Santa Cruz R.R. v. Schwartz

Agreement to Subscribe for Stock.—An agreement to subscribe for shares of a corporation upon a stipulated condition is not binding, unless the condition be complied with.

Appeal from the District Court of the Twentieth Judicial District, Santa Cruz County. This action was brought to recover an assessment of five hundred dollars upon five shares of the plaintiff’s capital stock. The plaintiff is a railroad corporation, organized in June, 1873, with a capital stock of one million dollars, divided into ten thousand shares, for the purpose of building a narrow-gauge railroad through Santa Cruz County, along the sea-coast. In May, 1873, the defendant signed a “ prospectus ” of the railroad, agreeing to take five shares of the capital stock, upon a certain “ statement and terms ” expressed in the prospectus, among which was the following : “ As soon as the subscriptions to the amount of one hundred and fifty thousand dollars of the capital stock have been secured * * * *. the company shall be organized, and the construction of the road shall be commenced at the town of Santa Cruz, and continue thence eastwardly until completed, to a point at or near the Pajaro Depot, on the line of the Southern Pacific Eailroad.” At the date of the organization only one hundred and thirty thousand dollars had been subscribed to the capital stock; one hundred and fifty thousand dollars were not subscribed until January 1st, 1875. The defendant refused to sign the articles of incorporation, or to take any part in the business of the corporation. Before any expenditures had been made he had asked leave to withdraw his subscription, but the request was refused by the defendant. ,The road was completed as proposed in the prospectus. In August, 1875, the company being in debt, an assessment of the full amount unpaid upon the capital stock was levied, and the defendant was served with due notice thereof. After the assessment became delinquent the Board of Directors elected not to proceed by sale of the stock, but to sue the stockholders for the sums due from them respectively. This action was accordingly brought against the defendant as a stockholder. The case was tried by the Court without a jury. Judgment was rendered for the defendant, and the plaintiff appealed.