US SUPREME COURT DECISIONS

The laws of a state required that before being organized, all railroad companies should have a subscription to their stock of not less than $50,000. Certain persons did subscribe more than this (to-wit, $148,750), with a proviso, however, that if a certain city in its corporate capacity subscribed $50,000 or upwards, the city should accept what each of them had subscribed above a small sum ($300) named. The city did subscribe the $50,000, and much more ($400,000), when, A.D. 1853, the directors of the company -- these directors being themselves persons who had subscribed part of the $148,750 -- passed a resolution authorizing the original subscribers to transfer to the city all stock subscribed by them over $300 each, and that the stock thus transferred be merged in the subscription made by the city.

As appeared by "an agreement of record" in which, without signature of anybody attached, it was certified by the clerk that it was admitted by the complainants on the final hearing that all the subscribers transferred, before July, 1854, their stock (above $300) to the city; that none of the original subscribers were ever charged on the books of the company with any greater amount than $300; that this sum had been paid by each, and accepted by the company in full satisfaction.

The company being insolvent in 1858, and the executions of creditors being then returned unsatisfied, the creditors of the company in 1868 filed a bill against the original subscribers to make them pay up the excess over $300 which they had subscribed.

Held:

1. That these subscribers could not be made liable for such excess.

2. That the proceeding being one in equity and not at law, the "agreement of record," though not made part of the record by the pleadings, would be regarded as evidence.

3. That it proved the transfer and acceptance of the stock by the city.

4. That the fact that the directors were original subscribers did not affect the case, the transfer having been in accordance with the conditions on which the original subscription was made, and in itself fair. chanrobles.com-red

Page 83 U. S. 391

5. That, independent of all this, the bill probably could not be maintained because of laches.

Burke, Putnam, and others were the equitable owners of a judgment recovered in 1857 against the New Albany & Sandusky Railroad Company. Upon this judgment an execution was issued in 1858, which, on the 1st of December of that year, was returned "nulla bona." On the 29th of January, 1868 -- that is to say, about ten years after the execution had been thus returned unsatisfied -- they brought the present suit. It was a bill in chancery against one Smith and some twenty-seven other defendants, and, alleging the insolvency of the company, it sought to subject to the payment of the judgment, rights which, it alleged, the company had against the said defendants. It averred that the defendants, on the 22d of August, 1853, under the general railroad laws of Indiana, organized the above-named railroad company and subscribed to its capital stock, severally, amounts which they had never paid, and the object of the bill was to compel the payment of the debts thus incurred, and the application of the payments to the satisfaction of the complainants' judgment. The facts were these:

On the 22d of August, 1853, under the general railroad laws of the state, the defendants, with others, united in forming articles of association for the incorporation of the New Albany & Sandusky Railroad Company, and severally subscribed to its capital stock in sums varying from $1,000 to $5,000. [The railroad laws referred to allow, it may be added, no organization of a road until at least $50,000, or $1,000 for every mile of the proposed road, shall have been established.] The articles of association contained the following stipulation:

"Provided, however, and it is hereby understood, that if the City of New Albany, in its corporate capacity, shall hereafter take stock in this corporation to the amount of $50,000 or upwards, inasmuch as the present subscribers, being residents of

Page 83 U. S. 392

and owning property in said city, will then be under the necessity of contributing still further to the corporation by way of taxation, unless a portion of the present subscription is taken off their hands, the said city shall accept, in part of the amount to be subscribed in its corporate capacity, at its par value, a transfer of any amount of stock now subscribed for by each individual over and above the amount of six shares, or $300, which each such individual may desire or request shall be so transferred."

There were fifty-five original subscribers, and the aggregate amount of the subscriptions was $148,750. With such a subscription and under such articles of association, the subscribers became a corporate body. After their incorporation, the City of New Albany subscribed $400,000 to the capital stock of the company. [Footnote 1] This subscription was made on the 19th of November, 1853, and on the 31st of December next following, the directors of the company adopted an order

"That the original subscribers to the articles of association be permitted, in accordance with the stipulations contained in the articles, to transfer any amount of the stock so originally subscribed by them over and above the amount of six shares, or $300, to the City of New Albany, said city having made a subscription to the stock of said company to the amount of $50,000 and upwards, and that the stock thus transferred be merged in the subscription already made by said city, so that the stock of said city, under her present subscription, with the stock so transferred, shall not exceed $400,000 as subscribed by her."

The directors of the company, who made this order, were themselves subscribers, like the defendants, for more than six shares, or sums above $300.

So far, there was no controversy respecting the facts. And there was also an "agreement of record" -- a document certified by the clerk of the court below, with the bill, answers, depositions &c., as part of the full, true, and chanrobles.com-red

Page 83 U. S. 393

complete copy and transcript of the record and proceedings in the case -- that the defendants transferred to the City of New Albany all the stock subscribed by them in excess of $300 for each, in compliance with the stipulation contained in the original articles of association; that the transfers were made before the 1st day of July, 1854; that none of these original subscribers were ever charged on the books of the railroad company with any greater amount of stock than $300; that the amount of stock charged against each (viz., $300) had been fully paid long before the filing of this bill, and when called by the company, and that such payments had been accepted by the company as full satisfaction of the respective subscriptions.

The question was whether the defendants were debtors to the railroad company for any excess of their subscriptions above $300.

The court below was of opinion that they were not, and dismissed the bill against them.

The complainants appealed. chanrobles.com-red

Page 83 U. S. 394