{
  "id": 1589526,
  "name": "Denman v. Country Club Realty Company",
  "name_abbreviation": "Denman v. Country Club Realty Co.",
  "decision_date": "1920-04-26",
  "docket_number": "",
  "first_page": "502",
  "last_page": "506",
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      "cite": "143 Ark. 502"
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    "id": 8808,
    "name": "Arkansas Supreme Court"
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    {
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    {
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    {
      "cite": "44 Ark. 377",
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  "analysis": {
    "cardinality": 448,
    "char_count": 8595,
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  "last_updated": "2023-07-14T19:36:12.961410+00:00",
  "provenance": {
    "date_added": "2019-08-29",
    "source": "Harvard",
    "batch": "2018"
  },
  "casebody": {
    "judges": [],
    "parties": [
      "Denman v. Country Club Realty Company."
    ],
    "opinions": [
      {
        "text": "Wood, J.\nThe appellee, a corporation, brought this action against the appellant in a justice of peace court. The action was begun on March 4, 1919.\nThe appellee alleged that on or about May 27, 1912, the appellant subscribed for stock in a corporation thereafter to be organized for country club and investment purposes, the face value of the stock being $500, payable in ten annual installments, according to the contract signed by the appellant and others.\nThe appellee set up the contract, which, among other things provided that \u201cthe subscription to said stock shall be paid for in ten equal payments, i. e., ten per cent, of said subscription in cash and ten per cent, each year thereafter with interest at six per cent, per annum added in accordance with the following schedule which is based upon a subscription of $100.\u201d The amount of the several payments to be made is then set forth.\nThe contract contained among others the following provisions: \u201cAll subscriptions shall be closed by notes conforming with the above schedule and containing a provision that default in any payment shall operate as a forfeiture to the company of all payments previously made and the stock issued therefor.\u201d\nThe appellee alleged that the appellant paid the first of the ten installments but had failed to pay the second, third, fourth, sixth and seventh installments as they became due.\nThe amended complaint, which was filed in the circuit court after the cause reached that court on appe\u00e1l, was in six counts stating a separate cause of action for the amount of each of the past due installments.\nThe appellant answered, setting up three defenses.\nFirst. That appellant had made the first payment and that under the contract the default in any subsequent payment forfeited the amount previously paid and appellant\u2019s stock.\nSecond. That five years before the action was brought the appellant had denied liability on the subscription contract and that appellee, therefore, was barred from maintaining the suit by the five years statute of limitations.\nThird. That appellant\u2019s subscription to the stock was based upon the condition that if he remain a resident of Fort Smith he was to pay for the stock, but if he moved from the city the subscription was not to be binding upon him. But by mutual mistake the above condition was not incorporated in the subscription agreement; that appellant was not now a resident of Fort Smith.\nThe appellee demurred to the answer. The court sustained the demurrer. The appellant stood upon his answer. The court, thereupon rendered judgment in favor of the appellee. From which judgment is this appeal.\nUnder the express provision of the contract \u201cthat default in any payment shall operate as a forfeiture to the company of all payments previously made and the stock issued therefor,\u201d the failure of appellant to pay the second installment due on his subscription for stock ipso facto forfeited the payment he had previously made and also the stock issued therefor. This provision of the contract is not a penalty against the defaulting subscriber for stock, but is in the nature of liquidated damages for his failure to pay any of the installments as they became due. The peculiar language of the above provision which the subscribers to stock and the organizers of the company chose to express the contract between the corporation and the subscribers to its stock, clearly indicated the purpose to give the corporations, as its only remedy against defaulting subscribers, the right to forfeit the stock and all previous payments made on the stock subscriptions. The language used makes the provision as to forfeitures self-executing. This provision was doubtless intended as a renunciation of the remedy which the corporation otherwise would have had to treat the unpaid balance of appellant\u2019s subscription as a debt due the corporation and to have same declared a lien under sections 8553, 8565, 8566, of Kirby\u2019s Digest.\nThe positive language of the contract \u201cthat default in any payment shall operate as a forfeiture,\u201d etc., had the effect to give the corporation, upon default in any payment, the absolute right to hold the previous payment made by the appellant and also the right to withhold or cancel his stock. The appellee grounds this action on the subscription contract and is bound by it.\nBut, even if this provision of the contract could be construed as only giving appellee the right to elect whether it would declare a forfeiture or sue for the debt, nevertheless the facts set forth in the answer show that appellee had elected to keep the first payment made by appellant and forfeit his stock.\nThe conduct of the appellee in waiting more than five years after default in making the second payment before instituting this action shows that the appellee elected to treat the stock and the first payment as forfeited. Having elected to forfeit appellant\u2019s cash payment and to treat his stock as forfeited under the contract, appellee correctly construed the contract when it treated the failure of appellant to pay the second installment as, ipso facto, a forfeiture of the first payment as well as the stock. The appellee can not therefore in this action pursue the appellant to recover, as for debt, the balance due on stock subscriptions. 1 Cook\u2019s Corporations, \u00a7\u00a7 121-125, 126.\nAlthough no notes were executed according to the terms of the contract containing the provision above set forth, nevertheless that provision is as much a part of the contract as if the notes had been executed with the provision embodied therein.\nThe rights of creditors are not involved, and as between the appellant and the appellee, in the absence of some statute, by-law or charter provision prohibiting such contract, the parties can make it and are mutually bound by its terms. See Collins v. Southern Brick Co., 92 Ark. 504.\nThe first paragraph of the appellant\u2019s answer, therefore, states a good defense to this action, and the court erred in sustaining the demurrer thereto. Having reached this conclusion, it becomes unnecessary to consider the other defenses.\nThe judgment is reversed and the cause is dismissed.",
        "type": "majority",
        "author": "Wood, J."
      }
    ],
    "attorneys": [
      "Hill & Fitshugh, for appellant.",
      "Geo. F. Youmcms, for appellee."
    ],
    "corrections": "",
    "head_matter": "Denman v. Country Club Realty Company.\nOpinion delivered April 26, 1920.\n1. Corporations \u2014 remedy on subscription contract. \u2014 Under a subscription contract which provided \u201cthat default in any payment shall operate as a forfeiture to the company of all payments previously made and the stock issued therefor,\u201d no other remedy for a default in payments is given except a forfeiture of installments paid.\n2. Corporations \u2014 subscription contract \u2014 election. \u2014 If a subscription contract gave the corporation the right to elect whether it would declare a forfeiture or sue for the debt, yet where the corporation waited five years after default by a \u25a0subscriber before suing on the subscription contract, it will be treated as having elected to forfeit an assessment paid, so as to preclude an action on the contract.\n3. Corporations \u2014 forfeiture of installments paid. \u2014 Where the rights of no creditors are involved, and no statute, charter or bylaw prohibits, a subscription contract providing that default in any payment shall forfeit previous payments is valid.\nAppeal from Sebastian Circuit Court, Fort Smith District; Paul Little, Judge;\nreversed.\nHill & Fitshugh, for appellant.\n1. The court had no jurisdiction, as the justice of the peace had none. 44 Ark. 377; 77 Id. 234; 83 Id. 372; 10 Id. 326; 1 Id. 252; 114 Id. 304.\n2. The suit was barred by limitation, which was pleaded. 12 L. R. A. (N. S.) 1191; 22 Id. 1110; 51 Id. 151; 92 Ark. Ill; 107 Id. 106.\n3. The corporation could not sue, as it could not accept payment and then declare a forfeiture and afterward sue. 1 Cook on Corp. (6 ed.), \u00a7\u00a7 121-125-6; 108 U. S. 436.\n4. An equitable defense was pleaded, which was done before a justice of the peace. 44 Ark. 277; 54 Id. 30; 55 Id. 101. See also 13 Ark. 129'; 101 Id. 135; 89 Id. 309; 113 Id. 305; 2 Pom., Eq. Jur., \u00a7 859.\nGeo. F. Youmcms, for appellee.\n1. The court had jurisdiction, as the justice had each installment in the contract constituted a separate cause of action and not the aggregate amount of the subscription.\n2. The suit was not barred by limitation. 26 A. & E. Enc. Law (2 ed), 928; 10 Cyc. 503-4.\n3. The provision for a forfeiture was not a part of the contract signed by appellant.\n4. Appellant\u2019s attempt to set up an equitable defense is futile and falls of its own weight. 92 Ark. 504; 123 S. W. 652. Parol evidence was not admissible to vary a written contract. 154 8. W. 212; 163 Id. 788; 138 Id. 978; 201 Id. 830."
  },
  "file_name": "0502-01",
  "first_page_order": 526,
  "last_page_order": 530
}