Ellison v. Mobile & Ohio Railroad , 36 Miss. 572 ( 1858 )

HANDY, J.,

delivered the opinion of the court.

The defendant in error brought this action to recover the amount of certain instalments, due upon a number of shares of the capital stock of the company, for which the plaintiff in error had become a subscriber.

The declaration alleged that the defendant in the court below, before the 1st of March, 1858, had subscribed for ten shares of the stock of the company, according to the written subscription signed by him and set forth, and averring that the instalments, according to the subscription, had been called for, and required to be paid by the president and directors of the company, and that they were requisite for the payment of contracts for the construction of the road of the plaintiff. The defendant demurred to the declaration, and upon his demurrer being overruled, he filed thirteen pleas, to all of which the plaintiff demurred, except the first, ninth, and thirteenth, to which he replied. The demurrer to these pleas was sustained, and the case was tried upon the issues presented by the first, ninth, and thirteenth pleas and replications. Upon the trial, sundry instructions were given to the jury, at the instance of the plaintiff, and several asked in behalf of the defendant were refused. The rulings of the court upon these points, and the sustaining of the plaintiff’s demurrer to the pleas, present the questions now to be determined.

It is unnecessary to state the pleas and proceedings in detail, which give rise to the points in controversy; and we will proceed to consider the questions involved in the rulings of the court, as they are presented and discussed in behalf of the plaintiff in error.

The first question presented is the validity of the subscription. It appears by the evidence offered on the trial, — and it is in substance stated in one or more of the pleas, — that the subscription for stock was made and contracted by the plaintiff in error with one Wheeler, acting under authority from John Childe, the general agent of the company, appointed by the board of directors to obtain subscriptions of stock, and appoint agents and commissioners for that purpose; that Wheeler’s acts in obtaining subscriptions were from time to time reported to and approved by the board of directors, and that compensation was allowed him for his services. And it is now insisted, in behalf of the plaintiff in error, that the board of directors had no power to take and contract for subscriptions, nor to appoint agents with power to do so, nor to ratify them when so taken; but that this power is conferred upon the commissioners named in the first section of the charter of the company, and other stockholders to be associated with them, who alone are authorized by the third section of the charter to receive subscriptions. Hence it is contended, that this subscription was void, neither conferring upon the subscriber the rights of a stockholder, nor creating any liability to pay the stock subscribed.

This position appears to be based mainly upon the provisions of the third section of the charter. That section authorizes certain persons named in the first section to open books to receive subscriptions to the stock, at such times and places as they, or a majority of them, should appoint, giving notice thereof, and to receive subscriptions under such regulations as they should adopt; “ and if more than five thousand shares of stock should be subscribed, they should have the power to make the shares so subscribed the capital stock of said company:” Provided, they should not exceed one hundred thousand shares. And in case the subscriptions should exceed one hundred thousand shares, the same should be reduced and apportioned in such manner as might be deemed most beneficial to the corporation.” And it is said that the fifth section adds strength to this view. It provides that those persons authorized to receive subscriptions, “ are also authorized, after the books of subscription to the capital stock of said company are closed, or when the sum subscribed shall exceed two hundred and fifty thousand dollars, to call the first meeting of the stockholders,” for the purpose of choosing directors to the company. These provisions, it is insisted, contemplate -the exercise of the power of receiving subscriptions, by the commissioners named for that purpose, after the directory should have been elected and the company organized, and until the subscriptions for stock should be closed, and all the stock taken. But we do not consider the position at all tenable.

It is manifest, that it was the object of the charter, in appointing commissioners to receive subscriptions for stock, to take preliminary steps for the organization of the corporation, — to ascertain who were the constituent members who were to form the company, to the end that such persons might proceed to organize it, by electing directors to take charge of it and manage its concerns; for without some such initiatory steps, such a company could never go into operation. The powers conferred upon the commissioners must be viewed with reference to this object, and in their nature are preliminary and temporary, to answer the necessity of the case.

By the third section, they are authorized to receive subscriptions, under sucb rules and regulations as they might adopt. This was for the purpose of ascertaining what persons should vote for directors, and in order that the corporation should be regularly organized; and accordingly, by the fifth section, they are authorized, after the books of subscription are closed, or when the subscriptions shall exceed the sum of two hundred and fifty thousand dollars, to call the first meeting of the stockholders, to elect directors. They are authorized to establish who are the stockholders entitled to vote for directors. But after the directors have been elected, the end of their appointment has been accomplished, and there appears to be nothing in the charter contemplating a continuance of their power.

The provision in the third section, that “ if more than five thousand shares of stock should be subscribed, the commissioners should have the power to make the shares so subscribed, the capital stock of said company,” cannot be justly construed to continue their powers after the organization of the company; for that would he to give them power over the directory, to determine a question which they have not the information properly to determine. It cannot be supposed, that it was intended to give such persons authority to determine so important a question, to the exclusion of the power of those, to whom the entire interests of the corporation were committed. And yet such appears to be the literal import of the language, and the construction contended for. But the provision must receive such a construction as will harmonize with the general scope of the charter, as to the powers of the board of directors, and, at the same time, preserve to the commissioners their proper functions. So considered, we think that it was intended to give to the commissioners the power to make the shares subscribed before them, the capital stock, to the end that the subscribers should be entitled to vote for directors, according to the shares ascertained and declared by the books of subscription.

This view is consistent with the fifth section, which requires, that when the books of subscription are closed, or so soon as the sum subscribed shall exceed two hundred and fifty thousand dollars, the commissioners shall call the stockholders, to choose directors. The clause, “token the books of subscription are closed,” here used, is evidently without force, and loosely employed; for, by the second section, the company is authorized to organize, and go into operation, whenever the capital stock subscribed should exceed two hundred and fifty thousand dollars; and the latter clause of the fifth section above stated, requires the commissioners to call the first meeting of the stockholders, for the choice of directors, in the same event. It was, then, the duty of the commissioners, to call upon the stockholders to choose directors, when the amount specified was subscribed, and-not to wait until the books of subscription were closed; that is, until all the stock required to be taken should be subscribed.' Hence, the language employed in this section does not justify the construction, that the powers of the commissioners were continued after the organization of the company.

But it appears to be clear, from other provisions of the charter, as well as from the nature and object of the appointment of the commissioners, that their functions were at an end, and that the power to receive subscriptions for stock vested in the board of directors, upon their election and oi’ganization. The seventh section gives the directors full power to make rules and regulations, in their discretion, “ touching the disposition and management of the stoc7c,” &c. . . . “ and all matters whatsoever, which may appertain to the concerns of said company.” The power here given, as to the disposition of the stock, is unqualified; and, from the nature of the subject, necessarily excludes the exercise of the power by any other persons. The necessity for any action in the matter by the commissioners had ceased, by the election and organization of the regular executive powers of the corporation; and the right in question could nowhere be so safely intrusted, as to that power. A construction founded on vague and doubtful phrases, holding that the important right conferred upon the directors, in plain terms, by the charter, is to be exercised by others, is not to be indulged.

We think, therefore, that there is no error, in the various rulings of the court upon this point.

The next question to be considered is, whether the alleged false statements made by the agent of the company, at the time the plaintiff in error subscribed for stock, in relation to the location of the road, and in consequence of which the subscription was made, rendered the contract invalid as to the subscriber.

The testimony before the jury upon this point was, in substance, that the subscription was obtained by Wheeler, an agent of the company to obtain subscriptions for stock, who spoke to the plaintiff in error of the great advantages which the road would afford to the community and to the plaintiff in error, and how it would increase the value of his property. That he refused to subscribe, unless the road would be located to run through Pontotoc county, where he resided, and the money subscribed should be expended upon the road in that county, as far as necessary. That Wheeler replied that two routes had been surveyed, one the eastern and the other the western, and that the engineer had already located the road on the western route, which run about twelve or fourteen miles in the county. It was then in evidence that the road has been located, and is in process of construction on the eastern route, which runs parallel with the western, at a distance of about half a mile or three-quarters of a mile apart, and that the eastern route runs through the county not exceeding one hundred yards. Upon this evidence the plaintiff in error asked the court to instruct the jury as follows: “If the jury believe from the testimony that, at the time when Wheeler, on the part of the plaintiff, procured defendant to execute the contract herein sued on, said defendant declined to take stock, unless plaintiff’s road should be located on the western route, through the county of Pontotoc, being the one nearest the defendant, and that thereupon, as inducement to defendant to execute said contract, said Wheeler untruly represented to defendant, that said road had already been located on said western route, and if such location was really and actually material to defendant to any extent, then such untrue representation by Wheeler was a fraud upon defendant, and makes the contract thus procured null and void.”

This instruction was refused, and the court instructed the jury, at the instance of the defendant in error, as follows: “ That the charter of the Mobile and Ohio Railroad Company, empowers the president and directors to locate the road on such route as they may think proper, and to alter and change the location of any part of it, as they might deem proper; and that no change of location would affect th - liability of the subscriber for stock, unless it works an essential change in the character of the enterprise, such as a change of the main termini of the road.” The same principle was embraced in other instructions, and was also involved in the demurrer to the eleventh plea, sustained by the court.

Conceding that the alleged representations were untrue, and that the plaintiff in error was induced by them to subscribe, and that they are binding on the company, let us consider the effect which they can have in law, upon the liability of the plaintiff in error upon his subscription.

The contract of subscription necessarily had reference to the charter of the company, which was the great law, both of the liability and of the rights of the stockholder. He must be held to have subscribed for stock, subject to the rules therein declared, and to the powers therein expressly granted, or necessarily implied ; and no consideration* can be permitted to enter into and form a part of the contract of subscription, which is incompatible with the powers granted in the charter, or which may be prejudicially affected by the exercise of the legitimate powers and duties appertaining to the company under its charter. So far as the nature and obligation of his contract are defined and secured by express stipulation in the charter, he has the right to insist upon the strict law as forming the basis of his contract; but when, from the nature of the provisions of the charter, a general power is conferred upon the company, the exercise of which may operate to his inconvenience or disadvantage, he is to be presumed to have contracted with that view, and must submit to its operation. For, in becoming a subscriber, he adopts the charter as the fundamental law, alike securing his rights and measuring his obligations; and he cannot be heard to say that he became a member, upon an agreement that the p_ower given for the general benefit would not be exercised towards him, for that would be to give the power to the corporation to violate its duty to act for the general good, by yielding to individual convenience, which would be destructive of the objects of the association. The promotion of the general good is the paramount law of its operation, within the limit of its powers; to that he assented in becoming a member, and he cannot be permitted to set up a right founded upon a violation of that duty.

Let us apply these general principles to the circumstances of this case. The charter of the defendant in error prescribed no route for the road, but its location was left entirely to the discretion of the company. This necessarily involved the power to change the route when located; and when, in the judgment of the board of directors, it might be necessary and expedient to the best interests of the company, it became their duty to make the change. This high duty the subscriber was bound to know, and to assent to, when he became a member of the company. He was bound to know that the company could not make conditions, to be obligatory, w'hich might be destructive of the best interests of the road, and that sucb things must depend upon their discretion. He subscribed subject to this paramount law of the corporation; and any individual advantages offered to him at the time of his becoming a subscriber, must be taken as made subject to the condition, that a compliance with them should not be deemed by the board ■ of directors inconsistent with the general good of the company. From the very nature of the enterprise, and from his becoming a partner in it, his individual convenience must yield to the general good. In becoming a member, he came under the obligation to submit the matter of the location of the road to the discretion of the constituted authority, and cannot be heard to insist upon an advantage inconsistent with it. The assurances given him in relation to the location of the road, cannot, therefore, under' the circumstances, be considered as a part of the consideration for his contract, but must be taken as a matter of collateral benefit expected from it, which must yield to the paramount right of the company to change the route, an essential and fundamental condition of the operations of the company. Irvin v. Turnpike Co. 2 Penn. 466.

Hence the representations relied on were insufficient, in law, to invalidate the contract, and the rulings of the court upon the question were correct.

It is to be observed that, in this case, no right contained in the charter, and which may be regarded as forming a consideration for the contract, has been, affected. And, in this respect, it differs from the case of Hester v. Memphis and Charleston Railroad Co. 32 Miss. 378, in which the route, as prescribed by the charter, was materially changed; and considering the charter as the foundation of the contract, it w7as there held that the change of the prescribed route discharged the subscriber from liability to pay his stock, subscribed with reference to the rights secured by the charter. This proceeds upon the ground that the charter defines the rights of the members of the corporation, and determines the nature of their liability as stockholders; and it follows from the principle there held, that where no right secured in the charter is violated, and the acts of the company are in accordance with their charter powers, the subscriber is not discharged.

The remaining question to be determined is, whether the Contract of subscription must be taken to be void by reason of a material alteration apparent from its face.

It appears, from the bill of exceptions, that the subscription paper was all printed except the words Pontotoc and Mississippi, which were inserted in blanks left for the purpose, and the words, “ the two and three per cent, not to be called for until March, 1858,” which clause was inserted by interlineation, in writing, at the caption of the paper, and is also added in writing at the conclusion of the printed part of the paper, between the close of the printing and the place intended for the subscriber’s name. The written words, at the caption, are apparently in a different handwriting, and with paler ink than those written at the close, and the marks are smaller, as if with a different pen. The printed part, in substance, subscribes for the number of shares attached to the signature, agreeing to pay for the same, one hundred dollars for each share, payable two dollars per share at the time of subscribing, three dollars per share in three months from the same date, and the remainder when requisite, &e. The alleged alterations and additions are, 11 the two and three per cent, not to be called for till March, 1853.”

Upon this evidence, the plaintiff in error asked the court to instruct the jury as follows: “ If any probable alteration, addition, or interlineation, in a material part of the contract sued on, is apparent on the face of it, and if such alteration, addition, or inter-lineation is, from its effect, calculated to operate in favor of the plaintiff, then the law presumes that the same was made after the execution of the contract, and without Ellison’s consent, and the contract thereby becomes null and void, unless the plaintiff has proved to them, by testimony, that such alteration, addition, or interlineation, was made before the contract was signed by the defendant, or that it was made afterwards, with his consent; and, unless sueh proof is made, the jury must find for the defendant.” The court refused to give the instruction.

The rule upon the subject of the instruction is well settled in this court, with respect to negotiable instruments. Railroad Bank v. Lane, 7 How. 414; Wilson v. Henderson, 9 S. & M. 375. It has, however, never been held by this court to he applicable to other instruments, and the cases are numerous holding it not applicable to other instruments. 3 Phill. Ev. (Cowen & Hill’s notes) 463, 3d edit.; Bailey v. Taylor, 6 Conn. R. 2d series. But, upon this point, we deem it unnecessary to express an opinion at this time.

Conceding the rule to be applicable to instruments of the character of the one here sued on, we still think that the instruction was properly refused.

In order to raise the presumption, that the instrument has been altered, and to put the holder to proof explaining it, it is necessary that it plainly appear from the face of it that it has been altered. It is not sufficient that it is probable that an alteration has been made, but it must be manifest to the inspection of the jury that it has been made. The consequences of an alteration, apparent'from the face of the paper, are so serious to the holder, especially when he has no notice, by pleading or otherwise, that he will be required to show its fairness, that the fact upon which the presumption of unauthorized or fraudulent alteration is founded should not depend upon mere probability; for that would be to found one presumption upon another, and to presume fraud upon mere probability. In this respect the instruction was erroneous.

With reference to the evidence touching the point of alteration, which consisted entirely of the paper itself, this instruction was calculated to have a very prejudicial effect in this respect upon the validity of the paper. There was nothing to show that the clause, added at the close of the printed part of the paper, was not written as a part of the contract agreed on between the parties. The mere fact that it was written, instead of being printed, in a space where it very properly might have been written by agreement of the parties, was not sufficient to raise the presumption that it was done without the consent of the subscriber. If so, any contract of a special character, part of which is printed and part in writing, or several parts of which appear to be in different handwritings, must be taken to have been unfairly altered and rendered void, unless explained. Yet, under tbe rule stated in the instruction, the jury, though not satisfied that it was not the contract as agreed on by the parties, were authorized to conclude, upon undefined probability, that the instrument had been altered after it was completed, without the consent of the subscriber. The rule, as stated, was clearly improper with reference to the paper as it is described in the record; and, from that description, we do not think that the jury would have been justified in finding that' the writing at the close of the paper was not done by the agreement of the parties.

Under this view, the interlineation in the caption was immaterial, because it was the same as that written at the conclusion, and was but a repetition of it.

Having considered the several grounds of error urged in behalf of the plaintiff, we think the judgment correct, and it is affirmed.

Harms, J., having presided on the trial in the court below, did not sit in this case.