Watters & Martin, Inc. v. Homes Corp.

Supreme Court of Virginia

Watters & Martin, Inc. v. Homes Corp.

116 S.E. 366, 136 Va. 114, 1923 Va. LEXIS 73

CourtSupreme Court of Virginia

DecidedMarch 22, 1923

StatusPublished

Cited by16 cases

This text of 116 S.E. 366 (Watters & Martin, Inc. v. Homes Corp.) is published on Counsel Stack Legal Research, covering Supreme Court of Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Watters & Martin, Inc. v. Homes Corp., 116 S.E. 366, 136 Va. 114, 1923 Va. LEXIS 73 (Va. 1923).

Pincite

Opinions

West, J.,

delivered the opinion of the court.

Homes Corporation brought action against Watters & Martin, Incorporated, on a subscription to its capital stock made before the organization of the corporation, and recovered a judgment for $6,000.00, the amount of the subscription agreement, with interest. To that judgment this writ of error was awarded.

In the summer of 1919 there was a scarcity of houses in and around Norfolk, Virginia. To relieve the situation a goodly number of the leading citizens held a con *117 ference and appointed a special committee to report in regard to the formation of a corporation which would increase the facilities for housing the excess population. The special committee reported to the general committee a prospectus for the establishment of a proposed corporation, and on August 28, H. W. Davis, one of the promoters and organizers of the plaintiff corporation, submitted a plan including the prospectus and subscription agreement on which the plaintiff corporation was ■subsequently chartered. Before the charter was granted subscriptions were solicited for stock of the proposed corporation, and after examining the ■ prospectus and financial plan the defendant company, acting through J. H. Watters, its president, signed a subscription agreement, of which the prospectus and financial plan formed a part, subscribing fifty shares of the preferred stock of the plaintiff corporation. This agreement was signed ■early in September, 1919. No cash payment was required, assessments being subject to call by the board of directors of the plaintiff corporation after its formation. The defendant company, a few days after the subscription contract was signed, attempted to withdraw its subscription through Rufus Parks, who was not authorized to act for the corporation in such matters. Shortly thereafter, on or after September 17, the defendant company, acting by its president, executed a paper .appointing L. T. Dobie, Richard B. Tucker and Otto Wells, or any one of them, as its proxy, with full power to vote for and on behalf of the defendant company the said fifty shares of the preferred capital stock of the plaintiff corporation at the first meeting of the incorporators and subscribers to the capital stock of the said corporation, held September 29, 1919. At this meeting the charter obtained for the plaintiff corporation was read and adopted, officers and directors elected, by *118 laws adopted, issuance of certificates of capital stock authorized, the directors authorized to levy an assessment on the subscription agreements, a corporate seal adopted, and other business transacted.

L. T. Dobie, proxy for the defendant company, was present and voted its stock upon all questiofis passed upon in the meeting.

On November 20, 1919, December 18, 1919, January 20, 1920, February 6, 1920, February 17, 1920, and February 23, 1921, letters were written by the plaintiff corporation to the defendant company notifying it of the levy of an assessment on the stock subscriptions, and requesting a remittance. No reply was made to either letter. Thereupon this suit was instituted, resulting in judgment for the plaintiff for $5,000.00, as aforesaid.

The position of the plaintiff in error, called the defendant, is that the defendant in error, called the plaintiff, is attempting to compel the defendant to pay for the stock of a corporation with purposes other and powers greater than, and essentially different from, those of the' proposed corporation as set forth in the prospectus and subscription agreement; and that-the prospectus and subscription agreement were a violation of the blue sky law (Laws 1918, C. 408), and therefore void.

The plaintiff contends that there is no material variance between the prospectus and charter as granted sufficient to release subscribers to the prospectus; that if such variance exists the defendant has expressly or impliedly ratified the charter as granted; that the blue sky law has not been violated, and even though violated such violation does not render the subscription agreement unenforceable.

The defendant relies on eight assignments of error, but they may be disposed of in the discussion of the following questions:

*119 1. Is there a fundamental and material variance between the prospectus of the plaintiff corporation and its charter sufficient to release non-assenting subscribers?

2. Has the charter granted been accepted by the defendant company?

3. Did the sale of securities of the plaintiff corporation involve a violation of the blue sky law of Virginia?

4. Does a violation of the blue sky law by promoters render contracts of subscribers unenforceable?

(a) Variance between prospectus and charter.

It is agreed that in the absence of assent, express or implied, any material variance between the prospectus and subscription agreement of the proposed corporation and the charter subsequently granted releases the subscribers to the stock from their subscriptions.

Any material change in the plan or purpose for which the subscription was made cannot be effected without the consent of the subscriber. He is thereby released, unless there has been a waiver, or unless he has estopped himself to deny his consent to the change. 37 Cyc. 495, and cases cited.

We give below in parallel columns the material portions of the charter of the Homes Corporation and the prospectus and subscription agreement of said corporation, as follows:

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