Troy & Rutland Railroad v. Kerr , 1854 N.Y. App. Div. LEXIS 37 ( 1854 )

By the Court, Hand, P. J.

The plaintiffs cannot rely upon the admission in the answer, as proof that the defendant executed' the instrument set forth in the complaint. The defendant, in his second answer, in which he sets up his first special ground of defense, admits that he executed those instruments. But all the material allegations of the complaint had before been denied by the first answer ; and this admission was a mere confession, for the purpose of avoidance; and the plaintiffs cannot dismember a special plea, and take this confession as a general admission in the suit. Certainly not, whan he takes issue upon the plea. Were this so, every good special plea to the whole declaration, notwithstanding the general issue, would be an admission of the declaration generally, and would be a waiver of the general issue, and change the onus on to the defendant. (Harrington v. Macmorris, 5 Taunt. 228. Robins v. Maidstone, 4 Q. B. Rep. 811. Firmin v. Crucifix, 5 Car. & Payne, 97. Montgomery v. Richardson, Id. 247.) The plaintiffs, therefore, were under the necessity of proving that the defendant signed the subscription upon which they had declared.

He acknowledged the execution of the articles of association, and “ the papers thereto annexed,” which included the subscription ; that, if not in fact part of the articles, being then prefixed and must have been intended, as no papers were literally “ annexed.” This acknowledgment authorized the originals to be given in evidence. (Laws of 1833, ch. 271, § 9.) The copy of the articles certified by the secretary of state, were also admissible in evidence. (1 R. & 166, § 4. Laws of 1848, ch. 140, § 3. Laws of 1850, ch. 140, § 3. Peck v. Farrington, 9 Wend. 44. Haddock v. Kelsey, 3 Barb. 100.) And the repeal of the act "of 1848, by § 50 of the act of 1850, would not destroy the vitality as evidence, of a certificate given in 1849.

But if the subscription was not properly filed in the office of the secretary of state, such certificate could not make the copy primary evidence. (Bouchaud v. Dias, 3 Denio, 238. Dick v. Balch, 8 Peter’s R. 33; 2 Cowen Hill’s Notes, 1244. Jackson v. Leggett, 7 Wend. 377.) And there is no law requiring or authorizing a subscription to the stock of a railroad corporation, distinct from the articles of association, to be filed with the secretary of state. The articles and affidavit indorsed thereon, or annexed thereto, are to be filed.

But I am inclined to think, the subscription, so called, or first paper, was sufficiently proved, in this case. The caption of the first instrument reads thus : “ articles of association and that, and what are claimed to be the articles, bear the same date, were signed by the same persons, and at the same time; were acknowledged at one time; have but one certificate of acknowledgment ; were filed together; and, as appears by the certificate of acknowledgment, were then attached together. And the second one recites that “ the undersigned, being subscribers to the stock,” &c. They may be considered as one instrument, and were, no doubt', intended to constitute the articles of association. And if that were not so, as the second one was properly proved, and was affixed to the other, and therein the defendant stated that he was a subscriber; as there was no other subscription paper proved, the last paper naturally refers to the first, and admits it to be genuine.

The execution of these papers made the defendant liable to pay the amount subscribed by him. I had occasion, this term, to examine this subject in the case of the Fort Edward and Fort Miller Plank Road Co. v. Payne;^(a) and as here was an express agreement to pay for the stock, the defendant was bound to do so, notwithstanding the corporation had also the power of declaring his stock forfeited for non-payment of calls.

The defendant denies that he paid ten per cent when he subscribed, or at any other time ; and the plaintiffs claim the whole sum. Perhaps he could not have been considered as a subscriber to the stock, under the railroad act of 1850, (Laws of 1850, ch. 140, § 4,) which declares that no subscription shall be received or taken without the subscriber pays ten per cent. (Union Turn. Co. v. Jenkins, 1 Caines’ Ca. in Err. 86.) The laws of 1848 required ten per cent on the amount of stock subscribed to be paid in. But I do not think payment of that sum, by each subscriber was by that statute a condition precedent. Ten per cent upon the total amount subscribed was paid; and the fact that Mr. Stevenson advanced the money for a large portion of the subscribers made no difference.

If the length of the road was misstated, as there is no pretense of fraud, or even of negligence, that is not a defense; and besides, the defendant himself joined in the statement.

The objection that stockholders were admitted to testify, I suppose to be answered by the case of Montgomery Co. Bank v. Marsh, decided in the court of appeals in December, 1852.

The defendant also insists, that, admitting he became bound by his subscription, he has been absolved from that obligation, by the alteration in the articles of association, and by the sale and transfer of the road. As I understand the evidence, the whole line of the railroad of the plaintiffs has passed out of the charge of the corporation. But if this was unauthorized, the corporation was not thereby ipso facto dissolved. (See Brinckerhoff v. Brown, 7 John. Ch. 217; Att’y Gen. v. Bank of Niagara, Hopk. 354; Ward v. Sea Ins. Co.,7 Paige, 294 ; Mickles v. Rochester City Bank, 11 Id. 118; Angel & Ames on Corp. ch. 22.) It has been decided in England, that one railroad corporation cannot lease its road, or give up the management of its line, to another, nor delegate the powers conferred by statute, without the authority of the legislature. Those acts are ultra vires. (Beman v. Rufford, 1 Sim. N. S. 550; S. C. 6 Eng. Law and Eq. R. 106. Great N. Cos. R. Co. v. Eastern Cos. R. Co., 9 Hare, 313; Winch v. Birkenhead, &c. Railway Co., 13 Eng. Law and Eq. R. 506; Shrewsbury and Chester R. Co. v. Shrewsbury and Bir. R Co., 1 Sim. N. S. 110. Mac Gregor v. Official Manager of Deal and Dover Railway Co., 16 Eng. Law and Eq. R. 180.) Not even with the assent of all the shareholders. (East Anglian Railway Co. v. Eastern Counties Railway Co., 11 C. B. 775.) Though this may be done with the consent of parliament. ( W. LondonRailway Co. v. London N. W. R. Co., 11 C.B. 254; S. C. Id. 327. Lond. S. West R. Co. v. South Easterly R. Co., 8 Exch. R. 584. Ware v. Grand June. Water Co., 2 R. Sg Mylne, 470.) But such a contract would not discharge the liability of a subscriber to pay for his stock. If the pretended grant, whether intended to be a sale or lease, is void; and it was so considered in East Anglian Railway Co. v. Eastern Counties Railway Co., (supra ;) it cannot have that effect. And so, if it is not void, even though it shohld be a breach of duty on the part of the "directors, the stockholders have other remedies, and cannot withdraw from membership.

But the change of the articles of association in this case, presents a more difficult question. It is not claimed that this was not done pursuant to the provisions of the act which authorizes a railroad corporation, by agreement, to shorten its line of road, and change its termination, and reduce its capital; where the lines of two roads embrace the same line of location. (Laws of 1851, ch. 19.) Of "course it was not illegal to do so, and the corporation is not, in consequence, liable to any forfeiture at the suit of the people.

But the defendant contends that it is not binding upon him. That by reducing the capital stock down to a little more than one fifth of the original amount, and throwing up nearly a moiety of the road, another and different enterprise is substituted-for the one in which he engaged.

A mere neglect to make the whole of a road specified. in the articles of association, even without a legislative sanction, does not discharge the liability of a subscriber to pay for his stock; unless the powers and existence of the corporation have ceased in consequence of such neglect. It has been supposed a railroad corporation can be compelled, on the application of an. owner of land through which it was to pass, to complete its road. (Reg-v. York and North Midland Railway Co., 1 Ell. & B. 178. Reg. v. Great Western Railway Co., Id. 253. Blackmore v. Glamorganshire Can. Nav. 1 My. & K. 154. Reg. v. Eastern Counties Railway Co., 10 A. & E. 531. And see Ang. Sp Ames on Corp. 649, 650, and cases there cited; 3 Paige, 74, 75.) The cases in Ellis & Blackburn, however, were reversed in the exchequer chamber, the court holding that a statute declaring “ it shall be lawful for the Said company to make, maintain,” &c. was enabling and not obligatory. (1 Ell. & B. 858, 874, n. 875. And see Rex v. Birmingham Can. Co., 2 Bl. R. 708.) By sect. 47 of the railroad act of 1850, if the road is not finished and put in operation in five years, “ its corporate existence and powers shall cease.” Probably this is the only condition or limitation as to time, so far as the public are concerned. But this case does not depend upon neglect or delay. The company does not contend that the amendment is not legal and valid; or that it was improperly made; or that the new articles have not been acted upon; or that the corporation now has power to build the road farther than Eagle Bridge; or raise the original amount of stock. By the act under which this company was first organized, the legislature could amend, annul, and repeal the charter. (Laws of 1848, ch. 140, § 45. And see Const, art. 8, § 1; 1R. S. 600, § 8.) But it does not follow that stockholders "are obliged to accept every amendment, however complete and fundamental. These acts have been considered in the nature of contracts. Dartmouth College v. Woodward, 4 Wheat. 637. Ld. Eldon, in Blackmore v. Glamorganshire Can. Nav. supra; Ang. & Ames on Corp. 8, 27,729,730,732, and cases there cited.) The legislature may repeal and also amend the charter of a railroad corporation; but if the amendment go farther than matters of police and those duties that immediately affect the public, I think there is no compulsory power, and the corporation may decline to accept. Whether, and when, the charter may be declared forfeited by such non-acceptance, or non-compliance, are other questions. The corporators say we accept this charter, you reserving the power to amend it; but they do not agree to accept and use it after an amendment, no matter how injurious to their interests. A charter of a private corporation must not only be granted, but accepted; and the rule is the same as to an amendment. (Ang. Ames on Corp. 67 to 70.) It would hardly be contended that under this reserved power, a corporation for the construction of a railway, could be compelled to carry on a brewery, by an amendment of its charter to that effect. After the charter has been accepted, courts may in some cases, as was attempted by Lord Campbell and his associates in the queen’s bench, in the cases to which we have referred, compel the corporation to fulfill the purposes of its creation. And then too, as a general rule, the acts of the majority control, when confined to the ordinary transactions of the company, and consistent with the original objects of its''formation»- But every thing relating to the organization of a private corporation of the nature we are considering, as well as of copartnerships, is mere matter of individual contract: and the compact, which is to clothe its members with this artificial; corporate existence, must receive the voluntary assent of the whole. And as there can be no compulsion in the first instance, I do not see how there can be a claim upon the property of a member to aid a different enterprise, after a material change in the Constitution of the company. Besides, in this case the alteration was voluntary on the part of the corporation. Having been made, did it cancel the obligation of a stockholder to pay calls 1 Admitting that an alteration may discharge that obligation, was this not one incidental to the undertaking, and to which the stockholder must be considered impliedly to assent; and if not, was it so material as to be a ground of defense ?

The case is certainly not free from doubt. In the case of the London and Brighton Railway Co. v, Wilson, and Same v. Fairclough, (6 Bing. N. C. 135,) the court refused to let the defendant amend, and plead that the calls were made for other purposes than those warranted by the act of parliament; and that there had been deviations in the line of railway, and that the calls were made to carry on the railway after such deviations» That however was not an alteration of the constitution of the company, nor a deviation by legislative sanction. In another ease, by the subscribers’ agreement, application was to be made to parliament for an act authorizing the construction of a railway from D. via M. to A., and it bound the subscribers to submit to such regulations as the legislature should impose. The company sought for, and obtained an act, by which it was authorized to terminate its road at M. and to purchase and work a canal to A.; and the defendant was held liable for calls. (Midland &c. Railway Co. v. Gordon, 16 Mees. & Wels. 804.) And where a shareholder filed a bill to prevent a railway corporation from building a branch, alleging that the time limited for that purpose had expired, an injunction was denied. (Ffooks v. London &c. R. Co., (19 Eng. Law and Eq. R. 7.) And it was said by the vice chancellor, that the general principle, that the. majority cannot bind the minority in a joint stock company, as to an act not within the common contract, if it be an act to extend the liability of the whole body in a way not contemplated by the contract, as in borrowing money to extend the capital where the amount of the capital was limited by contract, had not been applied to corporate companies for a public undertaking, involving public interests and public duties under the sanction of parliament. And Lord Brougham said in Ware v. Grand Junc. Water Co., (2 Russ. & M. 470,) “a corporation may apply to the crown for a new charter; and the new charter, when accepted, binds the corporation and gives it new existence.” In that case, a shareholder attempted to restrain the corporation from using its funds to procure an amendment. And it has been held here, that an amendment of a charter, authorizing the construction of branches, did not exonerate a subscriber to the stock from the payment of calls. (Northern Railroad Co. v. Miller, 10 Barb. 260. And see Irving v. Turn. Co., 2 Penn. R. 466. York &c. R. Co. v. Reg. supra. Ang. & Ames on Corp. 67, 70, 459, 460.) And in White v. Syracuse and Utica Railroad Co., (14 Barb. 559,) an injunction on the application of a shareholder, to restrain a corporation in this state, from paying a subscription to the capital stock of a railway corporation in Canada, made under a statute of this state authorizing such subscription, or a loan-of credit on obtaining the consent of two-thirds of the stockholders, was denied. And acquiescence may preclude the stockholder from making the objection. In Graham v. Birkenhead &c. Junc. Railway Co., (12 Beav. 460,) an injunction to restrain the directors from applying the funds of the company in the completion of a part of their line with a view to the abandonment of the remainder, was denied, because the plaintiff had remained passive eighteen months. (And see Ffooks v. London &c. R. Co., supra. Steigerberger v. Carr, 3 M. & G. 191. Tredwin v. Bourne, 6 M. & W. 461.) And it was in proof, in this case, that in the fall of 1851, the defendant said he would pay his subscription.

But on the other hand, there are many cases that seem to favor the defense. In Lond. and Brighton R. Co. v. Wilson & Fairclough, the statute, in terms, created a positive indebtedness. In Ffooks v. London Spc. Railway Co., some of the plaintiffs had acquiesced. And the lord chancellor, in Graham v. Birkenhead &c. Railway Co., (supra,) stated the general doctrine, (that parties who have subscribed their money for óné purpose, are not to be told that the directors or a majority of the company, are of opinion, that it would be very advantageous to employ it for another. And again, “every proprietor when he takes shares,” said Jervis, 0. J., “has a right to expect that the conditions upon which the act was obtained will be performed; and it is no .sufficient answer to a shareholder expecting his dividend, that the money has been expended upon an undertaking which at some remote period may be beneficial to the line.” (11 C. B. 811.) And this doctrine sustained the defense of a subscriber, in an action at law for calls, in Hartford and N. Haven Railroad Co. v. Croswell; where the alteration had received the sanction of the legislature. (5 Hill, 383.) And has often been recognized and acted upon. (Middlesex Turn. Co. v. Swann, 10 Mass. R. 384. Same v. Locke, 8 Id. 268. Ang. & Ames on Corp. 483. Livingston v. Lynch, 4 John. C. 573. Bagshaw v. Eastern U. R. Co., 2 Man. & G. 389. S. C., 7 Hare, 114. Mount v. Shrewsbury and R. Co., 13 Beav. 1. Colman v. Eastern Co’s R. Co. 10 Beav. 1. McGregor v. Official Manager of Deal &c. R. Co., 18 Eng. Law and Eq. R, 980. Cohen v. Wilkinson, 12 Beav. 125. Reg. v S. Wales R. Co., 14 Q. B. 902. Stevens v. South Devon R. Co., 13 Beav. 48. Const v. Harris, 1 T. & R. 496. Stevens v. Land and Burl. R. Co., 1 Am. L. Reg. 153. McCullough v. Moss. 5 Denio, 567. Coll, on Part. by Perkins, §§ 198,9, and notes.) And in the case of the Northern Railroad Co. v. Miller, not a step had been taken towards the construction of branch roads. With all respect, I should probably have found it difficult to concur in the judgment in White v. Syracuse and Utica Railroad Co. One who had embarked his fortune in the construction of a railroad, perhaps to run past his own door, could hardly have supposed that, under the usual power of repeal and amendment reserved by the legislature, he could be forced to lend his money to, or become a member of, another railroad corporation chartered and doing business in a foreign country. We have one or two other similar enactments I believe, upon our statute books ; but the legislature seems to have given a more restricted construction to its powers; and, in a recent act to authorize the consolidation of certain railroad corporations, inserted provisions enabling a dissenting stockholder to receive compensation for his stock, and withdraw. (Laws of 1853, ch. 76, § 6.) Perhaps in England, amendments of a charter are not a ground of defense at law, in an action against a shareholder for the price of his stock. But since the Hartford and New Haven Railroad Co. v. Croswell, here, it seems otherwise, and in such an action, he may show that there has been an essential change in the original plan and purpose of the association, without Ms consent or acquiescence. I have been inclined to the opinion that tMs had been shown in the present case; but I understand my brethren tliink there was no such radical change of the plan and business of the corporation as exonerated the defendant, and that Ms subsequent promise is evidence of Ms acquiescence. Consequently there must be judgment for the plaintiff.

[Saratoga General Term, May 1, 1854.

Hand, Cady and James, Justices.]

Judgment for plaintiff.

C. L. Allen, J., being a stockholder, took no part in the decision.

(a) Ante, p. 567,