Court Opinion

ID: 5514517
Source: CourtListenerOpinion
Date Created: 2022-01-10 04:28:06.52343+00
Date Added: 2024-06-11T08:34:15.390619
License: Public Domain

By the Court,

Sutherland, J.
The first section of the act creates the applicants for the charter, and such other persons as then are or may thereafter be associated with them, a body corporate and politic in prcesenti, without any condition precedent to be performed by them. The 5th section limits the capital to $350,000, which, by a subsequent act, is extended to $550,000, to be divided into shares of $50 each ; and authorizes the directors to demand from the stockholders all sums of money by them subscribed, at such time and in such proportions as they shall see fit. The promise of the defendant and the other subscribers, although it is in form to take the shares subscribed by them respectively, is undoubtedly (when taken in connection with what precedes it, and with the act of incorporation, which is there referred to and in part recited) a promise, not only to take the shares, but to pay for them—to take them upon the terms and conditions set forth in the subscription paper ; and the corporation could, undoubtedly, in the appropriate form of action, and upon a declaration containing the necessary averments, have enforced payment of the subscription price of the shares from the subscribers. In the case of The Goshen and Minisink Turnpike Road v. Hurtin, 9 Johns. R. 217, the general doctrine was established, that an action would lie against a stockholder of a turnpike corporation, at the suit of the corporation, on his promise in writing to pay for the shares for which he had subscribed ; and the decision of the court of errors, in Jenkins v. The Union Turnpike Company, 1 Caines' Cases in Error, 86, was not considered as conflicting with that opinion.
*24The same doctrine was reiterated in the subsequent case of The Dutchess Cotton Manufactory v. Davis, 14 Johns. R. 238. That was an action of assumpsit, upon the defendant’s subscription for the stock of the company; and the court saidj that since the case of Hurtin, the question whether an action would lie,.in such a case, ought to be considered as at rest. It was remarked by the court, that there was a consideration appearing on the face of the subscription 5 that it was a promise to pay S100 for each share of stock set opposite the defendant’s name; and that it was to be intended that the defendant had become a stockholder to that amount. In The Chester Glass, Company v. Dewey, 16 Mass. R. 94, the general principle, that a subscriber to the stock of an incorporated company may be compelled to pay the subscription price, was held by the whole court; and the objection was there taken, that the defendant was not a stockholder, or member of the corporation, because he had no certificate for the shares subscribed by him ; to which it was answered by Ch. J. Parker, that the subscribers would not lose their right for want of certificates, and that a court of chancery would compel the corporation, should they refuse to give them. It is true that none of these cases decide the precise point, that the mere fact of subscribing to the stock of an incorporated company, constitutes such subscriber a stockholder. But they do decide that such subscription puts it in his power to become a stockholder, in the broadest and most unqualified sense of the term, by compelling the corporation to give him the legal evidence of his being a stockholder, upon his complying with the terms of the subscription; and on the other hand, that it puts it in the power of the corporation to compel him to pay for the shares subscribed by him, and thereby to become a stockholder to that amount. Neither party, therefore, can escape from the obligations created by the subscription, without the consent of the other ; and I am inclined to think that this state of things is sufficient to constitute the subscribers stockholders, within the meaning of the term, as used in the 9th section of this act, where the rights of third persons are concerned. It was the policy of the act to give to the creditors of the corporation the security of the individual members thereof, and persons *25dealing with the company have a right to look to the subscription for the stock, as one means of determining who the stockholders are. As long as the relations subsisting between the subscribers and the corporation are such that the corporation can compel them to pay for their stock, it seems to me the policy of the act requires that they should be considered stockholders. Any other construction would put it in the power of the corporation to collude with the subscribers and defraud the creditors, to a certain extent, of the benefit of this provision of the statute.
The other grounds upon which the defendant objected to the plaintiff’s recovery, and moved for a nonsuit, were also properly overruled. The corporation had a right to purchase the land from the plaintiff, by which the debt to him accrued. They are not restricted by their charter to the purchase of the mere thread of the canal. In this case the canal was laid through the centre of the land purchased from the plaintiff, destroying his dwelling house. A mere passage for the canal, could not,under such circumstances, be expected to be purchased, and a reasonable discretion was vested in the corporation, which, in this case, certainly does not appear to have been abused. The 4th section of the act seems to contemplate the possession by the corporation of real estate beyond the absolute necessities of the company, for the mere purpose of making a canal; and from the very nature of the case, it must have been foreseen that the precise quantity required, without any excess, could not probably be obtained.
Whether the manner of distributing or dividing this excess among the stockholders, as set forth in the project of the corporation, was lawful and proper or not, does not appear to me to be material. Admitting it to be unlawful, it would not render the subscription of the stockholders void. The property would still belong to the company, and might be divided or disposed of in any other lawful manner. It did not work a forfeiture, and the defendant, I apprehend, cannot, as against the plaintiff, avail himself of any merely unlawful act of the corporation, either designed or fully consummated.
On the whole, I think the judgment of the superior court should be affirmed.