Court Opinion

ID: 6947725
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:27:35.056965+00
Date Added: 2024-06-11T16:07:58.524110
License: Public Domain

Treat, C. J. The second plea was not relied on at the argumént, and need not be further noticed. The third plea presents no defence to the action. The city of Alton and individuals residing in the city of New York, had a clear right to become stockholders in the company. The commissioners possessed no power under the charter to exclude them, especially as there was no excess of subscriptions to the capital stock. The city had also a clear right to give her proxy to whom she pleased. It is none of the business of one stockholder, for whom the votes of another shall be cast. In this respect, each is at' full liberty to act as his judgment or interest may dictate. The arrangement between the city and the New York subscribers, that the latter should receive six per cent, interest on their investments, for the period of eight years, is not binding on the corporation, or the other stockholders. At most, it amounts to but a guaranty on the part of the city, that the dividends on the capital stock, for that length of time, shall be equal to an interest of six per cent, per annum. And this is a matter exclusively between the city and those subscribers. It cannot operate to the prejudice of the remaining stockholders. The dividends must be general on all the stock, so that each stockholder will receive his proportionate share. The directors have no authority to declare a dividend on any other principle. They cannot exclude any portion of the stockholders, from an equal participation in the profits of the company. If they should attempt to carry into effect any such understanding as this plea discloses, their action would be in gross violation of the rights of the other stockholders, and would not for one moment bind them. The fourth plea is clearly defective. Conceding, for the purposes of this case, the power of the commissioners to permit one person to be substituted as a subscriber in the place of another, it does not appear from this plea that any such arrangement was consummated. The plea simply alleges that the defendant refused to retain the thirty shares, of stock, that Godfrey agreed to take them, and that the commissioners counted them as belonging to the latter. This does not show either that the defendant ceased to be a subscriber, or that Godfrey then became one. It fails to show a legal discharge of the one, or a binding assumption by the other. The intended arrangement was left incomplete and unconcluded. The agreément between the defendant and Godfrey remained unexecuted. The signature of the defendant should have been erased from the books of subscription, and that of Godfrey inserted in its place. It ought to appear, from the plea, that Godfrey could be made liable to the corporation, as an original subscriber for the stock. But the facts set forth in the plea, would not be sufficient to charge him as a subscriber. If he cannot be held liable as such, the defendant is still responsible on his subscription. The latter had no right to rescind his contract at pleasure, ajnd he yet continues liable thereon, unless he has been legally absolved from its performance. The plea did not show a valid discharge, and it was properly held insufficient. The fifth plea attempts to invalidate the subscription of the defendant, because five dollars on each share was not paid when the stock was subscribed. If he was to be considered as an ordinary subscriber to the stock of the company, the plea would present an interesting and important question. It was held, in the case of Jenkins v. The Union Turnpike, 1 Caines’s Cases, 86, that where an act of incorporation requires a certain sum to be paid at the time of subscribing, the direction must be complied with, or the contract of subscription is void. A similar decision was afterwards made, in the case of the Hibernia Turnpike v. Henderson, 8 Serg. & Rawle, 219. The former decision was pronounced by the Court of Errors in New York, against a contrary ruling of the Supreme Court of that State; and the decision in Pennsylvania was made by a divided court. Although the rule has been adhered to in those States in ordinary cases of subscription, their courts have repeatedly refused to extend its application to cases like the present. In the Highland Turnpike v. McKean, 11 Johns. 98, it was determined that a party who was named in the charter as a commissioner, could not insist upon the objection. The court said; “ the defendant was a commissioner to receive subscriptions; and he subscribed, while the book was in his own hands. This was, no doubt, a valid subscription, so as to entitle the defendant to the stock subscribed; and it would be a useless ceremony for him to pay himself the money required to be advanced on the subscription.” In Grayble v. The York and Gettysburg Turnpike, 10 Serg. & Rawle; 296, the court say; “ the plaintiff in error was one of the commissioners, who had authority to receive the five dollars when he made the subscription. It would be a ridiculous ceremony for him to take his money out of one pocket, and put it in the other. Wherever the hand which is to pay, is the hand which is to receive, that is payment*and satisfaction, as between the parties, even at law.” In Clark v. The Monongahela Navigation Co. 10 Watts, 364, the court held that a subscriber who had exercised the rights of a Stockholder, by voting for managers of the company, was thereby estopped to deny the validity of his subscription, because he had not paid the sum required by the charter. These cases are decisive against the defendant. He is concluded from raising the objection. He was one of the commissioners named in the act of incorporation. He was in fact the president of the board, and in that character signed the certificates of stock issued to the subscribers. He had full authority to procure subscriptions to the stock, and receive the five per cent, directed to be paid by the charter. As respects the stock in question, he acted both as a commissioner and subscriber. In judgment of law, he received the money when he subscribed for the stock. The five dollars on each share subscribed by him was in his own hands for the use of the company, the instant his subscription was made. Besides ; it was his official duty to require payment from subscribers, and he ought not to be allowed to set up his violation of that duty to defeat the action. Was Martin a competent witness for the corporation ? He was originally one of the commissioners, and the secretary of the board; and at the time he was called as a witness, he was a stockholder in the company. The general rule undoubtedly is, that a corporator cannot be called to testify on behalf of the corporation in which he is interested; but there are some exceptions to the rule, founded chiefly in considerations of convenience and necessity. A corporator may produce and identify a paper in his custody. The King v. The Inhabitants of Netherthong, 2 Maule & Selwyn, 337. A corporator may be called to prove that he was the depositary of the muniments of the corporation. The Union Bank v. Ridgely, 1 Harris & Gill, 324. The clerk of a corporation is a competent witness to identify its books and verify its records, although he is a member of the corporation, and interested in the suit in which the books and records are to be used as evidence. Wiggin v. Freewill Baptist Church, 8 Metcalf, 301. These authorities are conclusive of the question. Martin was called for the single purpose of identifying the minutes of the proceedings of the commissioners. For that purpose, he was clearly competent. His interest would exclude him from becoming a witness for the corporation generally. Were the minutes themselves admissible in evidence? The books of a corporation are competent evidence for the purpose of showing the acts and proceedings of the corporation. Highland Turnpike v. McKean, 10 Johns. 154; Owings v. Speed, 5 Wheat. 420. Where certain steps are required to be taken before a corporation has existence, such as the opening of books, subscription of the capital stock, and the choice of directors; the production of the corporation books, showing the election of officers, is, primá facie, sufficient to show that the prerequisites of the statute have been complied with, and that the corporation has an existence. Wood v. The Jefferson County Bank, 9 Cowen, 194. In an action against a shareholder to recover the amount of his subscription, the books of the corporation are competent evidence to prove the existence of the corporation, and the regularity of the previous proceedings. Gray v. Turnpike Company, 4 Randolph, 578. The organization of a company may be established by the corporation books. Duke v. Cahawba Navigation Company, 10 Ala. 82. The books of a corporation are admissible in evidence, for the purpose of showing the regularity and legality of the proceedings of the corporation. Hall v. Carey, 5 Georgia, 239. In the present case, the minutes of the board of commissioners were properly received in evidence. They were admissible for the purpose of showing that the requisitions of the charter had been complied with, and that the corporation came regularly into existence. As against a subscriber, the minutes' are presumptive, but not conclusive evidence of these facts. It would be extremely difficult to establish them in any other mode. The commissioners had the general direction of the company until it was fully organized, and some degree of credit should be given to the record of their proceedings. The minutes must be presumed to be correct, until the contrary is made to appear. The judgment is affirmed. Judgment affirmed.