Ridgefield & New York Railroad Company v. Brush.

as it previously existed, this clause inserted, "and in the presence of each other." But that cannot affect the validity of any will previously executed.

A new trial must be denied.

In this opinion the other judges concurred.

THE RIDGEFIELD & NEW YORK RAILROAD COMPANY vs. JAMES H. BRUSH.

The charter of a railroad provided that the company might be organized and proceed to construct the road when $200,000 had been subscrib d, and that the corporators should open books for subscrip ions under such regulations as they might think proper. The corporators opened the books, with a form of subscription in which it was provided that not over two per cent. should be called in until the whole amount estimated to be necessary for the construction of the road had been subscribed. The shares were fifty dollars each. The defendant subscribed for ten shares. The estimated expense of completing the road was $535,000 and less than $300,000 was subscribed. The company was organized and directors appointed. Some time after, M & Co. signed their names upon the book as subscribers for six thousand shares, making the subscription complete as to amount. Their subscription was in the same form with the others, but there was a private agreement with the directors that they should have the contract for building the road, and that they should pay for the stock half in cash and half in work and materials. After the subscription was made a contract was drawn, and signed by M & Co. and the directors, by which M&Co. were to construct the road according to the estimates and receive payment half in cash and half in stock. They were not at this time able to pay for the stock in cash, and this was known to the directors, but they were regarded as able to perform their contract for the construction of the road, and it was confidently expected by the directors that the subscription would be paid in full in cash and work in the proportion agreed. In fact however M & Co. were not able to perform their contract for building the road and performed but a small part of it. In a suit brought by the railroad company against the defendant to collect his subscription, in which the defence was that the whole sum required had not been legally subscribed, it was held that the subscription of M & Co., as a contract binding upon them, could not be affected by the contemporaneous parol agreement as to the mode of paying for the stock, nor by the subsequent written contract for building the road, and was therefore a valid subscription, in the absence of actual fraud upon

Ridgefield & New York Railroad Company v. Brush.

the other stockholders, which was not found, and of legal fraud, an inference of which the facts would not warrant. Two Judges dissenting.]

It appeared that some time after the subscription of M&o. was made, an installment of fifteen per cent. had been called in by the directors and had been paid by the defendant. It however appeared that, although he had learned of the arrangement with M & Co., he believed at the time, upon the representation of one of the directors, that they were able to pay for their stock and that the company had a guaranty for their doing so. Held that the defendant was not to be regarded as having waived his right to object to the invalidity of their subscription, and that he was not estopped from denying his obligation to pay further installments upon his subscription by reason of the fact that other subscribers were led by his acts to pay their installments. The charter authorized the company to organize and proceed to construct the road when $200,000 was subscribed. The corporators made the subscriptions conditional upon the whole amount required for the completion of the road being subscribed. Held that the condition was not inoperative as being repug nant to the provision of the charter.

And held that after the company was organized and the directors appointed all the subscriptions thereafter taken were to be regarded as received by the directors and not by the corporators, and that therefore any private agreement made with the directors was to be regarded as made with persons whose acts affected the corporation.

ASSUMPSIT, upon a subscription to the stock of the plaintiff corporation; brought to the Court of Common Pleas of Fairfield County and tried to the court, upon the general issue, before De Forest, J. The court found the following facts:

The plaintiffs were incorporated as a railroad company at the May session of the General Assembly in the year 1867, with a capital of $450,000, to be increased at the pleasure of the corporation to $750,000, the same to be divided into shares of fifty dollars each. The 3d section of the charter was as follows:

"The persons named in the first section hereof, or a majority of them, shall open books to receive subscriptions to the capital stock of said corporation at such a time or times and place or places as they or a majority of them may appoint, and shall give such notice of the times and places of opening said books as they shall deem reasonable, and shall receive said subscriptions under such regulations as they may adopt for such purpose."

The 4th section was as follows:

"The persons named in the first section hereof, or a major

Ridgefield & New York Railroad Company v. Brush.

ity of them, are hereby authorized to call the first meeting of the stockholders of said corporation, in such way and at such time and place as they may appoint, whenever two hundred thousand dollars or more of the capital stock of said corporation shall have been subscribed for, to choose directors and perfect the organization of said corporation; and in all meetings of the stockholders of said corporation cach share shall entitle the holder thereof to one vote, which vote may be given by said stockholder in person or by lawful proxy; and whenever said corporation shall have been so organized, it may proceed to commence the construction of the railroad hereinafter specified."

The corporators, under the authority of the 4th section of the charter, met on the 29th day of July, 1867, and adopted the following resolution with regard to the form and conditions of the subscriptions to be taken to the stock of the company, which resolution and form of subscription were entered in a book prepared and kept for such subscriptions, and all the subscriptions taken were made upon the same book and underneath the form so prepared.

"Resolution adopted by the board of corporators of The Ridgefield and New York Railroad Company, at a lawful meeting holden by them at Ridgefield, on the 29th day of July, 1867:

"Resolved, That no assessment shall be laid upon the stock subscribed of more than three per cent. until the whole amount of stock shall have been subscribed, estimated to be necessary for the completion of the road from Ridgefield to such point as shall be decided on by the company, and no assessment shall be made until $200,000 shall have been subscribed for the Stamford route, or $350,000 for the Greenwich route.

"The undersigned hereby agree to take the number of shares of the capital stock of The Ridgefield and New York Railroad Company, set to our respective names, subject however to, and payable on, the terms of the foregoing resolution, and only on condition that the southern point of said road shall terminate in the town of Greenwich or Port Chester. Dated Ridgefield, August 9th, 1867."

Ridgefield & New York Railroad Company v. Brush.

The defendant subscribed his name to this form of subscription, taking ten shares of the stock.

At the time the defendant subscribed less than $300,000 of the stock had been subscribed for, and the subscription remained for some time incomplete. The expense of the entire construction of the road, as estimated by the engineers of the company, was $534,973.

Soon after the corporators called the first meeting of the stockholders, at which the company was organized and elected a board of directors.

Afterwards, at a meeting of the directors, held on the 31st day of March, 1870, a firm by the name of Lawrence W Myers & Co., consisting of L. W. Myers, A. D. Myers, and E. N. Myers, signed their names to the plaintiffs' subscription list for six thousand shares of stock, making the total amount of stock subscribed for enough to cover the estimated expense. Without the subscription of Myers & Co., a sufficient amount of stock to cover the estimated expense has never been subscribed for.

The subscription of Myers & Co., as it stood on the plaintiffs' subscription books, was apparently upon the same terms as the defendant's subscription, and there was nothing upon the subscription books to indicate that Myers & Co.'s stock so subscribed for by them was to be paid for in work or materials, or in any other way than in cash. By a private parol arrangement, however, between the directors of the railroad company and Myers & Co., it was agreed before the subscription was made that Myers & Co. should have the contract for constructing the road, and that only fifty per cent. of the stock so subscribed for was to be paid for in cash, and that the remainder of the price was to be paid in the work and labor and materials furnished by Myers & Co. in performing their contract and building the road; and their subscription was made pursuant to this understanding and agreement. It was well known to the directors at the time the subscription was made that Myers & Co. had not the pecuniary ability to pay for the stock in cash beyond the fifty per cent. thereof, and it was not by them expected that they would so pay for it, but VOL. XLIII.-12

Ridgefield & New York Railroad Company r. Brush.

they did in good faith expect that the subscription would be fully paid in work and materials and in cash, in the proportion above mentioned.

On the 4th day of April, 1870, a written agreement was executed by Myers & Co. on the one part, and by the presi dent and secretary of the railroad company on the other, under which Myers & Co. were to construct the road for the sum estimated as the cost of its construction, the part of which agreement important to the present case is as follows:

"Payments to be made as stated herein monthly, on the engineer's estimate, at the village of Portchester, New York. It is further mutually agreed, by and between the parties hereto, that said parties of the first part shall receive in payment for all work done under this contract, fifty per cent. in United States currency, and fifty per cent. in the capital stock of the said Ridgefield & New York Railroad Company at par, and no assessments shall be laid for cash on the six thousand shares to the capital stock subscribed for this day by the first party hereto. But said stock (or certificate therefor) shall be issued to said first party for payment of the work as hereinbefore described.'

The parol agreement between Myers & Co. and the directors, which existed at the time of Myers & Co.'s subscription, and the provisions of the contract afterwards executed pursuant to the agreement, were unauthorized by the other stockholders and unknown to them, and the defendant had no knowledge of them at the time the subscription of Myers & Co. was made and the contract for the construction of the road entered into.

The first assessment upon the defendant upon his subscription was paid May 27th, 1870, under the following circumstances: The defendant was called upon by Henry Keeler, one of the directors, who was collecting assessments, being authorized by power of attorney from the treasurer so to do, and who had full knowledge of the circumstances under which the subscription of Myers & Co. was made, and of the provisions of the contract subsequently made by the directors with them, for fifteen per cent. of the stock subscribed for by him,