Ohio & Mississippi Railroad v. McPherson

Drtden, Judge,

delivered the opinion of the court.

This suit was-commenced the 28th November, 1858, and was for the recovery of fourteen hundred dollars and interest, being a balance of the larger sum of two thousand dollars, subscribed by the appellant on the 28th of March, 1851, to the capital stock of the Ohio and Mississippi Railroad Company, the respondent. There seems to be no dispute about the facts in the case, but about the law arising upon them. The facts as disclosed by the record, so far as are material to tire questions arising, are as follows :

The plaintiff was incorporated by an act of the Legislature of the State of Illinois, approved February 12, 1851; by the first section of which the persons named therein, “ and such other persons as might associate with them for that purpose, are hereby [were thereby] made and constituted a body corporate and politic by the name and style of the Ohio and Mississippi Railroad Company, with perpetual succession,” <fcc., &c. The purpose of the corporation was the construction and operation of a railroad commencing at Illinoistown, on the east bank of the Mississippi, running thence to the east line of the said State in the direction of the. city of Vincennes, in the State of Indiana. The act of incorporation vested the corporate powers of the company in a board of directors to consist of not less than seven nor more than seventeen in number, and such other officers, agents and servants as they should appoint; and named the first board, consisting of thirteen persons, who, by the provisions of the act, were to hold their offices until their successors should be elected and qualified; and provided that vacancies in the board might be filled by a vote of two-tliirds of the directors remaining, the appointees to continue in office until the next regular annual election of directors, which was required to be held on the first Monday of September in each year, at such place as the directors might appoint. A meeting of the board appointed in the charter was held in the city of St. Louis, Missouri, on the 28th of March, 1851, at which certain rules and regulations as to the rights and duties of stockholders (not necessary to be detailed here) were adopted, and a form of obligation was prescribed to be signed by subscribers for stock in the company. The following is the form of obligation thus prescribed, and is the same which was subscribed by the defendant and on which this suit was brought, viz. :

“We, whose names are subscribed hereto, do promise to pay to the Ohio and Mississippi Railroad Company, incorporated by the State of Illinois, the sum of fifty dollars for every share of stock set opposite to our names respectively, in such manner and proportions and times as shall be determined by such company in pursuance of the charter thereof and of tlie preceding resolutions of the board of directors. Witness the -day of-, A. D. 18 — .

“ Shares of fifty dollars ($50) each. — John O’Eallon, 1,000 shares; P. Chouteau, Jr. & Go., 200; George Collier, 50; Wm. M. Morrison, 50; John Tilden, 10; Henry Chouteau, 20 ; Wiggins Ferry Company, by the several proprietors, 400 ; Chambers & Knapp, 40 ; A. J. P. Garesché, 10 ; L. M. Kennett, 40; C. P. Chouteau, 40 ; Adolphus Meier & Co., . 20; Bridge & Brother, 20; Joseph Charless, 20; E. W. Clark & Bros., 40 ; John Smith, 10 ; John J. Anderson, 10 ; Wm. M. Pherson, 40” (and others).

Four calls for payment of subscriptions to stock were ordered by the board, all at meetings of the board in the city of St. Louis: the first on the 25th of September, 1851, for two and a half per cent.; the second on the 19th of November, 1851, for seven and a half per cent.; the third on the 5th of August, 1852, for thirty per cent., and the fourth on the 12th of August, 1853, for the remainder (sixty per cent.), to be paid in instalments of five per .cent, on and after the 1st of October, 1853, till fully paid ; of which several calls the appellant had due notice. At the meetings of the board at which the first and third calls were ordered there were present six of the thirteen members appointed in the charter, with, in one instance, one, and in another two appointees of the charter members; the second call was ordered by a meeting of seven of the charter members and two of their appointees; the fourth call was ordered by a meeting of directors, elected at a stockholders’ election held in the city of St. Louis on the 6th of September, 1852 — none of the directors in this meeting being charter directors. The appellant paid to the respondent on his liability arising upon his said subscription, on the 22d of March, 1852, the sum of one hundred dollars, and on the 3d of September', 1853, the further sum of five hundred dollars; and in an interview liad between the defendant and the treasurer of the company on the subject of the appellant’s said liability after the year 1855, and after .the completion of the road, he admitted his liability and expressed his willingness to pay when called on. A meeting of the stockholders of the company was held in St. Louis on the 4th of September, 1854, in the proceedings of which the appellant participated, voting with the majority in the adoption of measures looking to the accomplishment of the objects of the corporation. The avails of stock sold were used in building the road, and the road was completed on the 30th of June, 1855.

A recovery in the case was resisted on two grounds: first, that the facts were insufficient to show an acceptance of the charter, and therefore the plaintiff .was not shown to have any corporate existence; secondly and mainly; that the votes and proceedings of the stockholders and directors when assembled in St. Louis, beyond the bounds of the State granting the respondent’s charter, were wholly void, and therefore that the calls which were ordered in St. Louis, and in one instance by a board elected in St. Louis, were invalid, and imposed no obligation on the appellant to respect them.

1. As to the corporate existence of the respondent. It is maintained by the counsel for the appellant, that no acts of the board of directors performed beyond the territorial limits of the State from which the charter ^¡nii^jated could be a valid acceptance of the charter. In support of this position reliance is had chiefly on Miller v. Ewer, 27 Me. 509 : that was a writ of entry for a tract of land, in which the demand-ants derived their title from the'Bluehill Granite Company, incorporated by an act of the Maine Legislature. On the trial, it appeared that the meeting of the corporators was called for the organization of the corporation under its charter in the city of New York, and that the charter was there accepted and the officers of the corporation (president, directors, and secretary) were chosen. At a meeting ot the directors thus elected, held in the city of New York, a resolution was adopted directing the president and secretary to execute the conveyance under which the demandants claimed title. There was no proof that any meeting for the organization of the company, or for the choice of its officers, had ever been holden in the State of Maine ; but there was proof that the company, by a person acting as its agent, transacted business in the State. The question involved in the case involved the validity or invalidity of the conveyance thus made by the president and secretary in behalf of the company. The court decided jt was void, but placed its decision not on the ground that the board of directors ordering the execution of the conveyance met at a wrong place, but alone on the ground that the election of the directors by the stockholders having been held outside of the State, and because held out.of the State was void, and gave the directors thus chosen no legal authority to convey or to direct the conveyance of the corporate property. The opinion in the case, while it denies extraterritorial power to corporators, concedes it to directors. The court says, “ the directors of a corporation are not a corporate body; they are, when acting as a board, but a board of officers or agents, and they may exercise their powers as agents beyond the bounds iohere the corporation exists.” In the present case, the charter created a Corporation in presentí, and appointed a board of directors without the necessity of any action on the part of the corporators; and if any assent was necessary to infuse life into this body politic, the pT^ci&fflin^s of these directors, although had beyond the bounds and limits of the State of Illinois, were, according to the authority quoted, a sufficient expression of that assent.

But, aside from the question whether the action of the board of directors beyond the bounds of the State was a sufficient expression of assent to give vitality to the corporation, the appellant’s position towards the respondent is such as ought to preclude him from denying its corporate existence. The case of the Dutchess Cotton Manufacturing Company v. Davis, 14 John. 238, was a suit on a promise to pay the price of stock subscribed by the defendant. The court, on the authority of Henriques v. The Dutch West India Company, 2 Ld. Raymond, 1535, held that the defendant having entered into a contract witli the plaintiffs in their corporate name, thereby admitted them to be duly constituted a body politic and corporate.

The appellant having contracted with the respondent in its corporate name, paid his money to it as an existing living thing in answer to its corporate demands, and from year to year having attended meetings of its stockholders and voted at elections and upon questions which clearly implied the respondent’s existence, he ought to be estopped from denying what he has thus often and so solemnly admitted. (All Saints Church v. Davis, 1 Hall, N. Y., 191; John et al. v. Farm. & Mech. Bk. of Ind., 2 Blackf. 867; Chester Glass Co. v. Dewey, 16 Mass. 94.)

2. As to the invalidity of the calls. In the examination of the case under the first objection urged to the respondent’s right to recover, I think I have shown that the first three calls, as they were ordered by the Directors, the validity of whose appointment was not controverted, were subject to no valid objection, although ordered by the board when in session beyond the territorial limits of Illinois. But the alleged invalidity of the fourth call rests upon a total denial of official authority in those who ordered it. This call, as has been seen, was ordered by a board chosen by the stockholders of the company at an election in'tlurcrtyof St. Louis; and it is insisted on the authority of the case of Miller v. Ewer, already cited, that this election, by reason of the place where it was held, was a nullity, conferring no authority whatever on the persons chosen. I am not disposed to question the soundness of that decision in its application to the facts of that case, but I am unwilling to extend the principle there laid down to a case materially differing in its circumstances, as I think the one under consideration does. In that case, at the time the obnoxious election was held the corporation had no existence — it had not yet come into being; and, there being neither corporators nor corporation, no valid official authority could be communicated by such election: but in this case, at the time the election occurred to which objection is made, the corporation was, and for more than a year had been, in full life, exercising all the functions and franchises contemplated by its charter. After the corporation had become full fledged, I see nothing in reason or in principle why the stockholders might not as well elect directors as the directors a treasurer on the Missouri side of the line. The utmost that' could be said under such circumstances is that the election was irregular.

The corporation having been once put into existence, if tlio members of the board of directors — whether charter members, or. their appointees, or those elected by the stockholders in St. Louis — accepted their offices and acted under their appointment or election, as the evidence shows was the case, they became directors de facto, and their authority to act in behalf of the corporation could not be questioned by the appellant in this, a collateral suit, without showing a judgment of ouster against them in a direct proceeding by the government for that purpose. (Trust. of Vernon Soc. v. Hills, 6 Cow. 23; All Saints Ch. v. Lovett, 1 Hall, N. Y., 198-9 ; John et al. v. Farm. & Mech. Bk. of Ind., 2 Blackf. 367; Ang. & Ames on Corp., 3d ed., 104-5.)

I find no error in the record. Let the judgment be affirmed.

Judge Bay concurs. Judge Bates dissents.

Judge Bates.

I hold that the election of directors by the corporators in the city of St. Louis (outside of the State of Illinois) was an absolute nullity. (Ang. & Ames on Corp., § 498.) The defendant’s contract with the plaintiff was that he would pay “in such manner and proportions and times as shall be determined by said company in pursuance of the charter thereof and of the preceding resolutions of the board of directors.”

The charter vested the corporate powers of the company in the board of directors. The resolution of the board of directors which preceded the subscription of stock provided that the calls for payments on the subscriptions should be made by the board.

The persons who made the last call were not directors, the pretended election of them being an absolute nullity. There is nothing in the whole case which tends to show that the defendant in any manner, at any time or place, ever recognized them as directors. He recognized the existence or the corporation, and is estopped from denying it; but he did not recognize those persons as directors, and the acts of other persons without his consent cannot bind him.

If I promise to pay money upon the demand of A, I deny that I am bound to pay it upon the demand of B, who falsely claims to be the attorney of A, although B may have acted as such attorney de facto in a great many instances, and, may have been recognized as such attorney by a great many very respectable people.