Court Opinion

ID: 6576657
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:34:56.264089+00
Date Added: 2024-06-11T15:57:07.503827
License: Public Domain

Storrs, J.
In this case, the defendant claims, in the
first place, that the neglect of the grantees of the original charter, under which the plaintifFs claim to possess and exercise corporate powers, by virtue of the renewals thereof, to expend fifty thousand dollars within two years after the rising of the legislature, in 1846, was a non-compliance with the resolution of that year, renewing that charter. The plaintifFs claim that, by the true construction of that resolution, it would have been a compliance with it, either to have expended that sum, within said two years, or to have completed the railroad, within four years after the rising of the legislature of that year; and that the resolution of 1850, again renewing the charter, dispensed with the completing of the road within said four years, and extended the time therefor, three years longer, within which latter time the road was completed: and that, therefore, there was no noncompliance as claimed, or, that it was excused. We do not accede to this construction of the resolution of 1846. Its phraseology is too explicit to admit of such an alternative meaning. Its true construction is, not that the company should either expend said sum or complete the road, at their option, within the times respectively prescribed therefor, but that they should do both of those things. Therefore, the charter, as renewed in 1846, was not, in those respects, complied with.
The defendant, thereupon, further claims, that, in consequence of such non-compliance, the rights, privileges and powers of the corporation, created and renewed as aforesaid, by the express terms of the charter and the resolution first renewing the same, became extinct; and that, therefore, there then ceased to be any such corporate body capable of organization.
*448Whether, independently of the second renewal of the charter in 1850, and the effect of the particular terms of the subscription, in connection with the organization of the company, and the conduct of the subscribers after such second renewal, the corporate powers and capacity conferred by the charter, as first renewed in 1846, would, by the omission, on the part of the company, to expend the sum of fifty thousand dollars and to build the railroad, within the times required by the first renewal, have ceased and become so extinct, when the subscription was made and the first organization of the company took place by the choice of the first directors, that that organization would be an absolute nullity, not only as to the state, but also as to others, and ■ the subscribers themselves so organizing, if the charter had not been again renewed ; or, whether, after such organization, the effect of the subsequent renewal of the charter was to dispense with the omission to expend said sum of fifty thousand dollars, within the time prescribed for that purpose, and. with the consequences of such omission, and so to revive the powers of the company as to validate such previous organization,—are questions which we deem it unnecessary to determine : because, supposing that the objections made by the defendant to the regularity of the several steps which were taken in such organization, (which will be presently considered,) are untenable, we are of opinion that the notice of the commissioners to the subscribers, to meet as stockholders, for the purpose of choosing directors, in addition to those originally chosen,—the meeting of the subscribers for that purpose, in pursuance of that notice,—and the choice by them of such additional directors,—amounted to an acceptance of the charter by the subscribers, as renewed in 1850, and a recognition and confirmation of all the steps which preceded and resulted in the first organization of the company; and was equivalent to and constituted a new organization, as at the time of said last meeting of the sub*449scribers, of the corporation, and should be so regarded, even on a quo warranto, brought on behalf of the state, to try the question of the validity of their corporate powers: much more, as between the subscribers themselves, and as between them and the defendant, who was a subscriber to the stock and acted as a stockholder, in that meeting; and that they should be precluded from disputing the validity of those proceedings, or repudiating them, where the acts of the directors thus chosen, are in question. After those proceedings, it is too late for them to retract what had been previously done, even if it would have been proper or competent for them, otherwise, to have done so.
The defendant, however, claims, in the next place, that there were such irregularities and departures from the'charter, in the several steps taken by the commissioners and subscribers in organizing the company, that such organization is illegal and of no avail. He insists, 1. That all of the commissioners, in all cases, should have acted, or, at least, have been notified, and had an opportunity to act, in relation to the duties of their appointment. 2. That the mode of obtaining the subscriptions to the stock, by the defendant and others, was unauthorized, because it was not done by the commissioners personally. 3. That the commissioners should not have received the conditional subscriptions to the stock,—that, without including those subscriptions, there would not have been the amount subscribed which the charter required,—and that, therefore, they had no authority to convene the stockholders for the choice of directors, and that such choice was void. 4. That they illegally received the subscription of the defendant, at another time and place than those mentioned, in the notice for that purpose. 5. That there should have been a formal assignment or distribution by the commissioners, to the defendant and the other subscribers, of their stock. 6. That the meetings of the stockholders for the choice of directors, were convened, before the *450requisite amount of legal subscriptions was obtained, and therefore, before they had power to organize, and hence, that they had no authority to choose directors. 7. That the conditional subscribers should not have been allowed to vote in those meetings ; and 8. That, as' it does not appear that there was any warning of the stockholders’ meeting for the choice of the additional directors, its proceedings were void.
We are inclined to the opinion, that the specific answers, given by the plaintiffs to these several objections, are sufficient, excepting, perhaps, that which is grounded on the conditional character of some of the subscriptions received by the commissioners, and the circumstance that the conditional subscribers were allowed to vote at the meetings of the stockholders for the choice of directors, respecting which there is more difficulty : but in regard to that objection, we are also inclined to think, that those subscribers, by taking a part as stockholders in such meetings, should be deemed to have waived the condition annexed to their subscription, and that this objection is thus obviated. But it is not necessary for us to express a decided opinion on that or any other of these objections, because we have no doubt, that the conduct of the defendant, in regard to the organization by the choice of directors, and the preliminary steps which led to it, and his conduct since that organization, was such as ought, to preclude him, as between himself and the plaintiffs, in an action like the present, which is brought to recover the amount due on the installments assessed on his stock, from disputing the regularity or validity of these steps taken in the organization of the plaintiffs, as a corporation. He was a party tq, and co-operated very actively with the other subscribers and the commissioners, in that organization, and participated in all the proceedings which led to it. He was one of the earliest and largest subscribers to the stock, and induced others also to subscribe to it,—attended, on the call of the commissioners, all the meetings of the stockholders, as one of them, and acted with them, in the choice of di*451rectors,—accepted the office of director, to which he was chosen, and acted as such, in the meetings of the directors, and in the meetings at which the installments on the stock were laid,—and, until called upon long afterwards, for his part of those installments, it does not appear that he ever questioned the regularity of the organization of the company or its corporate powers : and he continued to be, and acted as, a director, subsequently, during all the time while the arrangements were made by the directors for the building of the road, and the operations connected with it. In consequence of this conduct on his part, and on the strength of what was thus done by him, in connection with the other stockholders and directors, the other subscribers, generally, were induced to pay for their stock ; and the company have also been induced to incur the expense of building their railroad, and of carrying on all the branches of their business connected with it. The other stockholders have thus been led to invest their funds and assume responsibilities, in a mode and to an extent which they would not have done, but for this conduct of the defendant. The consequence of permitting him now to repudiate his acts, might be to devolve upon the other subscribers a personal liability for the engagements of the company,—to make them even trespassers in regard to those whose property has been taken for the construction of their road, and to frustrate the whole object of their undertaking. It requires no argument to show that, under these circumstances, the case comes within the well established and most just and wholesome principle, that a person who, by his declarations, or a course of conduct, which is a species of declarations, has willfully induced another injuriously to alter his condition, is, as against the latter, estopped from denying the truth of such declarations, or the rightfulness of such conduct. Brown v. Wheeler, 17 Conn. R., 345. Kinney v. Farnsworth, 17 Conn. R., 361. Roe v. Jerome, 18 Conn. R., 138. Noyes v. Ward, 19 Conn. R., 250.
*452The defendant’s counsel have discussed the question in regard to the organization of the plaintiffs, as though this was a writ of quo warranto, brought to test the competency of the plaintiffs to act as a corporation. Such a proceeding, however, as it would involve the rights of the plaintiffs as against the state, would present a very different question from that which arises in the present suit, which depends merely on the relations between the plaintiffs and defendant : and it is therefore unnecessary to determine, what would be the result of a proceeding of that character. Nor need we here enquire what rights the plaintiffs have acquired, in consequence of what has been done by them, as against any third person other than the defendant. That question would obviously depend on other considerations than those upon which we have placed this part of the case.
The organization of the plaintiffs must, therefore, be deemed to be valid.
The defendant does not controvert the principle which we have repeatedly decided, and which is here to be considered as established, that, by the subscription of a person to the stock of a railroad corporation, of the number of shares annexed to his name on the terms, conditions and limitations mentioned in the charter, and the allowance to him of the shares so subscribed, the relation of stockholder, and company as between him and the corporation, is created, from which the law implies a promise by him, to pay installments ordered by the directors, pursuant to the charter. The Hartford New Haven Railroad Company v. Kennedy, 12 Conn. R., 499.
But he claims that the subscription itself, in this case, is entirely nugatory, on the ground, first, that it only professed to take shares of stock then, that is, at the time of the subscription, in existence, whereas there was then no company in existence in which stock could be taken ; and, secondly, that if it should be regarded as a subscription to stock at a future time, it was void, as an engagement of that descrip*453tion, for the want of a consideration or a promisee. We do not deem it necessary to examine these claims particularly, because we think that they are directly and palpably at variance with the views taken by this court, of the nature and effect of such a subscription, in the Hartford & New Haven Railroad Company v. Kennedy, (12 Conn. R., 499,) which was a case essentially and almost exactly like the present, in regard to the circumstances on which these points depend, and in which our opinion was so fully expressed that it is sufficient to refer to it. Whether the defendant would have incurred any obligation by his subscription, if the charter of the plaintiffs had not been renewed in 1850, or if the defendant had refused to concur with the other subscribers, in accepting it as then renewed, or if there had been no subsequent organization of the company,. or that which was equivalent, we need not determine. We have no doubt that, after such acceptance and organization, a liability to the company to pay the installments which were ordered, attached to the defendant, by virtue of his subscription. By that subscription, and the allowance to him by the commissioners, of the shares for which he subscribed, he became entitled to those shares, subject to the payment for them by him, as it should b.e required by the directors. That title constituted a good consideration for an express promise on his part, or, if there was no such promise, the law would, under the circumstances, imply a promise by him to make such payment. The consideration of such a promise, is the title which the subscriber to stock shall acquire to it, and in this case, the defendant acquired such title, and could have compelled a formal transfer of it to him, and a certificate of ownership, subject to the payment of installments regularly required ; but such certificate was not requisite^ in order to constitute him the owner.
* The defendant insists that there should have been a formal assignment to him, by the commissioners, of the shares allowed to him, or a record of such assignment. We do not, *454however, deem that to be necessary, where, as in the present instance, the amount subscribed did not exceed,the capital to be raised, and it was therefore unnecessary for the commissioners to reduce or apportion the shares subscribed. There having been no over subscription in this case, if any particular act by the commissioners was necessary in order to signify their assent to the defendant’s taking the stock subscribed by him, it was sufficient that they received from him and retained the amount paid by him towards the stock, when he subscribed, and that they recognized him as a stockholder, by consenting that he might act as such, in the meetings of the stockholders.
The vote of the directors requiring installments, is objected to, because it did not, in terms, make them payable to the treasurer of the company. The eighth section of the general railroad act, to which the charter, as last renewed, was made subject, was in this respect substantially complied with, and that was sufficient. The requirement in the vote, that the installments should be paid at the times therein designated, imports that payments should be made to the treasurer, who is the proper and only officer to receive and keep the moneys of the corporation.
The defendant next objects to a recovery by the plaintiffs, on the ground that notice of the assessments on his stock was not given according to the requirements of the eighth section of the general railroad act. That section provides that the president and directors of railroad corporations may direct the assessments on the shares to be paid to the treasurer, “ in such manner and with such notice as may be prescribed by the by-laws of the company.” The facts bearing on this point are, that the company who are the plaintiffs in this case, never passed any by-law prescribing the mode of such notice,—that the defendant was a director of the company, and as such, was present and acted in the meeting of the directors, at which the vote laying those assessments *455was passed,—and that, by their direction, notice of the assessments was given by the treasurer to the stockholders, by advertising'them five days thereafter in the newspaper published in the town where the defendant resided. We are of opinion that it was not the design of that section, to make the mode of notice therein mentioned exclusive of all others. If, indeed, a by-law on the subject had been passed, the stockholders would have a right to require that it should be complied with. But if they should not see fit to pass one, and there was no statute, or provision in the charter, prescribing the kind of notice, it would come within the general powers of the directors to adopt any mode which should be reasonable: and the company might prefer to leave that subject to the judgment of the directors, rather than to prescribe themselves an unbending rule, which might prove to be embarrassing or inconvenient. Indeed it will be found, that this is the course which has usually been taken ; probably because the manner of making assessments, and of apprising the stockholders of them, may generally be confided to the discretion of the directors, more beneficially than to the stockholders, as the former have the best means of judging when and in what manner the exigencies of the company require assessments to be made and notified. We do not think, therefore, that it was intended, by that section, to take away any of the general powers of the directors in this respect, excepting where they should be controlled by a by-law. In this case, the defendant had actual notice of the assessments, when they were made; and if there had not been such notice, we should not doubt that the early advertisement of them in the newspaper published where he resided, should be considered a reasonable notice to him. If however, the true construction of that statute required that a by-law, prescribing the notice, should be passed, and that no other mode could be adopted, we think that that requirement might be waived by the defendant, and that his course *456as a director, in regard to the assessments in question and the notice thereof, would amount to such waiver.
The defendant further insists, that the plaintiffs, by the sale of his shares, are precluded from maintaining this suit. That claim is directly opposed, not only to our decision in the Hartford & New Haven Railroad Company v. Kennedy, but also to the explicit provision of the general railroad act, authorizing a sale of stock, on the neglect of the owner to pay assessments, that “ If the shares of any delinquent stockholder shall not sell for a sum sufficient to pay his assessment, with interest and charges of sale, he shall be held liable to the corporation for any deficiency.”
The plaintiffs caused a location of the entire route of their railroad from Danbury to Norwalk to be made, which was in all respects legal, every step in regard to it required by the charter having been pursued. Afterwards, for a short distance on the northerly end, that location was altered, and a new route substituted, the requisite steps having been taken, as to said substituted portion of the route. The defendant claims that such alteration was unauthorized by the charter, and that he- is consequently absolved from his liability on his subscription. It is a conclusive answer to this claim, that, if the alteration of the route was unauthorized, it left the original location valid, and the defendant’s liability on his subscription unimpaired; and if the alteration was legal, it removes the objection founded on its supposed invalidity. But an irregularity in the location of the road, either in whole or part, whatever its effect might be on the rights of others, or whatever may be the nature of the remedy, by the stockholders, for a misapplication of the funds or the credit of the corporation, furnishes no defence to the stockholders, in an action to recover the installments on their stock. Such an action is not adapted to the purpose of investigating the legality of the doings of the corporation, or its officers, in these respects.
The defendant excepts to the admissibility of the contract *457between him and Stevens, introduced by the plaintiffs, as evidence in this case. It is clearly admissible, for the purpose, at least, of showing, that the defendant procured others to subscribe to the stock of the company, and the inducements which he held out for that purpose.
We have thus considered the points made on the argument of this case, and the result is, that the plaintiffs are entitled to judgment for the balance due on the installments, after deducting the proceeds of the defendant’s stock.
The superior court is advised accordingly.
In this opinion, the other judges concurred.