and even then, the company had the right to retain fifteeix per cent, of *106what was earned, as a forfeiture in case of a failure to perform, the contract.
It is further said that, inasmuch as the subscription of Myers <fc Co. appears to be a cash subscription upon the books of the company, like that of all the other subscribers, they would be liable to pay cash for the same in case they failed on their part to perform the contract; and in this respect, that the case differs from the case of Miller. But is this true ? They subscribed for stock only in connection with their contract for doing the work. The subscription -forms a part of that contract. It is so connected with it that it cannot be separated. How could the plaintiffs demand cash for the subscription, when they not only knew that it was not to be paid wholly in cash, but were themselves parties to the contract agreeing that half of the subscription should be paid in work and materials ? It seems to me it would be a novelty in judicial proceedings if such a claim should be sustained. If the stock had been transferred to them' on the books of the company, so that it became their property, then the claim might be valid. For then the company might say to Myers & Go., if you do not pay for the stock in work and materials as agreed, you must pay for it in money; you cannot hold the stock and not pay for it. But the stock was never transferred to Myers & Co. Neither was it agreed to be transferred, otherwise than as payment for work and materials, as in the case of Miller. I am unable to discern any difference in principle in the two cases.
■ See also Troy & Greenfield R. R. Co. v. Newton, 8 Gray, 596; Cabot & West Springfield Bridge v. Chapin, 6 Cush., 50.
But it is said that the defendant cannot make the claim that the subscription of Myers & Co. was not payable in cash. It is certainly remarkable if this be true. He made a contract with the corporators, then constituting the plaintiff corpora'tion, to become bound to the extent of ten shares of stock, when the company should procure cash subscriptions to their capital stock amounting to the sum of $534,973. Till such time shall arrive he will be a mere subscriber for stock, and liable only to be assessed to the extent of two per cent, of *107the amount of his subscription. That amount of cash subscriptions was a prerequisite to any further assessment or liability whatever on the part of the defendant; and the burden is on the plaintiffs to show affirmatively that the condition has been complied with. The company held out the condition as an inducement to the defendant and others to subscribe for the stock; and after subscriptions have been made upon the faith of it, it is strange indeed if the defendant cannot say to the plaintiffs, when they seek to subject him to the extent of his subscription—You have not fulfilled the condition precedent to such a right; the subscription of Myers & Co. was not a cash subscription as the condition requires. There certainly can be nothing in this claim.
The claim of waiver on the part of the defendant is so manifestly unfounded that it needs no consideration, and I pass it without comment.
In conclusion, it appears to me clear that, inasmuch as the subscription of Myers & Co. was not understood by the parties to the transaction to be payable in cash, but on the contrary it was expressly agreed that half of it should be received in payment for work and materials, or, what is the same thing, should be paid for in work and materials, it cannot be made a cash subscription except by an estoppel. But who can claim an estoppel? Who can set up that Myers & Co. cannot claim their subscription to be any thing else than what it appears to be on the face of the subscription ? Can these plaintiffs do it, who knew all the facts in relation to it and were parties to the transaction? Manifestly not. Perhaps a stock subscriber might do it to the extent of his injury, who had been lured into payment of installments in consequence of their subscription and had brought suit against them for damages, if he could gain any thing by so doing. But his case would depend upon showing that the subscription was not in fact what it purported to be; and hence an estoppel would defeat his claim.
Perhaps a creditor of the company might do it in some circumstances to the extent of his claim, but we have no such case here. I see no other way by which the subscription in *108question can be made a cash subscription by an estoppel. The contract made by the defendant with the company was that he would become a stockholder and assume all the liabilities incident to that relation, when cash subscriptions to a certain amount should be taken. That time has not yet arrived. All the other subscribers are in the same condition. The company is yet in embryo, and has, in my judgment, no right to the installment sought to be recovered in this suit.
. I think a new trial should not be advised.
In this opinion-Loomis, J., concurred.