Case Name: De Forest Manice v. The Hudson River Railroad Company
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1854-06-17
Citations: 3 Duer 426
Docket Number: 
Parties: De Forest Manice v. The Hudson River Railroad Company.
Judges: 
Reporter: Reports of cases argued and determined in the Superior Court of the city of New York
Volume: 10
Pages: 426–444

Head Matter:
De Forest Manice v. The Hudson River Railroad Company.
In September, 1846, it was agreed, between the subscribers to the capital stock of the Hudson River Railroad Company and the Company, that an application should be made to the Legislature, at its then next session, to authorize the issue of a limited number of shares of the capital stock'of the Company, to be applied to the payment of interest on the instalments paid in by the subscribers on the capital stock subscribed for by them respectively, until income should be realized from the road. The Legislature passed an act authorizing the Company to issue so many additional shares, not exceeding 10 per cent, of its original capital, “ as might be necessary to enable the Company to provide for, and pay, interest on the instalments paid in for the construction of the road until it should be completed and put in operation.”
Held, that, by the reasonable construction of the agreement, the additional shares to be issued by the Company were to be converted into money, and the stipulated payments of interest to be made to the subscribers in cash, and not by a transfer of shares.
Held, further, that the meaning of the parties was that interest should continue to be paid to the subscribers until an income should be realized from the road as an entirety—i. e. until the completion of the whole road.
Held, further, that the ambiguities in the agreement, if any, were removed by the act of the Legislature, which was explicit in its terms, and, by its acceptance, concluded the defendants.
(Before Dijer, Campbell, and Hoffman, J.J.)
June 8; 17, 1854.
This case came before the court upon an appeal by the defendants from a judgment for the plaintiff at Special Term upon demurrers to portions of the complaint and to the answer. In order that the questions discussed may be clearly understood, it is deemed necessary to state the pleadings m extenso. They are as follow.
The complaint of the plaintiff in this action shows, that heretofore, and on or about the first day of September, one thousand eight hundred and forty-six, he subscribed for fifty shares of the capital stock of the said Eailroad Company, and that he shortly thereafterwards acquired by purchase twenty-five other shares of said capital stock, of which seventy-five shares he is still the owner.
That by the terms of subscription, it was agreed, between the said company and the subscribers to said capital stock, that application should be made to the Legislature of the State of Hew York, at its then next session, to authorize the issue of a limited number of shares of the capital stock of said company, to be applied to the payment of interest on the instalments paid in by the subscribers on the capital stock subscribed for by them respectively, until income should be realized from the road; and it was further agreed that such interest should be at the rate of seven per cent, per annum, and be allowed on all payments from the day the same were made.
And it was further agreed, that the first payment of interest should be made on the fifteenth of Hovember, one thousand eight hundred and forty-seven, and semi-annually thereafter.
And it was further agreed, that if such authority to issue ■ shares should not be given by the said Legislature, then that the interest on such instalment should be paid from the first clear earnings of the company, and that no general dividend should be made on the capital stock until all such interest should be fully paid.
That afterwards, and on the twentieth of March, one thousand eight hundred and forty-seven, the said Legislature of the said state of Hew York, by an act passed upon the application of the defendant, on said day last named, entitled, “An act to amend an act entitled, ‘ an act to authorize the construction of a Bailroad from Hew York to Albany,’ passed May 12th, 1846,' authorized the said company to issue, in addition to the capital stock of the company, authorized by the original act of incorporation, as many shares of stock of one hundred dollars each, not exceeding in the whole ten per cent, of the capital, as might be necessary to enable the company to provide for and pay interest on the instalments paid in for the construction of the road until it should be completed and put in operation.
That the capital stock of said company, authorized by the original act, was five millions of dollars.
That the whole amount paid upon the stock subscribed for and purchased by the plaintiff, was seven thousand five hundred dollars, and that the last instalment, which completed that sum, was paid prior to the fifteenth day of Hovember, one thousand eight hundred and forty-eight.
That the said company, after the said twentieth of March, one thousand eight hundred and forty-seven, issued shares of stock only to the amount of four per cent, on the said capital, and sold and disposed of the same, and applied a portion of the proceeds thereof to the payment of interest on the instalments paid by the plaintiff on the said stock, subscribed for and purchased by him as aforesaid, and a portion of the proceeds thereof to the payment of interest on the instalments paid by other subscribers to the said original stock.
That the last payment of interest which was made by said company to the plaintiff, on the instalments paid by him, was made on the twentieth day of Hovember, one thousand eight hundred and forty-nine, and was the sum of two hundred and sixty-two dollars and fifty cents, being six months’ interest on said sum of seven thousand five hundred dollars from the fifteenth day of May, one thousand eight hundred and forty-nine, to the fifteenth of Hovember, one thousand eight hundred and forty-nine.
That after making the said last payment of interest to the plaintiff, and a similar payment to the other holders of the capital stock of said company, there was a balance of twenty thousand dollars or thereabouts to the credit of the account of stock issued as aforesaid, and which was a portion of the proceeds of the said stock issued as aforesaid for the purpose of paying the interest on said instalments, which said sum of twenty thousand dollars was applied to the general purposes and expenditures of the company, and no part thereof applied to the payment of interest on said instalments.
That all the holders of the capital stock of said company, other than the plaintifij have consented to receive, and have received, capital stock of the said company, as and for the payment of the interest due on their said respective instalments after the said fifteenth day of Hovember, one thousand eight hundred and forty-nine, up to and including the fifteenth day of Hovember, one thousand eight hundred and fifty-one.
That no income, within the intent and meaning of the said articles of subscription, has yet been realized from the said railroad. That the road of the said defendant was completed and put in operation on the twenty-ninth day of October, one thousand eight hundred and fifty-one.
And the said plaintiff further shows, that heretofore and on or about the first day of September, one thousand eight hundred and forty-six, he subscribed for other fifty shares of the capital stock of the said railroad company, and that he shortly tliereafterwards acquired by purchase other twenty-five shares of said capital stock, of which seventy-five shares he is still the owner.
That by the terms of subscription, it was agreed between the said company and the subscribers to said capital stock, that application should be made to the Legislature of the state of Hew York, at its then next session, to authorize the issue of a limited number of shares of the capital stock of said company, to be applied to the payment of interest on the instalments paid in by the subscribers, on the capital stock subscribed for by them respectively, until income should be realized from the road. And it was further agreed, that such interest should be at the rate of seven per cent, per annum, and be allowed on all payments from the day the same were made.
And it was further agreed, that the first payment of interest should be made on the fifteenth of Hovember, one thousand eight hundred and forty-seven, and semi-annually thereafter.
And it was further agreed, that if such authority to issue shares should not be given by the said Legislature, then that the interest on such instalments should be paid from the first clear earnings of the company, and that no general dividend should be made on the capital stock until all such interest should be fully paid.
That afterwards, and on the twentieth of March, one thousand eight hundred and forty-seven, the said Legislature of the said state of Hew York, by an act passed on said day last named, entitled, “ An act to amend an act entitled, ‘ an act to authorize the construction of a Railroad from Hew York to Albany,’ passed May 12th, 1846,” authorized the said company to issue, in addition to the capital of the company, authorized by the original act of incorporation, as many shares of stock of one hundred dollars each, not exceeding in the whole ten per cent, of the capital stock, as might be necessary to enable the company to provide for and pay interest on the instalments paid in for the construction of the road, until it should be completed and put in operation.
That the capital stock of said company, authorized by the original act, was five millions of dollars.
That the whole amount paid upon the stock, as last aforesaid, subscribed for and purchased by the plaintiff, was seven thousand five hundred dollars, and that the last instalment which completed that sum was paid prior to the fifteenth day of Hovember, one thousand eight hundred and forty-eight.
That the said company, after the said twentieth of March, one thousand eight hundred and forty-seven, issued shares of stock only to the amount of four per cent, on the said capital, and sold and disposed of the same, and applied a portion of the proceeds thereof to the payment of interest on the instalments paid by the plaintiff on the said stock subscribed for and purchased by him as aforesaid, and a portion of the proceeds thereof to the payment of interest on the instalments paid by other subscribers to the said original stock.
That the last payment of interest which was made by said company to the plaintiff on the instalments paid by him on the stock, in this count referred to, as being subscribed for and purchased by him, was made on the twentieth day of November, one thousand eight hundred and forty-nine, and was the sum of two hundred and sixty-two dollars and fifty cents, being six months’ interest on said sum of seven thousand five hundred dollars from the fifteenth day of May, one thousand eight hundred and forty-nine, to the fifteenth of November, one thousand eight hundred and forty-nine.
That after making the said last payment of interest to the plaintiff, and a similar payment upon the other capital stock' of said company, there was a balance of twenty thousand dollars or thereabouts to the credit of the account of stock issued as aforesaid, and which was a portion of the proceeds of the said stock issued as aforesaid for the purpose of paying the interest on said instalments, which said sum of twenty thousand dollars was applied- to the general purposes and expenditures of the company, and no part thereof applied to the payment of interest on said instalments.
That all the holders of the capital stock of said company, other than the plaintiff, have consented to receive, and have received, capital stock of the said company as and for the payment of the interest due on their said respective instalments, after the said fifteenth day of November, one thousand eight hundred and forty-nine, up to and including the fifteenth day of November, one thousand eight hundred and fifty-one.
That the road of the said defendant was completed and put in operation on the twenty-ninth day of October, one thousand eight hundred and fifty-one.
That by the operation of the said road, since its completion on the twenty-ninth day of October, one thousand eight hundred and fifty-one, the said company has received from time to time more money, over and above the costs of working the said road and the interest on its debt to others than its subscribers, than is sufficient to pay to the plaintiff and the other stockholders the interest on their respective instalments; but that instead of applying the same to the payment of such interest, the said net earnings have been applied to the general expenditures of the road—for construction, hiring and purchasing steamboats not necessary for the operation of the said road, and for buying off steamboat opposition to said road.
Wherefore, the plaintiff claims judgment for the sum of' $1,312.50, with interest on $262.50 from the 15th day of May, 1850 ; and interest on $262.50 from the 15th day of November, 1850; and interest on $262.50 from the 15th day of May, 1851; and interest on $262.50 from the 15th day of November, 1851; and interest on $262.50 from the 15th day of May, 1852; besides the costs of this action.
The defendant, the Hudson Eiver Eailroad Company, answers the second count or cause of action in the plaintiff’s amended complaint, as follows:
1. The defendant denies each and' every allegation contained therein.
2. The defendant farther answers and says, that the facts set forth therein do not constitute a cause of action.
3. The defendant further answering, alleges that it has paid to the plaintiff the interest on the several amounts, alleged in the complaint to have been paid in by him on his said subscriptions to the stock of the said defendant, to which the plaintiff was entitled, or the defendant bound to pay the plaintiff.
4. That the defendant is a corporation, duly organized under and by virtue of the laws of the State of New York, and that all its affairs are, and were at the several times mentioned in the plaintiff’s complaint, managed and governed by a board of directors, duly chosen and elected; and the stockholders thereof, and subscribers for stock, are and were at the time aforesaid bound and concluded by the action of said Board of Directors, in all things reláting to the business and affairs of said corporation.
5. That on the 26th day of March, in the year 1850, the said board of directors, at a regular meeting thereof, determined by a valid vote of its body, and according to the by-laws thereof, thereafter not to pay interest to subscribers for stock of said defendant, or to its stockholders, in cash, but resolved and determined to pay such interest in the stock of the said Hudson River Railroad Company.
6. That after the passage of said resolutions, and in conformity thereto, the defendant offered and tendered to the plaintiff the stock of the defendant in payment of all such sums as were then due and owing the plaintiff for such interest, and that the plaintiff refused to accept or receive the same, or any part thereof. The defendant further alleges that the act of the defendant, determining to pay the interest on its stock in the stock of the company, was a valid act, and binding on the plaintiff, being a stockholder, and concludes him from demanding the interest which may have fallen due on the stock held by him in cash.
The defendant demurs to that part of the plaintiff’s amended complaint in the above action, which sets forth the first cause of action mentioned therein, and specifies the following causes of demurrer:
1. That it does not state facts sufficient to constitute a cause of action.
2. That it appears from the facts stated in setting forth the said second cause of action, that the plaintiff is a stockholder of the defendant, and therefore cannot maintain an action for the recovery of the said interest against the defendant.
3. It does not appear that the stock mentioned therein belonged to the plaintiff on or after the 20th day of November, in the year 1849.
4. It does not appear that the interest claimed therein has not been paid.
5. It appears affirmatively therein that said interest is payable in the stock of the company, and not in cash.
6. It does not appear that the contingency, upon the happening of which the payment of the interest claimed was to cease, did not happen previous to the accruing of any portion of the claim, set forth in the second count or cause of action in said complaint.
Wherefore the defendant claims judgment, that the amended complaint in this action be dismissed with costs to the defendant,
The plaintiff demurs to the defence contained in the third division of the defendant’s answer to the second cause of action stated in the complaint, and for cause of demurrer, shows that the same does not state facts sufficient to constitute a defence to the said second cause of action.
The plaintiff also demurs to the defence contained in the fourth, fifth, sixth, and seventh divisions of the defendant’s answer to the second cause of action stated in the complaint, and, for cause of demurrer, shows that the same does not state facts sufficient to constitute a defence to the said second cause of action.
It is hereby stipulated and agreed that the question of the sufficiency of the defendant’s answer to the second cause of action in the complaint shall be argued on the foregoing demurrer, in connexion with the argument of the defendant’s demurrer to the first cause of action in said complaint, and that judgment may be given by the court upon said demurrer, with the usual leave to amend, with like effect as if a demurrer to an answer were allowed by the code of procedure. Dated Hew York, Feb. 12,1854.
At a special term of the Superior Court of the City of Hew York, held at the City Hall in the city of Hew York, on the 28th day of February, 1854, present, Hon. Murray Hoffman, Justice.
De Forest Manice v. The Hudson River Railroad Company :—This cause having been brought to trial on. the issues of law therein, and having been argued by Mr. Larocque, of counsel for the plaintiff, and by Mr. Fullerton, of counsel for the defendant, and due deliberation having been had, it is ordered and adjudged that the defendant’s demurrer to the first cause of action stated in the complaint, and also the demurrer contained in his answer to the second cause of action stated in said complaint, be and the same are hereby severally overruled, and that the plaintiff’s demurrers to the defences contained in the third, fourth, fifth, sixth, and seventh divisions of the defendant’s answer to the said second cause of action stated in said complaint, be and the same are hereby allowed, and judgment for the plaintiff upon all said demurrers, with liberty to defendants to amend their answer within ten days after notice hereof, upon payment of $23 costs to the plaintiff.
(A Copy.) Geo. H. E. Lynch, Clerk.
At a special term of the Superior Court of the City of Hew York, held at the City Hall in said city, on the 17th day of April, A.D. 1854, present, the Hon. Murray Hoffman, Justice.
. De Forest Manice v. The Hudson River Railroad Company :—This cause having come on to be heard on the demurrer of the defendant to part of the complaint, and on the demurrer of the plaintiff to a portion of the defendant’s answer, and the court having ordered judgment for the plaintiff on all said demurrers, with liberty to the defendants to amend their answer within ten days after notice of such order, on payment of costs to the plaintiff, on reading and filing the pleadings herein, and proof of due service of a copy of said order for judgment; also affidavit that no copy of any amended answer has been served upon the attorney for the plaintiff, and that no costs have been paid the plaintiff, as provided by said order, and on motion of Larocque & Barlow, attorneys for plaintiffOrdered judgment in favor of said plaintiff against said defendants for the sum of $1,497.50, being the amount demanded in the complaint, and also for the plaintiff’s costs herein adjusted at the sum of $212.98, together amounting to the sum of $1,710.58.
Geo. H. E. Lynch, Clerk.
The following opinion was delivered by the judge at special term.
Hoffman, J.—The correct interpretation of the contract and engagements of the defendants, se't out in the complaint, with the act of the Legislature referred to, will determine nearly every question raised upon the pleadings.
It is stated, that by the terms of subscription, it was agreed between the Company and the subscribers to the stock, that application should be made to the Legislature to authorize the issue of a limited number of shares of the capital stock of the said Company, to be applied to the payment of interest on the instalments paid in by the subscribers on the capital stock subscribed by them respectively, until income should be realized from the road. That such interest should be at the rate of seven per cent., and be allowed on all payments from the day they were made.
The first payment was to begin on the 15th November, 1847, and be made semi-annually thereafter.
If no such -law should be procured, then the interest was to be paid from the first clear earnings of the road, and no dividend was to be made until all such interest was fully paid.
The act contemplated was passed on the 20th of March, 1847, and empowered the Company to issue as many shares of stock of $100 each, and not exceeding ten per cent, of the capital, as might be necessary to enable the Company to provide for and pay interest on the instalments paid in for the construction of the road, until it should be completed and put in operation.
' The plaintiff subscribed $7,500, and paid his last instalment prior to November 15,1848. The last payment of interest to him was on the 20th of November, 1849.
The Company issued stock to the amount of four per cent, on the capital to meet this interest, and continued for some time to sell the same at a loss, and pay such interest subsequently ; but, on the 20th of March, 1850, the directors resolved not to pay the interest any longer in cash, but iii stock of the Company.
This raised the main question in the cause, viz. whether the interest should be payable in cash or stock. I think that the act of the Legislature may be used to assist the interpretation of the agreement between the stockholders and the Company; and these, together with the terms of the contract, in the event of failure to obtain an act, satisfy me that the construction rendered it obligatory on the defendants to pay the interest in cash. The Legislature permitted the issue of stock to enable them to effect it; but it is not a just conclusion from any of the proceedings, that the subscribers were compellable to accept stock in payment.
It is not stated whether the stock was to be transferred at par, or at its current value. But even if the latter was the case, I consider that the contract obliged the Company to bear the expense and trouble of turning it into money.
The terms of the act were, that such interest should continue to be paid until the road should be completed and put in operation, and this is stated to have been on the 29th of October, 1851. The claim of the plaintiff is for interest down to, and including that falling due, the 15th of May, 1852.
For the interest down to the 15th November, 1851, the Company would be responsible, on the view taken, disregarding the seventeen days from October 29th.
But I apprehend, that when the road was in operation, the common or partnership rights arose, and the subscribers had to look to profits, whatsoever they might be, in lieu of interest. But as the complaint rests upon the agreement for a claim beyond this period, and avers that no income has been received, within the conditions and terms, so as to stop interest, it will not be proper to decide that point now.
There are a few other points to be disposed of.
The third clause of the answer is nothing but the defendants’ assumption of what they are bound to pay, and is properly demurred to.
The fourth clause raises the question, whether the plaintiff, being a stockholder, can sue the Company. I cannot doubt his right to do so, upon the agreement set forth.
The fifth, sixth, and seventh clauses depend upon the question of the right to pay in stock, which I have before passed upon.
The result is, that the plaintiff’s demurrer to the third, fourth, fifth, sixth, and seventh clauses, or divisions of the answer to the second cause of action in the complaint, must be allowed.
The defendants’ demurrer to the first cause of action in the complaint, raises, in the first, second, and fifth clauses, the same questions as those upon the answer. The third, fourth, and sixth causes of demurrer are different; but each of them appears untenable.
The contingency, in the view I have taken—that is, the road going into operation—is stated, so as to show that it did not happen until a part of the claim accrued.
I think this demurrer to the complaint must be wholly overruled.
The demurrer which accompanied the answer to the second cause of action, must be disposed of in the same manner.
W. Fullerton, for the defendant, appellant,
insisted that the interest was payable in the stock of the Company, and not in cash ; that the suit could not be maintained, because there did not appear to have been any stock issued with which to pay the interest; and that there was no sufficient allegation that there was no income realized from the road; and upon these grounds argued that the judgment ought to be reversed, and judgment be given for the defendant.
J. Larocque, for the plaintiff, respondent, claimed an affirmance of the judgment upon the following points and authorities.
I. The objection that the plaintiff, being a corporator, cannot sue the corporation for the interest demanded, is untenable (Scott v. Eagle Fire Ins. Co., 1 Paige, 198 ; Gray v. The Portland Bank, 3 Mass. R. 364 ; Stockdale v. The South Sea Co., 2 Atk. 141; Titcomb v. Union Marine Fire Ins. Co., 8 Mass. R. 326).
H. The objection that it does not appear that the interest has not been paid, is untenable. If it has been paid, that is a fact for the defendant, and not for the plaintiff, to establish.
IH. The Company , is bound to pay the interest in money, and has no right to require the plaintiff to accept stock in lieu of money. 1. The language of the subscription contract manifestly contemplates payment in money. 2. The language of the act passed by the Legislature on the application of the defendants, pursuant to the subscription contract, is to the same effect. 3." The practice of the Company, under the subscription contract and act of the Legislature, is shown by the complaint to have been to pay in money, and not in stock, thus recognising their obligation to do so. 4. A resolution of the board of directors was considered necessary to change this practice. 5. The complaint shows that the Company has converted stock issued for the purpose of paying the interest into money, and has received from its proceeds a balance of twenty thousand dollars more than has been applied to the purpose.
IY. The objection that it does not appear from the complaint that the contingency upon the happening of which the payment of the interest claimed was to cease, did not happen previous to the accruing of the plaintiff’s demand, is also untenable. 1. The interest claimed is that accruing from November 15th, 1849. 2. The contingency referred to in the articles of subscription, for the cessation of interest, is that “ income should be realized from the road.” 3. The first count in the complaint expressly negatives the occurrence of that contingency. 4. The contingency provided for in the act of the Legislature, authorizing the issue of stock, to raise money to pay the interest, is, that the road should be completed and put in operation. 5. Both counts in the complaint show, that this was accomplished only on the 29th October, 1851. 6. The “income” contemplated by the subscription articles, to stop the running of interest, was income from the entire road, not from a mere portion of it. The intention was, that interest should cease when the Company came into the possession of other means to pay interest or dividends; and if income from a part of the road were to have the effect of stopping interest, it would have stopped as soon as cars were running to Manhattanville, which would be absurd. 7. The act of the Legislature, which expressly provides for the payment of the interest until the road should be completed, was passed on the application of the Company, gives their interpretation of the meaning of the subscription articles, and binds them.
Y. The allegation of payment, in the defendant’s answer, is entirely insufficient to bar the action. 1. The answer does not allege or pretend payment of the instalments of interest claimed in the complaint. 2. Answering payment of that “ to which the plaintiff was entitled, or the defendant bound to pay the plaintiff,” is no allegation of fact, but a mere legal dogma.
YI. The other facts stated in the defendant’s answer constitute no defence. 1. The plaintiff’s claim rests upon an express contract with the corporation. 2. This contract is valid and binding, and beyond the power of the directors to abrogate or vary without the plaintiff’s consent. 3. Ho facts are stated in the answer, by virtue of which this power, forbidden to the Legislature of the State by the constitution of the Union, is claimed for the directors of a railroad corporation. '4. The contract, therefore, remains binding, as originally made, notwithstanding the resolution of the directors (cases above cited, and also, Angell & Ames on Corporations, 281 ; Revere v. Boston Copper Co., 15 Pick. 363 ; First Presb. Cong. v. Quackenbush, 10 Johns. 217; Middlesex Turnp. Corp. v. Swan, 10 Mass. 384; Same v. Locke, 8 Ibid. 268 ; Franklin Glass Co. v. Alexander, 2 N. H. R. 380; Taunton Turnpike v. Whiting, 10 Mass. 327; Union Locks & Canals v. Towne, 1 N. H. R. 44; Amer. Bank v. Baker, 4 Met. R. 164; Vestry of St. Luke’s Church v. Matthews, 4 Desausure, 585 ; Mayor of Hudson v. Thorne, 7 Paige, 261).
VH. The judgment should be affirmed, with, costs.

Opinion:
By the Court. Duer, J.
The pleadings in this case are singularly constructed, and we should be unwilling to say that any of them, complaint, answer, or demurrers, are framed in entire conformity to the provisions of the Code. That, in some respects, they are at variance with its spirit and meaning, we do not doubt.
But the points, upon which alone the case has been argued, imply a waiver of all special exceptions, and we understand it to be agreed that the question, whether the judgment appealed from shall be affirmed or reversed, depends wholly upon the construction that we shall give to the agreement between the original subscribers to the stock, and the Company, and upon the operation of the act of the Legislature, which, in order to carry the agreement into effect, was subsequently passed.
If the controversy turned upon no other hinge than the terms of the original agreement, we should be compelled to say, that, in their fair and reasonable interpretation, they establish the right of the plaintiff to recover.
We cannot believe that it was the intention óf the parties that the additional shares of stock to "be issued should be applied to the payment of interest to the subscribers by a direct transfer, for the plain reason, that it must have been foreseen by the parties, that, in a vast majority of cases, a payment, by a mere transfer, would be impracticable. It could only be practicable in the cases of an exact correspondence between the amount of the interest to be paid, and the nominal value of the shares to be transferred. Hor can we believe that it was intended that the payments of interest should be made partly in cash and partly in shares, or to some of the subscribers wholly in cash, and to others wholly in shares. The subscribers, under the agreement, had equal rights, and were meant to be placed on the same footing, and, we think, could never have contemplated a mode of payment which would necessarily produce great inequality, and from the discretion it would imply, be liable to great abuse. We are, therefore, satisfied that it was the intention of all that the stipulated payments of interest should be made in money out of the proceeds of the shares to be issued, and not by their immediate transfer. The stockholders might indeed elect to take shares and set off the interest due to them against the price, but the corporation had no election to pay them in cash, or force shares upon their acceptance. The term "payment," in its legal import, means the full satisfaction of a debt by money, not by an exchange or compromise, or an accord and satisfaction, and it is only where the words used in connexion with it plainly manifest a different intention that the legal import of the term can be rejected. The words of the agreement in this case are, perhaps, ambiguous, but that they are inconsistent with the usual and legal meaning of " payment " cannot be pretended.
The stockholders, under the agreement, were to receive interest on the instalments paid by them " until income should be realized from the road," and the construction of these words is next to be determined. It is insisted, for the defendants, that the event happened, to which they refer, as soon as any part of the line of the road, however trifling in extent, was completed and used—that is, as soon as upon any portion of the road cars were run, and fare received, and consequently that from this time the right of the stockholders to demand the payment of interest ceased.
That the words in question, literally construed, may bear this meaning, it is unnecessary to deny, but we are satisfied that it is not in this sense that we, in order to carry into effect the real intention of the parties, are bound to understand them. We think the manifest intention of the parties was that interest should be continued to be paid to the stockholders until an income should be realized from the road, that, if exceeding its expenses, would be applicable to the payment of dividends—not until an income should be realized in which they would have no possible right to share. The subscribers could never have meant that it should be in the power of the directors of the Company to stop the payment of the interest, for which they had stipulated, by running cars on a mile or two of railroad in the city of Eew York; núr, unless a decep ' tion was intended, could this have been the meaning of those who acted for the Company in making the arrangement. The word " road" in the clause, " until an income shall be realized from the road," means the road as an entirety, and the realization of an income from it as such, is the event to which the clause refers. . "
We have, perhaps, dwelt longer than was necessary upon the construction of the agreement, since no more can be said on behalf of the defendants than that its terms are ambiguous, and are fairly susceptible of the interpretation for which they contend; but to every argument that has been urged in support of that interpretation it seems to us a conclusive reply, that whatever ambiguity may exist in the terms of the agreement, there is none whatever in those of the act of the Legislature, which was passed for the sole purpose of enabling the Company to carry the agreement into execution. The terms of the law are explicit; they declare that so many shares of stock shall be issued, " as shall enable the Company to provide for, and pay interest, on the instalments paid in for the construction of the road until it shall be completed and put in operation," thus plainly settling in favor of the plaintiff, the only question that, upon the face of the agreement, could be regarded as doubtful.
It is said, however, that it is upon the original agreement alone that this action is founded, or can be maintained, and that a subsequent act of the Legislature cannot be permitted to vary its legal construction; and there would, perhaps, be some force in this observation, if the terms of the agreement and of the law were plainly inconsistent, but that there is no such inconsistency we have already shown, and we, therefore, do not doubt that the act of the Legislature truly declares and carries out the intentions which the parties, in the agreement, designed to express. But we go further. Upon the averments in the complaint, not denied in the answer, we must regard it as certain, that the act of the Legislature is the very act for which the parties agreed that application should be made, and as it has been accepted by the Company, and both the Company and its stockholders have acted under it, both, we conceive, are bound by its provisions. Keither, it seems to us, can now be permitted to allege that there is any discrepancy between its provisions and their agreement.
We must, therefore, hold that, until the road was completed and put in operation, the plaintiff was entitled to demand from the Company the payment in money of interest, semi-annually, upon the instalments paid in upon the shares of stock which he holds, and it is scarcely necessary to add that his rights, in this respect, have not been, and could not be, varied by the subsequent resolution of the board of directors, nor by the arrangement which the Company has fortunately been able to make with its other stockholders. Without his individual consent the Company, in respect to his claims, could not be released from the obligations which the agreement and the act of the Legislature created.
The allegation that it does not appear from the pleadings that the Company has issued and sold any shares of stock, from the proceeds of which the demands of the plaintiff may be satisfied, is certainly groundless.
The complaint distinctly avers that the Company has issued and sold a number of shares of stock, under the authority given by the Legislature, and that the proceeds, after the payment of various sums of interest to the plaintiff and other stockholders, left a balance applicable to future payments of interest of about twenty thousand dollars ; and we think that the answer, in admitting that interest for a time was paid to the subscribers in cash, admits, by implication, the truth of these averments.
This balance of $20,000 is the fund out of which the claims of the plaintiff ought to be satisfied, and as the claims of all the other stockholders have been put at rest by an accord and satisfaction, it is far more than sufficient for the purpose. It cannot be pretended that the subsequent misapplication of the fund by the Company has created a bar to his recovery.
The conduct of the plaintiff, in refusing to accede to the mode of settlement which has been deemed satisfactory by all the other shareholders, may be thought unreasonable, but he chooses to stand upon his legal rights, and it is those alone that we, in passing upon his claims, as a court of justice, are at liberty to consider.
We must, therefore, affirm the judgment that he has obtained, but not for the whole amount for which it has been rendered.
The complaint avers that the road was completed and put in operation on the 29th of October, 1851. On that day, therefore, the right of the plaintiff to demand the. payment of interest from the Company wholly ceased. In the judgment as given, however, he has been allowed an excess of interest from the 29th of October to the 15th of November, 1851; and the sum of $262.50 as the semi-annual interest due on the 1st of May, 1852. These sums with interest, as erroneously included, must be deducted from the judgment.
(The plaintiff's counsel consenting to the deduction, the judgment, so modified, was affirmed with costs.)