4 Paige Ch. 229 | New York Court of Chancery | 1833
The act under which the commissioners opened books of subscription for the capital stock of the Utica and Schenectady Rail Road Company, did not create a corporation, eo instanti, when that act took effect as a law. It only constituted such persons a body corporate as should thereafter become stockholders, in the manner prescribed in the act. If the whole corporate stock, and no more, had been subscribed, within the three days during which' the commissioners were bound to keep the books open, then those persons who had thus subscribed, and paid their money to the commissioners, would have acquired legal rights as corpora-tors. And they would also have had the right to call upon the commissioners, not as their agents or trustees, but as agents or officers of the public, to notify an election of directors, and to preside as inspectors thereof, by a committee of their body, as directed by the act. But in the event which has happened, of an excess of subscription, no person can be a stockholder of the corporation, neither does any corporation exist, nor has any person any interest in the stock, as the legal owner thereof, so as to authorize him to vote upon it, or to transfer it as stock, until a majority of the commissioners have proceeded to apportion the same, and to designate the persons who are to be the stockholders, and the amount which each is to receive. It is evident, therefore, if the counsel for the complainant are right in supposing that the distribution in this case was absolutely void, and not merely voidable, that the election of directors, which they now seek to restrain by injunction, cannot possibly affect the rights of their client. As there could be neither a corporation nor stockholders in existence, until after the stock was apportioned, the commissioners did not hold the stock, nor did they act, in the character of officers, servants, agents or trustees of the corporation or of the subscribers. But they acted merely as officers or agents of the government, appointed by the legislature to assist in the organization of a corporation and to create a stock in the same. The legislature might by law have designated the stockholders, as they had done in the case of other corporations, or they might have delegated that portion of their authority to others. But as they did not delegate that power to the
I apprehend, however, the complainant is under a mistake in supposing that the apportionment of stock in this case was absolutely void. It was at the most voidable, even upon the principles upon which the complainant supposes it was absolutely void. And if any portion of the stock has been apportioned to persons who ought not to hold it, or if any one has received more than his share, under circumstances which would amount to a fraud upon the commissioners, or upon the law, such persons must be deemed to hold it for the benefit of all or some of the subscribers who have received no stock, or who have not received stock to the extent of their subscriptions. Here, however, another difficulty presents itself upon the face of the complainant’s bill. He shows that from one third to one half of all the subscribers, and who had as much right to a portion of the stock as himself, were excluded from any participation in the same, by the apportionment of the commissioners. And it can hardly be presumed that even those to whom stock was assigned, obtained the full amount of their subscriptions. The complainant has shown by his bill that all these had relinquished their rights, or he should have filed
There is also another fatal objection to the granting of a preliminary injunction, in this case, which was not adverted to on the argument; which is, that there is no prayer for such process in the complainant’s bill A final injunction may be obtained upon the prayer for relief by injunction, or perhaps under the prayer for general relief: But to obtain a preliminary injunction, to restrain the defendants’ proceedings , pending the suit, there should be a formal prayer for such process, or some other prayer which is equivalent. Thus, in the case of Wood v. Beadell, (3 Simon's Rep. 273,) an injunction was asked for, as here, in the general prayer of the bill, but as there was no preliminary injunction asked for in the prayer of process, such injunction was refused. The complainant, however, was permitted to renew his application upon an amended bill.
I am also inclined to think that the complainant has waived his right to question the correctness of the distribution of the stock, by voluntarily withdrawing from the hands of the commissioners the monies which were required to be paid on subscribing. On this point, however, I do not wish to be considered as having formed a definite opinion, as I have not had leisure to examine it fully. The opinion of Chancellor .Sanford, in the case of the Commercial Bank of Albany, is not decisive, as in that case the complainant acquired an abso
It was not necessary in this case that the commissioners should give to each subscriber an equal, or any other amount of stock. Wheie a distribution, or apportionment, is to be made between or among airy number of persons, or a class of individuals, and no discretion is vested in those who are to execute the power of making the distribution, or apportionment, each individual of the whole number, or class of persons named, is entitled to an equal share. But if the designation of a class or number of persons is made merely for the purpose of pointing out those from whom the selection is to be made, giving to the person entrusted with the power a discretionary right of distvibxtting among that particular class as he shall think proper, then the whole may be allotted to one, or more of that class, to the exclusion of the others. Formerly the question as to the right of the person entrusted with the power, to exclude any one of the class designated, by giving what was called an illusory portion, was frequently agitated in the courts, and produced much litigation. But the revised statutes have forever put that question at rest in this state. By the 98th and 99th sections of the article relative to powers, it is declared, that where a disposition under a pow
It is suggested by the complainant’s counsel that it does not appear by the report of that case that the objection was there raised, that it was inconsistent with their character as commissioners to distribute the stock—to subscribe for and apportion a part thereof to themselves. It appears to me, however, impossible to suppose the chancellor could have overlooked this general principle, if he had considered it as applicable to the case; for, upon looking into the pleadings in that cause, on file in the register’s office, a more appropriate case for the
As the law had entrusted the commissioners with a discretionary power, to apportion the stock in such manner as should be deemed by them most beneficial to the interests of the corporation, it would undoubtedly be a fraud upon the commissioners, and upon the law, for an individual to subscribe for stock in his own name, under a secret agreement or understanding with another that the stock which might be apportioned to him should be held in trust for the benefit of the latter; provided it was done for the purpose of deceiving the commissioners, and thus inducing them indirectly to give to a person stock, when they would not have considered it for the interest of the corporation to have apportioned the stock to such nominal subscriber, if they had known he was to hold the same in trust for another person. In such a case, however, as the trust would be illegal, and not authorized by the laws of the land, as between the parties to such fraudulent arrangement, the legal title to the stock awarded to such nominal subscriber would be vested in him. If such stock, therefore, could be reached by a suit in this court, for the benefit of all or any of the real subscribers, it would be necessary for that purpose to proceed aginst the person in whom the legal title to the stock was vested. It would be equally a fraud upon the law and upon the other commissioners, if one of their number should subscribe for stock in the name of another person, and conceal that fact from his co-commissioners, for the purpose of obtaining indirectly more stock than the majority of the commissioners would have thought proper to have awarded to him, had they been informed he was to be the beneficial owner of the stock thus subscribed for in the name of another. On the contrary, as the statute in this case had imposed no limitation whatever upon the amount which any
The complainant’s supposition that certain portions of the stock were set apart as a separate fund for state officers, and editors, and was distributed to them without reference to the fact that they were subscribers for the stock, is contradicted by the affidavit of Mr. Townsend, the chairman of the board, who swears that the whole capital stock was apportioned to 1423 persons who were subscribers for the same.
As the complainant’s bill is defective, both in form and substance, and states no sufficient grounds to authorize the interference of this court with the distribution of the stock, as made by the commissioners, the application for an injunction must be denied, with costs.
See also Savory v. Dyer, Amb. Rep. 70; and Davile v. Peacock, Barnad. Ch. Rep. 27.
As to personal estate, see 1 R. S. 773, § 2.