California Sugar Manufacturing Co. v. Schafer

California Supreme Court Jul 1, 1881 No. No. 6,770Published

Before: McKinstry

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Holding. The court held that the plaintiff corporation could not recover on the subscription agreement because it lacked mutuality, failed to establish ownership of the stock, and could not treat subscribers differently from other stockholders absent a valid assessment.

Issues

Whether a corporation can recover on a subscription agreement where it is not a party and lacks mutuality of contract.
Whether a corporation can recover on a subscription agreement without alleging ownership of the stock or authorization to sell it.
Whether a corporation can recover from subscribers outside of the statutory assessment process.

Disposition. Affirmed

Quotations verified verbatim against the opinion

“If the subscription paper could be treated as an agreement to purchase stock of the company, there would be no mutuality in the contract, since the presumption is that the corporation had no stock to sell.”

“The plaintiff was not a party to the subscription paper, nor has it acquired any rights under it, as successor of the subscribers (other than defendant) or otherwise.”

Synopsis

Corporation — Subscription to Stock.—Several persons signed a paper purporting to be an agreement to take stock in a corporation, which, as the paper recited, was about to be formed; and afterwards the paper was signed by the president and secretary, and the corporate seal affixed, and an action was brought to recover from one of said subscribers the price named in the paper. The complaint did not state when the company was incorporated; and it was not shown that any of the subscribers joined in its formation, or was a member thereof, or that it owned or was authorized to sell any of its stock. Held, that the plaintiff could not recover.

Id.—Pbesumption.—The presumption is, that a corporation has none of its stock to sell.

Id.—Stockholder.—If the paper was signed after the incorporation, and could be deemed a subscription for stock, the plaintiff has no power to recover from the subscribers other than the amounts of assessments duly levied.

McKinstry, J.: The action was brought to recover of defendant the sum of $500 by reason of his subscription to the paper writing following:

“ Whereas, it has been resolved to incorporate a company under the laws of the State of California, for the purpose of manufacturing sugar from melons and other fruits, to be known as the 'California Sugar Manufacturing Company,’ we therefore, for the purpose of raising a working capital, agree to take, and hereby do subscribe to the number of shares of the working stock of said company, set opposite our respective 'names, agreeing to take the same and pay therefor $5 gold coin for each share subscribed for by us respectively—$1 per share to be paid at the time of subscribing, and $1 more per share every thirty days thereafter, until the whole $5 shall be paid into the treasury—in case it is required.

“ California Sugar Manufacturing Company.

J. Pool, F. A. Roe,

[Seal.] Secretary. President.

No. Shares. No. Shares. Signatures. Date.

Fifty shares....... ... 50....... . P. H. Gardiner. ..

Fifty shares....... ... 50....... .J. F. Wilcox..... .. 6?19

One hundred shares ...100 ...... .John Schafer..... ..6219”

(And other persons whose names are here omitted.)

[398]The words “California Sugar Manufacturing Company, J. Pool, Secretary; F. A. Roe, President,” were inserted, and the corporate seal affixed, at some time after the other names were subscribed.

The plaintiff was not a party to the subscription paper, nor has it acquired any rights under it, as successor of the subscribers (other than defendant) or otherwise. No one of such subscribers is shown to have joined in the formation of the corporation plaintiff, or to be a member thereof.

The present action is not brought to recover an assessment.

If the subscription paper could be treated as an agreement to purchase stock of the company, there would be no mutuality in the contract, since the presumption is that the corporation had no stock to sell. (Civ. Code, §§ 343, 344.) The complaint does not allege, nor does the evidence establish, that plaintiff owned any stock, or that the disposition of stock by sale was authorized by the by-laws, or by vote of the stockholders.

California Sugar Manufacturing Co. v. Schafer

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