Court Opinion

ID: 6235177
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:30:52.989344+00
Date Added: 2024-06-11T08:58:01.542049
License: Public Domain

Mr. Justice Gordon
delivered the opinion of the court,
Where one subscribes to the stock of a public corporation prior to the procurement of its charter, such subscription is to be regarded as absolute and unqualified, and any condition attached thereto is void: Bedford Railroad Co. v. Bowser, 12 Wright 29. The reason for this rule is obvious ; the commissioners, who are appointed to receive such subscriptions, are not the accredited agents of the corporation, for it is not yet in being, but are rather the agents of the public, acting under limited and definite powers, which every one is bound to know, and if he be misléd by representations which such agents have no right to make, it is his own folly. Any other rule would lead to the procurement from the Commonwealth of valuable charters without any absolute capital for their support, and thus give rise to a system of speculation and *368fraud which would be intolerable. When, however, the company is once organized, a different order prevails. Such a company may receive conditional subscriptions for its stock, and, when it does so do, it is bound to the performance of the conditions therein contained: Railroad Co. v. Stewart, 5 Wright 54; Railroad Co. v. Hickman, 4 Casey 318. Doubtless the act of incorporation might alter this rule, and put all stock subscriptions within the same category, and subject them to the same conditions as those made before organization. But the Act of 1849, subject to the provisions of which the plaintiff company was erécted, has in it nothing to indicate that the legislature intended to restrict the powers which corporations ordinarily possess over their own stock. It follows, that the plaintiff might dispose of its stock, as of any other of its property, in such manner as, in its judgment, might best subserve the purposes of its erection, and, to this end, might receive conditional subscriptions for such stock.
Again, after the organization of a company, chartered for some public purpose, as, in this case, for the building of a railroad, if one subscribe, without condition to the stock of such company, be does so in view of the general powers conferred upon it by the legislature, and he is responsible with his fellow corporators for the proper and lawful exercise of those powers, and he cannot, therefore, set up an unlawful act of the directors as an excuse for the non-payment of his subscription ; for it is within his own power to prevent such abuse of authority.
As was said in Graff v. The Railroad Co., 7 Casey 489, the contract of subscription is not only with the company, but, also, with all the other shareholders; hence the subscriber may not set up even the fraud of the directors in order to defeat his contract. But whenever a power intervenes, over which he can have no control, to alter in a material point the character of his contract without his assent, actual or implied, such intervention works his release. As, where, by Act of the General Assembly, a turnpike company was authorized to alter the termini of its road ; in that case it was held that a subscriber to its stock was released from his contract of subscription: Turnpike Co. v. Phillips, 2 Penna. R. 184; Plankroad Co. v. Arndt, 7 Casey 317. The reason for this is, that such termini form part of the conditions wdiich enter into the contract, and as the supreme power, over which the subscriber has no control, intervenes to alter such conditions, he is. thereby released. A contrary doctrine would involve the unreasonable supposition that a contract might be imposed upon a party who never assented thereto.
We now come to the application of these principles to the case in hand. It is conceded that this company was fully organized at the time the subscription in controversy was made. It was erected by the Act of March 17th 1871, with an authorized capital *369of $500,000, and as much more as the stockholders might think necessary to complete and equip their road. It was empowered to build a railroad from any point “ beginning at or near the city of Philadelphia, thence by such practicable route, with moderate grades, as will, in the opinion of the president and directors, most conduce to the public interest, terminating on some point on the Pennsylvania Central Railroad, east of Downingtown station, in the county of Chester, in such manner as to connect with the said Pennsylvania Railroad.”
In the contract of subscription, signed by the defendant, the route and terminal points of the road are thus described : “ Commencing at a point on the Pennsylvania Railroad at or near Hestonville, thence by the most practicable route to the valley of Cobb’s creek, thence along Cobb’s creek to a point near City avenue, thence across the West Chester Turnpike road to Naylor’s run, and by the south branch through Pritchett’s farm to Darby creek, and along the valley of said creek to Fawkes’s run, thence along Fawkes’s and Caley’s runs to Newtown Square, thence via Sugartown and Goshenville by the most expedient route to be surveyed, to West Chester, and from .thence to Downingtown, as soon as sufficient funds shall be subscribed to carry on the work.” By this the company undoubtedly agreed that the road shall begin and terminate in certain points therein set forth, and that it shall, when built, occupy the route indicated.
These matters form part of the contract: Plankroad Co. v. Arndt, supra; and if the company has determined to abandon either of the termini or any material part of the route, as set forth in the contract, the defendant is, thereby, released from his obligation. Of this the minutes of the company were evidence; hence the second and fourth points of the defendant should 'have been affirmed. If the above stated doctrine be not correct, then has the defendant no remedy; for as the directors, in changing the route of their road, are acting within the powers conferred by the charter, he cannot prevent such change, though violative of the terms of the contract. He, therefore, occupies much the same position in which, as we have shown, the general stock subscriber is placed when such change is made by virtue of an Act of Assembly. The defendant’s offer, in which he proposed to show that the directors of the company plaintiff, or some of them, assured him, at the time he made his subscription, that the work would not be undertaken, nor the money called for, until bonfi fide subscriptions to the amount of $150,000 had been procured, ought not to have been overruled, for, as we understand the matter, it was one of the inducements by which his signature to the contract was obtained. There was, indeed, in this offer, nothing contradictory of the written instrument; it was, rather, explanatory. The writing reads, “ as soon as sufficient funds shall be subscribed to carry on the *370work.” This language is quite ambiguous. Would $500 be “ sufficient funds,” or $500,000 ? And what are we to understand by the phrase “ to carry on the work ?” Is the idea fulfilled by a preliminary survey, or is it thereby intended that the whole work shall be put in such a condition as to give a reasonable assurance of its final completion ? And what more reasonable than that a subscriber, who did not want his money to be squandered on a mere idle experiment, should inquire about the amount necessary to put the undertaking properly under Avay, and insist upon the assurance that until such amount was subscribed he should not be called upon to pay ?
Nothing is better settled-in this state than that not only can the ambiguities of a written instrument be explained by parol, but it may, in the same manner, be varied, added to, or even contradicted where it is shown that but for the oral stipulations, made at the time, the party affected would not have executed it. The authorities for, as well as the reasons given in support of this doctrine so abound in our books, that to cite the former, or to restate the latter would be but a waste of time. But, it is said, this corporation was not bound by the declarations of its agents, they 'having exceeded their authority, and hence it was under no legal obligation to fulfil their undertakings. Grant this to beso; but how, then, can it hold the defendant to his part of the covenant ? This plea would answer an excellent purpose were Caley seeking to enforce the contract against the company, but it so happens that the stick is in the other hand. “ If one party be not bound, neither is the other;” Strong, J., in the case of the Railroad Co. v. Stewart, 5 Wright 54. In this respect a corporation differs nothing from a natural person; if it would enforce the contracts of its agents it must first agree to adopt and be bound by them. In the foregoing we have discussed all the exceptions which we deem material or well taken; the rest are dismissed without further comment.
The judgment is reversed, and a venire facias de novo awarded.