142 Ind. 383 | Ind. | 1895
Lead Opinion
The appellant, Mioses Bradford, sued the Frankfort, St. Louis and Toledo Railroad Company, Sylvester H. Kneeland, The Bluffton, Kokomo and South Western Railroad Company, and the Toledo, St. Louis and Kansas City Railroad Company, on the 14th day of April, 1886. By cross-complaint the Frankfort, St. Louis and Toledo Railroad Company alleged, against her co-defendants, substantially the same facts pleaded in the complaint. The relief sought in each, said complaint and cross-complaint, was to declare the invalidity of a consolidation of the Frankfort, St. Louis and Toledo
The principal question before this court arises upon the ruling of the circuit court in overruling the demurrers of the appellants, Bradford and the Frankfort, St. Louis and Toledo Railway Company, to the affirmative answers of the appellees to the complaint and cross-complaint. The answer to the complaint alleged the presence, active participancy, and concurrence of Bradford in the meetings of the stockholders of May 11, 1881, and February 21, 1882, that he voted to change the number of directors, voted for the five chosen, voted for the consolidation and voted to confirm the consolidation agreed upon. It was alleged in both the answer to the complaint and
It is further alleged, in each of said answers, that H. R. Low & Oo., a railway construction company, by contract with the Frankfort, St. Louis and Toledo Railroad Company, had agreed to construct a line of railway from Warren, Huntington county, to Kokomo, Howard county, for a stated sum per mile, for all of the stock in said company, excepting the stock to issue to localities voting aid to such construction, and for certain first mortgage bonds of said railway company; that pending such contract, and while said railway was under construction, the construction company contracted with the Toledo, Delphos and Burlington Railway Company, to construct, for said latter company, a railway over the same line,
The sufficiency of the notice of the stockholders’ meeting of May 11, 1881, and whether the act of the Legislature of June 17th, 1852, is constitutional, would seem to be wholly immaterial, if the directors, consisting of five members, were de facto officers, or if the action of the stockholders, in the meeting of February 21st, 1882, had ■the effect to bind the Frankfort, St. Louis and Toledo Eailroad Company by the articles of consolidation. And, it would seem that, whether the act in question was constitutional, or whether the Frankfort, etc., company was estopped by the action of ninety-seven per centum ■of its stock, in making -the consolidation, directed February 21st, 1882, the appellant, Bradford, by his particiqjancy in all of the proceedings, which he characterizes ns fraudulent and without authority, and in which he acquiesced for nearly six years, and until new rights-attached and large investments are made, should have no standing to claim the overthrow of his own action.
Our first inquiry, therefore, will be as to the validity -of the action of the stockholders of the Frankfort, St. Louis and Toledo Eailroad Company, of February 21st, 1882. The meeting was called by thirty days’ publication of the time, place, and object thereof; ninety-seven per centum of the capital stock was represented at, and voted in favor of, the consolidation, and directed the president and secretary to execute the articles of consolidation, which were read to, and approved by, the meeting, and said articles were executed by said officers, as directed. By section 3893, R. S. 1881, (section 5143, R. S. 1894), it is provided that special meetings of the stockholders may be called at any time, “by giving thirty days’ public notice, of the time and place of the meeting, * * in a newspaper published in each county
Much of the contention of the appellants rested upon the assumption that, under the. laws of Illinois, and of Ohio, the action of the stockholders of the cross-complainant, on the 21st day of February, 1882, was invalid, because of the failure, in obtaining the consent of such stockholders to said consolidation, to observe such laws in the notice of the meeting, and in other respects relating to the separate action of said company. This assumption arose upon sections 3971, 3975, R. S. 1881; sections 5257, 5262, R. S. 1891. These sections gave power to the Frankfort, St. Louis and Toledo Railroad Company to consolidate and merge its stock with that of any other company, making of such consolidated companies one joint stock company, “upon such terms as may be by them mutually agreed upon, in accordance with the laws of the adjoining State, with whose road ■ or roads connections are thus 'formed.” We do not believe that it was the legislative intention, in this provision, to incorporate by reference the laws of Illinois and Ohio as a part of our law for the determination of the distinct rights, powers and privileges of an Indiana railway company. We cannot concur in the theory that this enactment was intended to provide that, when
Up to the point of consolidation there was no irregularity, or possible invalidity, of the proceedings of the Indiana corporation, unless it arose from the alleged want of authority in the board of directors, consisting of five members, to call the meeting of February 21, 1882. The statute directed the call by tbe board and it is alleged in the answers, that the call was by order of the board. If, from the want of power to constitute a
In the present case the corporation, upon the letter of the statute, elected five directors, and turned over to
But, conceding the existence of the irregularities in the proceedings of the consolidation, though none occur to us to affect the validity of the consolidation, we are confronted with the proposition that the present company, and we may say the same of the organization by consolidation, is a de facto corporation, sustaining an important relation to the public and exercising powers and privileges under the laws of the State, with the acquiescence of the authorities of the State. Such being the case, can a constituent corporation, complaining of such irregularities, attack and overthrow the defacto corporation, thereby dissolving such corporation, dislodging the interest of the public and condemning the corporate rights of that corporation ? The interests of the public forbid it, and, if the irregularities complained of were ultra vires, the attempt to do so is but the usurpation of the exclusive prerogatives of the State. The corporation, the Frankfort, St. Louis and Toledo Eailroad Company, occupied no better or different attitude than that occupied by Bradford. It participated in every step essential to the creation of a de facto corporation by consolidation, and it has stood by for years permitting mortgage foreclosures as upon its property, permitting purchasers to acquire supposed titles and new corporations to form, to purchase, to consolidate with still other corporations, and large sums to be expended in extending the gauge, suffering mortgage bonds to be issued and put upon the market, all without question. Leaving out of view the rights of stockholders not present at the 21st of February meeting, and offering no
Many phases of the various questions involved in the record have been very fully and ably discussed by counsel, and while we do not follow them through each step in this contention, we think we have reached the essence of the issue and that all of the phases presented by counsel must inevitably fall within the principles which have controlled our conclusions, unless possibly it be that as to whether title to the property in question passed by and under the decree foreclosing the mortgage by the Toledo, Delphos and Burlington Eailroad Company. As to that question, if we are correct in concluding that under the consolidation the property passed beyond the reach, in this suit, of the appellants, it becomes unimportant to inquire as to the effect of the foreclosure standing alone. In our opinion the judgment of the circuit court was clearly right, and it is affirmed.
Note. — The character of directors de facto in corporations is the subject of annotation to Waterman v. Chicago & I. R. Co. (Ill.), 15 L. R. A. 418.
Rehearing
On Petition for Eehearing.
The appellee the Frankfort, St. Louis and Toledo Eailroad Company has presented an earnest petition for a rehearing. The only question presented which did not receive full consideration on the original hearing, is as to the effect of a notice given by Moses Bradford at the time of the foreclosure sale mentioned in the original opinion, to the purchasers, to the general effect that he held paid up stock in said company; that he had paid taxes voted in aid of the construction of said road; that the then existing consolidation of said company with the Toledo, Delphos and Burlington Eailroad Company, and the Toledo, Cincinnati and St. Louis Eailroad Company, was not legal and that he would “contest the validity” of the alleged consolidation. The effect of this notice, it is insisted, was to preclude the
This result was, we think, correctly reached upon the theory that it was unimportant whether the organization
The petition for a rehearing is overruled.