Court Opinion

ID: 5579113
Source: CourtListenerOpinion
Date Created: 2022-01-11 01:33:38.47591+00
Date Added: 2024-06-11T08:36:02.071864
License: Public Domain

Lumpkin, J.
The Savannah Pure Food Canning Company brought suit against G. C. Dotson, alleging that it was a corporation under the laws of Georgia; that the defendant was indebted to it in the sum of $200 with interest, for that he subscribed to two shares of the capital stock of the plaintiff of the par value of $200; that, relying on such subscription, the plaintiff incurred large indebtedness, amounting to approximately $10,000, and unless it collects all the indebtedness due to it, and subscriptions to its stock, it will be unable to pay its indebtedness; that on a date named the plaintiff, by order of the board of directors, through its secretary, made a call for the amount due on the stock, and gave notice to the defendant thereof and demanded payment, but he failed and refused to pay; and that by this and similar suits it seeks to obtain the sums due on subscriptions to its stock for the purpose of paying its debts. The defendant demurred to the petition. The demurrer was overruled. The defendant sought to amend his answer. The amendment was not allowed. The court refused to grant a nonsuit, and after the close of the evidence directed a verdict for the plaintiff. The defendant excepted.
As to only two points do the headnotes require any elaboration. Where a contract of subscription includes a condition precedent which must be performed before liability attaches, it has been held that the plaintiff, in a suit on such subscription, must show that the condition has been performed, or a readiness to perform it. Thus where a contract of subscription to stock provided that the subscription should be paid in such installments and at such times as might be decided by a majority of the stockholders, or board of directors or trustees empowered for the purpose by a majority of the stockholders, and suit was brought on such-contract against a subscriber, and no proof was offered showing that the stockholders, directors, or. trustees had ever provided in what installments the subscriptions should be paid, or had fixed a time or times for such payment, or had made any call therefor, a judgment of nonsuit was held to be proper. North & South Street Railroad Co. v. Spullock, 88 Ga. 283 (14 S. E. 478). It has also been held, in a suit on a subscription to stock which stated as a condition of liability the receiving of a certain amount of subscriptions, that this should be alleged and shown. But in a suit by a corporation against a subscriber to its stock on a general *164subscription, it has been held in this State that it is not necessary for a corporation to allege and prove as a part of its case what was the minimum capital stock fixed by its charter, and that it had complied with the prerequisites of the statute before organization. If the subscriber sued desired to set up that he was relieved from his subscription by reason of the fact that the minimum capital stock fixed by the charter had not been subscribed, or that some of the subscriptions were colorable only, or that some of the subscribers had been released, so that the corporation in fact did not have subscriptions for the minimum amount, it has been held in this State that this was proper matter to be set up by way of defense rather than such as furnished ground for demurrer, no lack of authority or right to sue appearing on the face of the petition. Wood v. Coosa & Chattooga River R. Co., 32 Ga. 273 (3); South Georgia & Florida R. Co. v. Ayres, 56 Ga. 230 (2); Hendrix v. Academy of Music, 73 Ga. 437. See also 1 Boone’s Code Pleading, § 138; Mackay v. Elwood, 12 Wash. 579 (41 Pac. 919).
The trial judge refused to grant a nonsuit, and directed a verdict for the plaintiff. In this he erred. The contract described in the fourth headnote was not the ordinary subscription for stock in a corporation to be formed, payable on call of the directors, where upon the formation of the corporation the right to collect the subscriptions vested in it. Branch v. Augusta Glass Works, 95 Ga. 573 (23 S. E. 128). Here the primary provision was not the formation of a corporation which should then proceed to act for itself. But, by the terms of the agreement, the subscribers contracted as a voluntary unincorporated association; the subscriptions were parts of a contract with the corporation with which they contracted; it had the right to collect them; there was to be no incorporation of such subscribers until performance of the contract with the contractor; and then the agreement was, not that the title to unpaid subscriptions should vest in the corporation so formed, but that the contractor, after' receiving full payment, would assign what was left to the new corporation. The parties to the contract placed in the contractor the title and right to collect these subscriptions for its benefit, and they distinctly recognized that an assignment should be necessary to divest the contractor of such title. The agreement was not one in the nature of a mortgage or lien, where payment terminates the lien of the mortgagee, but it *165was a chose in action for which an assignment was specifically provided. Therefore the ordinary rule as to general subscriptions to stock in a corporation to be formed does not apply.
The decision of the Court of Appeals in Bing v. Bank of Kingston, 5 Ga. App. 578 (63 S. E. 652), does not conflict with this ruling, but harmonizes with it, so far as the two cases are similar. It was there held that where subscriptions to stock were evidenced by promissory notes payable to a named person, in the nature of a trustee to hold for the proposed corporation, such person could sue on them for the use of the corporation. How could he sue unless he had the title ?
"Whether the new corporation might have brought an equitable action, making all parties in interest, including the contractor, parties to the case, and determining its rights as well as that of the subscriber, is not before us. As the uncontradicted evidence showed that there had been no assignment to the new corporation, it was error to overrule a motion for nonsuit, and direct a verdict for the plaintiff.

Judgment reversed.

All the Justices concur.