Planters & Merchants Independent Packet Co. v. Webb , 144 Ala. 666 ( 1905 )

HARALSON, J.

The rules binding a subscriber for the stock of a corporation, as gathered from the books on the subject, may be thus stated: A contract of subscription may be entered into in various -ways. “Whenever an intent to become a subscriber is manifested, the courts incline, without particular reference to formality, to hold that the contract of subscription subsists. It is, as in the case of other contracts, very much a question of intent. Formal rules are for the most part disregarded, and in general a contract of subscription may be made in any way in which other contracts may be made. Any agreement by -which a person shows an intention to become a stockholder is sufficient to bind both him and the corporation.” — 1 Cook on Corp. § 52; 26 Am. & Eng. Ency. Law (2nd ed.) 902-3.

“The signing of the subscription paper is an implied promise to pay the subscription.”

That “a subscription for stock implies a promise to pay for it, even though the subscription was before incorporation is the rule sustained by the great weight of authority.” — 1 Cook on Corp. §§ 71, 75; 26 Am. & Eng. Ency. Law, 902; 1 Morawetz on Corp. §§ 47, 54. A subscriber may be bound by an actual subscription made before incorporation, or organization, although he makes no cash payment, and the proceedings after incorporation are without notice to him. — 26 Am. & Eng. Ency. Law, 902.

“A direct subscription to take stock may be enforced by the corporation, even though such subscription was made prior to the incorporation. An agreement reading ‘the undersigned hereby subscribe for the number of shares set opposite our names,’ may be enforced by the corporation when it is formed.” — lb. §§ 73, 75.

“When an action is brought to cdllect a subscription, either directly or indirectly for the benefit of corporate creditors, it is well established that the subscribers cannot defeat such action by the defense that the corporation was not an incorporation, by reason of its not having fully complied with the terms of the statute providing for such an incorporation. Not only is the subscriber estopped, by the act of subscribing, from setting up this defense, but be is bound also by the rule, that the existence of a corporation cannot be enquired into except by a direct proceeding in behalf of the State.” Ib. 184.

In San Joaquin L. & W. Co. v. Beecher, 101 Cal. 79, it is held that it is “not necessary to the validity of the corporation, or to the subscribers becoming stockholders, that they should all sign the articles of incorporation. Those who sign articles of incorporation act as the agents of the others. * * * These preliminary agreement? inured to the benefit of the corporations thereafter formed, as contemplated by the agreements. . * * * To constitute the subscribers stockholders it was not necessary that the certificates of stock should have issued to them.”

In the Selma & Tenn. R. Co. v. Tipton case, 5 Ala. 787, it was hold, (quoting from the head-notes which appear to be accurate,) that “In an action by a corporation, the declaration need not- specially allege a compliance with every particular circumstance relating to its organization, which is required in order to its becoming invested with the privileges and powers conferred by its charter. Although it may be necessary to prove these matters specially, the allegation may be more general. A regular subscription for shares in the stock of an incorporated company, whether made previous to its organization or not, if 'it organizes as provided by the charter, imports in itself a sufficient consideration, and may be declared on as the foundation of an action. * ' * * * A subscriber for stock in an incorporated company to whom the charter does not accord that privilege, cannot withdraw from the company, and thus avoid the liability to pay for it.”

The foregoing are some of the common law rules respect to the obligations of persons subscribing for stock in corporations, and are of general and binding effect, except as they may have been changed by statute, for where the statute prescribes the method of subscription, a subscription made in any other way cannot be enforced. 1 Cook on Cor. § 73. But, if the statute does not prescribe the particular method of subscription, as a condition precedent to the validity of the subscription, the ordinary, common law rules applicable to subscriptions will obtain. The act of 1903, (Acts 1903, 310), like that in the Code for the organization and regulation of a corporation, (Code, §§ 1255, 1260) have many similar provisions for its organization and the subscriptions of stock thereon; but in neither is it provided that unless specified conditions are complied with, a subscription shall not be binding. Under the latter act, as we have seen, it has been held, where the conditions of subscription are not conditions precedent to the binding obligation of a subscription, they may be binding though not formally or even if irregularly made, and the same principle applies in construction of the latter act. Under the facts set up in the complaint, and which under it are authorized to be proved, we have been unable to discover, why the same does not state a good cause of action. The demurrer to the same should have been overruled.

Reversed and remanded.

Dowdell, Simpson and Denson, JJ., concurring.