Harrison National Bank v. Votaw , 51 Kan. 362 ( 1893 )

The opinion of the court was delivered by

Allen, J.:

Plaintiff in error, as plaintiff below, obtained a judgment against the Douglass Sugar Company. Execution was issued on this judgment, and duly returned unsatisfied. Thereafter, plaintiff filed a motion and served proper notice on the defendants in error for the purpose of obtaining execution against them as stockholders in said corporation. The court, after hearing the evidence, made special findings of fact and conclusions of law, and overruled said motion. We are called on to review this action of the court.

It appears from the findings, that in the fall of 1887 the people of Douglass and vicinity were desirous of establishing a sugar manufactory, and a subscription paper was circulated, the heading of which reads as follows: “ We, the undersigned,, agree to take the number of shares set opposite our respective names in the Douglass Sugar Company, said shares to be in the sum of $100 each.” The defendants, with others, subscribed for various numbers of shares respectively, amounting in all to 215 shares. Afterward, on the 10th of October, 1887, the defendants L. E. Wright, D. P. Blood and others-executed, acknowledged and filed a charter for the incorporation of the Douglass Sugar Manufacturing Company, with a capital stock of $100,000, divided into 1,000 shares, and naming Wright and Blood, with 13 others, as directors. At a meeting participated in by the general public, defendant L. E. Wright was elected vice president, and defendant D. P. Blood, treasurer, but none of the persons elected at that time ever qualified or assumed the duties of their respective offices, nor did L. E. Wright or D. P. Blood ever qualify as directors, or act as such. Wright, however, with two other subscribers, acted on a committee to select a site for the sugar company’s mill, and examined the land that was afterward purchased by the company. Nothing further of importance was done until some time in February, 1888, when another meeting of the citizens of Douglass and vicinity was held, at which the question as to the legality and advisability of the township of Douglass taking stock in the company was discussed. It being the sentiment that the township could not legally take stock in the enterprise, it was determined to take steps to reorganize the company on the basis of a revised membership, and a new subscription list was prepared and signed by various persons, most of whom were subscribers to the original list, but not in every case for the same number of shares. The heading of this list reads as follows:

“We, the undersigned, do subscribe the following amounts set opposite our names to the capital stock of the Douglass Sugar Manufacturing Company, of Douglass, Kas., which stock we agree to pay in assessments not to exceed 20 per cent, each 30 days until said stock is fully paid up; each share of stock amounting to $100. Cane subscriptions to be paid not less than 25 per cent, of crop raised in stock.”

The whole number of shares subscribed on this paper appears to be 56. Afterward, on the 13th day of March, 1888, a meeting of the subscribers to the second subscription paper was held, and by a vote of such subscribers an amendment to the charter was authorized changing the name from Douglass Manufacturing Company to the Douglass Sugar Company, and the number of directors from 15 to 9, and a proper certificate of the change was duly filed with the secretary of state. This meeting was not attended by any of the subscribers to the original subscription paper except those who also were subscribers on the new, and no notice of the meeting was given to them. It does not appear that any of the defendants ever participated any further in the transactions of the corporation, and none of them ever subscribed for stock therein after the filing of the charter, nor made any payment to the company on account of any subscription.

Several questions were discussed by counsel for plaintiff in error in his oral argument, and also in the brief. We think, however, the only matter necessary to be noticed is the force and effect of the subscription paper, under which it is claimed the defendants are liable as stockholders. For the purposes of this case, it may be conceded that a valid subscription to the capital stock of a corporation can be made before the filing of the charter; but is this a subscription' to the capital stock of a corporation to be known as the Douglass Sugar Manufacturing Company, to exist for 30 years, with 15 directors as named in the charter afterwards filed, and with a capital stock of $100,000, divided into 1,000 shares? The paper signed names the Douglass Sugar Company, and fixes the amount of each share at $100, but does not fix the amount of the capital stock, nor any other of the essential particulars necessary to be stated in the charter of a corporation. Had this indefinite subscription been followed up by payments from the subscribers to the Douglass Sugar Manufacturing Company of installments based on the number of shares of of stock by them subscribed, and by a participation on the part of the subscribers in the operations of the company, showing the recognition on their part of their liability as stockholders, it might well be held that any informality in the manner of subscribing the stock would be cured, and the defendants be liable; but in this case it affirmatively appears that the organization of the company on the basis of this first subscription list was abandoned. Counsel complain that on the hearing the court admitted much incompetent evidence for the purpose of showing this abandonment; that witnesses were permitted to testify with reference to their understanding. It may be that in some instances the strict rules governing the admissibility of evidence were disregarded, but we are unable to see how the errors, if any, were materially prejudicial to the plaintiff. It was necessary for the plaintiff to do more than introduce this original subscription list. On the face of this paper, no liability whatever on the part of the defendants to the Douglass Sugar Manufacturing Company is shown. There is nothing in the paper itself to identify the Douglass Sugar Company with the corporation designated as the Douglass Sugar Manufacturing Company, and the only way in which the defendants could possibly be charged thereunder would be by showing that, as a matter of fact, the subscription was intended to be to the corporation afterwards formed. The testimony received by the trial court not only fails to show that fact, but does affirmatively show an abandonment of the project, so far as these defendants were concerned. It cannot be doubted for a moment that parties contemplating the organization of a corporation can abandon the project at any stage of the proceedings prior to the creation of any liability to outside parties, and in this case we think it clear that they did so abandon the project, and also that the fact of such abandonment was fully recognized and understood by those who became subscribers to the new list and participated in the actual operations of the corporation. The defendants, never having become liable to the corporation as stockholders, are of course not liable to its creditors as such. The change of the corporate name, so as to make it identical with the name contained in the first subscription paper, could not of course affect the liability of the defendants, having been made without their knowledge or consent. While we agree with counsel for the plaintiff in error .on most of the legal propositions presented by him, we are unable to see that they are material in this case, for the reasons before stated.

Complaint is also made to the ruling of the court on plaintiff’s motion to retax costs in said action. We find nothing in the record but plaintiff’s motion and the ruling of the court thereon. There is not even a copy of the fee docket, unless we assume that it is correctly copied in plaintiff’s motion. This we think unwarranted. The overcharge claimed is but trifling, and we find nothing to challenge our investigation in that respect.

The order of the district court will be affirmed.

All the Justices concurring.'