by a subscriber was a complete and valid delivery, so that his subscription became eo instanti a binding contract. The case stands precisely as a case where a contract is delivered by the obligor to the obligee. It can not therefore be treated as a case where the writing has been delivered to a third party in escrow.

The defendant, however, attempts to bring the case within the rule of Westman v. Krumweide, 30 Minn. 313, 15 N. W. Rep. 225, in which this court held that parol evidence was admissible to show that a note delivered by the maker to the payee was not intended to be operative as a contract from its delivery, but only upon the happening of some contingency, though not expressed by its terms; that is, that the delivery was only in the nature of an escrow. We so held upon what seemed the great weight of authority, although the doctrine, even to the extent it was applied in that case, is a somewhat dangerous one. The distinction between proving by parol that the delivery of a contract was conditional, and that the contract itself contained a condition not expressed in the writing, is one founded more on refinement of logic than upon sound practical grounds. It endangers the salutary rule that written contracts shall not be varied by parol. Said Earl, J., in Pym v. Campbell, 6 El. & Bl. 370, in sustaining such a defense: "I grant the risk that such a defense may be set up without ground, and I agree that a jury should, therefore, look on such a defense with suspicion." And in all the cases where such a defense has been sustained, so far as we can discover, they have been cases strictly between the original parties, and where no one has changed his situation in reliance upon the contract and in ignorance of the secret oral condition attached to the delivery, and hence no question of equitable estoppel arose. Many of these cases have been careful to expressly limit the rule to such cases. Benton v. Martin, 52 N. Y. 570; Sweet v. Stevens, 7 R. I. 375.

case.

Conceding the rule of Westman v. Krumweide, supra, to its full extent, there are certain well-recognized doctrines of the law of equitable estoppel which render it inapplicable to the facts of the present This subscription agreement was not intended to be the sole contract of defendant. It was designed to be also signed by other parties, and from its very nature defendant must have known this. Each succeeding subscriber executed it more or less upon the faith of the subscriptions of others preceding it. The paper purports on its face to be a completed contract, containing all the terms and conditions which the subscribers intended it should. When this agreement was presented to others for subscription, defendant had not only signed it in this form, but he had also done what, under the facts, constituted, to all outward appearances at least, a complete and valid delivery. He had placed it in the proper channel according to the ordinary and usual course of procedure for passing it over to the corporation when organized, and clothed Janney with all indicia of authority to hold and use it for that purpose without any other or further act on his part, untrammeled by any condition other than those expressed in the writing. In reliance upon this, others have not only subscribed to the

stock, but have since paid in a large share of it. The corporation has been organized and engaged in business, expending large sums of money and contracting large liabilities, all upon the strength of these subscriptions to its stock, and in entire ignorance of this secret oral condition which defendant now claims to have attached to the delivery. To permit defendant to relieve himself from liability on any such ground, under this state of facts, would be a fraud on others who have subscribed and paid for stock, upon the corporation which has been organized and incurred liabilities in reliance upon the subscriptions, and on creditors who have trusted it. The familiar principle of equitable estoppel by conduct applies, viz. : Where a person, by his words or conduct, willfully causes another to believe in the existence of a certain state of facts, and induces him to act on that belief so as to alter his own previous condition, he is estopped from denying the truth of such facts to the prejudice of the other.

We have examined all the numerous cases cited by the defendants' counsel, and fail to find one which, in our judgment, is analogous in its facts, or the law of which will cover the present case. The two which at first sight might seem most strongly in his favor, are Beloit and Madison R. Co. v. Palmer, 19 Wis. 574, and Ottawa, etc., R. Co. v. Hall, 1 Bradw. (Ill. App.) 612. But an examination of these cases will show that in neither did or could any question of estoppel arise, and in both the court held that the person to whom the instrument was delivered after signature was a stranger to it, so that it was strictly a delivery in escrow to a third party. Cases are cited where a surety signed a bond or non-negotiable note, and delivered it to the principal obligor, upon condition that it should not be delivered to the obligee until some other person signed it, and where, without such signature, the principal obligor delivered it to the obligee, and yet the courts held that the surety was not liable, although the obligee had no notice of the condition. Such cases seem usually to proceed upon the theory that a delivery to the principal obligor under such circumstances is a mere delivery in escrow to a stranger; the term "stranger," in the law of escrows being used in opposition merely to the party to whom the contract runs. It may well be doubted whether in such cases, where the instrument is complete on its face, the courts have not sometimes ignored the law of equitable estoppel. No such defense would be allowed in the case of negotiable paper, and it is not clear why the distinction should be drawn on that line. The doctrine of estoppel rests upon totally different grounds, and operates independently of negotiability, being founded upon principles of equity. But whether the cases referred to be right or wrong, we do not see that they are in point here. Our conclusion is that the court erred in admitting the evidence objected to, and for that reason a new trial must be awarded. Order reversed.

Note. See 1896 Phil. & D. Co. R. v. Conway, 177 Pa. St. 364. Also citations to § 99, supra, p. 456.

Sec. 111. (3) Subscription to agent or trustee, for proposed corporation.

SAN JOAQUIN LAND AND WATER CO. v. WEST.

1892. IN THE SUPREME COURT OF CALIFORNIA. 94 Cal. Reports, 399-405; 29 Pac. Rep. 785.

Appeal from a judgment of the superior court of San Joaquin county and from an order denying a new trial.

The following is a copy of the body of the agreement referred to in the opinion of the court:

"We, the undersigned, hereby agree with each other, and the one with the other, that a corporation shall be formed by us under the name of 'San Joaquin Land and Water Company,' for the purpose of procuring water rights on one or more of the rivers or streams running through the counties of Calaveras, Tuolumne, Stanislaus and San Joaquin, in this state; *that the capital stock of said corporation shall be $1,000,000, divided into 10,000 shares of $100 per share; and we hereby agree with each other, and one with the other, that we will take the number of shares of the capital stock of said corporation which appears opposite our respective names hereunto subscribed, and will pay 20 per cent. of the par value of said shares so subscribed by us respectively in five (5) days after the articles of said incorporation shall have been filed in the office of the county clerk of said county of San Joaquin, and will pay the same to F. M. West, at the Stockton Savings and Loan Society Bank at Stockton, Cal. We hereby constitute said F. M. West as the agent to collect the amount which becomes due as aforesaid. We further nominate, constitute and appoint L. U. Shippee, J. L. Beecher, and George Gray, as our agents, and the agents of the corporation so to be formed, to negotiate for the purchase of any one or more water rights, canals, reservoirs, aqueducts, or water-ways for said corporation, and draw from said West any or all moneys that may have been paid to him by us respectively, by virtue hereof, and use said money for paying for same; and any and all contracts which our said agents may make in said matter shall be binding upon said corporation, and also upon us. Our said agents are further authorized to employ engineers and other assistance, and have them survey routes for such canals, and examine proper locations for dams, and do such other service as may be, in their opinion, for our best interest and the interest of said corporation to accomplish the object or purpose for which the same is to be formed.

"Dated November 19, 1887."

Further facts are stated in the opinion of the court.

HARRISON, J. The controversy involved in this action arises out of the construction to be given to the terms of an instrument executed between the subscribers thereto for the incorporation of the plaintiff, 32-WIL. CASES.

and preliminary to such incorporation. The instrument itself was before this court in the case of West v. Crawford, 80 Cal. 19,1 and there set out at length. It was then held that West was authorized to collect in his own name twenty per cent. of the amount that the parties to that instrument had agreed to subscribe to the capital stock of the plaintiff by reason of their express agreement therein to pay it to him. After that decision the subscribers paid their twenty per cent. to West, and at the commencement of this action he had in his hands of the amount so collected by him $35,861.25, for the recovery of which the plaintiff brought this action, as money had and received by him to and for its use and benefit. After the commencement of the action West, under the order of the court therefor, paid the money to the clerk of the court, to be held subject to the order of the court, and the appellants were substituted as defendants in his place, and answered the complaint. Upon the trial of the issues, the court rendered judgment in favor of the plaintiff, from which the defendants who were substituted for West have appealed.

1. The agreement in question is of that character which is not unfrequently made by the subscribers to a corporation prior to its actual incorporation, and as preliminary thereto, its object being for their mutual benefit and protection until the organization of the corporate body, and also for the ultimate benefit of the corporation. Upon the formation of the corporation such an agreement, with its advantages and rights, inures to the benefit of the corporation, irrespective of any agreement or want of agreement to that effect, and notwithstanding it may contain special provisions for carrying its own terms into execution.

By the express terms of this instrument, West was simply "the agent to collect the amount" which should become due to the plaintiff by virtue of the subscription to its capital stock which the parties to the instrument should make in pursuance of their agreement. By the instrument itself, the subscribers agreed to "take," i. e., to subscribe for, the number of shares set opposite their names respectively, and "to pay twenty per cent. of the par value of said shares so subscribed, and that they would pay 'the same' to West in five days after the articles of incorporation were filed. The only money which the subscribers agreed to pay to West was for the stock which they should subscribe for to the plaintiff, and West was simply constituted the 'agent' for the corporation, to collect the amount which should become ‘due' under their subscription, and after its collection to hold it for the use and benefit of the corporation. By the same instrument, the subscribers appointed the appellants, together with one Shippee, as their 'agents,' and 'the agents of the corporation so to be formed,' with authority to negotiate for the purchaso' of property 'for said corporation,' and draw from West any or all moneys paid to him, 'and use said money for paying for same." " Giving to this language its reasonable construction, it was an authority to these three individuals, as agents of the subscribers prior to the organization of the corporation, 1 See infra, p. 500.

to make negotiation for the purchase of property, and that upon the formation of the corporation their agency for the subscribers should cease, and thereafter they should act for the corporation. They could not be the agents of the subscribers and of the corporation for the same purpose at the same time, inasmuch as the interests of the subscribers as individuals would be adverse to the interests of the corporation. The instrument does not provide that the appellants with Shippee would at any time be the custodians of the money collected by West. They were only to "draw,' from him such money as they might need to use in paying for any property that they should purchase for the corporation, and as it is not claimed that they have negotiated for the purchase of any property for the corporation, there was no occasion for them to draw any of the money from West, or for him to deliver it to them. They, as well as West, were at all times after the incorporation of the plaintiff only its "agents," and having no interest coupled with their agency, it was competent for the plaintiff to remove them at any time, and appoint other agents in their places, or itself assume the custody and disposition of the money. The finding of the court, that, upon the incorporation of the plaintiff, the appellants not only ceased to act as agents of the subscribers, but that "before any of the moneys were paid to West they repudiated such agency, and refused to act under said appointment, and wholly abandoned the same," fully established the right of the plaintiff as against their claim to the custody of the money.

The appellants, however, contend that the court below in its judgment disregarded the construction given to the agreement by this court in its opinion in the case of West v. Crawford, 80 Cal. 19, and that it was then held that the plaintiff herein had no right to the custody of the moneys which might be collected by West under that agreement. While there is some language in that opinion that upholds. this contention, the opinion must be construed with reference to the case before the court for its determination. That was merely whether West could maintain an action for the recovery of the twenty per cent. agreed to be paid by the subscribers, and his right to maintain such action was upheld upon the ground that the subscribers had made an express promise to pay it to him at a fixed date after the filing of the articles of incorporation. The only parties before the court were West and some of the subscribers, and the ultimate right to the custody of the money was not involved in the action. For the purpose

of meeting the argument of the appellants therein, that the money belonged to the corporation, and could be collected only by it in the manner provided by statute for collecting assessments, it was stated in the opinion that it did not appear from the agreement that the corporation would ever be entitled to receive the money. It was not intended thereby to preclude the corporation from asserting its right to the money, nor could any statement in the opinion have that effect. The corporation was not before the court, and as its right to the money had not been submitted by it to the court for determination, it could not be estopped by any statement in the opinion from subsequently