Chater v. S.F. Sugar Ref. Co.

Citations

• 19 Cal. 219

Syllabus

<p>C., G. & B. enter into an agreement to form a corporation for commercial purposes. By this agreement and the corporate act subsequently filed, each corporator is entitled to an equal proportion of the stock; G. and B. contribute to the capital in money, and C., having no money, proposes and is allowed to give his note in lieu of money, pledging his stock to G. and B. as security, they agreeing to raise him the money on the stock. It is agreed that the stock due him shall be issued on a given event; the event happens. The note is not made nor the stock issued to him, but the company, controlled by the other two corporators, go on with their business, recognizing C. as a corporator. No demand is made for his note or the stock. The corporation makes profit enough to pay the debts, and the share coming to C. pays his contribution to the capital. No stock having been issued to C., he now claims and sues to enforce the specific performance of the agreement: Held, that if G. and B., who were to raise the amount to be contributed by C., having by the agreement the right to demand his note and stock, do not demand them, or issue the stock 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 right, and cannot plead the want of a mere literal compliance as a forfeiture of the interest of C. in the common enterprise; that in equity, the substance of the whole transaction was fulfilled; the object of the security answered; and the original right of C. to his stock was not lost by mere failure on his part to give a particular form of security, upon which G. and B., who were beneficially interested in demanding it, did not insist; and that C.’s stock, whether actually issued in the form of a certificate or not, is boimd by the agreement, and he is entitled to it.</p> <p>This case is distinguished from mere executory agreements, through a performance of the terms of which a party becomes entitled to