San Joaquin Land & Water Co. v. West

Harrison, J.

The controversy involved in this ac»tion arises out of the construction to be given to the-terms of an instrument executed between the subscribers thereto for the incorporation of the plaintiff, and preliminary to such incorporation. The instrument itself was before this court in the case of West v. Crawford, 80 Cal. 19, and is there set out at length. It was then held that West was authorized to collect in his own name twenty per cent of the amount that the parties to that instrument had agreed to subscribe to the capital stock of the plaintiff, by reason of their express agreement therein to pay it to him. After that decision, the subscribers paid this twenty per cent to West, and at the commencement of this action, he had in his hands of the amount so collected by him, $35,861.25, for the recovery of which the plaintiff brought this action, as money had and received by him to and for its use and benefit. After the commencement of the action, West, under the order of the court therefor, paid the money to the clerk of the court to be held subject to the order of the court, and the appellants were substituted as defendants in his place, and answered the complaint. Upon the trial of the issues, the court rendered judgment in favor of the plaintiff, from which the defendants who were substituted for West have appealed.

1. The agreement in question is of that character which is not unfrequently made by the subscribers to a corporation prior to its actual incorporation, and as preliminary thereto, — its object being for their mutual benefit and protection until the organization of the corporate body, and also for the ultimate benefit of the corporation. Upon the formation of the corporation, such an agreement, with its advantages and rights, inures to the benefit of the corporation, irrespective of any agreement or want of agreement to that effect, and notwithstanding it may contain special provisions for carry-its own terms into execution.

By the express terms of this instrument, West was simply “ the agent to collect the amount ” which should become due to the plaintiff by virtue of the subscription to its capital stock which the parties to the instrument should make in pursuance of^hein,agreement. By the instrument itself, the subscribers agreed to “ take,” i. e., to subscribe for, the number of shares set opposite their names respectively, and “ to pay twenty per cent of the par value of said shares so subscribed, and that they would pay ‘ the same’ to West in five days after the articles of incorporation were filed. The only money which the subscribers agreed to pay to West was for the stock which they should subscribe for to the plaintiff, and West was simply constituted the ‘agent’ for the corporation, to collect the amount which should become ‘due’ under their subscription, and after its collection to hold it for the use and benefit of the corporation. By the same instrument, the subscribers appointed the appellants, together with one Shippee, as their ‘ agents/ and ‘ the agents of the corporation so to be formed/with authority to ( negotiate for the purchase ’ of property ‘for said corporation/ and to draw from West any or all moneys paid to him, ‘ and use said money for paying for same.’ ” Giving to this language its reasonable construction, it was an authority to these three individuals, as agents of the subscribers prior to the organization of the corporation, to make negotiations for the purchase of the property, and that upon the formation of the corporation their agency for the subscribers should cease, and thereafter they should act for the corporation. They could not be the agents of the subscribers and of the corporation for the same purpose at the same time, inasmuch as the interests of the subscribers as individuals would be adverse to the interests of the corporation. The instrument does not provide that the appellants, with Shippee, should at any time be the custodians of the money collected by West. They were only to “ draw” from him such money as they might need to use in paying for any property that they should purchase for the corporation; and as it is not claimed that they have negotiated for the purchase of any property for the corporation, there was no occasion for them to draw any of the money from West, or for him to deliver it to them. They, as well as West, were at all times after the incorporation of the plaintiff only its “ agents,” and having no interest coupled with their agency, it was competent for the plaintiff to remove them at any time and appoint other agents in their place, or itself assume the custody and disposition of the money. The finding of the court that upon the incorporation of the plaintiff the appellants not only ceased to act as the agents of the subscribers, but that “ before any of the moneys were paid to West they repudiated such agency, and refused to act under said appointment, and wholly abandoned the same/' fully established the right of the plaintiff as against their claim to the custody of the money.

The appellants, however, contend that the court below in its judgment disregarded the construction given to the agreement by this court in its opinion in the case of West v. Crawford, 80 Cal. 19, and that it was then held that the plaintiff herein had no right to the custody of the moneys which might be collected by West under that agreement. While there is some language in that opinion that upholds this contention, the opinion must be construed with reference to the case then before the court for its determination. That was merely whether West could maintain an action for the recovery of the twenty per cent agreed to be paid by the subscribers, and his right to maintain such action was upheld upon the ground that the subscribers had made an express promise to pay it to him at a fixed date after the filing of the articles of incorporation. The only parties before the court were West and some of the subscribers, and the ultimate right to the custody of the money was not involved in the action. For the purpose of meeting the argument of the appellants therein, that the money belonged to the corporation, and could be collected only by it in the manner provided by statute for collecting assessments, it was stated in the opinion that it did not appear from the agreement that the corporation would ever be entitled to receive the money. It was not intended thereby to preclude the corporation from asserting its right to the money, nor could any statement in the opinion have that effect. The corporation was not before the court, and as its right to the money had not been submitted by it to this court for determination, it could not be estopped by any statement in the opinion from subsequently asserting such right, and any statement in the opinion respecting its right to the money -would be only a dictum,, and not binding either upon the court or the corporation.

2. It was not necessary that Shippee should have been made a party defendant. The action was brought originally against West to recover certain moneys which had been collected and were held by him for the use and benefit of the plaintiff. This money was paid into court, and the appellants were substituted as defendants in place of West, and in their cross-complaint they ask that the money be paid to them alone. Inasmuch as West held the money for the use and benefit of the plaintiff, he could not by paying that money into court change or diminish the right of the plaintiff to receive it, nor was its right in any respect affected by the substitution of the appellants as defendants in the place of West. The appellants, after having repudiated their agency, cannot claim that Shippee's presence in court was essential to a determination of the plaintiff's right. Shippee and the appellants are in no respect trustees under the instrument for the purpose of carrying into effect any of its provisions. ■ There was no trust created by the instrument other than such a trust as always exists between a principal and his agent, nor do the moneys in question constitute a trust fund to be disposed of under the directions of a court of equity. They are simply moneys belonging to the plaintiff, and which it has the right at any time to demand from its agent.

The judgment and order are affirmed.

Garoutte, J., and De Haven, J., concurred.