Case Name: Lail v. Mt. Sterling Coal Road Company
Court: Kentucky Court of Appeals
Jurisdiction: Kentucky
Decision Date: 1877-02-10
Citations: 13 Bush 32
Docket Number: 
Parties: Lail v. Mt. Sterling Coal Road Company.
Judges: 
Reporter: Kentucky Reports
Volume: 76
Pages: 32–36

Head Matter:
Case 4 — PETITION OBDINABY
Feb. 10.
Lail v. Mt. Sterling Coal Road Company.
APPEAL PROM HARRISON CIRCUIT COURT.
1. The existence and organization op a corporation are admitted by a writing, whereby the obligor subscribed for stock in the corporation, as follows: “We, the undersigned, agree to subscribe the number of shares of $50 each to the capital stock of the Mt. Sterling Coal Boad Company,” etc., signed by “ John Lail, ten shares,” etc.
2. Upon an unconditional promise to pay a corporation a certain sum of money, either as an ordinary debt or as a subscription to its capital stock, it is unnecessary to aver that the requisite amount of capital stock has been subscribed, as provided by the charter, in order to present a good cause of action.
W. W. TRIMBLE, CHARLES DUNCAN, W. H. RATCLIFFE, and PRATHER & FORMAN for appellant.
1. The petition of appellee is defective, and the demurrer thereto ■ should have been sustained for the following reasons:
First. Because it (the petition) fails to state that the road was completed and in operation from Mt. Sterling to the coal-fields at the time of the making of the order extending it to Cynthiana.
Second. Because the order of extension was not made in conformity with appellee’s charter.
Third. Because the charter of the appellee and the order extending the road to Cynthiana {said order preceding and mahing a part of the terms of the subscription of appellant and the other subscribers in Cynthiana and vicinity) show conclusively that the subscription of appellant was for the sole purpose of building the road between Mt. Sterling and Cynthiana, when appellee states distinctly in its petition that it desires to collect the subscriptions to appropriate them in the payment of a debt incurred by it in the construction of the road east of Mt. Sterling, a purpose entirely foreign to that for which they were subscribed.
2. That the Coal Road Company had no right, under secs. 2 and 6 of its charter, to construct a branch road until its main line from Mt. Sterling to the coal-field was completed, and therefore the subscriptions to build the branch road from Mt. Sterling to Cynthiana were null and void.
3. That appellant’s petition was defective because it did not allege the organization of the company and the completion of the road from Mt. Sterling to the coal-field as conditions precedent to its right to construct a branch road to Cynthiana. (Fry’s ex’r v. Lexington & Big Sandy R. R. Co., 2 Met. 324.)
C. W. WEST, A. H. WARD, and J. Q. WARD for appellee.
1. Whether the company was duly and regularly organized or not can not be called in question in this action. (Gill’s adm’x v. The K. & C. G. & S. Mining Co., 7 Bush, 639.)
2. Sec. 7 of the charter authorizes the company to extend its road to Paris or Cynthiana without limit or restriction.
3. The subscription to the capital stock of the company is one thing, and the application of the funds to the completion of the road another.
The subscription agreement does not bind the directors of the company to any appropriation of the stock subscribed, except to the furtherance of the objects contemplated by the charter.

Opinion:
JUDGE PRYOR
delivered the opinion oe the court.
The plaintiff, the Mt. Sterling Coal Road Company, states that it is a body politic and corporate, created by an act of the General Assembly of Kentucky, passed on the-day of-, in the year-. That at a meeting of its president and directors, in accordance with the terms of its charter, an order was entered on its books projecting and extending its road from Mt. Sterling to the Kentucky Central Road at Cynthiana.
That books of subscription were opened for that purpose and signed by the appellant, by which he became a subscriber of ten shares of stock in the road. The agreement reads, " We, the undersigned, agreé to subscribe the number of shares of $50 each to the,capital stock of the Mt. Sterling Coal Road Company," etc., signed by "John Lail, ten shares," etc.
A demurrer was entered to this petition, and one of the grounds relied on is, that the pleader failed to allege the organization of the company in the manner provided by the charter. The fourth section of the act of incorporation provides that " whenever $15,000 shall have been subscribed, and notice shall have been given each subscriber of the time and place when and where a meeting of such subscribers shall be held, they may assemble and effect a permanent organization of the company and commence operations," etc.
Here is a direct undertaking on the part of the appellant to pay an incorporated company a certain sum of money for the purpose of extending its road, and now the appellant denies that the company ever had an existence, and proposes to raise that question by demurrer.
This can not be done. The appellant has admitted by his own undertaking the existence of the corporation and its organization, and if the corporation has ceased to exist or the company was never incorporated, the defense, to make it available, must be made by an appropriate pleading. A note executed to one as administrator dispenses with the necessity of producing the letters of administration; or a note payable to the Bank of Kentucky is an admission by the obligee that such a bank exists; and it would be mere surplusage for the pleader to allege that by the terms of the charter the bank was authorized to commence business when $15,000 of its capital stock had been subscribed; that the requisite amount of stock had been taken, and the company organized, and thereafter the appellant executed his note, or before its organization undertook to and did subscribe so much to its capital stock.
The petition is not only good on demurrer, but a general traverse by plea that no such corporation existed would be bad on demurrer, as such a plea is a denial of a fact that the obligee has already admitted. In the case of Fry's executor against Lexington & Big Sandy Railroad Company, reported in 2 Metcalfe, page 323, in an action to recover a subscription of stock, it is said that the subscription of a certain amount of capital stock being necessary before an organization could be effected, the subscription of that sum was a condition precedent, and the liability of the subscriber depending upon its payment, the failure to aver this fact rendered the petition fatally defective. This subscription was headed "Railroad stock taken at Catlettsburg in Lexington & Big Sandy Railroad Company, May 12, 1852." This was evidently a case where the parties were endeavoring to raise a sufficient amount of capital stock to enable the company to organize, and such facts appearing in the petition the court sustained the demurrer or adjudged the petition bad. The original record is not in this court.
If we are mistaken as to the facts of that case, still we must adjudge that upon an unconditional promise to pay a corporation a certain sum of money, either as an ordinary debt or as a subscription to its capital stock, it is unnecessary to aver that the requisite amount of capital stock has been subscribed, as provided by the charter, in order to present a good cause of action. The other questions raised by the demurrer and answer have been decided at the present term in the cases of Stewart and others from the same court, involving similar questions. Judgment affirmed.