Penobscot Railroad v. White

May, J.

The first objection urged in defence of this action is, that the notice, that books of subscription to the capital stock would be opened at different places, was signed by only twelve persons, being not all, but a majority of the persons named in the first section of the plaintiffs’ charter. The third section of the charter provides that such books shall be opened under the direction of the persons named in section 1, and that public notice shall be given, thereof, in some newspaper printed in Bangor and Boston. It is not denied that the proper notice was given if the signatures thereto were sufficient. There is nothing in the charter requiring such notice to be signed by all the persons named therein. The fact that the corporators acted upon it, and the defendant among them, so as to organize the corporation, sufficiently shows that it was *517 given under their direction. The provision in the charter, section 3, that if the subscription “ shall exceed four thousand shares, the same shall be distributed among all the subscribers according to such regulations, as the persons having charge of the opening of the subscription boohs shall prescribe before the opening of said books,” "would seem to indicate that the corporators had authority in this matter of subscription, to act through committees to whom their power might properly be delegated. The doings of the corporators, therefore, in fixing the time and the terms of the subscription, and the notice of the appointment of a committee for that purpose, of whom the defendant was an acting member, are without legal objection.

2. It is next objected that the one thousand shares, required to be subscribed for by the third section of the charter, as amended by the Act of 1850, § 1, before any organization could take place, were not legally proved to have been so subscribed for, and that, for that reason, the organization relied upon by the plaintiffs, and the subsequent assessments upon the shares, were unauthorized and void.

It appears from the records of the corporation, that at a meeting of the subscribers to the stock, held May 3, 1851, for the purpose of organizing said company, a committee was chosen to ascertain and report whether a sufficient number of shares had been subscribed, to authorize an organization, which committee reported that 1210 shares had been subscribed in said capital stock, being more than 1000 shares, the number required by the charter; and at the same time said committee also reported a list of the subscribers, their several places of residence, and the number of shares subscribed by each; which report was duly accepted, and the corporation was, thereupon, organized; a code of By-laws was adopted, and a board of directors chosen, of whom the defendant was one; in which office he acted, having been subsequently appointed upon a committee of the directors to negotiate a contract for the construction of the road.

In the case of these plaintiffs v. Dummer, 40 Maine, 172, *518 the Court say “ that when the corporation was organized, the shares subscribed for were recognized as shares of its stock, and the subscribers thereof as corporators. This was sufficient to complete the contract.” The contract in that case, was that of subscription, and precisely like that of the defendant in this case. In the present case the presiding Judge at the trial, ruled that the fact that 1000 shares had been subscribed as required by the charter and the terms of subscription, was sufficiently established by the evidence. In the case of these plaintiffs v. Rummer, just cited, the Court further say, that “ when a corporation has proceeded regularly to ascertain its corporators, and the owners of shares in its capital stock, and has entered them in its records, all parties become thereby prima facie entitled to the rights thus secured to them. The records are competent and sufficient evidence of them, unless proof be introduced to destroy their effect.” It is not denied, but that it appears from the records of the corporation in this case, that all this had been done, and as no contrary proof at this stage of the case had been offered, the ruling of the Judge upon this point is found to be correct.

3. It is next urged that this action cannot be maintained for the assessments, unless the plaintiffs first show a compliance with the terms of the third section of the Act of August 20, 1850, and that seventy-five per cent, of the estimated cost had been subscribed for by responsible persons, as therein specified. By this section, it is provided that the company shall not engage in, nor commence the construction of any section or sections of the railway, until that amount of the estimated cost of such section or sections is so subscribed. A like provision is somewhat considered in Boston & Providence R. R. Co. v. Midland R. R. Co. & al. 1 Gray, 368 . This provision does not seem to have any connection with the organization of the company; nor to take from them the power of making assessments, as conferred by their charter, when deemed necessary, however much it ought to influence them, in deciding upon the question of the expediency of making such assessments. It is undoubtedly true, as is *519 contended by the able counsel in defence, that the right to assess money upon corporators depends upon the right to use it when assessed and paid; but the right to use it may, without doubt, exist, notwithstanding there is no actual indebtedness on the part of the corporation existing at the time when the assessment is made. It may be, and often is expedient to make assessments, in view of anticipated liabilities, to be subsequently incurred in the prosecution of the general purposes for which the corporation was created; but it may be questioned, whether it would not generally be much wiser, and would not better promote the pecuniary interests of such corporations, to postpone the making of their contracts until a solvent treasury should insure the prompt performance of them on their part. Contractors, then, would have no occasion to exact exorbitant prices, because of the uncertainty of their being promptly paid, if paid at all. But whether expedient or not to assess moneys, in anticipation of liabilities to be subsequently created, there can, in our judgment, be no doubt of the existence of the power in the plaintiff corporation to make such assessments, and if rightfully made, we know of no authority, and none has been cited, tending to show that such assessments, even though the money should be subsequently misappropriated by the corporation or its agents, would be void; nor can we perceive any reason why such assessments, if made to raise money for the general but legitimate purposes of the corporation, when the corporation, through its directors, had made contracts for the execution of those purposes, should be void, even though it might subsequently turn out that such contracts were invalid, for want of authority in the directors to make them. In such a case the enterprise itself is lawful, being the very one for which the corporation was created; but the mode adopted for its completion is unlawful, being unauthorized by the charter. The moneys are assessed for the legitimate objects of the charter, but the contracts to secure the accomplishment of those objects are invalid. Such contracts may be avoided, and the moneys raised, may, notwithstanding, be appropriated *520 in conformity with the charter for the very purposes for which the corporation was created. It is, therefore, apparent that the right to make assessments cannot be made to depend upon any actual indebtedness existing at the time, nor defeated by any apparent indebtedness incurred under a contract which was void. It ought, perhaps, rather to be presumed that the corporation will.effect the purposes of its charter in some legal way, and that the moneys assessed will be invested for that purpose. The corporation therefore are not bound to show a compliance with § 3, of the statute of 1850, before this suit for the recovery of assessments can be maintained.

It is said by the counsel for the defendant, that this section imposing a limitation upon the powers of the corporation, was inserted in the Act of 1850, for the purpose of protecting the subscribers to the stock from unwise appropriations of their money. It may be so, but if so, the subscribers, when they find the corporation of which they are members, or its agents, misappropriating their money, must find a remedy in some other mode than that which is sought and relied upon in this case. No error is found in the ruling upon this point.

4. The defendant, assuming the burden of proof, next offered to prove that the requirements of said section 3, in the Act of 1850, had not been complied with, which testimony was excluded. The fact, for the reasons before stated, being immaterial, such evidence was rightly rejected.

5. Proof was next offered by the defendant, that of the 1210 shares subscribed for, and recorded in the books of the corporation as before stated, at least 500 shares were subscribed for by persons not actually pecuniarily responsible therefor, and who were not reputed to be responsible for the amount for which they subscribed. Testimony for this purpose was excluded, subject, however, to the qualification, that the defendant might offer any evidence tending to show, that these subscriptions were not made in good faith, and upon this point the defendant put in such testimony as he chose. Prior to the organization of the corporation, the defendant, *521 by his subscription, agreed to become the holder of twenty-five shares in the capital stock, upon the condition that not less than the least sum required by the charter should be subscribed ; and it cannot be doubted that before he can be held to such subscription, it must, appear that such condition has been performed. It is said, however, by the Court in the case of these plaintiffs v. Dimmer, before cited, that “ if the company obtain subscriptions to the amount required, in good faith, from persons apparently able to pay or to procure others to pay for the shares, it could not have been the intention to render its proceedings illegal and void, if those subscriptions should finally prove to be of little value.” The charter must receive a reasonable construction, if its language will allow it, and there can be no doubt that it requires good faith of the corporation in the exercise of its rights and the performance of its duties.

If the corporation should, for the purpose of making up the amount of stock required before an organization, accept a list of subscribers as share holders, which was composed in part of idiots and town paupers, as suggested by the counsel, in defence, such a subscription would not be a compliance with the provisions of the charter; but if, on the other hand, the list appeared to the company to consist of names which might be relied on for the fulfillment of the subscription, they would be justified in proceeding to organize, and their proceedings would be valid, even though it might subsequently be made to appear that some of the subscribers at the time were not of sufficient pecuniary responsibility to pay for their stock, and were not reputed to be so, provided the corporation acted in good faith on their part in the acceptance of such list. From the very nature of the contract of subscription, it must have been within the contemplation of the parties, that the share holders, or corporators, should determine who were apparently responsible as subscribers, and when they had done so in good faith, the subscribers to the stock must be regarded as bound by such decision. The reputation or fact of pecuniary inability, could at most only be evidence upon the *522 question of good faith, and for that purpose the defendant was permitted to prove them if he desired.

6. It is insisted, that the evidence offered upon the question of good faith, was sufficient to authorize the jury to find that the subscription of Gideon Mayo was colorable and fraudulent, and that the plaintiffs did not act in good faith in-accepting it. The case shows that the testimony upon this point consists in the declarations of said Mayo, in relation to his subscription, made at a meeting of the stockholders long after the corporation had been organized. Such declarations were not legally admissible upon the question whether the corporation acted in good faith at the time of its organization. The defendant himself testifies, that he thinks these declarations were made at some meeting after the assessments had been made. The Judge was requested to instruct the jury that, if Mayo’s subscription was not bona fide, but colorable, and made in fraud or evasion of the charter, it could not be regarded as a compliance with that provision of the charter, which required that at least 1000 shares should be subscribed for before any organization could take place. Whereupon, the Judge stated, that he should instruct the jury that if they believed the evidence; the subscription made by Mayo was binding upon him, and the plaintiffs’ evidence, if believed, was sufficient to entitle' them to recover. Both these propositions, in the judgment of the Court, are correct. No opinion was expressed by the Judge in regard to the requested instruction, probably because he regarded the evidence in the case, as insufficient to authorize the jury to find the fact on which the request was based; nor does this Court perceive any sufficient evidence to justify the jury in finding such fact. If the counsel for the defendant thought otherwise, he had the right to have insisted upon the requested instruction, and if given, to have submitted the evidence upon that question to the jury.’ He did not choose to do so, and may, therefore, properly be regarded as acquiescing in the opinion of the Judge, as to the effect and weight of the evidence. As no ruling was given in pursuance of said request, there being no *523 evidence to require it, we are not called upon to determine whether the proposition contained in the request, is in conformity to the law in such a case, or not.

7. The questions proposed to the defendant by his counsel, with a view to ascertain the circumstances under which he acted in attending the meeting of the directors, held Nov. 26, 1852, when certain assessments were made, and in signing a paper calling that meeting, and which were not admitted by the Judge at the trial, may be regarded as rightly excluded, because it was immaterial with what motives or under what circumstances he acted, in those particulars. Nothing which was done at that meeting, had any tendency to throw light upon the question of the legality of the organization, or the right of the plaintiffs to make assessments upon the stock. These had been perfected long before, and the assessments might have been lawfully made, for aught that appears, without his presence.

In view of all the evidence in the case, we perceive nothing erroneous in the orders, rulings and opinions of the Judge who presided at the trial, and concur with him that if the whole evidence in the case is believed, this action is maintained. The default, therefore, in accordance with the agreement of the parties, must stand.

Tenney, C. J., and Hathaway, J., concurred in the result. Appleton and Goodenow, J. J., concurred.