Little Rock & Ft. Smith R. R. v. Perry , 37 Ark. 164 ( 1881 )

OPINION.

Eakin, J.

The complaint is intended to set forth a cause of action at law, for services rendered, material furnished, money expended, etc., by Perry, for and in behalf of the defendant railway company, for which it afterwards promised to pay. The promise is the gist of the action, and its denial makes an issue exclusively cognizable at law. The history and circumstances of the transaction are set forth in the first paragraph of the complaint, not as grounds upon which the plaintiff directly seeks equitable relief, but, rather, to show the consideration of the promise, the inducement thereto, and the facts from which a promise might be implied. It cannot be said, from the face of the complaint, that the plaintiff “should have adopted proceedings in equity,” which would have authorized the defendant, under sec. 4464 of Gantt’s Digest (second clause), to move for a transfer. Nothing was waived by failure to make such motion, and the defendant has the right to insist that •the plaintiff shall stand on the ground he has chosen, and succeed upon such principles alone as are cognizable at law.

■PBAOTIC35: Perhaps the most perplexing questions, and least satisfactory decisions (not always in harmony with each other), which have sprung from the inauguration of the so-called system of American procedure, regaid the kind and measure of relief which may be afforded in cases where the proof elicted under one mode of proceeding, reveals mattei relievable under the other. This is especially the case in the few States which, like Kentucky and Arkansas, have adopted the Code system generally, with the interpolation of an effort still to preserve the distinction between proceedings at law and in equity. It is very hard to do that without separate Courts of Chancery, in the face of an express provision that an error as to the kind of proceedings shall not cause an abatement or dismissal of the action. Still, it is the duty of the' courts to make the effort, and preserve the distinction, so far as they may be able, in harmony with all parts of the Code.

BguitaSeactions 2. Trans-c Vu s e from law to equity The decisions in those States are, as yet, few, and no set of rules can be formulated from them, entirely satisfactory to the profession ; but in our State it is now settled that relief of a purely equitable nature cannot be given in an action properly begun and prosecuted at law. This has been illustrated in a striking manner, with regard to mortgages of property, not in esse. They have been treated in actions at law as wholly void, but have been sustained in equitable proceedings. See Apperson v. Moore, 30 Ark., 56; Tomlinson v. Greenfield, 31 Ark., 557; Roberts v. Jacks, Ib., 597 The case of Talbot et al v. Wilkins et al, 31st Ark., 411, Is not in conflict with this ruling. The Court expressly held that the case being at law to enforce subrogation, a purely equitable right, the defendants might have moved to have the action changed to equitable proceedings, and that the error was waived by neglect to do so. This does not apply to a case properly brought at law, in which no such motion could be sustained. It is unreasonable that a defendant should be held to a court of law by the allegations of' the complaint and be there subjected to the administration-of principles purely equitable ; but if he has an opportunity to have the change effected and neglects it, he should not complain. Even this practice has not, in all cases, been allowed ; but the rule has been so modified as to prevent parties, by consent, from indulging in such proceedings as-would, if common, entirely obliterate the distinction between-law and equity; and a special proceeding at law, founded, upon common law or statute, cannot be made, even without objection, to subserve the purposes of a bill in equity. In-such pdain and palpable cases of perversion of remedies, it is the duty of the Circuit Judge to interfere and refuse relief, unless the complainant shall approach the court in proper fashion. Thus it was held in Crawford, Auditor, v. Carson (Ex.) et al, 35 Ib., Ark. 565, which was an effort to make-the writ of mandamus serve the purposes of an injunction, that “ it is the duty of the Courts in clear cases, whore the entertainment of a writ in the form presented, would lead to a confusion of the boundaries between proceedings at law and in equity, and between ordinary actions and special proceedings, to refuse of their own motion to do so.” That case rested upon its peculiar nature. In ordinary civil actions it may now be considered as the settled rule of this court to be observed hereafter, that actions of a purely equitable nature and so appearing by the complaint, when-brought at law, may be transferred to the equit}r side on motion of either party, or by the court on its own motion,, by virtue of its inherent power over its proceedings and that the courts should be free in the exercise of that power to-sustain the legislative intent in retaining the distinction» amidst the wreck of all forms' of action; but that the failure to do so, without a motion by parties for the purpose, is not error for reversal.

Legan With regard to actions begun in Chancery, which upon their face appear to be exclusively and wholly cognizable at law, as, for instance, a bill to obtain judgment upon a note, or an ej'ectment bill without equitable elements, the rule is the same. It is always, however, to be borne in that if there be any equitable element to which the tion of a Court of Chancery may attach, then by the doctrine, the court in the same proceedings may administer all legal relief connected with the subj’ect matter and essential to do full and complete j'ustice at once to all parties before it.

no eciuion*£t.i®£al But when, as in this case, the action is purely legal upon its face, and properly brought at law, it must be decided legal principles alone. It follows that the plaintiff cannot be sustained in his judgment, unless he has shown, by evidence, either an express promise of the defendant Eailway Company, valid in law, to pay his claim, or circumstances from which, according to legal principles, a promise may be implied.

i, r. r.. OOHMNnss: "W li 6 ru i>y £0r®ro3eo' The plaintiff relied, and the court below seems to have acted upon, a principle which grew up in the English Courts i-. . of Equity, as an Equity doctrine ; and which, like the dor’s lien, contravening the strict rules of law, was adopted, ex aequo et bono, to prevent fraud and imposition, and do substantial justice. It amounted to this: That where the formation of a corporation was in contemplation, and the promoters of the corporation were taking initiatory steps to perfect its organization, and obtain a charter, and provide. ' in advance the means necessary for its successful operation', all contracts made by such promoters, for the benefit of the future corporation, and which were reasonable and proper to put it in operation, and the benefits of which were after-wards accepted by the corporation, became binding on • the corporation without any formal contract to pay.

A brief notice of some of the cases cited by the attorney for'the appellee,«will render the nature and scope of the •doctrine more intelligible.

The leading case is that of Edwards v. The Grand Junction Railway Company; 1st Mglne & Craig, 650. The promoters of the Railway had a bill • pending in Parliament for their incorporation, which had passed the Commons and gone to the House of Lords. In the latter house, the Trustees ■of a certain Turnpike road, whose line would be crossed, •had prepared and were about to present a petitiou in opposition to the bill. After some negotiations between the committees on behalf of the projectors, and the Trustees Of the 'Turnpike, it was agreed between them that the latter should withdraw their opposition to the bill, in consideration that the railroad crossing should be carried under the turnpike by constructing a bridge for the road of a certain agreed width and structure. It was desired by the turnpike trustees that these conditions should be made provisions of the charter, but as the amendment would have involved new delays in the then advanced state of the bill, the trustees were induced to waive this demand, by the written undertaking of one of the promoters in behalf of all, to execute an agreement to the effect of the desired clauses, and to have the same confirmed by the company, as soon as circumstances •should permit. The bill was allowed to pass, which provided for crossings of any Turnpike roads by bridges of a less width. The Railway Company was proceeding to construct a bridge at the crossing of the turnpike of complainants as authorized by the charter, but of less width than had been stipulated in the compromise. The Turnpike trustees applied for an injunction which was granted. Upon a motion before the Lord Chancellor to dissolve, lie held in effect, that conceding there was no legal liability on the company, on account of a contract made before its existence, yet there was an equity bindingit not to use its chartered power, obtained through and by means of such an agreement with the proprietors, who were pressing the bill in violation of its terms. The injunction was continued.. This is a case where the agreement was made expressly for the benefit of the company, and under a pledge that the-company when organized would carry it into effect.

The case of Stanley v. Birkenhead Railway Co., 9 Simons, 264 (reported in 16 Eng. Ch. Rep’ts., 264) was one in which the projectors of a railroad, seeking a charter and fixing their line, agreed with a landed proprietor, on behalf of the proposed company, in consideration that he would withdraw his opposition to their bill, to pay him 20,0001 for the portion of his estate required by the road.

A bill for specific performance was brought against the-company, after its complete organization, or, rather, against the company whose projectors had expressly adopted the agreement, and there was a demurrer for want of equity.. The vice-Chancellor held that the case was a very simple one ; that the company was bound by the equity , and overruled the demurrer. In this case, as in the former, it appears that there was an existing organization for the purpose of promoting the railroad, and that the contract was made in the course of preliminary proceedings, necessary to-obtain the franchises, and put the road into operation..

The cases of Preston v. The Liverpool, Manchester, etc.., Railway Co., 7 Eng. L. & Eq., 124; and Webb v. The Direct London and Portsmouth Railway Company, 9 Hare., 129, are of similar import. Whilst the equity is, in all of them, readily-acknowledged, under the circumstances, they are all cases where the projectors were acting under a preliminary organization to obtain ©barters- and' perfect the-¡scheme, and the contracts, though made with the projectors, were properly on behalf of the intended companies, and with the view entertained by both parties, at the time, of having them adopted by the companies, when perfected and ■empowered to do so. The equity is based upon the ground that, under such circumstances, it would be a fraud upon ' the vendor, or the person withdrawing an opposition, if the ■company, which had been thus pledged in advance by its creators, and obtained its franchises, through such pledges, should be allowed to violate them. None of the cases go to the extent of holding that any and all contracts made with the projectors of a road, upon their individual responsibility, and without any mutual expectation that they would form a company, which would assume the contract, would nevertheless be binding on a company, if the persons bound should afterwards organize themselves into a corporation, and put into it the property acquired, or the results of the services rendered, Such a ruling would destroy all distinction between the liabilities of corporations, and those of its individual members, and it may be added, that so wide and sweeping an equity would be very apt to deter any new subscriptions of stock under any charter. Of course there is no question but that liens upon property, in the hands of individuals, would be followed into the hands of a corpora- • tion which they might organize, and enforced against it, but that is not now the question.

The míe ReMeicf The rule has been freely adopted in the American courts, yup°n the English authorities, and with the same limitations. The rule is thus defined by Mr. Redfield, in his work on the Law of Railways, vol. 1., p. 16: “ Whenever a third party enters into a contract with the promoters of a railway, which is intended to inure to the benefit of the company, and they take the benefit of the contract, they will be bound to perform it, upon the familiar principle that one who adopts the benefit of an act, which another volunteers to perform in his name1, and on his behalf, is bound to take the burden with the benefit.” This is a very well formulated expression of the rule, and on all points carefully .guarded to conform with the decided cases, and limit its scope. It has also, in some cases, been held in America, that a corporation is liable at law, upon an implied assumpsit, for services rendered before it came in esse, but which were necessary to perfect its organization, and which, after such organization was perfected, it accepted, and the benefits of Avhich it enjoyed. See Low v. Ct. & Passumpric Railuay, 45 N. H., 375, which was a suit for services rendered in procuring stock-subscriptions. This is certainly reasonable, with regard to services rendered for the direct object of perfecting the organization.

corporation:' wiien Round for rendered-existence8 From all the authorities, it seems clear that, in order • ,• i, , . recover, m an action at law, the plamtift must show either . „ ,. , an express promise of the new company, or, that the ^ . tract was made with persons then engaged in its formation, .and taking preliminary steps thereto, and that the contract was made on behalf of the new company, in the expectation on the part of plaintiff, and with the assurance on the part of the projectors, that it would become a corporate debt, and that the'company afterwards entered upon and enjoyed the benefit of the contract, and by no other title than that derived through it. ■ From these circumstances an affirmance would be implied. Whether equities mjght arise under other circumstances, is a matter to be considered when duly presented in a Chancery case. No authorities have gone the length of holding that any contract made with individuals, exclusively upon individual credit, will become the contract of any future corporation they may form, for the more convenient management and use of the benefits of it.

The verdict in this case seems justified, under the instructions, and saves comment on the evidence. We will consider the instructions in the light of the principles above, announced.

The first and second instructions given for the plaintiff were given against the objections of the defendant. It is apparent that the first widens the liability of defendant much beyond the adjudged cases, and beyond any safe principle. It cannot be contended upon any authority, for instance, that if a number of gentlemen, with a view, amongst themselves, of organizing a corporation in the future, should buy property, and have labor done upon it, upon their individual responsibility, aud should afterwards form a company and take stock for their’ respective shares, the vendor or laborers would thereby, in the absence of a lien, have the legal right, by virtue of a supposed assumpsit, to impose the obligation of payment on the artificial person, the corporation. This would be unreasonable. The corporation having given stock for the property, as well as stock to other subscribers (if any), for money paid in, would have the right to proceed unincumbered. - It stands distinct from the component members, a person of itself. The creditors having no liens would have suffered no injury. They are left with the legal rights against the individuals upon which they at first reposed, and in enforcing them, may, by proper process, even reach the stock given for the property. Other elements are necessary in this action. It should appear that the view of future organisation was mutual between the contracting parties, and that the labor, material, etc., were furnished, at the time, on behalf of the future company, with the view, authorized by the assurances of the projectors, that the company, when chartered, would assume the debt, as created in its behalf. In such case only would the acceptance of benefits of the contract amount to a ratification, and implied promises at law, although there still might arise an obligation on a promise expressed and accepted.

The first instruction was erroneous and misleading. The second does not appear objectionable.

All the instructions asked by defendant were refused except the first and tenth. The first referred to the debts of the old company, and had little application; as the evidence is positive that the credit was' not given to it, but exclusively to the bondholders. The tenth is a general truism.

The second should have been given. It is a clear statement of the law, considering that the contract may be expressed or implied.

The third and fourth would have been misleading, and were properly refused. Corporations may incur legal liabilities from conduct, as above indicated.

tsViaeterminThe fifth would have been improper. Whether evidence6. tends to prove an issue may, on objection, be determined the court when offered. After it has gone to the jury, less wholly irrelevant, it is the province of the jury to weigh it and determine how far it, with other circumstances, conduces to prove the issue.

7. ?r,vc_Directing Jo constituí The sixth has been held improper by this court, under our Constitution, and we adhere to the former rulings. If there is any evidence whatever, however slight, to the issue, it should not be taken from the jury, even if the court is satisfied that it would grant a new trial, if verdict were found upon it. The learned counsel for the appellant press this point in their brief with much force, upon the practice at common law, in the Federal Courts, and in the courts of other States. We think the positive injunctions of the State Constitution, however, settle the matter here : “Judges shall not charge juries with regard to matter of fact, but shall declare the law.” Art. VII., .sec. 23. If the juries abuse this power, there may be a new trial; but that is quite different in its consequences, from a direction for a verdict.

uteTAof 1 £ati£fp£0 conti?afot©<3. before its organization. struotion.) The seventh would have been misleading, perhaps, although literally correct, as an abstract proposition. Under the circumstances, it might have diverted the attention of the jury from the possible implied contract by conduct, and by use of the benefits of a contract. The refusal was not ^ er1'01'- It would, have been better, however, to have qualified it by the insertion of “if there be no other sufficient evidence of an implied or express promise,” or words to that effect.

ratioSiPot mlmbe vsS struotion) The eighth, although strictly correct, was subject to the qualification, and might, as worded,.have misled. It tended to divert the minds of the jury from the obligation of the company, which might attach, from circumstances as explained above, and might have led them to suppose that an express assumpsit was necessary. It would have been better to have inserted, or added, “either by express promise, or one to be implied in law.”

dicn E3K' testimony The ninth instruction asked was clearly proper, and its reerroneous. It is certainly the duty of the party having onus to produce a preponderance of proof; otherwise, matters should stand as they are. The degree of preponderance is immaterial, but there must be some, of which the jury should judge.

pÉNclr1’ particunoif afea There was no error in refusing a new trial on the ground °f surprise: The defendant might have called for a bill of particulars.

is. COURT: jndgtwTooum erroneous as to one. As to the second count in the complaint, no error is but the judgment being in solido, must be re- , versed.

On the return of the cause, the plaintiff, if so advised, may proceed upon the second count alone, and dismiss as J to the first, with a view of filing a bill in equity as to the matters therein, or he may have a new trial on the whole at law,

Eeverse for the errors indicated, in overruling the motion for a new trial, and remand the cause for further proceedings, in accordance with law and this opinion.