Simonds v. E. Windsor Elec. Ry. Co.

• Decision Date: 06 February 1901
• Court: Connecticut Supreme Court
• Parties: SIMONDS et al. v. EAST WINDSOR ELECTRIC RY. CO. et al.

48 A. 210

73 Conn. 513

SIMONDS et al.

v. EAST WINDSOR ELECTRIC RY. CO. et al.

Supreme Court of Errors of Connecticut.

Feb. 6, 1901.

Appeal from superior court, Hartford county; Samuel O. Prentice, Judge.

Action by Jehiel H. Simonds and others against the East Windsor Electric Railway Company and others for an injunction and a cancellation of subscriptions to stock in the defendant company. From an order sustaining a demurrer to part of the answer, and from a judgment in favor of plaintiffs, defendants appeal. Reversed.

James E. Wheeler, for appellants.

Lewis Sperry, for appellees.

BALDWIN, J. The complainants are the incorporators named in a special charter granted in 1897 to the East Windsor Electric Railway Company. They brought this suit in 1900, and the case which they state is this: By a written contract they agreed, in 1898, to transfer forthwith to George W. Dunham, one of the defendants, "the franchise and charter of said company," to elect any five persons whom he might name as incorporators to act with them, to resign upon the completion of the organization of the company, and to elect such officers and directors as he might designate. In consideration of this, he was to cause the Hartford & Springfield Railway & Construction Company, a corporation, to be organized; to enter into an obligation that it would forthwith organize a corporation under the charter granted for the defendant company by procuring subscriptions to all the stock necessary; to make a proper survey, layout, and map of a street railway from Warehouse Point to East Windsor Hill, and have it duly lodged for record before the first Monday of October, 1898; to construct such a railway and have it in operation by the 1st of November, 1800; to enter into a contract with them to have such railway constructed and in operation by that day, said contract to be executed on May 1. 1899, with a forfeiture of $5,000, in case of default or otherwise, at his option; "to return the charter and forfeit all money paid thereon on May 1, 1899"; and. "upon the execution of the transfer" by them, to pay them $400 "towards the expenses of obtaining said charter," said sum "to cover all their right title, and interest thereto, and the said charter is to be conveyed to the said Dunham free from all debts, liens, or incumbrances of any kind whatsoever." In pursuance of this contract, they permitted him to subscribe for 237 shares of the capital stock of the defendant company, the balance of capital stock of 250 shares being allotted by the incorporators to themselves, they taking each one share of the same, except one of them, who too"k two. They then called the first meeting of the stockholders, when a pretended organization was effected by the election of a board of directors, who afterwards elected Dunham as president, and one Gilman, a nonresident secretary. All the shareholders except Dunham subscribed for their stock in good faith, expecting to pay the sums severally subscribed, and are able and willing to make such payment Dunham did not subscribe in good faith, nor intend to pay his subscription, but subscribed in order to prevent the construction of the railway and defeat the purpose of the charter. He has paid the company nothing, and it has no funds. He has utterly failed to construct any part of the railway, and has refused to surrender his stock to the plaintiffs or to retransfer the charter to them. If the plaintiffs can reopen books for subscription, they could procure valid subscriptions for the entire capital, and would proceed forthwith to construct the railway. Dunham refuses to carry out his agreement with them. The charter rights will lapse in 1901, unless the railway shall have been previously constructed. The plaintiffs made themselves defendants in their capacity as shareholders, and also Dunham and the company, described in their writ as a corporation chartered by the state and located in East Windsor. The plaintiffs, as defendants, admitted the truth of the complaint. The other defendants admitted most of it, but alleged that Dunham's stock subscriptions were made in good faith, and denied all charges of bad faith or fraud on his part, the statement that the organization of the company was a pretended one, and the averments that he had not fulfilled his part of the contract. As to that, they...