18 Barb. 297 | N.Y. Sup. Ct. | 1854
This action was brought to recover against the defendant, as an alleged subscriber, in the sum of $20,000, to the plaintiffs’ capital stock. The calls were made at various periods, from May, 1850, to February, 1851. In the articles of association organizing the company, the defendant was named as a director, and subscribed thereto fifteen shares. This latter subscription, it was admitted, had been paid to the plaintiffs, prior to the commencement of the present action.
The defendant (who was not among the applicants to the legislature for the act declaring the public utility of a railroad, on the route subsequently adopted by the plaintiffs,) in May, 1849, signed a paper in circulation in the county of Rensselaer, headed “ Troy and Boston railroad,” which, after reciting the fact of the passage by the legislature of the act to determine and decide the public utility of a railroad- from the city of Troy to the
If the effect of the defendant’s subscription to the paper of the date of May, 1849, was to constitute him a member and stockholder, to the amount of such subscription, of the plaintiffs’ corporation, upon its springing into legal existence, there would-probably be no validity in the point that the plaintiffs’ only remedy is a forfeiture of the stock. The statute authorizes a forfeiture,- but this is to be treated as a cumulative remedy.Payment may be enforced by action on the undertaking of the stockholder. So, also, there would be no force in the objection that there is no express agreement to pay for the stock subscribed. It seems to be well settled that the obligation of actual payment is created by a subscription to a capital stock, unless plainly excluded by the terms of the subscription. But- the legal effect of executing the preliminary paper must have been to impose on the defendant the obligations and liabilities of a corporator and stockholder; else there could have been, properly, no recovery. This effect, if produced at all, must have followed by force of the statute under which the plaintiffs’ company was formed. If the paper, standing by itself, was not wholly inoperative and invalid as between the subscribers to it, it certainly could not be enforced by the plaintiffs in this way, and in this form of action. At common law, and not considered as a necessary part of a scheme for creating and imparting vitality to railway corporations, it was void for want of mutuality. Construed as an agreement to take stock, there is no consideration,- or corresponding.
The plaintiffs were incorporated under the general railroad act of 1848. We are therefore to look primarily to that statute, to determine the relation which the parties sustain to each other, and their rights, obligations and liabilities. If the act declares, expressly or by reasonable implication, who are members or corporators, and defines who are stockholders, and from whom the directors are authorized to require payment as such, it is controlling. In such a case the common law rules of membership would not apply. This being an attempt to enforce an alleged statute liability, created by the act authorizing the incorporation, and binding on its members, and not strictly a question whether the subscription was a valid promise at common law, made to a proper party, the case mainly depends on a construction, of the statute.
In construing the law under which the plaintiffs acquired a corporate existence, with the view of determining who are corporators and stockholders, but little is left to implication. The language employed in the first section of the act, to express the • legislative intention, is slightly equivocal; but, beyond that, all
My deductions from the act under which the plaintiffs derived their corporate existence are, 1st. That the preliminary paper, on which this action is sought to be sustained, was not an essential and indispensable part of the machinery devised by the legislature for bringing the corporation into legal existence, nor does its vitality depend in any measure upon it. Consequently it neither controls nor affects the relation which the parties to this suit sustained to each other, nor imposes any obligations upon the defendant, which the plaintiffs as a corporation have the legal right to enforce. 2d. That the act explicitly defines who are corporators and stockholders, and from whom the directors have, as stockholders, the right to demand payment. These only are the persons who subscribe the articles of association, or who, subsequently to perfecting the organization of the company, subscribed to its capital stock. Ho other description of persons can be charged as stockholders by a corporation formed under the general law of 1848. It is an ingenious theory of the plaintiffs’ counsel, that the preliminary subscription is the contract of the members of the association with each other, while the articles of association are the charter or contract with the state; and in the former and not the latter, which does not remain with the association, we are to look for the stock subscription. But the difficulty with the theory is that it cannot be sustained in all its parts and give a reasonable construction and effect to the stat- '
We are consequently of the opinion, that the learned judge at the circuit erred in holding that the railroad act of 1848 enforces an obligation of the description counted on in this case; and that the paper of the date of May, 1849, signed by the defendant, "was “ a valid and obligatory instrument in itself, upon which the defendant was liable in the then action.” Upon an examination of the railroad act, and putting what we deem a reasonable and not fanciful construction upon its provisions, defining and declaring the rights and.obligations of parties to be affected by it, we are led to the conclusion that the affixing of the defendant’s signature to such a paper did not constitute him a member of, or stockholder in, the plaintiffs’ corporation; that it was not a subscription to the plaintiffs’ capital stock, nor an instrument legally imposing on the plaintiffs the obligation to
The cases of Stanton v. Wilson, (2 Hill, 153,) and Hamilton and Deansville Plank Road Co. v. Rice, (7 Barb. 157,) are not in conflict with the views above expressed. Indeed, as authority in this case, they are inapplicable. Both may be regarded as enunciating correct legal principles, without intrenching upon the soundness of the conclusions arrived at in the present case. In Stanton v. Wilson, the defendant had signed the articles of association; and at the foot of which he subscribed for fifty shares of stock. The articles, though dated and subscribed before, declared in terms that the association should not commence until 1st January, 1839, and that the subscribers, the defendant and others, had associated according to the statute. All that the case decided was that, in legal effect, the contract of the defendant was made on the 1st of January, and was then to pay the corporation the amount subscribed. In The Hamilton and Deansville Plank Road Co. v. Rice, a controlling feature of the decision was,-that the defendant, though subscribing before, after the organization of the company had received from the plaintiffs, and accepted, a certificate of stock. The decision in Lexington and West Cambridge Railroad v. Chandler, (13 Metcalf, 311,) was under a special act of incorporation providing no rules of membership, and upon the ground that the defendant had constituted himself a corporator according to the common law. That part of the decision which has any application to the present case was upon a point not strictly before the court.
The decision at the circuit was placed distinctly and wholly upon the ground, that what was called the “ preliminary paper” was a valid and obligatory instrument in itself, upon which the defendant was liable in the then action. As a matter of law, he
The judgment of the circuit court must be reversed, and a new trial ordered, with costs to abide the event.
Harris, Watson and Wright, Justices.]