The Schenectady and Saratoga Plank Road Company against Thatcher

The Schenectady and Saratoga Plank Road Company against Thatcher. It is not requisite to the incorporation of a plank road company under the general act, that the whole amount of the capital stock should he subscribed before filing the articles of association. It is sufficient that stock to the amount of #500 for every mile of the proposed road is in good faith subscribed and five per cent paid thereon. The directors have authority to require payment of subscriptions for stock before the whole capital is subscribed. A subscriber to the stock in a proposed company, who is present at the first election and is there elected a director and acts as one of the board, will not he permitted afterwards, in a suit against him by the company, to object to the validity of its organization on the ground that no notice of such election was given, and that some of the subscribers did not attend. A person is liable to the company for the amount of his subscription, although after calls were made, and before they were payable, he assigned his stock to a responsible party and had it transferred to and an account opened with him on the books of the company. The court will not reverse a judgment for an erroneous refusal to nonsuit where the defect in proof is supplied during the trial. Per Johnson, J. It is not a defense to a subscriber to stock, who as a director of the company, voted for the resolution requiring payment of subscriptions and delivered to other subscribers notices thereof, that notice of the required payments was not given to him pursuant to the 39th section of the act. Where a company was incorporated in 1848 under the plank road act of 1847^ and the defendant then subscribed to its stock, and the company, by virtue of a subsequent act ol'the legislature, without his consent increased its capital and applied its funds to the construction of a branch road, not authorized by its original organization; Held, that the defendant was not thereby released from his subscription. Appeal from a judgment of the supreme court sitting in the fourth district. The action was brought to recover a balance due on a subscription by the defendant for one hundred shares of plaintiff’s capital stock, and was tried at the Schenectady circuit before Justice Willard, without a jury. The plaintiff proved that on the 23d of Dec. 1848, the defendant with others subscribed a written instrument by which he agreed to take and pay for one hundred shares, at fifty dollars each, of the capital stock of a plank road company to be incorporated to construct a plank road from Schenectady to Saratoga Springs, five per cent thereof being paid down and the residue to be paid when called for by the directors of the corporation according to law. The plaintiff’s counsel read in evidence, (the same having been objected to in due season on the two grounds first specified on the motion for a nonsuit hereafter stated,) a duly certified copy of the articles of association of the plaintiff, and of subscriptions thereto and affidavit annexed; the articles were dated December 23d, 1848, and stated among other things that the company was formed to construct a plank road from Schenectady to Saratoga Springs; that the distance was 22 miles ; that the capital stock was $50,000, divided into one thousand shares of $50 each, and that the defendant and eight others named “ who had been duly elected by the subscribers,” should be the directors of the company for the first year; the subscriptions annexed were for $29,800 only of the stock, and among these was that of the defendant for one hundred shares; by a clause in the articles, the subscribers agreed to pay the amount of their subscriptions whenever called for by the directors-; the affidavit annexed was made by the defendant and two other directors on the 26th of said December, and stated that they were directors, “ that five per cent of the whole amount subscribed in said articles has been paid in in good faith in cash by the persons subscribing, which amount is at least five hundred dollars for every mile of the road intended to be built under the articles, and that the five per cent is in the hands of the treasurer of the company.” It was proved that the plaintiff was conducting business as a company and receiving tolls, and had been since July, 1849; that the defendant was at the election of and one of the firáí directors of the company, and acted as superintendent from its organization, till in April, 1849;' that on the 8th of March, 1849, the board of directors passed a resolution “ that the treasurer issue a circular letter to the stockholders, setting forth the condition of the company as regards the contracts made and the prospect of the completion of the road, &c. and at the same time give notice that the following calls for the payment of instalments on subscriptions for stock are hereby made to meet these contracts, viz: and that the president sign said circular with the treasurer;” that the defendant was present at the meeting at which this resolution was passed, and voted for it; that defendant paid "five per cent when he subscribed for the stock, and the ten per cent required on the 10th of April had been paid. It was admitted that the defendant transferred 50 shares of his stock to others, who had paid for the same. The plaintiff then rested. The counsel for the defendant thereupon moved the court to nonsuit the plaintiff on the grounds, 1. That the articles of association showed that the whole amount of the capital stock was not subscribed before filing the same: 2. That the affidavit annexed to the articles did not show that the amount of capital stock required by the act of 1847, (ck. 210,) and the amendments thereto had been subscribed or five per cent on that amount had been actually paid in before filing the articles; -3. That the plaintiff did not prove it was a corporation ; 4. That the resolution of the directors did not specify a place of payment, and that a notice of the calls for payments is not shown to have been served thirty days before the times when they were required, or properly served; 5. That the calls for payments and notice thereof were not made or served as required by the 39th section of the act. The motion was denied, and the counsel for the defendant excepted. The counsel for defendant offered to prove that at the time the call for the payment of the said instalments was made, the whole amount of the capital stock as fixed by the articles of association, had not been subscribed. This evidence was objected to by the counsel for the plaintiff as immaterial; the same was excluded, and the counsel for the defendant excepted. The counsel for the defendant offered to prove that no notice was given of the election for the first directors of said company, being that at which the directors named in the articles were elected, and that some of the subscribers for stock were not present at or notified of 8”ch election. This evidence was objected to as immaterial arid excluded, and the counsel for defendant excepted. The defendant proved that on the 20th of March, 1849, he transferred the fifty shares of stock, to recover the balance upon which this suit is brought, to one Boyd; that the same were on that day transferred to Boyd on the books of the company, and a new account opened with him as to the same; and that Boyd paid the instalment of April 10,1849, but refused to pay the others. The counsel for the defendant offered to prove that on the 9th of July, 1849, the plaintiffs, in pursuance of the act of the legislature, passed April 6, 1849, (Laws of 1849, p. 374,) decided to and did proceed to construct a branch to the road authorized in its articles of association and said subscription paper, and for that purpose increased its capital and applied its funds prior to the commencement of this suit; and that neither the defendant or Boyd ever consented thereto, or to the passage of said act of 1849 by'the legislature. This evidence was objected to, excluded, and the counsel for the defendant excepted. After the defendant rested, the counsel for the plaintiff proved, that pursuant to the resolution of March 8, circulars signed by the president and treasurer of the company were made out, addressed to the stockholders, giving notice of the calls for payments as mentioned in said resolution, and stating that the amounts might be paid at the office of the company or remitted by mail to the treasurer, and that a package of these circulars was delivered to the defendant to be handed to the subscribers for stock residing on the line of the road, he volunteering to deliver them to such subscribers. The defendant in due sear son objected to this evidence, on the ground that it was not such notice as was required by the statute, and that there was no evidence that such notice was served on or sent him by mail. The objection was overruled, and he excepted. It was proved that no notice of said calls was published in any newspaper. After the evidence was closed, the counsel for the defendant insisted that the plaintiff was not entitled to recover, for the reasons stated in the motion for a nonsuit. He also insisted that the transfer of the fifty shares of stock to Boyd, the entry of such transfer on plaintiffs’ books and the payment of an instalment thereon by Boyd, discharged the defendant as to the subsequent instalments; he also insisted that in the resolution requiring payments no place where they should be made was specified.; that the directors had omitted to publish notice of said calls in a newspaper, or to send notice of the same to the defendant as required by the act, and that for these reasons the plaintiff could not recover. The justice overruled the objections and decided that the plaintiff was entitled to recover the balance due upon the subscription for the fifty shares of stock tranferred to Boyd, and ordered judgment in favor of the plaintiff for such amount, being $2371,56. To which rulings and decision the counsel for the defendant excepted. The judgment was affirmed by the supreme court at a general term. The defendant appealed to this court. Wm. L. Learned, for the appellant. P. Potter, for the respondent, [MAJORITY — Parker, J. Johnson, J.] Parker, J. 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 the Hamilton 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; 9 id. 187 ; 10 id. 142; 1 Mood. & Malk. 151; 4 Eng. L. and Eq. 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 instalments 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 first authorizes an incorporation to take place in subscribing s 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 Deansville Plank 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 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 Railroad Company 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 ; 15 Pick. 363 ; 1N. Hamp. 44; 2 Am. Law Jour. N. S. No. 11, for May, 1850.) The question was carefully considered in 10 Barb. 277, and in the recent case of White v. The Syr. and Utica Railroad 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 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. Johnson, J. 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. 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, &e. 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 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 madé, 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 stockholder 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 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 óf 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 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 Haven Railroad 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 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.