Case ID: scl_39/html/0145-01.html
Source: Caselaw Access Project
Author: {"author": "Evans, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Greenville & Columbia Rail Road Company vs. James Woodsides.
    
    The charter of a Rail Road Company provided that each stockholder should, at the time of subscribing, pay the first instalment in money: the defendant became a subscriber, and, for the first instalment, the commissioners took his promissory note payable to themselves — gave him a receipt as for money — reported him as having paid, and he acted by his proxy in organizing the company: the note was afterwards transferred by the commissioners to'the company: — Reid, that, even conceding (which, semble, the Court were not inclined to do) that the receipt of the note was not such a payment as the charter required, the defendant, by acting as a stockholder in organizing the company, had waived the irregularity, and could not refuse to pay the rest of the instalments called for.
    
      Before Frost, J. at Greenville, Fall Term, 1851.
    The report of his Honor, the presiding Judge, is as follows.
    “ The action was brought to recover ten instalments on twenty-five shares. It was not disputed that the defendant had subscribed for that number. In the certified list of subscribers, made by the commissioners, the name and number of shares of the defendant are entered, with the payment of one dollar on each share. No money was, in fact, paid by the defendant.— He gave his note to the commissioners for $25, dated 6th April, 1847, and payable to them on demand. This note, together with a number of other notes, taken by the commissioners for the payment required at the time of subscribing, in the whole amounting to $1,293, were delivered to Mr. Elford, for the company, by Mr. Duncan, one of the commissioners, the 19th November, 1849. This note is the subject of a suit, now on the docket, in which the commissioners, “ for the use of the G. & C. R. R. Co.” are plaintiffs.
    “ The defendant offered to prove that he suffered his subscription to be entered on the express condition that the road was to be located through Laurensville. Wm. Choice was called as a witness. He said that the defendant had made it the condition of his subscribing, that the road should be so located. Being cross-examined, he said that no one of the commissioners was present. He was acting as the agent of the commissioners. The declaration was made in his presence. On reflection, he stated that the declaration was made before any commissioners had been appointed. It was after the date of the power of attorney. The defendant’s attorney said that Mr. Duncan could prove the same declaration. The evidence was held to be inadmissible.
    “ The evidence taken in Coleman’s case was admitted in this.
    “It was held that the defendant never having complied with the requirement of the Act, to pay one dollar on each share, at the time of subscribing, is not a stockholder in the company; and that his having been represented in two meetings of the company, by proxies, was tortious — conferring upon him no right as a stockholder, and creating no liability. It was considered that the payments towards the stock which, by legislative Act, are made the condition precedent of a grant of franchises to a joint stock company, should be/strictly enforced. Subscriptions, without the required payments, operate as a fraud on bona fide shareholders and on the public. They would be treated as void on a quo warranto, to vacate the charter. If void in law for one purpose, they must be void for every purpose. If one is not a stockholder in consequence of not having performed an essential condition, required by the charter, he cannot be made a stockholder by compulsion. The giving of a note to the commissioners was clearly not a payment within the intent and purposes of the Act. The note created no liability which was not contracted by the subscription for the shares. It gave no greater security to the public. If the subscription of the defendant, without the payment on each share, required by the charter, constituted him a stockholder, then all other subscriptions, without such payment, would constitute the subscribers stockholders ; and the company might assume a corporate existence and claim the franchises granted by the Legislature, without a compliance with the required conditions. The public interest and good faith between the subscribers to a joint stock company, require the exaction of a strict performance of all the conditions of the charter; and more especially of so important a condition as the payment of money on the subscription of shares. The transaction was illegal whereby the defendant engaged to take' stock, without making the required payment, and the plaintiffs accepted that engagement, and admitted the defendant as a stockholder. Such an arrangement, if legal efficacy be attributed to it, must be prolific of fraud.
    
      “ On these views of the case, the opinion was expressed that the plaintiffs could not recover, and, therefore, a nonsuit was taken, with notice of a motion to set it aside. On the same grounds, nonsuits were taken in two or three other cases.”
    The plaintiffs now moved this Court to set aside the nonsuits ordered in this case, and others of similar character, on the following grounds.
    1. Because his Honor erred in holding that the defendants were released from their liability to the Rail Road Company as stockholders, because they had paid the first instalments on their stock to the commissioners by promissory notes, which the commissioners had receipted for as money, and had so reported to the company.
    2. Because his Honor erred in holding that the transfer of these notes to the treasurer of the Rail Road Company was a release of the stockholders from their liability to the Company, although the said notes were payable to the commissioners, and not to the company.
    
      Gregg, Perry, for appellants,
    cited Union Turnpike Company vs. Jenkins, 1 Caine’s Rep. 381; Hibernia Turnpike Company vs. Henderson, 8 Serg & R. 219 ; 11 Johns. R. 100; Smith’s Stat. & Constitutional Law, § 670; 5 Har. & Johns. 122; 10 Watts R. 364; 16 Sergi & R. 140; 1 Sandf. Ch. 411; 3 Strob. Eq. 290; 1 Rich. Eq. 475 ; 2 Rich. 368.
    
      Sullivan, contra,
    cited 3 Strob. 245.
   The opinion of the Court was delivered by

Evans, J.

The question made in the brief is, whether the-circuit court was in error in deciding that the plaintiffs could not recover, because the defendant, at the time he subscribed for the shares in the company’s stock, did not pay. as directed by the charter, twenty-five dollars in money, (11 Stat. 324) but gave his note payable to the commissioners, and which has since been transferred to the company.

If the defendant had done no more than subscribe for the shares, there would be authority for saying, that a subscription without payment, was a violation of the terms on which the charter was granted, and a fraud on the public. (1 Caine’s Rep. 381; 8 Serg. & R. 219). But in a later case, (16 Serg. & R. 140,) the Court seemed to think the public could redress its wrongs by scire facias or quo warranto, but that the subscribers might be bound. But this case steers clear of this diificulty.— Here the defendant gave his note for the payment and received his receipt for the same, as money. The commissioners reported him as having paid, and he acted by his proxy in organizing the company. In the case above referred to, m 16 Serg &. R. 140, the subscription for a large part of the stock was fictitious, made in the names of persons who paid nothing and had nothing wherewith to pay; the Court held that the defendant, who was a bona fide subscriber, could not be compelled to pay if he had sustained any damage, and had done nothing more than to subscribe; but where he had accepted the charter, and by his own act had put it in operation, he was bound to pay. Now this was precisely what Woodsides did. So that even admitting, (which I am not inclined to do) that the receipt of his note was not such a payment as the charter required, it was a mere irregularity which he has subsequently waived as to himself, by his subsequent conduct. In all other particulars, his case is like the cases of Coleman and Choice, in which the opinion has just been delivered. The nonsuit is set aside and a new trial ordered. A new trial is also ordered in the cases of the same plaintiffs vs. T. Henry Stokes, James M. Sullivan and W. T. M. Austin, which depend on the same principles and the same facts.

Wardlaw and Withers, JJ. concurred.

O’Neall and Whitner, JJ. the first being President and the second Director of the company, did not hear the argument and gave no opinion.

Motion granted.