Braddock Electric Railway Co. v. Bily, Appeal, No. 208

Appeal, No. 208 | Pa. Super. Ct. | Jul 28, 1899

Opinion by

Beeber, J.,

In February, 1891, the defendant subscribed to twenty shares of stock of the plaintiff company of the par value of $50.00 each, and at the time of the subscription paid an assessment of $5.00 per share upon them, amounting in all to $100. A short time thereafter he received notice of a second assessment of the same amount, to recover which assessment this suit was brought. Some time in February, 1893, a certificate of the plaintiff company for two shares of stock was delivered to the defendant, duly signed by the president and by the secretary with the corporate seal attached. There was no evidence to explain why this certificate was given. The defendant says that he never asked for it, and he does not even pretend that when it was delivered to him any agreement was made to release bim from Iris liability to pay for the balance of the stock for which he had subscribed. The second, third and fourth assignments of error are to that part of the charge of the learned trial judge in which he said that the jury could find, from the delivery of this certificate for two shares of stock to the defendant, that the company had agreed to release him from the payment of the balance of his shares, there being no creditors that could be prejudiced thereby.

We think the court erred in the instructions complained of in these assignments. By his subscription the defendant not only made a contract with the company, but with the other stockholders. It is well settled that subscriptions to the stock oí a corporation are trilateral contracts. They are undertakings not only with the company and the commonwealth, but with all the other subscribers to the stock; Graff v. Pittsburg & Steubenville R. R. Co., 31 Pa. 489" court="Pa." date_filed="1858-07-01" href="https://app.midpage.ai/document/graff-v-pittsburgh--steubenville-railroad-6230701?utm_source=webapp" opinion_id="6230701">31 Pa. 489. It appears in the evidence in this case that the plaintiff had a bonded indebtedness of $41,000. It also appears that there were more than twenty other stockholders, in addition to the president and secretary of the company. Under such circumstances we do not think it was within the power of the president and secretary, nor within the power even of the board of directors, to release the subscription of the defendant to the stock of the company without a sufficient consideration. The assets of the company cannot be given away even by the directors, because it would be in violation of their duty to preserve them which they owe to all the other stockholders, to the bondholders and to the company itself: Bedford R. R. Co. v. Bowser, 48 Pa. 37. Even though we assume, as the learned trial judge did, that a mortgage was given as collateral security for this bonded indebtedness, it by no means follows that the property pledged in the mortgage would be of a value sufficient to pay the bonds. The bondholders, even though a mortgage has been given to secure their bonds, are still creditors of the plaintiff. It was therefore error for the court to say that the jury might infer an agreement to release the defendant from the payment of the balance of his stock simply because of the delivery to him of the certificate for the two shares. . The defendant himself does not say that there was any such agreement, and it would avail him nothing if he did, for, as we have seen, such an agreement would be invalid, and if an agreement to do such a thing would be invalid, an inference that there was such an agreement must be immaterial. These assignments are sustained.

The fifth and sixth assignments are to that part of the charge which mentioned to the jury the number of shares subscribed and paid for by the president, and stated'to it that the subscription of the defendant, if collected, would go to the other stockholders and mainly to the president. We think it was . error to charge the jury to this effect. It is immaterial and irrelevant how many shares the president owned, and it is clearly wrong to say that the money sought to be recovered from the defendant would go to the other stockholders and mainly to the president; It would go to the company itself. It was likewise wrong to say that if the president and the other stockholders agreed to release the defendant they had the power to do so, for there was no evidence whatever that there was any such agreement, and even if there had been, as we have already shown, it would be invalid under the facts in this case. Besides there is no evidence at all that any of the more than twenty other stockholders ever agreed to release the defendant. We sustain these assignments.

The first assignment is to that part of the charge of the learned trial judge in which he told the jury that if the defendant was liable at all he would be liable to pay the whole of the unpaid balance of the subscription. Whilst it might be properly said that it is immaterial to a proper decision of the issue in this case whether this is so or not, the truth of the statement is so evident that we do not think it can be said to be error for the court to make it to the jury. This assignment is overruled.

In our opinion, from a survey of the whole evidence, this was a ease for binding instructions in favor of the plaintiff but inasmuch as the plaintiff did not ask for such instructions it cannot be said to be reversible error for the court not to have given them.

Judgment reversed and venire facies de novo awarded.