Court Opinion

ID: 5434862
Source: CourtListenerOpinion
Date Created: 2022-01-08 17:52:00.13434+00
Date Added: 2024-06-11T08:31:44.808975
License: Public Domain

Baldwin, J. delivered the opinion of the Court upon the petition for rehearing
Field, C. J. and Cope, J. concurring.
We propose to notice only two points made by the appellants on their petition for rehearing. The first is that as to the alleged error in the decree below, that Chater was entitled to three hundred and thirty-three and a third shares of the stock, when by the agreement he was only, at most, entitled to two hundred and fifty shares. As to the eighty-three and a third shares, a part of the common stock of two hundred and fifty shares, it was provided that, after being issued to the respective holders, (one-third to each) they were to be given back to the company, and sold only by a majority vote of the company, and that the shares not sold, belonging to the common stock of the company, shall, if it be not found necessary to sell them, be divided equally among the three parties, but not until the *245company’s works have been in operation for at least twelve months. We see no evidence that these eighty-three and one-third shares of Chater were ever so sold, or that there was any necessity to sell them. Indeed, they were never issued to him at all. Originally he had a right to them; but after getting the certificates he was to return them to the company—the company to hold them, and in the given event, use them to pay its debts. The decree only affirms the title of Chater to them. If on a settlement of the account it be found that Chater owed on account of his stock, or the corporation owed money for which the stock should have been sold, possibly the stock, which was designed to be a security for the debts, would be in equity charged, and ordered to be so applied. That matter does not arise now on the pleadings or proofs, and we leave it open for settlement upon the final hearing, and the decree may be so reformed, if it be deemed necessary, as to reserve the question, unaffected by the decree, for disposition when all the facts can be presented.
2. It is next insisted that we erred in holding that this agreement bound the corporation. That point was barely suggested on the oral argument, and in the learned and able briefs of the counsel. ISTo great stress seemed to be laid on it. We gave it no very elaborate consideration, for we really supposed—erroneously, perhaps— that the counsel placed but little reliance upon it. The argument now on this point is very full and very ingenious, but as applied to the facts of this record is not sound.
Every opinion, as Chief Justice Marshall well observes, must be considered with reference to the particular facts upon which it is made; for it is impossible so to use language as that general expressions apply in every instance with the same meaning to every condition of facts. We asserted no such doctrine as that, by force of a secret agreement between the original corporators in a commercial corporation, whether made before or after the Act of Incorporation, the stock issued by the corporation to innocent parties without notice of the agreement could be charged or affected by it. There was no ease before us for the application of such a principle. But the right to incorporate for such a purpose as that here is a statutory right, which is free to everybody. The rights in the *246corporation can be adjusted by contract, and the terms fixed by contract. The corporation is little more, under our laws, than a joint stock company under the English laws ; indeed, in its true nature more nearly resembling a limited partnership under special articles than a corporation at common law. This corporation was organized under an agreement, which was in itself legal and binding. The original corporators were really the men (except one— if indeed, he were not the assignee of one) who made the agreement, and were bound to execute it. They had the power to execute it; for they had on the organization the power, subject to restrictions which we do not apply here, to control their own business in their own way. A man may as well make an agreement with another for certain stock in a corporation to be organized hereafter, as an agreement for stock in a presently existing corporation. If A, B and C agree to form a corporation for a railroad with a capital of so much, to be represented by so many shares of stock, why may not they contract that each is to have so many shares on such and such terms ? What rule of law forbids ? Is there anything immoral in the contract, or opposed to public policy ? Cannot a man as well subscribe one time as another for stock, if all interested consent ? Indeed, as under this particular agreement they organized, so far as the then members are concerned, the agreement becomes as effectual as if a part of the corporate act. As there is in this respect no restriction upon the terms on which they associate or do business, or to the time of making them, why not find those terms in an antecedent agreement as well as a present adoption, if the preceding agreement is connected by clear proof with the act of incorporation and its affairs ? Suppose A, B and C agree to form a corporation for running stages, and put in, each, $10,000, but there are to be no certificates of stock issued and no debts incurred. This agreement precedes, of course, the incorporation; and suppose the money is paid before the corporate act is consummated. The corporation is formed and proceeds to do business. Will it be contended that these men are not entitled to their respective shares of the profits, etc., from the mere fact that all this occurred before the technical, ideal thing—the corporation—was called into existence ? The truth is, the corporation, under our system, following such an *247agreement, would be the mere agency of the associates created for the sake of convenience in carrying out the agreement, as between those who made the bargain—the different characters or forms in which or by which the bargain was made, and the order in which the several parts of it were executed, making no substantial difference in the obligation. But if it did, and this ideal thing, the corporation, be something essentially distinct and exclusive, making the men inside of it and controlling it wholly different from the same men just before they went into it; yet these shares are interests and property in esse or posse. This interest, or those shares, entitle the holder to certain privileges of value, and may entitle him to profits. Whether, therefore, the corporation is bound of itself, and as a separate entity, to recognize a right in a claimant to this interest, a private person holding these shares or interests would be bound to such claimant for them. But apart from all this, when the corporation became such, it organized with Chater, Bond and Gordon as trustees, and these were really the sole corporators also; and they organized with full knowledge of this agreement, which not only contemplated the formation of the company or corporation, but prescribed the terms and rights of the members in the corporation and corporate business. Chater ivas not only superintendent under this agreement, but trustee too; and the corporate business was commenced and for a long time prosecuted with reference to this agreement, which recited these terms and affirmed these rights. If anything could be, this was an adoption by the corporation of these terms. It is not necessary to inquire whether an innocent purchaser of the stock, buying subsequently without notice, would be affected by any such acts—for no such question is before us now.- If the corporation be bound by » this agreement, and the Court, proceeding to enforce it by ordering the issuance of stock, should affect injuriously any innocent holder of stock, it will be time enough to consider his rights, legal or equitable, when the facts and proper parties are before the Court.
■ If on taking the account, it should appear that Chater is not entitled to anything, but that the corporation is so indebted as to make it inequitable for him to receive his shares, the Court below, *248on the final hearing, can make the proper decree, unaffected by anything in the decree under review.
With these modifications, the decree is affirmed and the cause remanded.