Case Name: The Ashtabula and New Lisbon Railroad Company v. Azariah Smith
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1864-12
Citations: 15 Ohio St. 328
Docket Number: 
Parties: The Ashtabula and New Lisbon Railroad Company v Azariah Smith.
Judges: Brinkerhoee, C.J., and Scott and Welch, JJ., concurred.
Reporter: Ohio State Reports, New Service
Volume: 15
Pages: 328–337

Head Matter:
The Ashtabula and New Lisbon Railroad Company v Azariah Smith.
1. When the second section of the act to provide for the creation and regulation of incorporated companies (S. & C’s. Stat. 271), has been complied with, the corporators and their associates become a body corporate.
2. Where, in a petition, it is averred that directors of a railroad company had been duly elected by the stockholders, in pursuance of notice, it is to be presumed that the requisite amount of stock had been subscribed to authorize
„ such election, and also to authorize the location of the road and the making of assessments by the directors so elected.
3. Conditional subscriptions, on the performance of the conditions, become absolute. Chamberlain v. Painesville and Hudson Railroad Company, ante p. 225.
á. Where the condition was that the road should “ pass through ” a given locality, the permanent location of the road, without its construction, on the route designated, is a compliance with the condition.
5. Where a conditional subscription was delivered to the company, before the election of directors, and, after such election, the condition was performed, the subscription took effect at the time of performance. The first installment then became payable, and the subscriber liable to assessment for the residue.
6. A subscription, unexceptionable in other respects, will not be rendered invalid by reason of not having been made in a book opened by the company for the purpose.
Error to tbe court of common pleas of Ashtabula county. Reserved in the district court.
On May 14, 1861, the Ashtabula and New Lisbon Railroad Company filed a petition, against Azariah Smith, in the court of common pleas of Ashtabula county, which states :
1st. That the plaintiff, at the time the defendant became a subscriber to the capital stock of the plaintiff as hereinafter set forth, to-wit: on the 1st day of June, 1853, was, and still is, an incorporated company, created by and under the laws of the State of Ohio, duly organized pursuant to an act of the legislature of said state, entitled, “ An act to provide for the creation and regulation of incorporated companies in the state of Ohio,” passed May 1, 1852, and the acts amendatory of the same.
2d. That in contemplation, and for the purpose of constructing, owning and maintaining the Ashtabula and New Lisbon Railroad, and in consideration of the advantages thereof to each of them severally, the defendant, with several other persons, on or about the first day of June, 1853, became a subscriber to the capital stock of the plaintiff by (severally) signing, executing, and delivering an agreement in writing, of which the following is a copy:
“ Rome, No. 2. The Ashtabula and New Lisbon Railroad Company, incorporated February, 1853. Subscription to the capital stock. We, the subscribers, in consideration of the advantages thereof to each of us, severally agree with the Ashtabula and New Lisbon Railroad Company to take the number of shares set opposite our respective names, each share being fifty dollars, and to pay therefor as required by law, and the orders of the board of directors, which may be formed hereafter. It is understood, however, that the first installment shall not exceed ten per cent. Dated — 1853.
Names. No. Shares. Amount. Remarks. Azariah Smith, 20 1000 This subscription is on condition that the road passes through the fourth range, and that they make a point at Rock creek for the fourth range.
3d. That among other persons, the defendant signed and executed the said agreement, and set opposite his name twenty shares and one thousand dollars, each share being the sum of fifty dollars, and the twenty shares amounting to the sum of one thousand dollars, which the defendant then and thereby agreed to pay to the plaintiff, as required by law and the orders of the board of directors, which might thereafter be formed by said plaintiff, upon the condition that the railroad should pass through the fourth range, and that a point should be made at Rock creek. And said subscription was immediately thereafter transferred to the regular books of the plaintiff.
4th. That after the signing and executing the agreement or subscription aforesaid by the defendant, to-wit: on the fourth day of July, 1853, in pursuance of notice theretofore duly given, the stockholders of the plaintiff duly elected a board of directors, which board Of directors were afterward, to-wit: on the day and year last aforesaid, duly qualified in pursuance of the statute in such case made and provided, who, together with their successors in office, have since that time, and still do, constitute the board of directors of the plaintiff. Of all of. which the defendant, at the time, had notice.
5th. That afterward, to-wit: on or about the third day of April, 1854, the board of directors of the plaintiff did cause to be surveyed, and did locate the railroad upon and so that it passes through the said fourth range, and the board of directors did also locate and establish a depot, and thereby make a point at Rock creek; and the plaintiff has duly performed all the condition of said agreement on its part. Of all of which the defendant, at the time, had notice.
6th. That by means of the premises, and by force of the statute in such case made, the defendant became and was a stockholder in said company, and entitled to twenty shares of the stock, and became liable to pay therefor to the plaintiff the sum of one thousand dollars.
7th. That an' installment of ten per cent., or five dollars upon each share of stock of the company, including the twenty shares of stock so subscribed by the defendant, by the provisions of the statutes of said State of Ohio, were due and payable at the time of the making of the subscription by the defendant, to-wit: on the first day of June, 1853.
The petition further states in detail numerous calls regularly made by the board of directors of the company, upon the defendant on other stock subscribers, for the payment of installments and their stock subscriptions ; and that, on the 1st February, 1861, the plaintiff demanded of the defendant full payment for the stock subscribed for by him, which he neglected and refused to make.
Wherefore plaintiff asks judgment against the defendant for one thousand dollars, with interest from February 1, 1861.
To this petition the defendant demurred for the reasons:
1st. The petition does not state facts sufficient to constitute a cause of action.
2d. The petition shows that the pretended agreement was not mutual, and imposed no obligations on the plaintiff.
3d. The pretended agreement was a mere proposition made to the plaintiff.
4th. It does not appear that the proposition was ever accepted.
5th. It does not appear that the defendant was ever notified that the plaintiff would accept the proposition.
6th. It is not shown that the defendant was ever a subscriber to the capital stock of said railroad company.
7th. It is shown that the pretended subscription was only conditional, and it does not appear that the condition was ever accepted by the plaintiff.
8th. It is not shown that the defendant ever became a stockholder of said company.
9 th. The plaintiff has never tendered to the defendant a certificate of stock in said company.
The common pleas sustained this demurrer to the petition, and the plaintiff excepted. Judgment was entered against the plaintiff for costs.
To reverse this judgment the plaintiff filed a petition in error in the district court, assigning for error that the common pleas sustained the demurrer and entered judgment as stated.
The district court reserved the case for decision here.
Lee Kellogg, for plaintiff in error:
1. It is no defense to an action to recover the amount due upon a subscription to the stock of a railroad company, that the $5 on each 'share, required by law to be paid at the time of subscribing, was not paid. Pierce on Am. R. R. Law, pp. 64, 65, 66; Henry et al. v. Vermillion and Ashland R. R. Co., 17 Ohio Rep. 187; 21 Barb. 541; Wright v. Shelby, 16 B. Mon. 5.
2. It is no defense to an action for the recovery of the amount due upon a subscription to the stock of a railroad company, that the stock was subscribed before the organization of the company. Pierce on Am. R. R. Law, p. 59 and cases there cited; 21 Barb. 455 ; 40 Maine, 172; 17 Ill. 54.
3. Subscriptions to railroad stock conditional upon location, have been sustained in all the states (except New York) as authorized, and not in conflict with public policy, in the absence of special prohibition. Pierce on Am. R. R. Law, p. 70, and cases there cited; McMillen v. M. and L. R. R. Co. 15 B. Mon. 218; H. and N. R. R. Co. v. Lovell, 16 B. Mon. 358; Rhey v. Ebensburg R. R. Co. 27 Penn. St. Rep. 261; New Albany R. R. Co. v. McCormick, 10 Ind. 499; Trott v. Sarchett et al., 10 Ohio St. Rep. 241; Central Turnpike Co. v. Valentine, 10 Pick. 142; N. H. Central R. R. Co. v. Johnson, 10 Foster (N. H.) 401.
4. The delivery of a certificate, or the formal allotment of shares to a party, is not, in general, necessary to hold him as a subscriber. Pierce on Am. R. R. Law, p. 58, and cases there cited; Danbury and Newark R. R. Co. v. Wilson, 22 Conn. 453; N. H. Central R. R. Co. v. Johnson, 10 Foster, 390. On acceptance, by the railroad company, by entry on their records, of conditional subscriptions, they become binding, and the subscriber a stockholder; and the notice of acceptance is not necessary before suit. New Albany R. R. Co. v. McCormick, 10 Ind. 499.
Simonds Cadivell, for defendant in error:
1. The agreement sued on, is not a subscription, in contemplation of law, and is void. It was not in a book authorized by the corporators. It was not accepted at the time, nor until the ensuing year. No installment of five per cent, was paid or, by the terms of the agreement, was payable at the time of making it. No liability could arise upon it until compliance, by the company, with the conditions upon which the agreement was made. S. & C.’s Stat. p. 276, sections 6 and 9; 18 Barb. S. C. Rep. 317; 1 Hill, 518.
2. There was no consideration for the pretended agreement, and no mutuality between the parties. The petition does not show that, at the time the instrument was made, the plaintiff-had any knowledge of it; nor when nor how the plaintiff became possessed of it. It does not appear that the conditions were accepted at the time, nor within a reasonable time thereafter. Mutual promises must be concurrent and obligatory upon each at the same time, in order to render either binding. Both must be bound, or neither. 3 T. R. 654; 4 Shepley (16 Me.), 460; 4 Johns. 235; 21 Wend. 139; 18 Barb. 317.
3. The petition does not show a performance of the conditions by the plaintiff. The condition that the road shall pass through the fourth range and that a point be made at Rock creek, are not complied with by locating the road through the fourth range, and a depot at Rock creek, without building or completing either.
There is no averment that the plaintiff acceded to the defendant’s proposition; nor that the plaintiff ever consented to let the defendant have twenty shares of stock upon the terms proposed; nor that the defendant was ever notified that his proposition was accepted, or that the plaintiff was ready and willing to even use the money in constructing the road upon these conditions.

Opinion:
White, J.
The questions, in this case, arise upon demurrer to the petition ; and the special assignments result in the general question, whether the petition states facts sufficient to constitute a cause of action.
I. When the persons, associating to form a company for the purpose of constructing a railroad, have complied with sec. II, of the act to provide for the creation and regulation of incorporated companies (S. & C. Stat. vol. 1, 271), they and their associates, successors and assigns, by the name and style provided in the certificate, become a body corporate, invested with all the powers conferred upon this class of corporations, and subject to the restrictions provided by sec. Ill of the act.
Under the restrictions imposed, these general powers fall into two classes: 'such as may be exercised before, and, such as can not be until after, the election of directors. Among the former is the right to receive subscriptions to the capital stock, and, when ten per centum of the amount shall be subscribed, to elect directors ; and, among the latter, the location and construction of the proposed road. After the election of directors all the business of the corporation is to be transacted by them, or under their authority; but, the existence of the body corporate does not depend upon the election of, or the right to elect, directors.
II. In the present case, it appears from the petition, that the plaintiff was on the first of June 1853, and thenceforth continued to be a corporation duly organized pursuant to the act already referred to; and that, on the fourth of July of the same year, in pursuance of notice theretofore given, the stockholders of the plaintiff duly elected a board of directors; who qualified according to the statute, and assumed the discharge of the duties of their ofiice. On the third of April next following their election, the board located the road on the route, and made á point at the place named in the condition to the writing sued on. And it is to be presumed that the requisite amount of actual stock had been taken to authorize the election of the directors and their action in the location of the .road.
III. The writing in controversy was signed and delivered by the defendant to the plaintiff, on the first day of June 1853, prior to the election of directors, but after the organization of the company. Its taking effect, as a subscription, was subject to two conditions. First, the one expressed, as to the location of the road and the making a point at Rock creek; the second, and necessarily implied from the first, that the amount of unconditional stock would be taken, required by law to authorize the election of directors ; who, alone, would be invested with the powers necessary to perform the ex pressed condition. The writing, upon its face, is declared to be a subscription to the capital stock of " the Ashtabula and New Lisbon Railroad Company." The subscribers, severally, agree with the plaintiff, to take the number of shares set opposite to their respective names, " and to pay therefor, as required by law, and the orders of the board of directors which may be formed" thereafter. And they declare, as a condition, that the road shall pass through the fourth range, and that the company shall make a point at Rock creek for that range. It was known to the defendant that the condition could not be acted on until directors were elected. The subscription was designed as,, and was in fact, a standing or continuing proposition, upon which the plaintiff was not expected to act, until the time arrived for the final location of its road. Having been delivered for this purpose and acted on by the plaintiff, after the condition has been complied with, it became an absolute subscription.
But it is claimed that the location of the road was not a compliance with the terms of the condition — that the road should have been completed on the designated route.
The construction of conditions, like the present, should be such as to facilitate the object of the enterprise. Pierce's R.R. Law, 75. The views expressed in Chamberlain v. The Painesville and Hudson R. R. Co., decided at the present term, and which it is not necessary to repeat, are conclusive against the construction claimed. The language, in question, is used to designate the line, or route, upon which the road was to be constructed, and the averments in the petition, in our opinion, show a compliance, on the part of the plaintiff, with all that can be fairly required.
IY. There are several other points made which we will briefly notice.
1st. It is said there was no consideration for the agreement, nor mutuality between the parties.
The consideration, was the performance, by the plaintiff, of the condition, and the stock to which the defendant would become entitled. The defendant having submitted the sub scription to the plaintiff to induce its action, upon the terms proposed, until withdrawn, the latter was authorized to act upon it, and when performed on its part, no reason is perceived why it should not be as binding upon the parties, in this form as in any other. 27 Penn. St. R. 261; 3 Cush. R. 224; 24 Verniont, 478; 9 Watts, 458; 3 Seldon, 349.
Except in New York, conditional subscriptions, in the absence of á special prohibition, So far as we have observed, have been sustained, as authorized, and not in conflict with public policy. Pierce's R. R. Law, 70; Redfield on Railways, 97, sec. 57, note 4; 16 B. Mon. 364;' 39 Maine, 595; 10 Poster, 401; 10 Ind. Rep. 499; Chamberlain v. The P. & H. R. R. Co. ante, 225.
2d. It is said (1) the company was not a party when the agreement was made; and (2), that it is not shown when the plaintiff became possessed of the instrument.
The first part of this objection proceeds upon the supposition that the plaintiff had not a corporate existence at the time of the delivery of the proposed subscription. This has already been shown to be unfounded. The answer to the second is, that the subscription, in question, was designed for the action of the directors, and, on their election, passed, with all other property of the corporation, under their control.
3d. It is claimed that unless the proposed subscription took effect at the time of delivery, it is void under.the sixth section of the statute, which provides, that five dollars on each share shall be payable at the time of making the subscription.
This section, as was decided in Chamberlain's ease, does not prescribe the form or mode in which subscriptions are to be made. It does not apply until after the legal relation of a stock subscriber has been established. When this had been done, it declares that an installment of five dollars shall be', payable on each share. " The time of making the subscription" refei's to the time at which it becomes complete. In the present case, the liability of the defendant to pay the first installment and the assessments, arose when his subscription became absolute.
4th. It is objected that the defendant was not notified of the acceptance of his subscription.
It is averred that he had notice of the performance of the condition, and this was sufficient.
5th, Another objection, insisted on, is that it is not shown that the provisions of the ninth section were complied with; and, further, that the alleged subscription does not appear to have been made in a boob opened for the purpose.
As to the first part of this objection it may be answered, that, under the allegations in the petition, it will be presumed that all the necessary facts existed to authorize the election of directors. And, as to the second, that the subscription, if unexceptionable in other respects, will not be rendered invalid by reason of not being written and subscribed in a book. The opening of subscription books, though one, is not the exclusive mode in which a railroad company is authorized to dispose of its stock.
The judgment of the common pleas will be reversed, demurrer overruled, and the cause remanded for further proceedings.
Brinkerhoee, C.J., and Scott and Welch, JJ., concurred.