11 N.Y. 102 | NY | 1854
Lead Opinion
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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *107 I cannot agree with the defendant's counsel, that it was necessary to the incorporation of the Schenectady and Saratoga Plank Road Company, that the whole amount of capital stock should be subscribed before the filing of the articles of association. The first section of the act under which the company was organized, (Sess. Laws of 1847, p. 216,) permits the subscribers to elect directors, and to subscribe and file the articles of association, "when stock to at least five hundred dollars for every mile of the road so intended to be built shall be in good faith subscribed, and five per cent paid thereon," c. This has been so adjudged in this state, in the case of theHamilton and Deansville Plank Road Co. v. Rice, (7 Barb. 166.) A subscription of the whole amount of stock has never been held a condition precedent to a legal corporate existence, except when it was made so by the act of incorporation. (6 Pick. 23; 9id. 187; 10 id. 142; 1 Mood. Malk. 151; 4 Eng. L. andEq. 455.) That stock was subscribed, to the extent required by the statute, and that all the other preliminary steps were taken, was established in the mode required by the second section, viz. by an affidavit of three of the directors of the company, of whom the defendant was one.
Nor was it necessary that the whole amount of stock should have been subscribed, before calls of installments could be made. The act not only makes no such requirement, but it expressly permits (§ 39,) the directors of any company incorporated, c. to require payment of the sums subscribed to the capital stock, at such times and in such proportions as they shall see fit. It *108 first authorizes an incorporation to take place in subscribing a certain amount, (§§ 1, 2,) and then in section 39 authorizes the directors to require payment of the "sums subscribed." The decisions, therefore, in the courts of Massachusetts, (6 Pick. 23; 9 id. 187; 10 id. 142; 6 Cushing, 50,) relied on by the defendant's counsel, are entirely inapplicable. The same amount of stock subscriptions which is necessary to the organization of the company, is all that is requisite, as preliminary to a call for its payment by instalments.
The court rejected the offer of the defendant to prove that no notice had been given of the first election of directors. I think this was properly rejected, on the ground that the defendant could not avail himself of a neglect to give notice to any other stockholder. The defendant himself was present at that meeting, aud voted, and was elected a director. He has not suffered by an omission to serve notice, and he is not in a situation to object as to others.
I see no reason why the liability of the defendant on his contract was not full and complete. He cannot avail himself of the objection that it was without consideration. He made the promise to pay, not as a gratuity, but in consideration of the shares of stock he was to receive and his anticipated dividends. This subject is fully examined in the Hamilton and DeansvillePlank Road Co. v. Rice, (7 Barb. 164.) Nor was it any defense that the defendant had sold his stock to Boyd. That did not release him from his express promise to pay the plaintiff.
It is claimed that the building of the branch road, without the consent of the defendant, released him from his subscription and that the evidence on this point should have been admitted. The general act of 1847, under which the corporation was organized, reserved to the legislature the right at any time to alter, repeal or amend that act. That power was exercised in 1849, (Sess. Laws of 1849, p. 374,) by an act amending the act of 1847 in several particulars, and among others, conferring the right upon the directors of any plank road company, with the written consent of persons owning two-thirds of the stock, and with the written *109 consent of the majority of the inspectors, to construct branches to their main line, or extend their main line or change the route of their road or any part thereof. The defendant subscribed to stock under the original act, subject to the contingency that additional powers might be conferred or other changes made by an amendment of the law, and he stands now on the same footing as if his subscription had been made after the amendment of 1849. It was not offered to be proved that the building of the branch road was prejudicial to the defendant's interests, or to those of the corporation; nor was it pretended that there had been any fraud or breach of trust on the part of the directors of the corporation. The defendant's counsel seems to rely with much confidence on the case of the Hartford and New Haven RailroadCompany v. Croswell, (5 Hill, 383;) but that was an extreme case, and the change was one by which the nature of the business to be transacted by the company was radically changed, and the decision was put expressly upon the ground that the change made after subscription was plainly prejudicial to the interests of the stockholders. It is not certainly every extension of the main line, or construction of a branch, or change of route subsequent to subscription for stock, that will discharge a stockholder from his express agreement to pay for his stock. The change made may be unimportant, or may be, and in most cases doubtless is, beneficial to the stockholders. And where it is not claimed to be prejudicial, and the character of the contract is not altered, there can certainly be no reason for allowing a dissatisfied stockholder to take advantage of it. None of the cases recognize the right of a stockholder to complain where he has not been injured. (2 Watts Serg. 156; 2 Penn. R. 466; 10 Barb. 277; 2 Russ. Mylne, 470; 8 Mass. 270; 10 id. 385; 15Pick. 363; 1 N. Hamp. 44; 2 Am. Law Jour. N.S. No. 11, forMay, 1850.) The question was carefully considered in 10 Barb. 277, and in the recent case of White v. The Syr. and UticaRailroad Co., 14 Barb. 559.)
The case before us is also plainly distinguishable from that of the Hartford and New Haven Railroad Co. v. Croswell, and *110 the Massachusetts cases relied on by the defendants' counsel, in the controlling feature, that in these cases the legislature had not reserved the right to alter the charter of the company. In such case the assent of those interested was necessary to changes so great as were proposed.
I think none of the exceptions of the defendant were well taken, and that the judgment of the supreme court should be affirmed.
Concurrence Opinion
The defendant's first objection presents the question whether the whole amount of the capital stock of a plank road company formed under the general act of 1847, must be subscribed before the company can be duly organized as a corporation. The 1st and 2d sections of the act in question (Laws of 1847, ch. 210,p. 216) furnish the answer, "that when stock to the amount of at least $500 per mile shall have been in good faith subscribed and five per cent paid thereon, the subscribers may organize themselves into a corporation." In their articles of association they are to specify the amount of the capital stock and the number of shares of which it shall consist; but it is nowhere provided that it must all be subscribed at the time of organization. The other provisions of the same sections confirm this construction. The articles are to be filed in the office of the secretary of state, and thereupon the corporate body comes into existence. They are not however to be filed until five per cent on the amount of the stock subscribed thereto shall have been paid in cash; nor until an affidavit of at least three directors named in the articles is annexed to or indorsed on the articles, stating that the amount of capital stock required by the first section has been subscribed, and that five per cent on the amount has been actually paid in. The amount of capital stock required by the first section we have already seen to be "at least $500 per mile of the road intended to be built." There is no expression in either section which favors the idea, that the whole amount of the capital stock must be subscribed before the corporation can be created. *111
The second objection is not well taken. The affidavit of the three directors does show not only that the amount subscribed to the articles is at least $500 per mile of road intended to be built, but also that five per cent on the whole amount subscribed had been in good faith paid in, in cash.
The foregoing objections were also made the grounds of a motion for a nonsuit, which, so far as relates to those objections, was properly denied.
Some other grounds for that motion were also stated. 1st. That there was not sufficient evidence of the corporate existence of the plaintiff; and 2d. That the proceedings of the company in making and giving notice of the calls sued for had not been such as to enable them to recover.
As to the first ground, the third section of the act provides that a copy of any articles of association filed in pursuance of the act, with a copy of the affidavit aforesaid indorsed thereon or annexed thereto, and certified to be a copy by the secretary of state or his deputy, shall in all courts and places be presumptive evidence of the incorporation of the company and of the facts therein stated. The legislature certainly has power over the law of evidence, and has as certainly exercised that power in this section, by making the production of the certified copies of the papers mentioned presumptive evidence of the incorporation of the company. That was sufficient evidence of the corporate existence of the plaintiff, until it should be rebutted by proof on the defendant's part.
As to the second ground before mentioned, it appears that the board of directors made the calls by resolution on the 8th of March, 1849; that the defendant was then one of the directors, was present and voted for the resolution. The resolution directed the treasurer to issue a circular letter setting forth the condition of the company as regards contracts made, c. and at the same time to give notice that calls for the payment of instalments on subscriptions for stock were thereby made to meet the contracts mentioned, and that the president sign the circular with the treasurer. The amount of the calls and the times of payment *112 were specified in the resolution. No evidence had been given when the objection under consideration was taken, of any other notice to the defendant, of these calls, than that which he had received by being present at the time of its adoption. The objection is raised upon § 39 of the act, which enacts that the directors of any company incorporated under this act may require payment of the sums subscribed to the capital stock, at such times and in such proportions and on such conditions as they shall see fit, under the penalty of the forfeiture of their stock and all previous payments thereon, and they shall give notice of the payments thus required, and of the place and time when and where the same are to be made, at least thirty days previous to the payment of the same, in one newspaper printed in each county in or through which their road is located, or by sending such notice to such stockbolder by mail, directed to him at his usual place of residence.
At a subsequent stage of the case, the plaintiffs gave in evidence printed notices of the calls signed by the president and treasurer, in pursuance of the foregoing resolution, which notices specified that the payments were to be made at the office of the company or remitted by mail to the treasurer, and also proved that the defendant volunteered to deliver notices to the persons along the line of the road, and that a package of said notices was sent and delivered to him for that purpose. If the proof was insufficient when the nonsuit was moved for, and the defect was afterwards supplied, a new trial would not be granted on account of an error thus afterwards obviated. Taking all the proof on the point together, I think it was shown that the defendant had sufficient notice of the calls, to charge him. Personal service of due notice is clearly more advantageous to the defendant, than either an advertisement in a newspaper or a notice sent by mail. That he received, in addition to the knowledge on the subject derived from his personal participation in the passage of the resolutions. The section does not require the place of payment to be specified in the call for payments but only in the notice of the calls, and the resolution was authority to the treasurer *113 and president to make the instalments payable at the office of the company, it specifying no different place. Upon the whole case, therefore, if notice to a director personally present and joining in making the call is necessary, the evidence shows that the defendant had sufficient notice to render him liable.
The defendant was properly precluded from showing that no notice was given of the first election of directors, and that some subscribers were not present at the election. He was present, signed the certificate which states that he and eight others had been duly elected by the subscribers to be directors for the first year and until others should be chosen, and swore in the affidavit filed in the secretary of state's office that he was a director. After this and after the company had gone into operation, he was not at liberty to controvert the fact of the regularity of its proceedings in becoming incorporated. If the question could be opened at all, it could, I think, only be inquired into upon quo warranto.
Whether the defendant, after a transfer of his shares in good faith to a solvent person, remained liable for calls made before the transfer but becoming payable afterwards, depends upon the statute and his agreement. His agreement was to pay to the company the amount of his subscription when called for by the directors. The statute does not as is sometimes the case authorize calls upon "stockholders" merely, but gives power to require payment of the sums subscribed, without specifying the persons from whom payment may be so required. I think that from subscribers they have a right to require payment according to their agreements, and that this liability can only be extinguished in those modes in which ordinary liabilities to pay money are extinguishable. In order to dispose of this case it is not however necessary to go so far; for here the calls were actually made before the transfer.
The remaining question in the case relates to the effect upon the defendant's liability of the construction by the company of a branch road under the act of 1849, (ch. 250.) That among other things provides that the directors of any plank road company *114 formed under the general law before mentioned may, with the written consent of the holders of two-thirds of the stock and of a majority of the inspectors, construct branches to their main line, or extend their main line or change the route of their road. This act took effect as a law, April 26th, 1849. Prior to that time the defendant had transferred his stock. He was not then a director or stockholder in the company. In July, 1849, the directors, under the act above mentioned determined to construct and commenced the construction of a branch road, and it was offered to be proved that neither the defendant nor Boyd his transferee had assented to the building of such branch road.
The first section of the act of 1847 subjects the corporations founded under its provisions to the 3d and 4th titles of chapter 18 of the first part of the revised statutes. One of these is that the charter of every corporation that shall hereafter be granted by the legislature shall be subject to alteration, suspension and repeal, in the discretion of the legislature. This condition is thereby engrafted upon the original constitution of companies formed under the act. The subsequent act was passed and operates under that reservation of power to the legislature. The corporate property is subject to that power, by reason of the assent to its exercise, implied from and by an organization under the act which reserves it. Every one who enters into such a company is aware of the reservation of the power and of the possibility of its exercise and trusts, as in many other matters he must trust, to the wisdom and justice of the legislature that this power will not be abused. In the Hartford and New HavenRailroad Co. v. Croswell, (5 Hill, 383,) and in the cases there cited as holding the same doctrine, the legislature had reserved no such power, and the acts there involved were held to violate the provision of the constitution of the United States, which forbids the enactment by a state of any law impairing the obligation of contracts. The persons who contract to take shares in a company under such an act, contract subject to the same reservation of power. The courts are bound to read their agreement with the legislative condition. They agree to take and *115 pay for the shares for which they subscribe, subject to the power of the legislature to alter or repeal the charter of the company, and it does not lie in their mouths to complain that the power has been exercised.
The judgment below should be affirmed.
Judgment affirmed.
