Sacramento Daily Union, Volume 22, Number 3281, 3 October 1861 — SUPREME COURT DECISIONS. [ARTICLE]

SUPREME COURT DECISIONS.

JULY TERM.

Chater vs. San Franoisoo Sugar Refining Com-pany.—-This was a bill filed by tbe plaintiff for the specific performance of a certain agreement made between the plaintiff and the defendants, Gordon and Bond, on the 4th of April, ISSB. This agreement provided for the formation of a Company to be called the " Bsn Francisco Sugar Refining Company," to consist of 1,000 shares of stock, of the nominal value of $ICO per share. The agreement provides tbat one-third of the shares, or _$'■*_ shares, were to be Issued to J. B. Band or his assigns, upon him or them paying $12,500, and Bond to convey hack to the Cempany 83>f shares of the said slock Into the common slock of tbe Company. A like provision la made In reference to Gordon. The third clause In the agreement la In these words : " Oae-thlrd or _- _ shares of said stock are to be Issued to George Gordon or to his assigns, un on him or them paying $12,500, and the s .Id George Gordon Is to transfer back to the Oompany _■_ Blares of the said stock Into the common stock of the Company." The agreement proceeds : " One- third or _. _ shares of said atock are to be Issued to Nathaniel Oh ate r or his assigns, upon him or their executing two notes, one of $6,250 to J. B. Bind, collaterally secured by 125 shares of stosk, having two years te run, bearing two per cent, per month Interest ; and another of $6,250 to George Gordon, .collaterally secured by 125 shares of stock, having tbe same time to run, and bearing the same Interest, and the said Ohater la also to transfer back to tbe Oompany _ ' _ shares of stock Into the common stock of the Oompany. It Is agreed tbat the two hundred and fifty aharea of stock thus given back to the Company shall be sold only by a majority vole of the Company, and J. B. Bond guarantees to the extent of the note of said Ohater held by him ($6,250), that from one hundred and twenty-five of the shares be will raise the sum of $12,5.0, aa needed, and George Gordon guarantees to the extent of the note of said Caster held by him, that be will on one hundred and twenty-five shares also rase the sum of $12,500. And It la further agreed that the shares not sold belonging to the common stock of the Company, aa above recited, shall, If it be not found necessary to sell them, be divided equally among the three parlies hereto, but not until the Company 'a works have been in operation for at least twelve months. . It Is agreed that George Gordon shall organize tbe Company ln Ban Francisco by taking out articles of incorporation according to law, and that the first Trustees shall be Charles W. Bond, Nathaniel Ohater and George Gordon. That upon the organization of the Oompany and on the enactment of Its by-laws, the Trustees shall ltsuo stock as herein set forth, to the parties upon their furnishing the respective amounts they herein agree to furnish, or la proportion as they furnish said amount. Each certificate of slock to be signed by two Trustees and counter- by the Secretary. The stock of N. Ohater to be issued to him as herein provided on the execution of the agreement to manage the works, a memorandum of whloh agreem .nt Is made simultaneous with this. The said Gordon and Chater agree that to the extent of the Interest which they may control, they will vote for the said Bond to act as agent of the Company In San Francisco, attending to the commercial affairs of said Oompany there, for which aervlpe he shall reoelve a salary of eighteen hundred dollars per annum." Afterward another agreement was made, of the same data, as follows: " Whereas N. Ohater has Induced the said Bond and Gordon to enter Into the organization of a Oompany In San Francisco for the purpc a. of sugar refining and Its collateral branches ; and the aald Bond and Gordon do so on the representation of aald Ohater and on his prom* lie to manage the same for five years, and to retain his Interest therein during that time, and upon bla further representation that he can skillfully manage a augar refinery, with a view of engaging the services of said Ohater ; the said Bond and Gordon, by an agreement of even date herewith, have agreed to act apart to aald Ohater two hundred and fity shares of the capital stock of the Company, at the rale of fifty cents on the dollar of the p tr value of the shares, and to take therefor the notes of aald Chater (two and $6,250 each), leaving two years to run, collaterally aecured by the aald 250 aharea, and also to give the said Ohater one-third of the reserved or paid back shares which may not be sold, as provided for In agreement of this date made between Uie present contracting parties. Now the aald Chater agrees with and to the aald Gordon and Bond (which agreement they make for the company they propose to form, and with the undemanding that they shall be at liberty to transfer the said agreement to the oompany when It shall be formed), that he the said Ohater will proceed to San Francisco and there superintend the erection of the Sugar Refinery and construct the same as be may be directed by the company, with regard to location, coat and extent, and get the same Into working order ; and that after the same la ln order he ahall superintend the business of sugar refining for the said company for the period of five years from the dale of Aral of May, ISSC (eighteen hundred and flfty-s'x). That he ahall engage in no other business during the period of hla engagement with tbia company, but devote his entire time to the business of the company during the time be la manager. Ana the more effectually to secure the performance by him, the aald Chater, of this agreement, he hereby agrees that during the period of hla engagement above named of five years, he will not dispose of such of his shares of stock lv tbe oompany (or sell or transfer them) aa he may have been enabled to pay for out of the dividends made upon the stock issued to him, and the said C.ater agrees that the stock shall be Issued to him with Buch restrictions aa shall prevent him selling It during the above named period. He. the said Ohater, also agrees with the aald Bond and Gordon that the dividends declared from time to time upon the stack Issued to him shall go to the payment of the notes hereinbefore referred to. The said Bond and Gordon undertake that the proposed company shall, ln consideration of the premises, agree to pay the aald Chater the yearly aalary of three thousand dollars, In monthly sums of two hundred and fifty dollars per month, to commenoe at tbe time the works go Into operation, and shall also pay him tbe monthly sum of one hundred and fifty dollars, during the time his aervlcea may ba required In erecting the works prior to commencing operations and up to the time of commencing operations. That said Ohater alao agreea that If at any time the company become dissatisfied with hla management they may remove him without prejudice to this agreement, in which event his yearly salary of $3,000 shall cease and determine, but he, the aald Ohater, shall not be at liberty to engage. In California, in the business of sugar refining, either for himself or for others. Interest on the notes given by aald Chater to commence on the first day of September of this present

year. . It la agreed that aald Bond, and the aald George Gordon, ahall procure for the said Ohater, within sixty daya of being notified by him of his readiness to pay the notes herein specified, the aald notea and collaterals, though the notes ahall not have matured, and that ln tbe event of the aald Gordon and Bond respectively falling to procure ths said notes <be Interest upon aame ahall from auch date be reduced to one per cent, per month. It la further agreed, until dlv'denda ahall have been declared by the company of sufficient amount ao that tboae due on the Block of Bald Chaier, hypothecated to secure said notes, ahall be sufficient to pay the Intereat due and accruing monthly on those notes, that the j company shall advance to said Ciater the interest ao upon due until the maturity of the notes as a loan to him. . The said Gordan and Chater agree that to the extent of the interest whloh they may control they will vote for the said Bond, to act as agent of the company In San Franciaco, attending lb the oommerclal .Irs of said company there, for which service be ahall receive a salary of eighteen hundred dollars per annum." We have given the agreement at length, aa it would require aa much apace to give Its substance as that occupied by the copy. Ohater, afterwards, on the 17th October, 1836, was seized with paralysis, and was rendered Incapable of attending to the business. Tbe notes mentioned in the agreements as those to be made by the plaintiff were never given, nor, so far as appears, demanded. The defense set ma to reat principally upon the point that theae notes were not made aa contemplated by the agreement; that the plaintiff, therefore, did not dimply with the contract on his put, and consequently baa no right to Insist on performance by defendants ; that one of the principal. If not the leading. Inducements to the contract was the rendition of the services of the plaintiff, and that the failure to render these, though caused by his sickness, was a failure of the consideration of tbe agreement ; , and that Uie agreement was that of the Individual members or stockholders, Gordon and Bond, and not of the corporation. The appellants argument seems to proceed upen the Idea thai Gordon and Bond were Uie principal parties In this company and to this agreement, and that Chater was to oome in secondarily and derivatively, and to aoquire the Interest which be claims by concession from tbem, or through or by virtue of certain conditions to be performed by contract with them. This, however, does not appear to be the true relation of these parties. Ths plaintiff and defendants were the original projector* of the' enterprise, and equally interested and influential In respect to the matters Involved. Coaler's right* and obligations stand substantially on the same footing laa those of Bond and Gordon. He waa, ln other worda, an equal partner, with tbe same original rights, and the benefits of the agreement accrued to blm in like manner aid to the aame extent as to them. Upon the organization of the corporation, the stock and the . right to control the affairs of the com* pany as stockholder would enure to him as well as to them It is ■ true some conditions . and restrictions qualifying his right to receive the stock appear ln the agreement ; but the aame observation applies to them. His title to the stock and to the interests in the business come from his character as stockholder, and from the original article of association. It la true that In order to entitle blm to receive the certificates of slock which he claims, as against Bond and Gordon, he must comply with the conditions, whiob, by the con* tract he bound himself to perform. These conditions, as we have seen, are, as In one part of the agreement set out, the execution of two notes— to Gordon and the otber to Bond. It ls provided, that, for the paymeat of these notes, the stock was to be held as collateral security. If nothing more had been said, probably the true construction would be that Uie making of the notes and the issuing of the stook were to be ootemporanooua acts ; as it Is difficult to see bow the atock -was to be received as collateral security before it was Issued. In fact, the circumstance that the stock was to be Issued In hla name and deposited by him as collateral security to his notes shows that he was regarded as Uie owns* ; tbat the title to It had attached and vested tn bus, subject only to the conditions of tbe proposed bailment. - The transaction was an hypothecation of the stock by one stockholder to secure bis debt, to his associate or to the corporation— is Immaterial which —and tills .poses an original 'ownership In the stock by the pledgor. If this share of the stock did not belong to Chater, to whom did it belong Not to th; corporation nor to Bond and Gordon ; for the agreement only gave them a Hen on It, Md this as the property of Chater, and to secure Chater's debt, i But it Is provided in a subsequent clause of tbe I article that the stock of Chaier wss to be Issued to him on the execution of the agreement after wards entered Into, by which Chater bound himself to manage the works. It seems that Bond was to pay $12,500 and Gordon a like sum ; this was their contribution to the capital stock ; Ohater) we Infer, was unable |to pay in money ; but to enable him to raise his proportion, he was to execute his notes to Bond and Gordon, and they guaranteed that they would raise .'• It for him on his stock. The notes bore, or were to bear, ? interest.' ; Cbaler did not at this ' time owe Bond and Gordon anything on this agreement ; but this arrangement of the notes waa a mere mode of enabling htm to raise money which it was anticipated might be needed for the purpose, and as a part of the. capital of this business; and they guaranteed,- as said before, that on this security they would raise it for him: and the form the transaction took was designed for their aecurlty. If they loaned blm the money on other security," or without any security, they could not complain because he had not gons (trough tbs particular process which the agreement

I prescribed. .They might waive this or any otbsr term I of the agreement I'esVned ; for their benefit or protee- ! Uon. Ttie agreement that the stock should be held and t->at Chater should pay this sum, wna th* security to Gordon and Bond, which they could enforce if ihey advanced the money accord— g to contract. Th»re is n-> proof that they demanded the notes or Issued thestotk, or that the failure to rive the notts operated ln any way to their prejudice; and there la proof that long after the time ._ the notes, according to the preten slon, were to be mad. and the str ck issued, 'he business was continued and Onater . recognised as Interested in it. If Bond and Gordon bad not p. ld their money for-all this time, and Ohater had made his no __ In time, could It be pretended that payment by Gordon and Bond afterwards wouid . not . entitle them to their interest ? - Or if they bsd never paid, and the business was carried on on credit, or otherwise, until the profits paid the debts, could it be held that they bad forfeited their stock? The truth is, we do not regard either the payment of the money or , the giving tbe notes of Chaier as conditions precedent to the rights of these parties as stockholders. These rights they had by tbe agreement and the Act of incorporation ; for If none had paid, to whom would belong the stock ? There Is no clause of forfeiture for non-payment or non-per-formance ; aa corporators, the whole business and the whole stock was theirs. But this clause as to Coaler was for the aecurlty of the corporatora inter sese ; It qualified the title to atock as between the parties, which Utle the law gave by virtue of the relation of the stockholders to the corporation. But so long aa Chater owed for the stock or capital, he could not have It iaraedto him ; not because he did not originally own it, but because he bad agreed that another disposition should be temporarily made of It; it was pledged, In other words, for the payment of his debt; and whenever tbe debt waa discharged— is not material In what way— it became released. If It was necessary to use the money repreaented by Chat notes or debt, Bond and Gordon were to raise It; and whether they raised it on the nous, or the atock and notes, or In any other way, la not material. In any event, by the agreement, they held the stock aa aecur.ty, and they bound themselves lo raise the money for Ohater; the failure to Issue the certificates of slock was merely a failure to get the security In the form which might be more convenient to them If they had to borrow the money from third peraona ; and ao of the failure to get the notes of Chaier. But If no money was necessary, or if It could be conveniently raised otherwise, or advanced by Gordon and Bond, every object was. answered that could be accomplished by the literal performance of this agreement. The whole cass ln this view of it may be thus aummed up : Three men enter into an agreement to. form a . corporation for commercial purposes. By this agreement, and the corporate Act, each corporator Is entitled to an equal proportion of the stock; two contribute to the capital ln money; the third baa no money — he proposes and la allowed to give his note In lieu of money, pledging bis stock aa aecurlty; the other two agree that on tills stock they will raise him the money. It la agreed that the atock due him ahall be Issued on a given event ; the event happens. The note Is not made nor the stock issue.! to him, but the company, controlled by the other twe corporators, go on recognizing the third as a corporator; no demand la made for his note or the stock Issued to him. Tbe corporation makes profit enough to pay the debts, and the ahare coming to the third partner pays his contribution. No stock la Issued to him, and he now claims It. If tl.e twe who were to raise the amount to be contributed by the third, having by the agreement the right to demand his note and Block, do not demand them or Issue the atock to him. and, without this form of security, advance the money which was to be raised, they are to be considered as waiving this formal rl.bl, and are not at liberty to plead the want of a mere literal compliance as a forfeiture —for auch It would be — of the Interest of the tblrd partner in the common enterprise. In equity, the substance of the whole transaction la fulfilled ; the object of the aecurlty answered ; and the original right of the plaintiff here to bla Block la not lost by a mere failure 1 on hia part to give a particular form of aecuMty, upon which those beneficially Interested in demanding It did not insist. What, In auch a state of things, was not Insisted upon was waived, and equity not regarding mere modes or forma, but looking at the very substance of th* transaction, ia satisfied when the substantial purpose ia effected, though not effected in the precise way contemplated by the parties ; and thla la the more especially true, If this failure to follow the preacrlbed mode be owing to the laches, or be by the waiver or acquiescence of the party entitled in strict right to Insist upon It. The notes of Ohater were merely to represent bla debt, and the money to pay thla debt Bond and Gordon were to raise on the security of his stock, they being Interested ln using It ; and whether the stock was issued in the form of a certificate or not, It was bound by the agreement ; and, If they chose, they could as aafely advance the money without the note, and the aubaiatice ofthe whole arrangement be attained. It la not necessary tot us, therefore, to consider the other points, urged, to aay the least, with pi _ talblll ty In avoidance of the ground taken by the appellant to sustain the proposition just discussed. Tbls view dlitlngulaheathls caae from mere executory agreement through a performance of the terma of which a party becomes entitled to property; of which class Green a. d Co vl Hand (tO Cal ), and the other cases cited by appellant, are examphs. Here Ohater was entitled, as of original right, to bis stock, and the conditions annexed to the Issuance of the certificate a to him, even If not waived, at most were mere qualifications ln favor of 5 is associates, of that right, and in the nature of security to them, the substance of whloh security they enjoyed, and a failure of the precise process prescribed, neither by the general principles of law applicable to such contracts, nor by the express 'er ma of the agreement, worked a forfeiture of his Interest in the at.ck, nor In tbe business ofthe corporation. 2. We think there Is nothing in the point that the rendering of plaintiff's services for the five years waa a condition precedent to the vesting ofthe plaintiff's title to the atock. Nothing In the agreement ao declares. The provision for the employment of plaintiff as Superintendent seems to be an Independent term of the agreement. He was to get a salary of $3,000 per annum for his services as aucb, which does not seem to be entirely consistent with the Idea that these services entered Into and constituted a part of the general consideration of the agreement which was the basis of the association. It la very true that the reputed or supposed skill of the plaintiff ln the proposed business may have been a motive for proposing to take or accept him aa a partner in a new and hazardous enterprise of this sort; but this Is a very different thing from making the rendition of his services an indlapeneable requisite to any claim to the profits or business, and hla contracting that, despite of all accidents or casualties, he would render the services or loae hla Interest ; or, In other words, Insure hla life, mind and health for five years, or forfeit everything except the salary already earned. The more reasonable Interpretation of the contract la, that the services, advice, etc., of such a man were of value to thla oompany In thla untrltd scheme, and that, to carry It on, they were as willing as himself to take the risk of natural or accidental causes which might disable him from prosecuting the business of Superintendent; and that, for hla contribution to the capital of the company, hla Block waa considered as good aecurlty. This construction la atrongly fortified by the provision that, if the company became dissatisfied with his management, they might discharge htm, thereby stopping his pay aa Superintendent; but It was stipulated in this connection that thla discharge was not to affect the agreement otherwise. This Itself Is strongly persuasive, If not conclusive, of the Inference that his death or sickness was not to affect It ; for it Is Incredible that if he became wholly unfit for the business, or acted ao fraudulently and culpably aa to require the c. mpany, for their aafety and protection, to discharge him, this waa to be insufficient to deprive blm of his rights, under the contract, to hla ahare In the business, and yet that ! a mere misfortune or visitation of Providence, for which no blame rested on him, was to have this effect ; and tbls even though the casualty happened in the last year of hia service. Nor la I .at all probable, If thla had been the understanding, that the agreement wonld have provided f r the Issuance of the atock to him ao long in advance of the time, and the events when, or upon which, he would be entitled to it.

Moreover, If the rendition of these services was a consideration of the vital Importance to the contract now pretended, it is not apparent, why, in caae of bis misconduct or mismanagement, the consequence should be confined to the mere loss of the place and the wages, with an expreaa reservation in favor of the Interest he hell unrer the other parte of the agreement Boch an agreement as that supposed would be very unequal. if we suppose that Chater had the qualifications evidently attributed to him at the time of the forming of the agreement. It cculd scarcely be supposed he would be wil'lng to leave New York— he waa residing— to come to San Francisco to be discharged at any time— thus losing his wages aa superintendent, and thea, without wages, to wait for five years before be could get anything on the contract; or, In case of sickness or death, after Inaugurating the business, and giving hla assistance ln getting It under way, should lose, for himself or family, everything for which he had made sacrifices ln migrating to this State. It la mush more reasonable to suppose, as well from the nature of the caae and surrounding circumstances, as from the language of the contract, that the services of Chater were considered equal to the money, or money and credit of Bond and Gordon, in starting a new enterprise of tbls sort, especially when he was to draw no profits and be entitled to no interest In the business until afier he had paid his proportion— itock itself being the security for inch payment. Other portion! of the agreement— such, for example, as the obligation of Chater, If discharged, not to engage In California ln the business of sugar refining, add weight to the construction we give to the agreement. We do not consider It necessary to give further elaboration of these views. 8 We think that • this ' agreement, made by these stockholders, Bond and Gordon, who really represented the Interests and persons afterwards Incorporated, and whose agreement was only in anticipation of the formation of the corporation, and for Its benefit, and was carried out by It, and recognized by it, be und the defendants. .. _

4. Other points need not be noticed; for the provision for the aalary of Ohater as superintendent, being Independent of hla Interest as stockholder, It Is not necessary to go Into any Inquiry In this place of the failure, or of the conaequencea of a failure on hla part to fulfill his obligations aa such. A speedy remedy, however, was left by the contract to the corporation for any failure, for any cauae, to discharge bis duties, by his dismissal -__. Dscree affirmed. BALDWIN, J. Wesonour: OOPE, J., ■ ■ ■ FIFLD, O.J.

Keltey vs. Trustees of __-_!.— Plaintiff aeeka by this action, which is assumpsit, to teat the validity of an Act of the Legislature passed In ISCI, entitled "An Act to provide for the construction of a bridge in the city of Nevada." (Statutes p. 7S.V. In 1 -." - the Act Incorporating the city of Nevada was passed, by which power was given, among other things, to levy and collect annually a tax on all property in the city not exceeding one per cent, on the assessment valuation thereof. Thla Act was amended ; ln 1 SSS, by ar Act limiting the tax to one-half of one per cent* By the Act of 1 _1, the municipal board are " authorized and empowered In their discretion to levy and collect a special lax, not exceeding five- eighths of one per cent., for the construction of a bridge within the city limits, and It is provided that such tax shall be levied upon the valuation of city property as fixed by the assessment roll of the city made by the Oity Assessor during the year A. D. ISCO." ■ By virtue of this Aot, the Board passed an ordinance— set forth In the record— a tax of five-eighths of one per cent, on all city property, to be ' apportioned and collected on the assessment of IS6Q. The statute of IS6I, but not the ordinance, provided that tbe valuation as fixed by the roll of 1860 might be added to or modified by the Board of Trustees, sitting as a Board of Equalization, at a time and place of which due notice should be given. Tbe Board did sit for several days; the only notice of auch sitting being a publication In the oity newspaper. t Plaintiff did not attend, and no change was made In his assessment.' -' v,-...,--T\ ...... .. ■. ■ • ■__ _.?° -.__-. by the *PPe»»nt, plaintiff below, that !._..-_,__ _$_ . no °M-*taUo_ai, for the reason that tou ___l-io__^T -^T^.; ? _?, toe -^-.latureto y The learned aad elaborate argument of . the appellant'a counsel merits attention chiefly as a manifestation of extraordinary Ingenuity exhausted upon a

question too plain to bs sllhsr obscured or Ilium..— by H.V '. . - ./• ;...:-.'. •-• We . regard this Act of IS Cl as nothing more or less than an amendment of the charter of a municipal corporation ; | that the Legislature had the same power to amend as to make the charter; lhat it had the same power to Inert aae the tax as to limit It ; and the aame power to authorise this special tax as to authorise the general lax ; and thai this is no transfer of legislative powers any more than every power given to a municipal corporation is such transfer. Many Acts of a similar nature have been passed by the Legislature applicable to otber cities and towns, and to hold them void would lead to great oonf uslon, as so to hold would be warranted by , principle or authority. (See Blandlng vs. Burr. 18 ; , - 2. Tbe next objection la that the Act Is void because the tax la apportioned according to the assessment roll of t* c previous year. We see no Ing unconstitutional in this. Taere la no constitutional requirement ■ for annual assessments. If tbe Legislature chose, we do not see why property _hould not be taxed for several years at a given rate shown by a particular estimate or valuation. Thla assessment la but a mode of reaching the value, etc. ; and taxes can never be apportioned with exact uniformity or exact justice. We cannot judicially know lhat property has varied ln value since 1860 in Nevada, or that it has changed hands to any considerable exeat. If Individual Injustice has been done, this Is not an objection to the whole law, but, at moat, would only entitle the particular party injured to relief. Besides, the Act afforded means of correction of errors committed to the prejudice of the taxpayers. * As to the provision for the correction of the list, the Act of the Legislature, waj enough without the ordinance cf the town. As to notice of the meeting of the Board of Equalization, If anything more was necessary than the publication, see Co ami va. D _b (12 Oai., 274.). Tbe judgment Is affirmed. . BALDWIN, J. We concur : COPE, J., FIELD, 0. J.