Int'l&g. N. R. R. Co. v. Bremond

• Decision Date: 19 March 1880
• Docket Number: Case No. 855.
• Citation: 53 Tex. 96
• Parties: INTERNATIONAL & G. N. R. R. Co., MOSES TAYLOR ET AL. v. PAUL BREMOND.
• Court: Texas Supreme Court

53 Tex. 96

INTERNATIONAL & G. N. R. R. Co., MOSES TAYLOR ET AL.

v.PAUL BREMOND.

Case No. 855.

Supreme Court of Texas.

Mar. 19, 1880.

APPEAL from Harris. Tried below before the Hon. James Masterson.

Suit by Paul Bremond, brought on the 3d day of December, A. D. 1875, against the Houston & Great Northern Railroad Company, the International & Great Northern Railroad Company, and against W. E. Dodge, Jacob S. Wetmore, Wm. M. Rice, C. Ennis, G. A. Grow, W. J. Hutchins, W. W. Phelps and C. E. Noble, seeking a recovery of sixty thousand dollars as his interest in the stock of the Houston & Great Northern Railroad Company.

He alleged that in 1870 he subscribed for $100,000 stock in the Houston & Great Northern Railroad Company, paid on it all installments ever demanded of him, aggregating $40,000 paid up to 24th of November, 1871.

He alleged that the company was incorporated October 22, 1866, and that the individual defendants were its directors on the 1st day of January, 1874, and the company was, on that day, consolidated with the International Railroad Company, under the name of the “International & Great Northern Railroad Company,” and that said directors, without being properly authorized, transferred all of the assets, franchises and effects of his company to the new company, having constituted themselves directors in the new company.

He alleged this transfer and consolidation to be a conversion of his property; that it was procured by the directors by breach of trust, faith and confidence, and that the assets were received by the consolidated company in collusion with them.

He alleged that the company had large assets; that his interest was worth $50,000; and claimed the recovery back of the installments paid and interest thereon, or the value of his stock and interest in the company, from the defendants, all of whom, he alleged, fraudulently and collusively united to destroy and convert his property against his repeated protests.

Defendants answered with:

1. General demurrer.

2. General denial.

3. Admitted the consolidation, but justified the same on the following grounds, viz.:

That in 1871, the directors of the Houston & Great Northern Railroad Company purchased the property franchises of the Houston Tap & Brazoria Railroad Company, which was an incorporation under the laws of Texas; that the purchase was approved by the stockholders in the company, including plaintiff, and that in the charter of the “Tap” was a provision that it might consolidate with any other company, by a vote of two-thirds of its stockholders.

That on the 8th of May, 1873, the legislature of Texas passed an act consolidating the Houston & Great Northern Railroad Company with the Houston Tap & Brazoria Railroad Company, by which it granted to the former all the franchises and privileges of the latter; that in the charter of the latter was a provision authorizing its consolidation with any other company. This, they claimed, passed to and was bestowed on the Houston & Great Northern Railroad Company by this act.

4. They pleaded that the consolidation was effected by a vote of more than two-thirds of the stockholders, at a special meeting called for that purpose, September 27, 1873, and attached the proceedings of the meeting, showing the vote, and the articles showing the terms of the consolidation, which they justify, and plead that it has been ratified by the legislature.

5. They pleaded that as far back as February, 1872, articles of agreement to consolidate were in existence, and had been ratified by the stockholders, of the same purport as those of the actual consolidation, and they exhibited them, and that from that date on the two companies were operated as one consolidated company.

That plaintiff, knowing these things, and taking no steps to prevent it, was estopped to complain of them.

A jury was waived, cause submitted to the court, and judgment for appellee against appellants, for $43,182.30, who gave notice of appeal.

The appellants severed in their assignments, and the directors, Wm. E. Dodge, J. S. Wetmore, Cornelius Ennis, Moses Taylor, Wm. M. Rice and Galusha A. Grow, assigned errors, apparent from the opinion.

The Houston & Great Northern Railroad Company was incorporated by act of the legislature of Texas, on the 22d of October, 1866, for the purpose of constructing a railroad from Houston to Red river, passing as near Montgomery, Huntsville, Crockett, Rusk and Tyler as practicable.

No section of the charter contained authority to consolidate.

It was agreed that the Houston & Great Northern Railroad Company consolidated with the International Railroad Company, and the consolidated company was called the International & Great Northern Railroad Company, and that “from about the 1st of January, 1874, the consolidation, merge and mingling, has been perfect as one road,” and that “the road's assets, franchises and effects, and capital stock of the two companies, were from that time claimed, owned and used by the consolidated company.”

It was further agreed that Paul Bremond, in 1870, subscribed for one thousand shares of one hundred dollars each, in the stock of the Houston & Great Northern Railroad Company, and paid all calls made on him therefor, amounting to $40,000 “paid up,” by the 24th day of November, 1871.

Bremond protested against the consolidation repeatedly, verbally and by letter.

The International Railroad Company was an incorporation under act of the legislature of Texas, of 5th of August, 1870, “and it was agreed that the only section of its charter, referring to the subject matter of this suit,” is section 14, which does not seem to give that company the power to consolidate.

The directors of the Houston & Great Northern Railroad in 1872 and 1873, and at time of consolidation, were W. E. Dodge, Wm. M. Rice, G. A. Grow, Moses Taylor, Jacob S. Wetmore, C. Ennis, W. J. Hutchins, W. W. Phelps and C. E. Noble, until his resignation in September, 1873.

At a meeting of the board of directors, on the 19th of February, 1872, in New York city, at which appellants Taylor, Dodge, Wetmore and Rice were present, there was adopted an agreement to consolidate the Houston & Great Northern Railroad Company with the International Railroad Company, and the officers were directed to execute the same, when the International should adopt them.

The articles of agreement began by suggesting the expediency of getting further legislative enactment to authorize consolidation, and postponed the consummation of it until such legislation could be obtained, or the impossibility of obtaining it ascertained; “but in the meantime, the interest of the two companies shall be considered one interest, and managed in view to such consolidation.”

From that date the administration of the two companies should be one, each board to retain its own existence, the direction of the business of the two companies to be in the hands of a joint board.

The basis of consolidation was, that the stock of each company was to be called in and cancelled, and $5,000,000 of stock of the consolidated company issued to represent property of every description belonging to the joint companies, and divided by giving to the stockholders of the International twenty-three thousand four hundred and thirty shares, and to the Houston & Great Northern Railroad Company twenty-six thousand five hundred and seventy shares.

From that date the earnings of the two companies should be considered as belonging to the joint companies, and the expenses as joint expenses, but the accounts and management of the funds should be directed as theretofore by the officers of the respective companies, until permanent consolidation was effected.

This agreement was signed by J. Sandford Barnes, president of the International, and defendant Grow, as president of the Houston & Great Northern Railroad Company.

The agreement was adopted, subject to the rejection of their stockholders, by a three-fourths vote.

Defendant Grow, in behalf of defendants, testified he was the president of both of the companies in the years 1872 and 1873, and up to the time of consolidation, and was president of the consolidated company from its existence till July, 1874. He never heard any talk of consolidation until he went to New York, immediately before the meeting of February 19, 1872.

The agreement of the 19th of February, 1872, was signed by him as president of the Houston & Great Northern Railroad Company, by direction and order of the board of directors. The articles in effect were an agreement for pooling the earnings of the two roads, and providing for operating them as one road, expenses to be joint expenses, receipts to be joint receipts, with one set of officers so as to save expenses of two. This agreement was entered into by the directors of the Houston & Great Northern Railroad Company, at a directors' meeting in the city of New York. Separate accounts were, however, to be kept by each road, until the two roads were actually consolidated, and the accounts were so kept. So soon as the agreement was executed, it was shown to the stockholders present, and to those in New York, for their approval. Nothing was done under the agreement until the assent to it by the stockholders, as reported to the stockholders' meeting in December, 1872. He showed the agreement to Mr. Bremond, and after reading it through, he expressed his disapproval and refused to give his assent. He had afterwards different conversations with Bremond, and he in all of them expressed his opposition to the consolidation. The two roads were run and operated under this agreement from about April 1, 1872, till September 27, 1873: “By changing the line of the road so as to intersect the International at or near Palestine, we cut off competition of the Trinity boats, and by making this agreement, competition between the two roads was prevented; and by using fifty miles of the track of the International we were enabled to reach...