Cumberland & O. V. R. R. v. Shelbyville, B. & O. R. R.

117 Ky. 95 | Ky. Ct. App. | 1903

Opinion of the court by

JUDGE O’REAR

Affirming.

This a suit by the Cumberland & Ohio Yalley Railroad Company, a railroad corporation, against the Shelbyville, Bloomfield & Ohio Railroad Company, and the Louisville & Nashville Railroad Company for the specific performance of an alleged contract of sale, by which plaintiff claims that the Shelby-ville, Bloomfield & Ohio Railroad Company undertook to •sell it (the Cumberland & Ohio Yalley Railroad Company) the railroad running from- Shelbyville to Bloomfield, formerly known as the Northern Division of the Cumberland & Ohio Railroad, and later known as the Shelbyville, Bloomfield & Ohio Railroad. The Louisville & Nashville Railroad Company is made a party defendant because it is now the owner of the property, and plaintiff claims that it purchased same with notice of the existing contract between plaintiff and the Shelbyville, Bloomfield & Ohio Railroad Company. The above named railroad had recently been purchased at a foreclosure sale by a certain syndicate of its bondholders', of whom P. B. Reed, J. Stone Walker, A. L. Schmidt, and others were members. The purchasers organized themselves into the corporation, the Shelbyville, Bloomfield & Ohio Railroad Company, and apportioned to themselves shares of stock in proportion to their respective interests as former bondholders. Peter Arl'und, a promoter and broker, conceived the seheme of selling .this property, or combining it, with other properties, into a more extensive and profitable railroad system. He, with certain associates, organized a corporation called the Southern Finance & Development Company, which they caused to be incorporated under the laws of West Virginia. This last named corporation took an option upon the capital stock of about all of the stockholders of the Shelbyville, Bloomfield & Ohio Railroad Company. The option provided that it was to continue for 30 days from its date, July 1, 1901, but that it might be extended 15 days longer upon the payment of $500 to P. B. Reed for the stockholders, but it must be accepted in writing and signed toy the development company within the time allowed by the contract, “otherwise, it is considered withdrawn.” It provided for the payment of certain claims against the railroad company, and for the payment to the stockholders for their shares of stock at the rate of $600 per share. This made the total consideration a little over $136,000, which was to be paid in cash upon the acceptance of the option. Arlund and his associates organized the appellant, Cumberland & Ohio Yalley Railroad Company, with-a view to ultimately taking over the railroad properties under the option named, when it should be accepted. The option was never accepted. Nor did the Southern Finance & Development Company, or any one* else for it, pay or tender to the stockholders of the Shelbyville, Bloomfield & Ohio Railroad Company, the purchase money, or any of it. A few days before the expiration of the option period it was discovered that at least one of the interests represented by the option could not be transferred within the time covered by the option. At least it Avas ho considered by the parties. It was then attempted to execute the agreement by an actual conveyance of the corporeal property (that is, the railroad and its rolling stock and other properties, instead of the transfer of the capital stock), the consideration to be the same as would have been paid for the capital stock; leaving the purchase price to be distributed among the original stockholders according to their interests. This agreement Avas in parol, Arlund’s companies had arranged (so he claims) to raise the purchase money upon mortgage bonds to be issued upon the property, and to be negotiated in Philadelphia.. The stockholders of the Shelbyville, Bloomfield & Ohio Railroad Company, at a called meeting adopted a resolution authorizing and empowering their board of directorsto execute a deed to all of the company’s property to the appellant railroad company upon the payment of $126,878.67. This resolution was spread upon the records of the company, and signed by the chairman of the meeting and the secretary. Immediately the board of directors of appellee company adopted a resolution authorizing and empowering their president, P. B. Reed, to execute and deliver the deed referred to upon the payment in cash of the consideration named. This resolution was adopted at a meeting of the board of directors at which a quorum was present, and was spread upon the minutes of the board’s meetings, signed by the president and secretary. The deed was drawn, signed, and acknowledged by the president and secretary of the grantor corporation, but retained in the possession of its president, and not delivered. It was so prepared that if the purchase price was paid on the 15th day of August, 1901, in Philadelphia, where the representatives of the corporations were to meet, it could be delivered and the transaction closed without delay. The board of directors of appellant, Cumberland & Ohio Yalley Railroad Company, by a resolution adopted, authorized the acceptance of the deed mentioned, and empowered its president, Arlund, to negotiatejnecessary loans to pay the purchase price. Arlund failed in his negotiations. The purchase price was not paid, nor has it ever been tendered.

The question is whether these resolutions altogether satisfy the requirements of the statute of frauds and perjuries, that a contract respecting the sale of real estate, or some memorandum thereof, must be in writing, and signed by the parties to be charged. The court is of the opinion that the option agreement for the sale of the shares of capital stock by the individual stockholders of the Shelbyville, Bloomfield & Ohio Railroad Company was an entirely independent transaction from the proposal to sell the railroad, so far as the corporation was concerned. It could have no effect whatever upon the title of the corporation to its property. The subsequent agreement between the president of the railroad company proposing to buy the property in question (that is, the roadbed, rolling stock, etc.,) and the president of the railroad company proposing to sell it, was a proposition in parol regarding the sale of real estate* and, not being in writing, was not obligatory upon either party. It was, of course, competent for the parties to- have executed it by writing sub-, sequently signed and delivered. It is claimed for the appellant thatthiswasdoneinthe matter of making of the entries upon the records of the respective corporations above referred to, and the signing and acknowledging of the deed by the vendor corporation, but which was retained in the possession of its president until such time as. the purchase money should be paid. To constitute a' valid contract for the sale of real estate, it is essential that the parties to it (the vendor and the vendee) should have agreed upon the terms and the property concerned; that this agreement should have been reduced to writing, and should have been signed by the party to be bound thereby; and that the contract so signed should have been delivered. A resolution adopted on the.part of the directory or at a stockholders’ meeting of a corporation declaring their willingness to sell the corporate property at a certain figure, and empowering the president to consummate the sale by executing and delivering the necessary deed, will not alone be a contract of sale. It is so far an unexecuted purpose or intention to sell.

It is no more a contract -of sale than would have been a power of attorney executed by the owner to an attorney in fact, clothing him with authority to mate a conveyance of the property upon the satisfaction of certain conditions. It was only an investiture of the president of the company with legal authority to make a valid contract of sale, which he otherwise did not have. The parties were left in precisely the same attitude, so far as having contracted with each other was concerned, as they were when the presidents of the two companies had respectively-agreed with each other in parol upon the terms. There was no time when the Shelbyville, Bloomfield & Ohio Railroad Company was legally bound to convey its property to the Cumberland & Ohio Yalley Railroad Company. All that the parties undertook to do in their effort to close that transaction was voluntary, and fell short of becoming obligatory as a contract, executed or otherwise.

The judgment of the circuit court dismissing appellant’s bill for a specific execution of the alleged contract concerning the sale of the property of the appellee corporation, Shelbyyille, Bloomfield & Ohio Railroad Company, must be affirmed.